CORAM HEALTHCARE CORP, S-4, 1995-05-15

CORAM HEALTHCARE CORP
S-4, 1995-05-15
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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1995

REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CORAM HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)

1125 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202
(303) 292-4973

(Address, including zip code, telephone number and
area code of Registrant's principal executive offices)

<TABLE>
<S> <C> <C>
STATE OF DELAWARE 33-0615337 8082
(State or other jurisdiction of (I.R.S. Employer (Primary Standard Industrial
incorporation or organization) Identification Number) Classification Code Number)
</TABLE>

---------------------
JAMES M. SWEENEY
CHIEF EXECUTIVE OFFICER
1125 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202
(303) 292-4973

(Name, address, including zip code, and telephone
number, including area code, of agent for service)

Copies to:

<TABLE>
<S> <C>
ROBERT A. SCHWED, ESQ. RICHARD A. FINK, ESQ.
OTHON A. PROUNIS, ESQ. JEREMY W. MAKARECHIAN, ESQ.
REBOUL, MACMURRAY, HEWITT, BROBECK, PHLEGER & HARRISON
MAYNARD & KRISTOL 1125 SEVENTEENTH STREET, SUITE 1500
45 ROCKEFELLER PLAZA DENVER, COLORADO 80202
NEW YORK, NEW YORK 10111
</TABLE>

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

Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the Registration Statement becomes
effective.

If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. / /

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(1) OFFERING PRICE(2) PRICE(3) FEE(4)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001
per share.................. 45,665,000 $28.31 $841,968,050 $290,334
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</TABLE>

(1) Based upon assumed maximum number of shares that may be issued in the
transactions described herein.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(1) based upon the average of the high and low
prices reported on NASDAQ for a share of Lincare Common Stock on May 9,
1995.
(3) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(f).
(4) The registration fee was calculated based on a fee of 1/29 of 1% of the
proposed maximum aggregate offering price.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

CORAM HEALTHCARE CORPORATION

CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM S-4 AND
PROSPECTUS PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
LOCATION OF CAPTION IN JOINT
ITEM PROXY
NO. FORM S-4 CAPTION STATEMENT/PROSPECTUS
- ---- ----------------------------------------------------- ---------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Facing Page of Registration
Statement, Outside Front Cover
Page
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page;
Available Information; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. Summary; Summary Historical
Consolidated Financial Data;
Comparative Per Share Data;
Investment Considerations; The
Coram Meeting; The Lincare
Meeting; The Merger
4. Terms of the Transaction............................. Summary; The Merger; The Merger
Agreement; Comparative Rights of
Stockholders
5. Pro Forma Financial Information...................... Summary Historical Consolidated
Financial Data; Unaudited Pro
Forma Condensed Combined
Financial Statements
6. Material Contracts with the Company Being Acquired... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters...... Not Applicable
8. Interests of Named Experts and Counsel............... The Merger; Legal Matters;
Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Not Applicable
10. Information With Respect to S-3 Registrants.......... Not Applicable
11. Incorporation of Certain Information by Reference.... Not Applicable
12. Information With Respect to S-2 or S-3 Registrants... Not Applicable
13. Incorporation of Certain Information by Reference.... Not Applicable
</TABLE>
<PAGE> 3

<TABLE>
<CAPTION>
LOCATION OF CAPTION IN JOINT
ITEM PROXY
NO. FORM S-4 CAPTION STATEMENT/PROSPECTUS
- ---- ----------------------------------------------------- ---------------------------------
<C> <S> <C>
14. Information With Respect to Registrants Other Than
S-2 or S-3 Registrants............................. Summary; Summary Historical
Consolidated Financial Data; Com-
parative Per Share Data; Compara-
tive Market Data; Capitalization;
Selected Historical Consolidated
Financial Data of Coram; Selected
Historical Consolidated Financial
Data of Caremark Business; Man-
agement's Discussion and Analysis
of Financial Conditions and
Results of Operations -- Coram;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations -- The
Caremark Business; Business of
Coram; Management of Coram;
Security Ownership of Principal
Stockholders and Management of
Coram; Certain Relationships and
Transactions; Unaudited Pro Forma
Condensed Combined Financial
Data; Financial Statements
15. Information With Respect to S-3 Companies............ Not Applicable
16. Information With Respect to S-2 or S-3 Companies..... Not Applicable
17. Information With Respect to Companies Other Than S-2
or S-3 Companies................................... Summary; Summary Historical
Consolidated Financial Data;
Selected Historical Consolidated
Financial Data of Lincare;
Management's Discussion and
Analysis of Financial Condition
and Results of
Operations -- Lincare; Business
of Lincare; Management of
Lincare; Security Ownership of
Principal Stockholders and
Management of Lincare; Unaudited
Pro Forma Condensed Combined
Financial Data; Financial
Statements
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................ Notices of Stockholder Meetings;
Outside Front Cover Page;
Summary; The Coram Meeting; The
Lincare Meeting; The Merger;
Amendment of Coram's Certificate
of Incorporation
19. Information if Proxies, Consents, or Authorizations
are not to be Solicited, or in an Exchange Offer... Not Applicable
</TABLE>
<PAGE> 4

CORAM HEALTHCARE CORPORATION
1125 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202

June , 1995

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Coram Healthcare Corporation, a Delaware corporation
("Coram"), to be held on , July , 1995, at a.m., local time,
at .

At the Annual Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger dated as of April
17, 1995 (the "Merger Agreement") between Lincare Holdings Inc., a Delaware
corporation ("Lincare"), and Coram, providing for the merger (the "Merger") of
CHC Acquisition Corp. ("Merger Sub"), a Delaware corporation and a wholly-owned
subsidiary of Coram, with and into Lincare, with Lincare becoming a wholly-owned
subsidiary of Coram. In accordance with the Merger Agreement, each share of
Common Stock, par value $.01 per share, of Lincare (the "Lincare Common Stock")
outstanding immediately prior to the consummation of the Merger will be
converted into the right to receive 1.5354 shares (the "Exchange Ratio") of
Common Stock, par value $.001 per share, of Coram (the "Coram Common Stock").
Approval and adoption of the Merger Agreement also will constitute approval of
the amendment of Coram's Certificate of Incorporation effective upon
consummation of the Merger. Such amendment will increase the number of
authorized shares of Coram Common Stock. In addition, approval and adoption of
the Merger Agreement will constitute approval of the assumption by Coram of
Lincare's stock option plans under which the outstanding Lincare stock options
were granted.

In addition to the proposal regarding the Merger Agreement, you will be
asked to consider and vote upon (i) the election of members of the Board of
Directors of Coram and (ii) a proposal, contingent upon approval of the proposal
regarding the Merger Agreement, to amend Coram's 1994 Stock Option/Stock
Issuance Plan (the "Coram Option Plan") to increase the number of shares
authorized to be issued under the Coram Option Plan from 7,600,000 to
12,000,000. The Merger and other related matters, the election of directors and
the proposal to amend the Coram Option Plan are more fully described in the
accompanying Joint Proxy Statement/Prospectus. We urge you to review carefully
the Joint Proxy Statement/Prospectus and the accompanying appendices.

AFTER CAREFUL CONSIDERATION, THE CORAM BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
(INCLUDING THE AMENDMENT TO CORAM'S CERTIFICATE OF INCORPORATION) AND THE
AMENDMENT TO THE CORAM OPTION PLAN. THE BOARD BELIEVES THAT THE TERMS OF THE
MERGER AND THE AMENDMENT TO THE CORAM OPTION PLAN ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF CORAM AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE MERGER AND THE AMENDMENT TO THE CORAM OPTION PLAN AT THE ANNUAL
MEETING. IN ADDITION, THE CORAM BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF EACH NOMINEE TO THE CORAM BOARD OF DIRECTORS NAMED IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.

We hope you will attend the Annual Meeting. However, whether or not you
plan to attend the Annual Meeting, it is important that your shares are
represented. Accordingly, please complete, sign and date the enclosed proxy and
promptly return it in the enclosed prepaid envelope. If you are present at the
meeting you may, if you wish, withdraw your proxy and vote in person.

Very truly yours,

/s/ JAMES M. SWEENEY
JAMES M. SWEENEY
Chairman and
Chief Executive Officer
<PAGE> 5

CORAM HEALTHCARE CORPORATION
1125 SEVENTEENTH STREET, SUITE 1500
DENVER, COLORADO 80202

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July , 1995

To the Stockholders of
CORAM HEALTHCARE CORPORATION:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Coram Healthcare Corporation, a Delaware corporation ("Coram"),
will be held at a.m., local time, on , July , 1995, to
consider and act upon:

1. A proposal to approve and adopt the Agreement and Plan of Merger
dated as of April 17, 1995 (the "Merger Agreement") between Lincare
Holdings Inc., a Delaware corporation ("Lincare"), and Coram, providing for
the merger (the "Merger") of CHC Acquisition Corp. ("Merger Sub"), a
Delaware corporation and a wholly-owned subsidiary of Coram, with and into
Lincare, with Lincare becoming a wholly-owned subsidiary of Coram. In
accordance with the Merger Agreement, each share of Common Stock, par value
$.01 per share, of Lincare (the "Lincare Common Stock") outstanding
immediately prior to the consummation of the Merger will be converted into
the right to receive 1.5354 shares (the "Exchange Ratio") of Common Stock,
par value $.001 per share, of Coram (the "Coram Common Stock"). Approval
and adoption of the Merger Agreement also will constitute approval of the
amendment of Coram's Certificate of Incorporation effective upon
consummation of the Merger. Such amendment will increase the number of
authorized shares of Coram Common Stock. In addition, approval and adoption
of the Merger Agreement will constitute approval of the assumption by Coram
of Lincare's stock option plans under which the outstanding Lincare stock
options were granted.

2. The election of members of the Coram Board of Directors.

3. A proposal to amend Coram's 1994 Stock Option/Stock Issuance Plan
(the "Coram Option Plan"), contingent upon approval of the proposal
regarding the Merger Agreement, to increase the number of shares authorized
to be issued under the Coram Option Plan from 7,600,000 to 12,000,000.

4. Such other business as properly may come before the Coram Meeting
or any adjournment or postponement thereof.

The Merger and other related matters (including the proposed amendment of
Coram's Certificate of Incorporation) and the election of directors and the
proposed amendment to the Coram Option Plan are more fully described in the
accompanying Joint Proxy Statement/Prospectus and the appendices thereto, which
form a part of this Notice.

The Board of Directors of Coram has fixed the close of business on May ,
1995 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. Only stockholders of record at the close of
business on the Record Date are entitled to notice of and to vote at the Annual
Meeting and any adjournments or postponements thereof. A list of such
stockholders will be available for inspection at the offices of Coram located at
1125 Seventeenth Street, Suite 1500, Denver, Colorado 80202, at least ten days
prior to the Coram Meeting.

AFTER CAREFUL CONSIDERATION, THE CORAM BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
(INCLUDING THE AMENDMENT OF CORAM'S CERTIFICATE OF INCORPORATION) AND THE
AMENDMENT TO THE CORAM OPTION PLAN. THE BOARD BELIEVES THAT THE TERMS OF THE
MERGER AND THE AMENDMENT TO THE CORAM OPTION PLAN ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF CORAM AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE MERGER AND THE AMENDMENT TO THE CORAM OPTION PLAN AT THE ANNUAL
MEETING. IN ADDITION, THE CORAM BOARD OF DIRECTORS
<PAGE> 6

RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE TO THE CORAM BOARD OF
DIRECTORS NAMED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.

Whether or not you plan to attend the Annual Meeting, please execute, date
and return promptly the enclosed form of proxy. A return envelope is enclosed
for your convenience and requires no postage for mailing the United States.

By Order of the Board of Directors,

/s/ SAM R. LENO
SAM R. LENO
Secretary

June , 1995

YOUR VOTE IS IMPORTANT

TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE> 7

LINCARE HOLDINGS INC.
19337 U.S. 19 NORTH
CLEARWATER, FLORIDA 34624

June , 1995

Dear Stockholder:

You are cordially invited to attend a Special Meeting of Stockholders (the
"Lincare Meeting") of Lincare Holdings Inc., a Delaware corporation ("Lincare"),
to be held on , July , 1995, at a.m., local time,
at .

At the Lincare Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger dated as of April
17, 1995 (the "Merger Agreement") between Lincare and Coram Healthcare
Corporation, a Delaware corporation ("Coram"), providing for the merger (the
"Merger") of CHC Acquisition Corp. ("Merger Sub"), a Delaware corporation and a
wholly-owned subsidiary of Coram, with and into Lincare, with Lincare becoming a
wholly-owned subsidiary of Coram. In accordance with the Merger Agreement, each
share of Common Stock, par value $.01 per share, of Lincare (the "Lincare Common
Stock") outstanding immediately prior to the consummation of the Merger will be
converted into the right to receive 1.5354 shares (the "Exchange Ratio") of
Common Stock, par value $.001 per share, of Coram (the "Coram Common Stock").
The Merger and related transactions are more fully described in the accompanying
Joint Proxy Statement/Prospectus. We urge you to review carefully the Joint
Proxy Statement/Prospectus and the accompanying appendices.

AFTER CAREFUL CONSIDERATION, THE LINCARE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE
BOARD BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF LINCARE AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE MERGER AT THE LINCARE MEETING.

We hope you will attend the Lincare Meeting. However, whether or not you
plan to attend the meeting, it is important that your shares are represented.
Accordingly, please complete, sign and date the enclosed proxy and promptly
return it in the enclosed prepaid envelope. If you are present at the meeting
you may, if you wish, withdraw your proxy and vote in person.

Very truly yours,

/s/ JAMES T. KELLY
JAMES T. KELLY
Chairman of the Board,
Chief Executive Officer and President
<PAGE> 8

LINCARE HOLDINGS INC.
19337 U.S. 19 NORTH
CLEARWATER, FLORIDA 34624

To the Stockholders of
LINCARE HOLDINGS INC.:

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Lincare
Meeting") of Lincare Holdings Inc., a Delaware corporation ("Lincare"), will be
held at , at a.m., local time, on , July , 1995,
to consider and act upon:

1. A proposal to approve and adopt the Agreement and Plan of Merger
dated as of April 17, 1995 (the "Merger Agreement") between Lincare and
Coram Healthcare Corporation, a Delaware corporation ("Coram"), providing
for the merger (the "Merger") of CHC Acquisition Corp. ("Merger Sub"), a
Delaware corporation and a wholly-owned subsidiary of Coram, with and into
Lincare, with Lincare becoming a wholly-owned subsidiary of Coram. In
accordance with the Merger Agreement, each share of Common Stock, par value
$.01 per share, of Lincare (the "Lincare Common Stock") outstanding
immediately prior to the consummation of the Merger will be converted into
the right to receive 1.5354 shares (the "Exchange Ratio") of Common Stock,
par value $.001 per share, of Coram (the "Coram Common Stock").

2. Such other business as properly may come before the Lincare Meeting
or any adjournment or postponement thereof.

The Merger and other related matters are more fully described in the
accompanying Joint Proxy Statement/Prospectus and the appendices thereto, which
form a part of this Notice.

The Board of Directors of Lincare has fixed the close of business on May
, 1995 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Lincare Meeting or any
adjournment or postponement thereof. Only stockholders of record at the close of
business on the Record Date are entitled to notice of and to vote at the Lincare
Meeting and any adjournments or postponements thereof. A list of such
stockholders will be available for inspection at the offices of Lincare located
at 19337 U.S. 19 North, Clearwater, Florida 34624, at least ten days prior to
the Lincare Meeting.

Whether or not you plan to attend the Lincare Meeting, please execute, date
and return promptly the enclosed form of proxy. A return envelope is enclosed
for your convenience and requires no postage for mailing the United States.

By Order of the Board of Directors,

/s/ JAMES M. EMANUEL
JAMES M. EMANUEL
Secretary

June , 1995

YOUR VOTE IS IMPORTANT

TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND MAIL
IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE> 9

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED MAY 15, 1995
CORAM HEALTHCARE CORPORATION

LINCARE HOLDINGS INC.

JOINT PROXY STATEMENT
FOR MEETINGS OF STOCKHOLDERS
TO BE HELD ON JULY , 1995

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

CORAM HEALTHCARE CORPORATION

PROSPECTUS

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

This Joint Proxy Statement/Prospectus is being furnished to the
stockholders of Coram Healthcare Corporation, a Delaware corporation ("Coram"),
and to the stockholders of Lincare Holdings Inc., a Delaware corporation
("Lincare"), in connection with the solicitation of proxies by their respective
Boards of Directors to be used at the Annual Meeting of Stockholders of Coram
(the "Coram Meeting") and a Special Meeting of Stockholders of Lincare (the
"Lincare Meeting"), each of which is to be held on July , 1995, and at any
adjournment or postponement thereof.

At each of the Coram Meeting and Lincare Meeting, the respective
stockholders will be asked to consider and vote upon a proposal to approve and
adopt the Agreement and Plan of Merger dated as of April 17, 1995 (the "Merger
Agreement") between Lincare and Coram, providing for the merger (the "Merger")
of CHC Acquisition Corp. ("Merger Sub"), a Delaware corporation and a
wholly-owned subsidiary of Coram, with and into Lincare, with Lincare becoming a
wholly-owned subsidiary of Coram. Upon consummation of the Merger, each share of
Common Stock, par value $.01 per share, of Lincare (the "Lincare Common Stock")
outstanding immediately prior to the consummation of the Merger will be
converted into the right to receive 1.5354 shares (the "Exchange Ratio") of
Common Stock, par value $.001 per share, of Coram (the "Coram Common Stock").
Approval and adoption of the Merger Agreement by Coram's stockholders also will
constitute approval of the amendment of Coram's Certificate of Incorporation
(thereafter, the "Coram Certificate") effective upon consummation of the Merger.
Such amendment will increase the number of authorized shares of Coram Common
Stock. See "Amendment of Coram's Certificate of Incorporation." In addition,
approval and adoption of the Merger Agreement will constitute approval of the
assumption by Coram of the Lincare Stock Option Plans (as defined below) under
which the outstanding Lincare stock options were issued. See "The Merger
Agreement--Treatment of Stock Options." A copy of the Merger Agreement is
attached as Appendix A to this Joint Proxy Statement/Prospectus.

In addition, at the Coram Meeting the stockholders of Coram will consider
and vote upon (i) the election of members of the Coram Board of Directors and
(ii) a proposal, contingent upon approval of the proposal regarding the Merger
Agreement, to amend Coram's 1994 Stock Option/Stock Issuance Plan (the "Coram
Option Plan") to increase the number of shares authorized to be issued
thereunder from 7,600,000 to 12,000,000.

Coram has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
S-4 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Coram Common Stock to be issued pursuant to the Merger
Agreement. This Joint Proxy Statement/Prospectus constitutes the Prospectus of
Coram filed as part of the Registration Statement. All information contained
herein with respect to Coram has been furnished by Coram and all information
contained herein with respect to Lincare has been furnished by Lincare.

The Coram Common Stock is quoted on the New York Stock Exchange (the
"NYSE") under the symbol "CRH." On June , 1995, the last reported sale price
for a share of Coram Common Stock on the NYSE was $ .

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

SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN CONSIDERATIONS
WHICH SHOULD BE CONSIDERED IN EVALUATING THE SECURITIES OFFERED HEREBY.

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

THE SECURITIES ISSUABLE PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

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

THIS JOINT PROXY STATEMENT/PROSPECTUS AND THE ACCOMPANYING FORM OF PROXY
ARE FIRST BEING MAILED OR DELIVERED TO THE STOCKHOLDERS OF CORAM AND LINCARE ON
OR ABOUT JUNE , 1995.

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

THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS JUNE , 1995.
<PAGE> 10

AVAILABLE INFORMATION

Coram and Lincare are subject to informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. The Registration Statement, as well as reports, proxy statements
and other information filed by each of Coram and Lincare can be inspected and
copied at the Commission's Public Reference Room, Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the public reference
facilities maintained by the Commission at its regional offices located at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661, and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such materials can be obtained from the Commission at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Additionally, material filed by Coram can be inspected
at the offices of the New York Stock Exchange ("NYSE") at 20 Broad Street, New
York, New York 10005 and material filed by Lincare can be inspected at the
offices of the Nasdaq National Market System ("Nasdaq"), Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006.

A copy of Coram's 1994 Annual Report to Stockholders (the "Stockholders
Report") is being mailed to Coram stockholders concurrently with this Joint
Proxy Statement/Prospectus. The Stockholders Report includes Coram's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994, without
exhibits, including the financial statements and the financial statement
schedules, required to be filed with the Commission pursuant to Rule 13a-1 under
the Exchange Act. The exhibits will be provided to any Coram stockholder upon
the receipt of a written request and the payment of a 25 cents per page fee to
cover Coram's costs of providing such exhibits. Requests for exhibits should be
mailed to Coram Healthcare Corporation, 1125 Seventeenth Street, Suite 1500,
Denver, Colorado 80202, Attention: Investor Relations.

Coram has filed the Registration Statement with the Commission covering the
Coram Common Stock to be issued pursuant to the Merger Agreement. As permitted
by the rules and regulations of the Commission, this Joint Proxy
Statement/Prospectus does not contain all information set forth in the
Registration Statement and the exhibits thereto. For further information, please
refer to the Registration Statement, including the exhibits thereto. Statements
contained in this Joint Proxy Statement/Prospectus relating to the contents of
any contract or other document referred to herein are not necessarily complete,
and reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.

All information concerning Coram contained in this Joint Proxy
Statement/Prospectus has been furnished by Coram and all information concerning
Lincare contained in this Joint Proxy Statement/Prospectus has been furnished by
Lincare. No person is authorized to provide any information or to make any
representation with respect to the matters described in this Joint Proxy
Statement/Prospectus other than those contained herein and, if given or made,
such information or representation must not be relied upon as having been
authorized by Coram, Lincare or any other person. This Joint Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
any offer to purchase, any securities, or a solicitation of a proxy, in any
jurisdiction in which, or to or from any person to or from whom, it is unlawful
to make such an offer or solicitation. Neither the delivery of this Joint Proxy
Statement/Prospectus nor any distribution of securities hereunder shall under
any circumstances be deemed to imply that there has been no change in the
assets, properties or affairs of Coram or Lincare since the date hereof or that
the information set forth herein is correct as of any time subsequent to the
date hereof.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
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<S> <C>
AVAILABLE INFORMATION........................... 2
SUMMARY......................................... 5
General......................................... 5
Coram........................................... 5
CHC Acquisition Corp............................ 6
Lincare......................................... 6
The Meetings.................................... 6
The Coram Meeting............................... 6
The Lincare Meeting............................. 7
The Merger...................................... 7
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL
DATA.......................................... 11
Coram Summary Historical Consolidated Financial
Data.......................................... 11
Caremark Business Summary Historical
Consolidated Financial Data................... 12
Lincare Summary Historical Consolidated
Financial Data................................ 12
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
DATA.......................................... 14
COMPARATIVE PER SHARE DATA...................... 15
COMPARATIVE MARKET DATA......................... 16
INVESTMENT CONSIDERATIONS....................... 17
Implementation of Business Strategy............. 17
Dependence on Payors and Reimbursement Related
Risks......................................... 17
Limited Operating History of Coram; Recent
Losses........................................ 18
Financial Leverage.............................. 18
Dependence on Key Personnel..................... 18
Governmental Regulation......................... 19
Health Care Reform Legislation.................. 20
Certain Litigation and Governmental
Investigations................................ 20
Competition..................................... 20
Potential Professional Liability................ 21
Changes in Technology........................... 21
Interests of Certain Persons in the Merger...... 21
THE CORAM MEETING............................... 22
General......................................... 22
Matters to be Considered at the Coram Meeting... 22
Record Date..................................... 22
Proxies......................................... 23
Quorum.......................................... 23
Vote Required................................... 23
THE LINCARE MEETING............................. 25
General......................................... 25
Matters to be Considered at the Lincare
Meeting....................................... 25
Record Date..................................... 25
Proxies......................................... 25
Quorum.......................................... 26
Vote Required................................... 26
THE MERGER...................................... 27
Background of the Merger........................ 27
Coram's Reasons for the Merger and Board of
Directors' Recommendation..................... 28
Opinion of Coram's Financial Advisor............ 29
Lincare's Reasons for the Merger and Board of
Directors' Recommendation..................... 32
Opinion of Lincare's Financial Advisor.......... 34
Interests of Certain Persons in the Merger...... 37
Certain Federal Income Tax Consequences......... 39
Regulatory Approvals............................ 40
Accounting Treatment............................ 40
Resale Restrictions............................. 41
THE MERGER AGREEMENT............................ 42
The Merger...................................... 42
Effective Time of the Merger.................... 42
Conversion of Securities........................ 42
Treatment of Stock Options...................... 42
Exchange of Certificates........................ 42
Representations and Warranties.................. 43
Covenants; Conduct of Business Prior to
Effective Time................................ 44
Negotiations with Others........................ 45
Management After the Merger..................... 45
Indemnification and Insurance................... 45
Conditions of the Merger........................ 46
Termination..................................... 46
Effect of Termination and Abandonment........... 47
Amendment and Waiver............................ 47
CAPITALIZATION.................................. 48
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
OF CORAM...................................... 49
Selected Historical Financial Data of Coram..... 49
Selected Historical Financial Data of the
Caremark Business............................. 51
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CORAM............................. 52
History......................................... 52
Recent Developments............................. 52
Impact of Four-Way Merger and Post Four-Way
Merger Consolidation.......................... 52
The Caremark Transaction........................ 53
Impact of Pricing/Volume Trends................. 54
Results of Operations........................... 54
Three Months Ended March 31, 1995 Compared to
Three Months Ended March 31, 1994............. 55
Certain Trends from Prior Quarter............... 56
Liquidity and Capital Resources................. 59
Future Health Care Proposals and Legislation.... 61
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--THE CAREMARK BUSINESS............. 62
General......................................... 62
Three Months Ended March 31, 1995 Compared to
Three Months Ended March 31, 1994............. 62
SELECTED CONSOLIDATED FINANCIAL DATA OF
LINCARE....................................... 65
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- LINCARE......................... 67
Net Revenues.................................... 67
Cost of Goods and Services...................... 67
Operating and Other Expenses.................... 67
Amortization Expense............................ 68
Operating Income................................ 68
Interest Expense................................ 69
Income Taxes.................................... 69
Acquisitions.................................... 69
Liquidity and Capital Resources................. 69
BUSINESS OF LINCARE............................. 71
General......................................... 71
The Home Respiratory Market..................... 71
Operations After the Merger..................... 71
Business Strategy............................... 71
Oxygen and Other Respiratory Services........... 71
Lincare Operations.............................. 72
Sales and Marketing............................. 73
Recent Acquisitions............................. 74
Quality Control................................. 74
Suppliers....................................... 74
Competition..................................... 74
Medicare and other Third Party Reimbursements... 75
Governmental Regulation......................... 76
Insurance....................................... 77
Employees....................................... 77
Environmental Matters........................... 77
Properties...................................... 78
Legal Proceedings............................... 78
MANAGEMENT OF LINCARE........................... 79
Directors and Executive Officers................ 79
Director's Fees................................. 80
Committees and Meetings of the Board of
Directors..................................... 80
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
EXECUTIVE COMPENSATION.......................... 81
Employment Agreements........................... 81
Compensation Committee Report................... 82
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT OF LINCARE......................... 85
COMPARATIVE RIGHTS OF STOCKHOLDERS.............. 86
General......................................... 86
Number and Election of Directors................ 86
No Stockholder Action by Written Consent........ 86
Common Stock.................................... 87
Preferred Stock................................. 87
Amendment of the Certificate of Incorporation
and Bylaws.................................... 87
Business Combinations........................... 87
Limitation of Liability of Directors............ 88
Indemnification of Directors and Officers....... 88
BUSINESS OF CORAM............................... 90
General......................................... 90
History......................................... 90
Industry Overview............................... 90
Business Strategy............................... 92
Coram Consolidation Plan........................ 93
The Caremark Transaction........................ 93
Caremark Consolidation Plan..................... 94
Delivery of Alternate Site Health Care
Services...................................... 94
Products and Services of Coram.................. 96
Organization and Operations..................... 99
Reimbursement of Services....................... 99
Quality Assurance............................... 100
Competition..................................... 100
Sales and Marketing............................. 101
Customers and Suppliers......................... 102
Governmental Regulation......................... 102
Potential Liability and Insurance............... 105
Employees....................................... 105
Facilities...................................... 105
Litigation...................................... 106
DESCRIPTION OF CORAM CAPITAL STOCK.............. 107
Common Stock.................................... 107
Preferred Stock................................. 107
Transfer Agent and Registrar.................... 107
DIVIDEND POLICY................................. 107
MANAGEMENT OF CORAM............................. 108
Directors and Executive Officers of Coram....... 108
Committees and Meetings of the Board of
Directors..................................... 109
Compliance With Section 16...................... 110
EXECUTIVE COMPENSATION.......................... 110
Compensation of Directors....................... 110
Summary of Cash and Certain Other Compensation
of Executive Officers......................... 111
SUMMARY COMPENSATION TABLE...................... 111
Option Grants in Last Fiscal Year............... 112
Option Exercises in Last Fiscal Year and Fiscal
Year-End Values............................... 113
Employment Contracts and Change of Control
Arrangements.................................. 113
Compensation Committee Interlocks and Insider
Participation................................. 113
COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION.................................. 114
General Compensation Policy..................... 114
CEO Compensation................................ 115
Compliance with Internal Revenue Code Section
162(m)........................................ 115
STOCK PERFORMANCE GRAPH......................... 116
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT OF CORAM........................... 117
CERTAIN RELATIONSHIPS AND TRANSACTIONS.......... 119
AMENDMENT OF CORAM'S CERTIFICATE OF
INCORPORATION................................. 120
PROPOSAL TO ELECT CORAM DIRECTORS............... 121
Introduction.................................... 121
Information Concerning Incumbent Directors and
Nominees to the Coram Board of Directors...... 121
PROPOSAL TO AMEND THE CORAM OPTION PLAN......... 122
Introduction.................................... 122
Equity Incentive Programs....................... 122
Share Reserve................................... 122
Plan Administration............................. 123
Eligibility..................................... 123
Valuation....................................... 123
Discretionary Option Grant Program.............. 123
Automatic Option Grant Program.................. 124
Stock Issuance Program.......................... 125
General Provisions.............................. 125
Option/Vesting Acceleration..................... 125
Financial Assistance............................ 126
Special Tax Election............................ 126
Amendment and Termination....................... 126
Option Grants................................... 127
Federal Income Tax Consequences................. 127
Option Grants................................... 127
Stock Appreciation Rights....................... 129
Direct Stock Issuances.......................... 129
Accounting Treatment............................ 129
Stockholder Approval............................ 129
LEGAL MATTERS................................... 130
EXPERTS......................................... 130
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING... 130
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS.................................... 132
Coram Healthcare Corporation Unaudited Pro Forma
Condensed Combined Balance Sheet.............. 133
Coram Healthcare Corporation Unaudited Pro Forma
Condensed Combined Statement of Operations.... 134
Lincare Holdings Inc. Unaudited Pro Forma
Condensed Combined Statement of Operations.... 135
Coram Healthcare Corporation Unaudited Pro Forma
Condensed Combined Statement of Operations.... 136
Lincare Holdings Inc. Unaudited Pro Forma
Condensed Combined Statement of Operations.... 137
Coram Healthcare Unaudited Pro Forma Condensed
Combined Statement of Income.................. 138
Coram Healthcare Unaudited Pro Forma Condensed
Combined Statement of Income.................. 139
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.......................... 140
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES..... F-1
APPENDIX A -- Agreement and Plan of Merger...... A-1
APPENDIX B -- Fairness Opinion of Donaldson,
Lufkin & Jenrette Securities Corporation...... B-1
APPENDIX C -- Fairness Opinion of Alex. Brown &
Sons Incorporated............................. C-1
APPENDIX D -- Amendment to Certificate of
Incorporation of Coram........................ D-1
APPENDIX E -- Amended and Restated 1994 Stock
Option/Stock Issuance Plan.................... E-1
</TABLE>

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<PAGE> 13

SUMMARY

The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Joint Proxy Statement/Prospectus and the appendices hereto. Stockholders
are urged to read this Joint Proxy Statement/Prospectus and its appendices
before voting on the matters discussed herein. As used herein, the term "Coram"
refers to Coram Healthcare Corporation, and the term "Lincare" refers to Lincare
Holdings Inc., in both cases including, unless the context otherwise requires,
their respective subsidiaries.

GENERAL

This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Coram Healthcare Corporation, a Delaware corporation ("Coram"), in connection
with the solicitation of proxies by the Board of Directors of Coram, for use at
the Annual Meeting of Stockholders of Coram (the "Coram Meeting") which is
scheduled to be held on July , 1995. This Joint Proxy Statement/Prospectus is
also being furnished to stockholders of Lincare Holdings Inc., a Delaware
corporation ("Lincare"), in connection with the solicitation of proxies by the
Board of Directors of Lincare, for use at the Special Meeting of Stockholders of
Lincare (the "Lincare Meeting") which is scheduled to be held on July , 1995.
At the Coram Meeting and the Lincare Meeting, the stockholders of Coram and the
stockholders of Lincare will be asked to consider and vote upon, among other
things, the proposed merger (the "Merger") of CHC Acquisition Corp., a Delaware
corporation ("Merger Sub"), with and into Lincare pursuant to the terms of the
Agreement and Plan of Merger dated April 17, 1995. The Merger Agreement is
included in this Joint Proxy Statement/Prospectus as Appendix A. In connection
with the Merger, all of the outstanding shares of common stock, $.01 par value
per share, of Lincare (the "Lincare Common Stock") will be exchanged for shares
of common stock, $.001 par value per share, of Coram (the "Coram Common Stock")
at the rate of 1.5354 shares (the "Exchange Ratio") of Coram Common Stock for
each share of Lincare Common Stock and all outstanding options to acquire
Lincare Common Stock will be assumed by Coram, together with the various Lincare
Stock Option Plans under which those options were granted, and the assumed
options will be converted into options to purchase Coram Common Stock based on
the Exchange Ratio. The information in this Joint Proxy Statement/Prospectus
concerning Coram and Lincare has been furnished by each of such entities
respectively.

CORAM

Coram is the largest provider of alternate site (outside the hospital)
infusion therapy and related services in the United States, operating 143
branches as of March 31, 1995, covering geographic locations in which over 90%
of the population of the United States resides. Infusion therapy involves the
intravenous administration of anti-infective, chemotherapy, pain management,
nutrition, and other therapies. Other services offered by Coram include the
provision of lithotripsy, non-intravenous infusion products and physician
support services. On April 6, 1995, Coram acquired the alternate site infusion
and certain related businesses of Caremark International Inc. (the "Caremark
Business"), which at that time was the largest provider of alternate site
infusion therapies in the United States based on breadth of services and total
revenues (such acquisition, including certain financings related thereto, are
collectively referred to herein as the "Caremark Transaction").

Coram was formed on July 8, 1994 pursuant to a merger (the "Four-Way
Merger") by and among T2 Medical, Inc. ("T2"), Curaflex Health Services, Inc.
("Curaflex"), Medisys, Inc. ("Medisys") and HealthInfusion, Inc.
("HealthInfusion"), each of which was a publicly-held national or regional
provider of home infusion therapy and related services. The Four-Way Merger
enabled Coram to become a national provider of home infusion and other alternate
site health care services. On September 12, 1994, Coram further broadened its
geographic coverage by acquiring H.M.S.S., Inc. ("HMSS"), a leading regional
provider of home infusion therapies based in Houston, Texas. Coram is in the
process of completing a branch and corporate office consolidation of its five
predecessor companies (the "Coram Consolidation Plan") which is expected to
result in significant annual cost savings and operating efficiencies. Coram
expects to implement a

5
<PAGE> 14

similar branch office and consolidation program (the "Caremark Consolidation
Plan") to integrate the Caremark Business, resulting in additional cost savings
and operating efficiencies. Coram is led by a newly formed management team with
extensive background in the health care industry, including James M. Sweeney,
Chairman and Chief Executive Officer. Mr. Sweeney is widely regarded as having
pioneered the home infusion industry when he founded the predecessor to Caremark
in 1979.

Coram's principal executive offices are located at 1125 Seventeenth Street,
Suite 1500, Denver, Colorado 80202, and its telephone number is (303) 292-4973.

CHC ACQUISITION CORP.

Merger Sub is a Delaware corporation recently organized as a wholly-owned
subsidiary of Coram for the purpose of effecting the Merger. It has no material
assets and has not engaged in any activities except in connection with such
proposed acquisition. Merger Sub's executive offices are located at 1125
Seventeenth Street, Suite 1500, Denver, Colorado 80202. Its telephone number at
that address is (303) 292-4973.

LINCARE

Lincare is one of the nation's largest providers of oxygen and other
respiratory therapy services to patients in the home. Lincare's customers
typically suffer from chronic obstructive pulmonary disease, such as emphysema,
chronic bronchitis or asthma, and require supplemental oxygen or other
respiratory therapy services in order to alleviate the symptoms and discomfort
of respiratory dysfunction. Lincare currently serves over 70,000 customers in 35
states through 190 operating centers.

Lincare's principal executive offices are located at 19337 U.S. 19 North,
Clearwater, Florida 34624, and its telephone number is (813) 530-7700.

THE MEETINGS

THE CORAM MEETING

The Coram Meeting will be held on July , 1995 at a.m., local
time, at . At the Coram Meeting, including any adjournment
thereof, the stockholders of Coram will consider and vote on (i) a proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby, (ii) the election of members of the Coram Board of Directors, (iii) a
proposal, contingent upon approval of the proposal regarding the Merger
Agreement, to amend the Coram Option Plan and (iv) such other business as
properly may come before the Coram Meeting. Approval and adoption of the Merger
Agreement by the stockholders of Coram also will constitute approval of the
amendment of Coram's Certificate of Incorporation effective upon consummation of
the Merger. The amendment of Coram's Certificate of Incorporation to increase
the number of authorized shares of Coram Common Stock will be effective upon
consummation of the Merger. See "The Coram Meeting," "The Merger Agreement" and
"Amendment of Coram's Certificate of Incorporation." A vote in favor of the
merger will also constitute a vote in favor of Coram's assumption of the Lincare
Stock Option Plans and the outstanding options thereunder.

The close of business on May , 1995, has been fixed as the record date
(the "Record Date") for the determination of the stockholders of Coram entitled
to notice of and to vote at the Coram Meeting. Holders of Coram Common Stock are
entitled to one vote for each share of Coram Common Stock held by them. The
holders of a majority of the outstanding shares of Coram Common Stock, present
either in person or by properly executed proxies, will constitute a quorum at
the Coram Meeting.

The affirmative vote of holders of a majority of the outstanding shares of
Coram Common Stock entitled to vote thereon is required to approve and adopt the
Merger Agreement. The affirmative vote of a majority of the outstanding shares
of Coram Common Stock present at the Coram Meeting, either in person or by
properly executed proxies, and entitled to vote is required to elect each member
of the Coram Board of Directors and to approve and adopt the amendments to the
Coram Option Plan. As of the Record Date, shares of Coram Common Stock
were issued and outstanding, of which approximately % were
beneficially owned by directors, executive officers and affiliates of Coram
(excluding shares

6
<PAGE> 15

which may be acquired upon exercise of options which are exercisable within 60
days of the Record Date). See "The Coram Meeting--Vote Required."

THE LINCARE MEETING

The Lincare Meeting will be held on July , 1995 at a.m., local
time, at . At the Lincare Meeting, including any adjournment thereof,
the stockholders of Lincare will consider and vote on a proposal to approve and
adopt the Merger Agreement and the transactions contemplated thereby, and such
other business as properly may come before the Lincare Meeting. The Merger
Agreement provides that as of the effective time of the Merger, Merger Sub, a
wholly-owned subsidiary of Coram, will be merged into and with Lincare,
whereupon Lincare will become a wholly-owned subsidiary of Coram. See "The
Lincare Meeting" and "The Merger Agreement--Treatment of Stock Options."

The close of business on May , 1995, has been fixed as the Record Date
for the determination of the stockholders of Lincare entitled to notice of and
to vote at the Lincare Meeting. Holders of Lincare Common Stock are entitled to
one vote for each share of Lincare Common Stock held by them. The holders of a
majority of the outstanding shares of Lincare Common Stock, present either in
person or by properly executed proxies, will constitute a quorum at the Lincare
Meeting.

The affirmative vote of the holders of a majority of the outstanding shares
of Lincare Common Stock entitled to vote thereon is required to approve and
adopt the Merger Agreement. As of the Record Date, shares of Lincare
Common Stock were issued and outstanding, of which approximately %
were beneficially owned by directors, executive officers and affiliates of
Lincare (excluding shares which may be acquired upon exercise of
options which are exercisable within 60 days of the Record Date). See "The
Lincare Meeting--Vote Required."

THE MERGER

Conversion of Securities. Upon consummation of the transactions
contemplated by the Merger Agreement, Merger Sub will be merged with and into
Lincare and each share of Lincare Common Stock outstanding immediately prior to
the consummation of the Merger will be converted into the right to receive
1.5354 shares of Coram Common Stock and all Lincare Options (as defined below)
will be assumed by Coram and converted into options exercisable for Coram Common
Stock based on the Exchange Ratio (collectively, the "Merger Consideration"). No
certificates or scrips representing fractional shares of Coram Common Stock will
be issued in the Merger, but cash will be paid to stockholders in lieu thereof.
See "The Merger Agreement--Conversion of Securities."

Recommendations of the Board of Directors. The Coram Board of Directors
believes that the terms of the Merger are fair to, and in the best interests of,
Coram and its stockholders. Accordingly, Coram's Board of Directors has
unanimously approved the Merger Agreement and unanimously recommends a vote FOR
approval and adoption of the Merger Agreement by the stockholders of Coram. The
Board of Directors of Lincare believes that the terms of the Merger are fair to,
and in the best interests of, Lincare and its stockholders. Accordingly,
Lincare's Board of Directors has unanimously approved the Merger Agreement and
unanimously recommends a vote FOR approval and adoption of the Merger Agreement
by the stockholders of Lincare. See "The Merger--Coram's Reasons for the Merger
and Board of Directors' Recommendation" and "--Lincare's Reasons for the Merger
and Board of Directors' Recommendation."

Opinions of Financial Advisors. Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") delivered to the Board of Directors of Coram a written
opinion dated April 17, 1995 that, as of such date and based upon and subject to
certain matters as stated therein, the consideration to be paid by Coram
pursuant to the Merger was fair, from a financial point of view, to the holders
of Coram Common Stock. See "The Merger--Opinion of Coram's Financial Advisor."
DLJ subsequently confirmed its opinion by delivery of a written opinion dated as
of the date of this Joint Proxy Statement/Prospectus. The full text of the
written opinion of DLJ dated as of the date of this Joint Proxy
Statement/Prospectus, which sets forth the assumptions made, matters considered
and limitations on the review undertaken by DLJ, is attached as Appendix B
hereto and is incorporated herein by reference. Coram stockholders are urged to
read the opinion carefully in its entirety.

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<PAGE> 16

Alex. Brown & Sons Incorporated ("Alex. Brown") has acted as financial
advisor to Lincare in connection with the Merger and has delivered to the Board
of Directors of Lincare a written opinion dated April 17, 1995 that, as of such
date, the Exchange Ratio was fair to the stockholders of Lincare from a
financial point of view. Alex. Brown subsequently confirmed its April 17, 1995
opinion by delivery of an opinion dated as of the date of this Joint Proxy
Statement/Prospectus. A copy of the opinion of Alex. Brown, dated the date of
this Joint Proxy Statement/Prospectus, which sets forth the assumptions made,
factors considered and limitations on the review undertaken, is attached as
Appendix C to this Joint Proxy Statement/Prospectus and is incorporated herein
by reference. Stockholders of Lincare are urged to read such opinion in its
entirety. See "The Merger -- Opinion of Lincare's Financial Advisor."

Effective Time of the Merger. The Merger will be effected upon the filing
of a Certificate of Merger (the "Certificate of Merger") with the Delaware
Secretary of State. The date and time of such filing (the "Effective Time") is
currently expected to occur on or shortly after the date of the Coram Meeting
and the Lincare Meeting and satisfaction or waiver of the conditions precedent
to the Merger set forth in the Merger Agreement. See "The Merger
Agreement--Effective Time of the Merger" and "--Conditions of the Merger."

Conditions to the Merger; Termination. The obligations of Coram and
Lincare to consummate the Merger are subject to the satisfaction of certain
conditions, including, among others, (i) obtaining requisite Coram and Lincare
stockholder approvals and requisite regulatory approvals (including the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act")), (ii) the
effectiveness of the Registration Statement and the receipt by Coram of all
necessary approvals under applicable state securities laws, (iii) the absence of
a material adverse change in the financial condition, business, properties,
results of operations or prospects of the other party, (iv) the absence of any
injunction prohibiting consummation of the Merger, (v) the receipt of certain
legal opinions with respect to the tax consequences of the Merger and certain
other matters and (vi) the receipt of accountants' letters with respect to the
qualification of the Merger as a "pooling-of-interests" and customary "cold
comfort" matters. See "The Merger Agreement--Conditions of the Merger."

The Merger Agreement is subject to termination by either Coram or Lincare
if the Merger is not consummated on or before October 31, 1995. In addition, the
Merger Agreement may be terminated under certain circumstances by either Coram
or Lincare, including circumstances under which either of the parties may be
entitled to receive a termination fee. See "The Merger Agreement--Termination"
and "--Effect of Termination and Abandonment."

Surrender of Lincare Common Stock Certificates. After the Effective Time,
holders of Lincare Common Stock will be furnished with a transmittal letter to
be used to exchange their certificates for the Merger Consideration.
Stockholders should not return any stock certificates with the form of proxy
accompanying this Joint Proxy Statement/Prospectus. See "The Merger
Agreement--Exchange of Certificates."

Treatment of Stock Options. At the Effective Time, all options to purchase
shares of Lincare Common Stock (individually, a "Lincare Option") outstanding
under Lincare's Amended and Restated 1991 Stock Option Plan (the "Lincare 1991
Option Plan"), Lincare's 1994 Stock Option Plan (the "Lincare 1994 Option Plan")
and the Lincare Amended and Restated Non-Qualified Stock Plan (the
"Non-Qualified Plan" and together with the Lincare 1991 Option Plan and the
Lincare 1994 Stock Option Plan, the "Lincare Stock Option Plans") granted on or
prior to the Effective Time, whether or not currently exercisable, will remain
outstanding and will be assumed by Coram. Thereafter, such options will be
exercisable upon the same terms and conditions as under the applicable Lincare
Stock Option Plan and the applicable option agreement issued thereunder, except
that (i) the number of shares of Coram Common Stock subject to each Lincare
Option will be determined by multiplying the number of shares of Lincare Common
Stock subject to the Lincare Option immediately prior to the Effective Time by
the Exchange Ratio and (ii) the per share exercise price will be determined by
dividing the per share exercise price in effect immediately prior to the
Effective Time under the Lincare Option by the Exchange Ratio. Approval of the
Merger Agreement by the stockholders of

8
<PAGE> 17

Coram will constitute stockholder approval of the assumption by Coram of the
Lincare Stock Option Plans. See "The Merger Agreement--Treatment of Stock
Options."

Employment Agreements. At the Effective Time, employment agreements
between Coram and James T. Kelly, Howard R. Deutsch and John P. Byrnes, who are
currently officers of Lincare, will become effective. Each of such agreements
will be terminable at any time by either party and will contain five-year
non-competition provisions. See "The Merger--Interests of Certain Persons in the
Merger."

Interests of Certain Persons in the Merger. In considering the
recommendation of the Board of Directors of Coram and the Board of Directors of
Lincare with respect to the Merger Agreement and the transactions contemplated
thereby, stockholders should be aware that certain members of the Boards of
Directors of Coram and Lincare and the management of both Coram and Lincare may
have interests in the Merger that are in addition to the interests of
stockholders of Coram and Lincare generally (including, without limitation, the
eligibility for severance benefits). The Boards of Directors of Coram and
Lincare were aware of these interests and considered them, among other factors,
in approving the Merger Agreement and the transactions contemplated thereby. See
"The Merger--Interests of Certain Persons in the Merger," "The Merger
Agreement--Covenants; Conduct of Business Prior to Effective Time,"
"-- Treatment of Stock Options" and "The Merger Agreement--Indemnification and
Insurance."

Regulatory Matters. Coram and Lincare each have filed pre-merger
notification forms with the Federal Trade Commission and the Department of
Justice under the HSR Act, and the required waiting period will expire on June
8, 1995 unless terminated at an earlier date or unless Coram or Lincare receive
a request for additional information. No other material federal or state
regulatory approvals must be obtained in order to consummate the Merger. See
"The Merger--Regulatory Approvals."

Certain Federal Income Tax Consequences. It is a condition to the
obligation of Lincare to consummate the Merger that Lincare receive an opinion
of its counsel, Reboul, MacMurray, Hewitt, Maynard & Kristol, which may be based
upon certain representations and assumptions, that (i) the Merger will
constitute a reorganization for United States federal income tax purposes within
the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended
("Code"); (ii) Lincare, Merger Sub and Coram will each be a party to the
reorganization within the meaning of section 368(b) of the Code; (iii) no gain
or loss will be recognized by Lincare, Merger Sub or Coram as a result of the
consummation of the Merger; and (iv) no gain or loss will be recognized by a
stockholder of Lincare to the extent the stockholder exchanges its shares of
Lincare Common Stock solely for shares of Coram Common Stock pursuant to the
Merger (except with respect to cash received in lieu of a fractional share
interest in Coram Common Stock and except with respect to the conversion and
exchange of any shares of Lincare Common Stock that were acquired by the holder
thereof pursuant to any employee stock option, employee stock purchase plan or
otherwise as compensation). It is a condition to the obligation of Coram to
consummate the Merger that Coram shall have received an opinion from its
counsel, Brobeck, Phleger & Harrison, to the same effect. Lincare and Coram may
each waive the requirement that it receive such an opinion. See "The
Merger--Certain Federal Income Tax Consequences" and "The Merger
Agreement--Conditions of the Merger."

Dissenters' Rights. Under the General Corporation Law of the State of
Delaware (the "DGCL"), holders of Lincare Common Stock are not entitled to
dissenters' rights in connection with the Merger.

Resales of Coram Common Stock. The shares of Coram Common Stock to be
issued pursuant to the Merger Agreement have been registered under the
Securities Act, and therefore may be resold without restriction by persons who
are not deemed to be "affiliates" (as such term is defined under the Securities
Act) of either Coram or Lincare. See "The Merger--Resale Restrictions."

Investment Considerations. See "Investment Considerations" for factors
which should be considered in evaluating the Merger Agreement and the
transactions contemplated thereby.

Amendment of Coram's Certificate of Incorporation. Approval and adoption
of the Merger Agreement by the stockholders of Coram will also constitute
approval of the amendment of Coram's Certificate of Incorporation effective upon
consummation of the Merger. Such amendment will increase the number of
authorized shares of Coram Common Stock from 75,000,000 shares to 200,000,000
shares. See "Comparative

9
<PAGE> 18

Rights of Stockholders," "Description of Coram Capital Stock" and "Amendment of
Coram's Certificate of Incorporation."

Proposal to Elect Coram Directors. The following individuals have been
nominated for election to the Coram Board of Directors: James M. Sweeney,
Patrick J. Fortune, Tommy H. Carter, Richard A. Fink, Dr. Gail R. Wilensky,
Stephen G. Pagliuca, and L. Peter Smith; provided, however, that if the Merger
Agreement and the transactions contemplated thereby are approved and the Merger
is consummated, James T. Kelly and Frank T. Cary will be appointed to Coram's
Board of Directors. See "The Merger Agreement--Management After the Merger,"
"Amendment of Coram's Certificate of Incorporation" and "Proposal to Elect Coram
Directors."

Proposal to Amend the Coram Option Plan. The Coram Board of Directors has
approved an amendment to the Coram Option Plan, contingent upon the approval of
the proposal regarding the Merger Agreement, to increase the number of shares
authorized to be issued thereunder from 7,600,000, representing approximately
19% of the outstanding Coram Common Stock prior to the Effective Time, to
12,000,000, representing approximately 14% of the outstanding Coram Common Stock
immediately following the Effective Time. Approval of the amendment to the Coram
Option Plan by the requisite vote of Coram stockholders is not a condition to,
and is not required for, consummation of the Merger. See "Proposal to Amend the
Coram Option Plan."

10
<PAGE> 19

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The respective summary historical data presented in the tables below have
been derived from Coram's Consolidated Financial Statements and notes thereto,
the Financial Statements of the Caremark Business and the notes thereto and
Lincare's Consolidated Financial Statements and the notes thereto included
elsewhere herein and should be read in conjunction therewith. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Coram"
and "--The Caremark Business" and "--Lincare". Historical financial data for
Coram are based on the combined financial data of the predecessor entities and
may not be comparable on a year by year basis. Certain data for Coram prior to
the fiscal year ended December 31, 1992 are unavailable based upon the
accounting records of such entities.

Data for Coram and the Caremark Business for the three months ended March
31, 1995 and March 31, 1994 have been derived from unaudited consolidated
financial statements. The unaudited financial statements of Coram and the
Caremark Business include all adjustments consisting of normal accruals that
Coram considers necessary for a fair presentation of the financial position and
results of operations for those periods. Operating results for the three months
ended March 31, 1995 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1995.

Data for Lincare for the three months ended March 31, 1995 and March 31,
1994 have been derived from unaudited consolidated financial statements. The
unaudited financial statements of Lincare include all adjustments consisting of
normal accruals that Lincare considers necessary for a fair presentation of the
financial position and results of operations for those periods. Operating
results for the three months ended March 31, 1995 are not necessarily indicative
of the results that may be expected for the entire year ending December 31,
1995.

CORAM SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............. $162,214 $299,851 $413,100 $462,304 $ 450,496 $113,065 $104,778
Gross profit............ -- -- 188,744 177,281 137,314 36,050 29,169
Restructuring costs and
other................. -- -- 2,385 4,468 164,520 -- (4,131)
Operating income
(loss)................ 34,178 82,144 108,564 59,532 (137,601) 9,599 8,612
Net income (loss)....... $ 22,412 $ 56,009 $ 71,858 $ 28,661 $(128,072) $ 3,211 $ 4,589
Net income (loss) per
common share.......... $ .82 $ 1.67 $ 1.95 $ .76 $ (3.32) $ .08 $ 0.11
Weighted average common
and common equivalent
shares outstanding.... 27,189 33,632 36,812 37,778 38,633 38,616 40,939
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1994 MARCH 31, 1995
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 20,046 $ 21,580
Working capital........................................... 83,395 94,274
Total assets.............................................. 576,115 597,451
Long-term obligations, excluding current installments..... 120,817 133,101
Stockholders' equity...................................... 322,261 332,679
</TABLE>

11
<PAGE> 20

CAREMARK BUSINESS SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1990 1991 1992 1993 1994 1994 1995(*)
-------- -------- -------- -------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL OPERATING DATA:
Net revenue............... $391,200 $430,800 $457,000 $420,500 $441,900 $101,000 $96,100
Gross profit.............. 150,200 158,400 135,800 119,900 103,700 26,800 19,900
Restructuring expense..... -- -- 26,700 -- 25,000 25,000 --
Operating income (loss)... 48,100 58,100 1,500 20,500 (2,600) (24,400) 100
Net income (loss)......... 23,100 28,500 (2,800) 6,400 (2,400) (25,100) (500)
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1994 MARCH 31, 1995(*)
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 4,700 $ --
Working capital........................................... 103,200 112,500
Total assets.............................................. 418,700 373,000
Long-term obligations, excluding current installments..... 600 --
Divisional equity......................................... 301,100 330,400
</TABLE>

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

(*) Caremark data shown as of three months ended March 31, 1995, excludes
certain assets not included in the Caremark purchase agreement.

LINCARE SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
THREE
YEAR ENDED DECEMBER 31, MONTHS ENDED
------------------------------------------------------ MARCH 31,
PRO FORMA -----------------
1990(1) 1991 1992 1993 1994 1994 1995
----------- ------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue................ $70,024 $88,634 $117,403 $154,506 $201,142 $44,009 $61,223
Gross profit............... 32,512 45,521 62,570 87,239 114,334 24,839 34,959
Amortization expense....... 10,215 10,572 5,125 4,695 7,281 1,333 2,391
Operating income........... 269 9,444 27,500 46,089 62,258 13,255 19,415
Interest expense........... 5,033 4,902 1,242 387 473 63 110
Net income (loss) before
extraordinary loss....... (2,419) 2,847 16,139 28,252 37,953 8,129 11,862
Extraordinary loss, net of
taxes(2)................. -- -- 1,000 -- -- -- --
Net income (loss) after
extraordinary loss....... (2,419) 2,847 15,139 28,252 37,953 8,129 11,862
Net income (loss) per
common share before
extraordinary loss.... -- .15 .64 1.01 1.34 .29 .42
Net income (loss) per
common share after
extraordinary loss.... -- .15 .60 1.01 1.34 .29 .42
Weighted average common
and common equivalent
shares outstanding.... -- 18,713 25,334 27,911 28,307 28,303 28,526
</TABLE>

12
<PAGE> 21

<TABLE>
<CAPTION>
DECEMBER 31, 1994 MARCH 31, 1995
----------------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................... $ 16,023 $ 7,266
Working capital................................................ 18,517 13,013
Total assets................................................... 195,778 222,625
Long-term obligations, excluding current installments.......... 6,717 14,026
Stockholders' equity........................................... 162,088 178,624
</TABLE>

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

(1) On November 30, 1990, Lincare acquired the outstanding capital stock of
Lincare Inc. from Union Carbide Corporation and members of management in a
leveraged buyout (the "Buyout"). The pro forma statement of operations data
for the year ended December 31, 1990 gives effect to the Buyout as if it
had occurred on January 1, 1990. The pro forma adjustments as a result of
the Buyout reflect (i) increased depreciation expense relating to
capitalized software, (ii) increased amortization of intangible assets,
(iii) interest expense relating to the additional indebtedness incurred and
(iv) the related income tax effects of such adjustments. The pro forma
adjustments do not reflect Lincare's acquisitions subsequent to the Buyout.

(2) Upon the prepayment of Lincare's senior and subordinated debt with the
proceeds of Lincare's March 1992 initial public offering, Lincare recorded
an extraordinary loss, net of taxes, of $1,000,000, attributable to (i) a
prepayment premium ($300,000), (ii) unamortized loan origination fees
related to the senior debt ($990,000) and (iii) unamortized discount on the
subordinated debt ($357,000).

13
<PAGE> 22

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following table presents summary unaudited pro forma selected
operations data for the years ended December 31, 1992, December 31, 1993,
December 31, 1994 and for the three months ended March 31, 1995. This table has
been prepared as if the Merger and the other transactions requiring pro forma
adjustments had occurred on January 1, 1992 assuming that the Merger had been
consummated and accounted for using the pooling-of-interests method of
accounting.

The following summary unaudited pro forma condensed combined financial data
are provided for comparative purposes only and should be read in conjunction
with the unaudited pro forma condensed combined financial statements and the
notes thereto and the separate audited consolidated financial statements and
related notes thereto of Coram and Lincare. See "Unaudited Pro Forma Condensed
Combined Financial Statements." The following summary unaudited pro forma
condensed combined financial data do not purport to be indicative of the results
which actually would have occurred if the Merger had been consummated on the
dates indicated or which may be obtained in the future.

The following summary unaudited pro forma condensed combined financial data
does not reflect certain expected cost-savings from the consolidation of the
operations of Coram or the Caremark Business. See "Business of Coram--Coram
Consolidation Plan" and "--Caremark Consolidation Plan."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- ------------------
1992 1993 1994 1995
-------- -------- --------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenue.......................... $530,503 $616,810 $1,112,485 $264,891
Cost of service...................... 279,189 352,290 748,503 179,222
-------- -------- --------- ------------------
Gross profit......................... 251,314 264,520 363,982 85,669
Selling, general and administrative
expenses........................... 77,281 110,329 181,799 45,017
Provision for estimated uncollectible
accounts........................... 25,627 31,583 44,250 8,853
Restructuring costs and other........ 2,385 1,600 143,720 (4,131)
Merger costs......................... -- 2,868 28,500 --
Special provision for uncollectible
accounts........................... -- -- 17,300 --
Amortization expense................. 9,957 12,519 24,097 6,953
-------- -------- --------- ------------------
Operating income (loss).............. 136,064 105,621 (75,684) 28,977
Interest (income) expense, net....... (1,303) (54) 47,815 11,479
Other, net........................... 653 1,620 12,667 2,150
-------- -------- --------- ------------------
Income (loss) before taxes and
extraordinary items................ 136,714 104,055 (136,166) 15,348
Provision (benefit) for income
taxes.............................. 48,717 47,142 (2,864) 6,711
-------- -------- --------- ------------------
Income (loss) before extraordinary
loss............................... 87,997 56,913 (133,302) 8,637
Extraordinary loss, net of taxes..... (1,000) -- -- --
-------- -------- --------- ------------------
Net income after extraordinary
loss............................... $ 86,997 $ 56,913 $(133,302) $ 8,637
======== ======== ========= ===============
Net income (loss) per common share... 1.15 .71 (1.62) .10
Shares used to compute income (loss)
per share.......................... 75,710 80,633 82,096 84,738
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1995
------------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 21,546
Working capital...................... 181,887
Total assets......................... 1,188,376
Long-term obligations, excluding
current installments............... 444,227
Stockholders' equity................. 509,303
</TABLE>

14
<PAGE> 23

COMPARATIVE PER SHARE DATA

The following table presents historical and equivalent pro forma per share
data of Coram and Lincare after giving effect to the Merger using the
pooling-of-interests method of accounting, assuming the Merger had been
effective during all periods presented. The pro forma equivalent data are based
on the pro forma combined amounts per share multiplied by 1.0 for Coram and
1.5354 for Lincare, each representing the number of shares of Coram Common Stock
issuable in exchange for one share of Coram Common Stock and Lincare Common
Stock in the Merger. The pro forma data do not purport to be indicative of the
results of future operations or the results that would have occurred had the
Merger been consummated at the beginning of the periods presented. The
information set forth below should be read in conjunction with the financial
statements and the notes thereto of Coram and Lincare and the unaudited pro
forma condensed combined financial statements included elsewhere in this Joint
Proxy Statement/Prospectus. Neither Coram nor Lincare paid any cash dividends
during the periods presented.

<TABLE>
<CAPTION>
CORAM LINCARE
----------------------- -----------------------
PRO FORMA EQUIVALENT EQUIVALENT
COMBINED HISTORICAL PRO FORMA HISTORICAL PRO FORMA
--------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Book value per share of common stock
outstanding at March 31, 1995.......... $7.61 $8.43 $7.61 $6.50 $11.68
Income (loss) per share from continuing
operations before extraordinary item:
Three months ended March 31, 1995........ $.10 $.11 $.10 $.42 $.15
Year ended 1994.......................... (1.62) (3.32) (1.62) 1.34 (2.49)
Year ended 1993.......................... .71 .76 .71 1.01 1.09
Year ended 1992.......................... 1.15 1.95 1.15 .64 1.78
</TABLE>

15
<PAGE> 24

COMPARATIVE MARKET DATA

Coram Common Stock and Lincare Common Stock are quoted on the NYSE and
Nasdaq under the symbols "CRH" and "LNCR," respectively. The table below sets
forth, for the calendar quarters indicated, the high and low sales prices per
share quoted on the NYSE with respect to the Coram Common Stock and Nasdaq with
respect to the Lincare Common Stock.

<TABLE>
<CAPTION>
CORAM COMMON LINCARE COMMON
STOCK STOCK
--------------- -------------------
HIGH LOW HIGH LOW
---- ---- -------- --------
<S> <C> <C> <C> <C>
Calendar 1993:
First Quarter................................... $ -- $ -- $ 16 3/4 $ 87/16
Second Quarter.................................. -- -- 14 1/4 11 5/8
Third Quarter................................... -- -- 19 7/8 12 1/4
Fourth Quarter.................................. -- -- 25 1/2 19
Calendar 1994:
First Quarter................................... $ -- $ -- $ 25 1/2 $ 19 3/4
Second Quarter.................................. -- -- 23 18 3/4
Third Quarter................................... 19 1/8 10 1/2 24 3/4 19 1/4
Fourth Quarter.................................. 18 3/4 14 1/2 29 23
Calendar 1995:
First Quarter................................... $ 26 1/2 $ 15 3/8 $ 31 1/4 $ 24 1/4
Second Quarter (through May , 1995)........
</TABLE>

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

The last reported sale prices per share of Coram Common Stock and Lincare
Common Stock on April 17, 1995, the last trading day preceding public
announcement of the Merger, were $25 and $29 5/16, respectively. Based on such
closing sale price of Coram Common Stock, the market value of one share of
Lincare Common Stock (after giving effect to the exchange of 1.5354 shares of
Coram Common Stock for each outstanding share of Lincare Common Stock in
connection with the Merger) was $38.39. On June , 1995, the closing sale price
per share of Coram Common Stock was $ and the closing sale price per
share of Lincare Common Stock was $ . Based on such closing sale price
of Coram Common Stock, the market value of one share of Lincare Common Stock
(after giving effect to the exchange of 1.5354 shares of Lincare Common Stock
for each outstanding share of Coram Common Stock in connection with the Merger)
was $ .

Because the Exchange Ratio is fixed and because the market price of Coram
Common Stock is subject to fluctuation, the market value of the shares of Coram
Common Stock that holders of Lincare Common Stock will receive in the Merger may
increase or decrease prior to and following the Merger. STOCKHOLDERS ARE URGED
TO OBTAIN CURRENT MARKET QUOTATIONS FOR CORAM COMMON STOCK AND LINCARE COMMON
STOCK.

16
<PAGE> 25

INVESTMENT CONSIDERATIONS

The following factors should be considered carefully by the stockholders of
Coram and Lincare in connection with voting upon the Merger Agreement and the
transactions contemplated thereby.

IMPLEMENTATION OF BUSINESS STRATEGY

Coram is seeking to implement an aggressive business strategy focused on
(i) completing the Coram Consolidation Plan; (ii) implementing and completing
the Caremark Consolidation Plan; and (iii) pursuing possible acquisitions of
other alternate site health care companies such as Lincare. Pronounced changes
are expected to occur in the markets which Coram serves, which may require
adjustments to Coram's strategy. Execution of this strategy has placed and will
continue to place significant demands on Coram's financial and management
resources and there can be no assurance that such demands will not adversely
affect Coram's future financial performance or that Coram will be successful in
fully implementing its estimated cost savings, responding to ongoing changes in
its markets which may require adjustments to its strategy, or in identifying,
acquiring, managing or integrating additional operations. Implementation of
Coram's strategy could also be affected by a number of factors beyond Coram's
control, such as loss of personnel, the response of competitors and regulatory
developments. While Coram generally intends to operate Lincare as a stand-alone
business unit following the Merger, the Merger will involve some degree of
integration between two companies that have previously operated independently,
particularly with respect to the integration of certain marketing and other
corporate functions. No assurance can be given that the benefits expected from
such integration will be realized.

DEPENDENCE ON PAYORS AND REIMBURSEMENT RELATED RISKS

The profitability of Coram and Lincare depends in large part on
reimbursement provided by third party payors. Since alternate site care is
generally less costly to third party payors than hospital-based care, alternate
site providers have historically benefitted from cost containment initiatives
aimed at reducing the costs of hospitalization. However, competition for
patients, efforts by traditional third party payors to contain or reduce health
care costs and the increasing influence of managed care payors such as health
maintenance organizations ("HMOs") in recent years have resulted in reduced
rates of reimbursement for services provided by alternate site providers such as
Coram. During 1993 and early 1994, the alternate site infusion industry,
including Coram, experienced severe reductions in the pricing of its products
and services as a result of these trends.

A significant portion of Lincare's revenues are attributable to payments
received from the Medicare and Medicaid programs. The levels of revenues and
profitability of Lincare are affected by the continuing efforts of these
programs to contain or reduce the costs of health care. A number of changes to
the Medicare and Medicaid programs are being considered in connection with
recent efforts to reduce budget deficits at the federal and state levels. Among
the changes under consideration is a proposal to convert all or part of Medicare
into a managed care payor program. Other proposals would reduce Medicare and
Medicaid expenditures by lowering reimbursement rates, increasing case
management review of services and negotiating reduced contract pricing. A
significant change in coverage or a reduction in payment rates by Medicare or
Medicaid could have a material adverse effect upon Lincare's business and
financial condition. See "Investment Considerations--Health Care Reform
Legislation," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Lincare" and "Business of Lincare."

Additionally, managed care payors and even traditional indemnity insurers
increasingly are demanding fee structures and other arrangements providing for
the assumption by health care providers of all or a portion of the financial
risk of providing care (e.g., capitation). While Coram believes that short-term
pricing pressures are stabilizing and that Coram's business strategy to become
the high quality, low cost provider of choice in the markets it serves is
responsive to these trends, no assurance can be given that pricing pressures
will not continue or that Coram's financial results will not be adversely
affected by such trends. A rapid increase in the percentage of revenue derived
from managed care payors without a corresponding decrease in Coram's operating
costs could have an adverse impact on Coram's profit margins. See "Management's

17
<PAGE> 26

Discussion and Analysis of Financial Condition and Results of
Operations--Coram," "--The Caremark Business," "--Lincare," "Business of Coram"
and "Business of Lincare."

In addition to infusion therapy and related services, Coram also provides
lithotripsy services. Lithotripsy is a non-invasive technique that uses shock
waves to disintegrate kidney stones. Coram's lithotripsy operations have
contributed an increasing amount to Coram's operating income. A material change
in the operating performance of the lithotripsy business could have a material
adverse effect on the consolidated operating results of Coram. Recently, the
Health Care Financing Administration ("HCFA") released a proposed rule reducing
the rate at which ambulatory surgery centers and certain hospitals would be
reimbursed for the technical component of a lithotripsy procedure. The adoption
of this proposed rule could have a material adverse effect on Coram's
lithotripsy revenues. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Coram."

LIMITED OPERATING HISTORY OF CORAM; RECENT LOSSES

Coram is subject to the uncertainties and risks associated with a newly
formed and expanding business. Coram has only been operating as a combined
entity since July 8, 1994, and has incurred cumulative net losses of
approximately $117.7 million (including $164.5 million of special pre-tax
charges) from such date through March 31, 1995. In addition, 1994 net revenues
of the Caremark Business experienced a material decline from 1993 net revenues,
in each case calculated on a pro forma basis giving effect to the March 1, 1994
acquisition of Critical Care of America, Inc. The future operating results of
Coram will depend on many factors, including stabilization of operating revenues
and pricing pressures, the ability of Coram to implement its strategy, the level
of competition, the ability to integrate other complementary businesses into its
current organization, general economic conditions, the ability to attract and
retain qualified personnel at competitive rates, and government regulation and
reimbursement policies. See "Investment Considerations--Dependence on Payors and
Reimbursement Related Risks," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Coram," "--The Caremark Business" and
"Business of Coram."

FINANCIAL LEVERAGE

Coram incurred a significant amount of long-term debt in connection with
the Caremark Transaction. As of March 31, 1995, Coram's pro forma consolidated
long-term indebtedness after giving effect to the Caremark Transaction would
have been $430.2 million and its pro forma consolidated stockholders' equity
would have been $331 million. Coram's pro forma interest coverage ratio (EBITDA
divided by interest expense) for the three months ended March 31, 1995, pro
forma for the acquisition of the Caremark Business, would have been 2 to 1. The
degree to which Coram is leveraged could (i) impair Coram's ability to finance,
through its own cash flow or from additional financing, its future operations or
pursue its business strategy; and (ii) make Coram more vulnerable to economic
downturns, competitive and payor pricing pressures and adverse changes in
government regulation. Coram believes that the Merger will strengthen Coram's
balance sheet, reduce its financial leverage and increase its cash flow. Coram's
pro forma interest coverage ratio for the three months ended March 31, 1995,
after giving effect to the consummation of the Merger, would have been 4.3 to 1.
See "The Merger--Coram's Reasons for the Merger and Board of Directors'
Recommendation," "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Coram."

The terms of Coram's outstanding indebtedness contain a number of covenants
that, among other things, restrict the ability of Coram and its subsidiaries to
dispose of assets, incur debt, pay dividends, create liens, make capital
expenditures and make certain investments or acquisitions and otherwise restrict
corporate activities. The ability of Coram to comply with such provisions may be
affected by events beyond its control. The breach of any of these covenants
could result in a default under the terms of such indebtedness.

DEPENDENCE ON KEY PERSONNEL

Coram's operations and ability to successfully implement its business
strategy are dependent on the efforts, ability and experience of James M.
Sweeney, its Chairman and Chief Executive Officer, Patrick J. Fortune, its
President and Chief Operating Officer, Olav B. Bergheim, its Executive Vice
President, and other executive officers. The loss of some or all of these key
executive officers could have a material adverse impact

18
<PAGE> 27

on Coram. Lincare is also dependent upon the ability and experience of its
senior managers, and there can be no assurance that Lincare will be able to
retain all of such officers subsequent to the Merger. If, for any reason, such
executives do not remain active in Lincare's management, Lincare's operations
could be adversely affected. Coram has entered into employment agreements with
three of such executives which will become effective as of the Effective Time.
See "The Merger--Interests of Certain Persons in the Merger," "Management of
Coram" and "Management of Lincare."

GOVERNMENTAL REGULATION

Each of Coram and Lincare is subject to federal and state laws that
prohibit certain direct and indirect payments between health care providers that
are intended, among other things, to induce or encourage the referral of
patients to, or the recommendation of, a particular provider of items or
services. In addition, certain federal and state laws have been enacted to
prohibit physicians from referring patients for certain "designated health
services" to providers with which the referring physician has an ownership or
compensation arrangement. In particular, Medicare and Medicaid antifraud and
abuse amendments codified under Section 1128B(b) of the Social Security Act (the
"Antifraud Amendments") prohibit certain business practices and relationships
that might affect the provision and cost of health care services reimbursable
under Medicare and Medicaid. Sanctions for violating the Antifraud Amendments
include criminal penalties and civil sanctions, including fines and possible
exclusion from the Medicare and Medicaid programs. Pursuant to the Medicare and
Medicaid Patient and Program Protection Act of 1987, the Department of Health
and Human Services ("HHS") has issued regulations that describe some of the
conduct and business relationships permissible under the Antifraud Amendments
("Safe Harbors"). The fact that a given business arrangement does not fall
within a Safe Harbor does not render the arrangement per se illegal. Business
arrangements of health care service providers and suppliers that fail to satisfy
the applicable Safe Harbor criteria, however, risk increased scrutiny by
enforcement authorities. The Antifraud Amendments apply both to relationships
with physicians and with other entities such as hospitals. In addition, Section
1877 of the Social Security Act was amended, effective January 1, 1995, to
significantly broaden the number of designated health services and scope of
prohibited referrals under the Medicare and Medicaid programs to providers with
which physicians have ownership interests or other financial arrangements. Many
states have adopted or are considering similar legislative proposals, some of
which extend beyond the Medicaid program to all health care services. Coram's
participation in and development of business relationships which in any way
involve financial arrangements with physicians could be adversely affected by
these amendments and similar state enactments as well as future regulatory
developments in this area, while Coram's business relationships with
non-physicians could be adversely affected by the Antifraud Amendments or
amendments thereto, as well as by similar state enactments.

As part of its compliance program, Coram is reviewing all of its business
arrangements with physicians that may be questionable in the current regulatory
environment to determine whether such arrangements need to be restructured or
terminated. Because Coram may be less willing than some of its competitors to
enter into business arrangements that may be questionable under existing law, it
could be at a competitive disadvantage in entering into certain transactions and
arrangements with physicians and other health care providers. While Coram
believes that it is in material compliance with applicable law, there can be no
assurance that such laws will ultimately be interpreted in a manner consistent
with the practices of Coram.

The businesses of Coram and Lincare are also subject to other substantial
governmental regulation including state laws governing the dispensing,
distribution and compounding of prescription products; state laws regulating
pharmacies and the provision of home health services; and federal laws
regulating the repackaging and dispensing of drugs. Failure to comply with these
laws could adversely affect Coram's or Lincare's ability to continue to provide
or receive reimbursement for its therapies and services. Changes in these laws
and the interpretation of existing laws could have a material adverse effect on
the activities of Coram or Lincare, the relative costs associated with doing
business and the amount of reimbursement by government and other third party
payors.

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HEALTH CARE REFORM LEGISLATION

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

CERTAIN LITIGATION AND GOVERNMENTAL INVESTIGATIONS

Coram has entered into a Stipulation of Settlement (the "Stipulation")
dated as of January 27, 1995 which sets forth the principal terms of a proposed
settlement of class action shareholder litigation which was initiated against T2
in 1992. The settlement provides for Coram to pay the shareholder class $25
million in cash (of which approximately $7.8 million will be contributed by one
of Coram's insurance carriers), and to issue warrants to acquire an aggregate of
2.52 million shares of Coram Common Stock at an exercise price of $20.25,
subject to adjustment. The Stipulation was approved by the court on May 5, 1995
and is expected to be consummated shortly thereafter; however, if the settlement
is not consummated and the shareholder claims continue to be pressed, the
resulting distraction of management, the costs of defending such claims and the
payment of any settlement or damage award could have a material adverse effect
on Coram's results of operations and financial position.

In September 1994, T2 entered into a settlement of an investigation by the
HHS Office of Inspector General ("OIG") into T2's financial arrangements with
physicians (the "T2 OIG Settlement"). T2, in expressly denying liability, agreed
to a civil order which enjoins it from violating federal anti-kickback and false
claims laws related to Medicare/Medicaid reimbursement. The order further
requires T2 to comply with certain standards when providing management or other
services to physicians. Coram is implementing programs to ensure that it is in
compliance with the terms and conditions of the T2 OIG Settlement and has
engaged Richard P. Kusserow, the former Inspector General of HHS, as a
consultant to assist Coram in developing its compliance program. However, in the
event that T2 violates the T2 OIG Settlement or Coram engages in conduct that
violates federal or state laws, rules or regulations, Coram may be subject to a
risk of increased sanctions or penalties; including, but not limited to, partial
or complete exclusion from the Medicare/Medicaid program.

In January 1994, Lincare was advised by the United States Attorney for the
Middle District of Florida that a grand jury has been investigating certain
services provided by Lincare to a pharmacy that supplied medications to home
respiratory patients. Under its contracts with the pharmacy, Lincare was
responsible for providing various marketing, field administration and patient
services to the pharmacy. The contracts were in effect from February 1989 to
April 1992, and accounted for less than one percent of Lincare's revenues during
such period. Lincare is cooperating with the investigation and believes that it
will be able to demonstrate that its services for the pharmacy were provided in
accordance with all applicable federal laws. However, no assurance can be given
that the matter will be resolved promptly or that the United States Attorney
will not seek penalties against Lincare or its officers.

COMPETITION

The alternate site health care market is highly competitive and is
experiencing both horizontal and vertical consolidation. Some of Coram's current
and potential competitors include hospital chains and providers of multiple
products and services for the alternate site health care market. On March 3,
1995, two of the largest companies in the alternate site health care industry,
Abbey Healthcare Group Incorporated ("Abbey") and Homedco Group, Inc.
("Homedco"), announced an agreement to merge. The size, purchasing power,
ability to bundle products and services, and relationships with physicians and
payors which certain providers enjoy make them formidable competitors to Coram
and Lincare. Moreover, there are relatively few barriers to entry in the local
markets which Coram and Lincare serve. Local or regional companies have entered
the home health care market in the past and others may do so in the future.
There can

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<PAGE> 29

be no assurance that Coram and Lincare will not encounter increased competition
in the future that could limit their ability to maintain or increase their
market share. Such increased competition could have a material adverse effect on
the business and results of operations of Coram and Lincare. See "Business of
Coram--Competition" and "Business of Lincare--Competition."

POTENTIAL PROFESSIONAL LIABILITY

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

CHANGES IN TECHNOLOGY

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

INTERESTS OF CERTAIN PERSONS IN THE MERGER

Certain persons have interests in the Merger that are in addition to the
interests of stockholders of Lincare generally. As of the Effective Time, three
executives of Lincare will become employees of Coram pursuant to employment
agreements with Coram. Certain executives of Lincare will be entitled to
severance payments as a result of the termination of their respective employment
arrangements with Lincare. In addition, options to acquire shares of Lincare
Common Stock now held by certain members of Lincare's management will accelerate
upon consummation of the Merger. Furthermore, if the Merger is approved, two
members of the Lincare Board of Directors will become directors of Coram, and
all Lincare directors and officers will be entitled to a continuation of now
existing indemnification arrangements. Upon the consummation of the Merger, all
employees of Lincare will become employees of Coram and all options to acquire
shares of Lincare Common Stock will be converted into options to acquire shares
of Coram Common Stock based on the Exchange Ratio. See "The Merger--Interests of
Certain Persons in the Merger."

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<PAGE> 30

THE CORAM MEETING

GENERAL

This Joint Proxy Statement/Prospectus is being furnished by Coram to the
holders of Coram Common Stock in connection with the solicitation of proxies by
the Board of Directors of Coram for use at the Annual Meeting of Stockholders of
Coram to be held on July , 1995 at at a.m., local time,
and any adjournment or postponement thereof.

This Joint Proxy Statement/Prospectus, the attached Notice of Meeting and
the accompanying form of proxy are first being mailed to stockholders of Coram
on or about June , 1995.

MATTERS TO BE CONSIDERED AT THE CORAM MEETING

At the Coram Meeting, holders of shares of Coram Common Stock will consider
and vote upon:

1. A proposal to approve and adopt the Merger Agreement providing for
the merger of Merger Sub with and into Lincare, with Lincare becoming a
wholly-owned subsidiary of Coram. In accordance with the Merger Agreement,
each share of the Lincare Common Stock outstanding immediately prior to the
consummation of the Merger will be converted into the right to receive
1.5354 shares of Coram Common Stock and all outstanding options to acquire
Lincare Common Stock will be assumed by Coram and converted into options to
acquire Coram Common Stock based on the Exchange Ratio. Approval and
adoption of the Merger Agreement also will constitute approval of the
amendment and restatement of Coram's Certificate of Incorporation effective
upon consummation of the Merger. Such amendment and restatement will
increase the number of authorized shares of Coram Common Stock from
75,000,000 shares to 200,000,000 shares. In addition, approval and adoption
of the Merger Agreement will constitute approval of the assumption of the
Lincare Stock Option Plans under which the Lincare Options were issued;

2. The election of members of the Coram Board of Directors;

3. A proposal to amend the Coram Option Plan, contingent upon the
approval of the proposal regarding the Merger Agreement, to increase the
number of shares authorized to be issued under the Coram Option Plan from
7,600,000 to 12,000,000; and

4. Such other business as properly may come before the Coram Meeting
or any adjournment or postponement thereof.

The Coram Board of Directors has unanimously approved the Merger Agreement
and the transactions contemplated thereby (including the amendment and
restatement of Coram's Certificate of Incorporation effective upon the
consummation of the Merger). The Coram Board of Directors believes that the
terms of the Merger and the proposed amendment to the Coram Option Plan are fair
to, and in the best interests of, Coram and its stockholders and unanimously
recommends that the holders of Coram Common Stock vote FOR the approval and
adoption of the Merger Agreement and the transactions contemplated thereby and
FOR the amendment to the Coram Option Plan. For further information, see "The
Merger--Coram's Reasons for the Merger and Board of Directors' Recommendation,"
"Amendment of Coram's Certificate of Incorporation" and "Proposal to Amend the
Coram Option Plan." In addition, the Coram Board of Directors recommends that
you vote FOR each person nominated to the Coram Board of Directors. See
"Proposal to Elect Coram Directors."

It is currently expected that representatives of Coram's principal
accountants for the current year will be present at the Coram Meeting where they
will have the opportunity to make a statement if they so decide and will be
available to respond to appropriate questions.

RECORD DATE

The Board of Directors of Coram has fixed the close of business on May ,
1995, as the Record Date for the determination of stockholders entitled to
notice of, and to vote at, the Coram Meeting. Accordingly, only

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<PAGE> 31

holders of record of shares of Coram Common Stock at the close of business on
the Record Date are entitled to notice of, and to vote at, the Coram Meeting. As
of the Record Date, shares of Coram Common Stock were outstanding and
held of record by approximately stockholders.

PROXIES

When a proxy card is returned, properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a stockholder does not attend the Coram Meeting and does not
return the signed proxy card, such stockholder's shares will not be voted. If a
stockholder returns a signed proxy card but does not indicate how his or her
shares are to be voted, such shares will be voted FOR approval of the Merger
Agreement and the transactions contemplated thereby (including the amendment and
restatement of Coram's Certificate of Incorporation), FOR the election of the
persons nominated to the Coram Board of Directors and FOR the amendment to the
Coram Option Plan. As of the date of this Joint Proxy Statement/Prospectus, the
Coram Board of Directors does not know of any other matters which are to come
before the Coram Meeting. If any other matters are properly presented at the
Coram Meeting for consideration, including, among other things, consideration of
a motion to adjourn the Coram Meeting to another time and/or place, the persons
named in the enclosed form of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their best judgment.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Coram, at or before the taking of the vote at the Coram
Meeting, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a later dated proxy relating to the same shares of Coram
Common Stock and delivering it to the Secretary of Coram before the taking of
the vote at the Coram Meeting or (iii) attending the Coram Meeting and voting in
person (although attendance at the Coram Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Coram Healthcare
Corporation, 1125 Seventeenth Street, Suite 1500, Denver, Colorado 80202,
Attention: Corporate Secretary, or hand delivered to the Secretary of Coram at
or before the taking of the vote at the Coram Meeting.

Coram will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers and employees of Coram in person or by
telephone or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses incurred in connection with such solicitation.
Arrangements also will be made with custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodians, nominees and fiduciaries, and Coram will reimburse
such custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith. In addition, (" ") will assist in
the solicitation of proxies by Coram for a fee of $ , plus
reimbursement of reasonable out-of-pocket expenses.

QUORUM

The presence, either in person or by properly executed proxies, of the
holders of a majority of the outstanding shares of Coram Common Stock is
necessary to constitute a quorum at the Coram Meeting. Abstentions will be
counted for purposes of establishing a quorum and will have the same legal
effect as a vote against the adoption of the proposals to be voted upon.

VOTE REQUIRED

Coram stockholders are entitled to one vote at the Coram Meeting for each
share of Coram Common Stock held of record by them on the Record Date. The
affirmative vote of the holders of a majority of the outstanding shares of Coram
Common Stock entitled to vote thereon is required to approve and adopt the
Merger Agreement and the transactions contemplated thereby. The affirmative vote
of a majority of the outstanding shares of Coram Common Stock present at the
Coram Meeting either in person or by properly executed proxies and entitled to
vote is required to elect each member of the Coram Board of Directors and to
approve the amendment to the Coram Option Plan. The Merger Agreement, the
election of the Coram Board of Directors and the amendment to the Coram Option
Plan will be voted upon separately. Approval of the

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<PAGE> 32

proposed amendment to the Coram Option Plan is not a condition to, or required
for, consummation of the Merger.

As of the Record Date, Coram's directors, executive officers and affiliates
may be deemed to be beneficial owners of an aggregate of shares of
Coram Common Stock (excluding shares which may be acquired upon
exercise of options or other rights which are exercisable within 60 days of the
Record Date), or approximately % of the then outstanding shares of Coram
Common Stock. Coram has been advised that its directors and executive officers
intend to vote in favor of the proposals described above.

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<PAGE> 33

THE LINCARE MEETING

GENERAL

This Joint Proxy Statement/Prospectus is being furnished by Lincare to the
holders of Lincare Common Stock in connection with the solicitation of proxies
by the Board of Directors of Lincare for use at the Special Meeting of
Stockholders of Lincare (the "Lincare Meeting") to be held at on July
, 1995 at a.m., local time, and any adjournment or postponement thereof.

This Joint Proxy Statement/Prospectus, the attached Notice of Meeting and
the accompanying form of proxy are first being mailed to stockholders of Lincare
on or about June , 1995.

MATTERS TO BE CONSIDERED AT THE LINCARE MEETING

At the Lincare Meeting, holders of shares of Lincare Common Stock will
consider and vote upon a proposal to approve and adopt the Merger Agreement and
the transactions contemplated thereby and such other matters as may properly
come before the Lincare Meeting.

The Lincare Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby. The Lincare Board of
Directors believes that the terms of the Merger are fair to, and in the best
interests of, Lincare and its stockholders and unanimously recommends that the
holders of Lincare Common Stock vote FOR approval and adoption of the Merger
Agreement and the transactions contemplated thereby. For further information,
see "The Merger--Lincare's Reasons for the Merger and Board of Directors'
Recommendation."

It is currently expected that representatives of Lincare's accountants will
be present at the Lincare Meeting, where they will have the opportunity to make
a statement if they so decide and will be available to respond to appropriate
questions.

RECORD DATE

The Board of Directors of Lincare has fixed the close of business on May
, 1995, as the Record Date for the determination of stockholders entitled to
notice of, and to vote at, the Lincare Meeting. Accordingly, only holders of
record of shares of Lincare Common Stock at the close of business on the Record
Date are entitled to notice of, and to vote at, the Lincare Meeting. As of the
Record Date, shares of Lincare Common Stock were outstanding and held
of record by approximately stockholders.

PROXIES

When a proxy card is returned, properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a stockholder does not attend the Lincare Meeting and does not
return the signed proxy card, such stockholder's shares will not be voted. If a
stockholder returns a signed proxy card but does not indicate how his or her
shares are to be voted, such shares will be voted FOR approval of the Merger
Agreement and the transactions contemplated thereby. As of the date of this
Joint Proxy Statement/Prospectus, the Lincare Board of Directors does not know
of any other matters which are to come before the Lincare Meeting. If any other
matters are properly presented at the Lincare Meeting for consideration,
including, among other things, consideration of a motion to adjourn the Lincare
Meeting to another time and/or place, the persons named in the enclosed form of
proxy and acting thereunder will have discretion to vote on such matters in
accordance with their best judgment.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Lincare, at or before the taking of the vote at the
Lincare Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares of
Lincare Common Stock and delivering it to the Secretary of Lincare before the
taking of the vote at the Lincare Meeting or (iii) attending the Lincare Meeting
and voting in person (although attendance at the Lincare Meeting will not in and
of itself constitute a revocation of a proxy). In addition, brokers who hold
shares of Lincare Common Stock as nominees will not have discretionary
authorization to vote such shares on any of the matters to be voted thereon in
the absence of

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<PAGE> 34

instructions from the beneficial owners. Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to Lincare Holdings Inc.,
19337 U.S. 19 North, Clearwater, Florida 34624, Attention: Corporate Secretary,
or hand delivered to the Secretary of Lincare at or before the taking of the
vote at the Lincare Meeting.

Lincare will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers, and employees of Lincare in person or by
telephone or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses incurred in connection with such solicitation.
Arrangements also will be made with custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodians, nominees and fiduciaries, and Lincare will
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith. In addition, (" ") will
assist in the solicitation of proxies by Lincare for a fee of approximately
$ , plus reimbursement of reasonable out-of-pocket expenses.

LINCARE STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. THE PROCEDURES FOR THE EXCHANGE OF SHARES AFTER THE MERGER IS
CONSUMMATED IS SET FORTH BELOW IN THIS JOINT PROXY STATEMENT/PROSPECTUS.

QUORUM

The presence, either in person or by properly executed proxies, of the
holders of a majority of the outstanding shares of Lincare Common Stock is
necessary to constitute a quorum at the Lincare Meeting. Abstentions will be
counted for purposes of establishing a quorum and will have the same legal
effect as a vote against the adoption of the proposals to be voted upon.

VOTE REQUIRED

Lincare stockholders are entitled to one vote at the Lincare Meeting for
each share of Lincare Common Stock held of record by them on the Record Date.
The affirmative vote of the holders of a majority of the outstanding shares of
Lincare Common Stock entitled to vote thereon is required to approve and adopt
the Merger Agreement.

As of the Record Date, Lincare's directors, executive officers and
affiliates may be deemed to be beneficial owners of an aggregate of
shares of Lincare Common Stock (excluding shares which may be acquired
upon exercise of options or other rights which are exercisable within 60 days of
the Record Date), or approximately % of the then outstanding shares of
Lincare Common Stock. Lincare has been advised that its directors and executive
officers intend to vote in favor of the approval and adoption of the Merger
Agreement.

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<PAGE> 35

THE MERGER

BACKGROUND OF THE MERGER

The alternate site health care industry has experienced dramatic growth
over the last decade, with total estimated expenditures growing from $3.8
billion in 1985 to over $22 billion in 1994. The industry's rapid growth is
primarily due to the cost-effectiveness of alternate site care relative to
hospital care and to improvements in medical technology that have expanded the
range of care that can be administered outside of traditional settings such as
hospitals and physicians' offices. However, while demand for alternate site care
continues to grow, alternate site providers are increasingly under pressure from
payors to share the burden of containing health care costs and to improve the
quality of care. This trend has led to a consolidation of providers as they seek
to reduce their cost structures through economies of scale and operating
efficiencies. Coram has actively participated in such consolidation through the
Four-Way Merger, its acquisition of HMSS and the Caremark Transaction and
believes that this consolidation trend will continue for the foreseeable future.

Recognizing these market forces, the senior management of both Lincare and
Coram have expended considerable efforts in analyzing their financial and
strategic alternatives and reviewing their options for strategic combinations of
the type contemplated by the proposed Merger. In July 1993, the Lincare Board of
Directors met to consider a variety of strategic alternatives for Lincare. Among
the alternatives considered was the possibility of a merger with another health
care company. To that end, the Lincare Board of Directors retained Alex. Brown
to advise it as to potential strategic combinations. From time to time
thereafter, members of Lincare's management and Alex. Brown contacted and held
exploratory discussions with a number of potential strategic partners, but no
agreement resulted from these preliminary discussions.

Shortly following the public announcement of the Abbey/Homedco merger in
early March 1995, James M. Sweeney, the Chairman and Chief Executive Officer of
Coram contacted James T. Kelly, the Chairman and Chief Executive Officer of
Lincare, to express an interest in discussing a possible combination with
Lincare. On March 8 and 9, 1995, representatives of senior management of both
companies initially met to consider the advantages of such a combination. After
this meeting, members of Lincare's management, assisted by Alex. Brown, began to
conduct due diligence investigations and meetings.

On March 29, 1995, the Lincare Board of Directors met to consider the
possibility of a strategic combination with Coram. Representatives of Alex.
Brown were present at the meeting and presented information on Coram, as well as
certain preliminary analyses relating to a possible Coram/Lincare merger. After
considering the possible business risks and advantages of such a combination,
the Lincare Board of Directors requested that its legal and financial advisors
continue their due diligence review and evaluation of Coram.

Between March 30 and April 11, 1995, Lincare initiated a more comprehensive
financial and legal due diligence investigation of Coram, including
consideration of Coram's recently consummated acquisition of the Caremark
Business. During this period, the companies began to generally discuss the
principal terms of a Coram/Lincare merger. On April 12, 1995, the Lincare Board
met again to discuss the results of the due diligence investigation, including a
review and discussion of Coram's business and operations (including the recently
acquired Caremark Business) with representatives of Alex. Brown and a review and
discussion of Coram's regulatory and legal affairs with Lincare's legal
advisors. The Lincare Board of Directors agreed that Lincare's management and
advisors should commence negotiations of a definitive agreement. Extensive
negotiations and discussions between the two companies took place between April
12 and April 16.

During the period between March 27, 1995 and April 14, 1995, Coram and its
representatives conducted financial and legal due diligence on Lincare. On April
14, Coram's Board of Directors held a telephonic meeting to discuss the status
of the discussions and negotiations between the companies. On April 17, 1995,
the Coram and Lincare Boards of Directors each held a special meeting to
consider the provisions of the proposed Merger Agreement, including the proposed
Exchange Ratio, and the transactions contemplated thereby. At such meetings,
members of each company's senior management, together with its legal and
financial advisors, reviewed and evaluated with their respective Board of
Directors, among other things, the background of the Merger, each company's
alternatives, the strategic implications of the Merger, a summary

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<PAGE> 36

of due diligence findings, financial and valuation analyses of the transaction
and the terms of the Merger Agreement. At Coram's meeting, DLJ rendered its oral
opinion, which was subsequently confirmed in writing, to Coram's Board of
Directors that, based upon and subject to the various considerations set forth
in the opinion, as of such date, the consideration to be paid by Coram pursuant
to the Merger Agreement was fair, from a financial point of view, to the holders
of Coram Common Stock. Alex. Brown rendered its oral opinion to Lincare's Board
of Directors, which was subsequently confirmed in writing, that, based upon and
subject to the qualifications and limitations set forth in the opinion, as of
such date, the Exchange Ratio was fair to the holders of Lincare Common Stock
from a financial point of view. After extensive consideration, the management
and directors of each company concluded that the proposed Merger was an
important strategic combination for each company and in the best interest of
each of its respective stockholders. Accordingly, the companies' Boards of
Directors approved the Merger Agreement and the transactions contemplated
thereby. The Merger Agreement was executed by the parties on the evening of
April 17, 1995, and a public announcement of the signing was made on April 18,
1995, prior to the opening of the financial markets. See "The Merger--Coram's
Reasons for the Merger and Board of Directors' Recommendation" and "--Lincare's
Reasons for the Merger and Board of Directors' Recommendation."

CORAM'S REASONS FOR THE MERGER AND BOARD OF DIRECTORS' RECOMMENDATION

The Coram Board of Directors believes that the Merger will further its
strategic objective of becoming the leading provider of alternate health care
products and services in the United States. In approving the Merger Agreement
and the transactions contemplated thereby, and in recommending that Coram's
stockholders approve the same, Coram's Board of Directors consulted with Coram
management, as well as its financial and legal advisors, and considered a number
of factors, including, but not limited to, the following:

1. Coram's Board of Directors concluded that the Merger would provide
a key element of Coram's horizontal integration strategy of positioning
itself as a "one-stop shop" for alternate site health care services and
products, including infusion therapy and respiratory therapy services. The
Coram Board of Directors believes that the addition of Lincare, a leading
supplier of alternate site respiratory therapy services, to Coram, a
leading supplier of alternate site infusion therapy services, should
enhance the opportunities of the combined entity in marketing its products
and services to managed care organizations, the fastest growing segment of
the health care payor market.

2. Coram's Board of Directors concluded that the Merger was consistent
with Coram's strategy of providing the highest quality care at the lowest
cost to the health care system. Consistent with Coram's strategy of
becoming the lowest cost provider in an increasingly cost conscious health
care environment, the Coram Board of Directors believes that the lowest
cost and most efficient providers will have a competitive advantage in
marketing their products and services. Since Coram believes that Lincare's
operating margins are the highest of the major alternate site respiratory
therapy providers, Lincare represented an attractive acquisition candidate
in the respiratory therapy industry.

3. Coram's Board of Directors concluded that the Merger could result
in accelerated revenue growth to the extent that Lincare's respiratory
therapy services could be marketed through Coram's branches which are
covering geographic locations in which over 90% of the United States
population resides. Moreover, the Coram Board of Directors believes that
the Merger would provide Lincare with access to Coram's managed care
relationships and dedicated managed care sales force, another potential
source of revenue growth.

4. Coram's Board of Directors concluded that, based on Lincare's
senior management, competitive position, financial strength, businesses
strategy and prospects, Lincare represented the leading independent
alternate site respiratory therapy provider in the United States. The Coram
Board of Directors has observed the rapid consolidation of the alternate
site health care industry, including the recently announced merger
agreement between Abbey and Homedco, and concluded that the Merger would
enhance Coram's ability to compete more effectively against other companies
in the industry.

5. Coram's Board of Directors concluded that the Merger would
strengthen Coram's balance sheet, reduce its financial leverage, increase
its cash flow and improve Coram's overall financial position and

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results of operations. As a result of Coram's acquisition of the Caremark
Business, Coram has become highly leveraged. The addition of Lincare's
financial condition, results of operations and cash flows will
significantly improve Coram's key leverage ratios.

6. Coram's Board of Directors concluded that the businesses of Coram
and Lincare are compatible, from product, geography and management
standpoints. Because Coram does not provide respiratory therapy services
and Lincare does not provide any significant infusion services, a
combination of the two businesses permits the combined enterprise to offer
a broad range of alternate site services without a loss of momentum or
significant disruption of either business. Because Lincare does not provide
respiratory therapy services in many major geographical markets in which
Coram operates, the Coram Board of Directors believes that the Merger has
the potential to enhance Lincare's presence on a national basis. The Coram
Board of Directors also believes that the experience and operating
philosophy of Lincare's senior management is compatible with Coram's senior
management and that the two management teams will complement each other
following the Merger.

7. The Coram Board considered the presentation of DLJ on April 17,
1995, including DLJ's opinion that the consideration to be paid by Coram
pursuant to the Merger Agreement was fair, from a financial point of view,
to the holders of Coram Common Stock;

8. The Coram Board of Directors believes that the terms and conditions
of the proposed Merger Agreement, generally, are favorable to Coram's
stockholders.

Due to the wide variety of factors considered in connection with the
evaluation of the Merger, the Coram Board of Directors did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.

THE BOARD OF DIRECTORS OF CORAM UNANIMOUSLY RECOMMENDS THAT CORAM
STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.

OPINION OF CORAM'S FINANCIAL ADVISOR

Coram retained DLJ to render a financial opinion letter to the Coram Board
of Directors with respect to the fairness, from a financial point of view, of
the consideration to be paid by Coram pursuant to the terms of the Merger
Agreement. At the April 17, 1995 meeting of the Coram Board of Directors, DLJ
rendered its written opinion that, as of such date and based upon and subject to
the various considerations set forth in its opinion, such consideration was fair
from a financial point of view to the holders of Coram Common Stock. DLJ
subsequently confirmed its April 17, 1995 opinion by delivery of a written
opinion dated as of the date of this Joint Proxy Statement/Prospectus.

The full text of the written opinion of DLJ dated as of the date of this
Joint Proxy Statement/Prospectus, which sets forth the assumptions made,
procedures followed, matters considered and scope of the review undertaken, as
well as the limitations on DLJ in rendering its opinion, is attached as Appendix
B to this Joint Proxy Statement/Prospectus. Coram stockholders are urged to read
DLJ's opinion in its entirety. DLJ did not recommend to Coram that any specific
exchange ratio constituted the appropriate Exchange Ratio for the Merger. The
analyses performed were prepared solely as part of DLJ's analysis of the
fairness, from a financial point of view, to the holders of Coram Common Stock
of the consideration to be paid by Coram pursuant to the Merger Agreement and
does not constitute a recommendation to any Coram stockholder as to how such
stockholder should vote at the Coram Meeting. The summary of the opinion of DLJ
set forth in this Joint Proxy Statement/Prospectus is qualified in its entirety
by reference to the full text of such opinion.

To arrive at its opinion, DLJ, among other things, (i) analyzed certain
publicly available financial statements and other information of Coram and
Lincare, (ii) analyzed certain internal financial statements and other financial
and operating data concerning Lincare and Coram prepared by the managements of
Lincare and Coram, respectively, (iii) analyzed certain financial projections
prepared by the managements of Lincare and Coram, respectively, (iv) discussed
the past and current operations and financial condition and the prospects of
Lincare with senior executives of Lincare, (v) discussed the past and current
operations and

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financial condition and the prospects of Coram with senior executives of Coram,
and analyzed the pro forma impact of the merger on Coram's earnings per share,
consolidated capitalization and certain financial ratios, (vi) reviewed the
reported prices and trading activity for the Lincare Common Stock and Coram
Common Stock, (vii) compared the financial performances of Lincare and Coram and
the prices and trading activities of Lincare Common Stock and Coram Common Stock
with that of certain other comparable publicly traded companies and their
securities, (viii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions, (ix) discussed with
the respective managements of Coram and Lincare certain synergies and other
benefits expected to be derived from the Merger, (x) reviewed the Merger
Agreement and certain related documents and (xi) performed such other analyses
as it deemed appropriate.

In rendering its opinion, DLJ assumed and relied upon, without independent
verification, the accuracy and completeness of the information reviewed by DLJ
for purposes of its opinion. With respect to the financial projections including
the synergies and other benefits expected to result from the Merger, DLJ assumed
that they were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of each of
Coram and Lincare. DLJ's opinion was necessarily based on economic, market and
other conditions as in effect on, and the information made available to DLJ as
of, the date of its opinion. In rendering its opinion, DLJ assumed that the
value of the Coram Common Stock was equal to its closing stock price on April
12, 1995 and on , 1995 for the purpose of delivering its April 17, 1995
opinion and its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, respectively.

The following is a brief summary of the analyses performed by DLJ in
preparation of its opinion letter dated as of April 17, 1995, and reviewed with
the Coram Board of Directors.

Stock Trading History. DLJ reviewed Coram's and Lincare's stock market
trading histories and stock market performances, Coram's and Lincare's
historical operating and financial information and selected financial analysts'
commentary on Coram and Lincare. In its review of the stock market trading
histories, DLJ reviewed the performance of the per share market price of the
Coram Common Stock over the period July 11, 1994 to April 12, 1995 and the
Lincare Common Stock over the period March 20, 1992 to April 12, 1995 and
compared such per share market price data to the Standard & Poor's industrial
average of 400 stocks and to an index comprised of six alternate site healthcare
companies, including Abbey Healthcare Group, Inc., Caremark International, Inc.,
Healthdyne Technologies, Homedco Group, Inc., In Home Health, Inc. and Quantum
Health Resources Inc., that, in DLJ's judgment, were comparable to Coram and
Lincare for purposes of this analysis.

Comparable Company Analysis. DLJ reviewed and analyzed certain available
financial and market information for seven alternate site healthcare companies,
including Abbey Healthcare Group, Inc., Caremark International, Inc., Coram
Healthcare Corporation, Healthdyne Technologies, Homedco Group, Inc., In Home
Health, Inc. and Quantum Health Resources Inc. (collectively, the "Comparable
Companies") that, in DLJ's judgment, were comparable to Lincare for purposes of
this analysis. Such financial and market information included, among other
things, market value, earnings per share, market price as a multiple of earnings
per share and aggregate enterprise value as a multiple of revenue and of
earnings before interest, taxes, depreciation and amortization ("EBITDA"). The
analysis indicated that based on Lincare's closing stock price on April 12, 1995
and a compilation of earnings projections by securities research analysts,
Lincare traded at 17.9x forecasted earnings for the calendar year 1995 and 15.0x
forecasted earnings for the calendar year 1996, and Coram traded at 23.1x
forecasted earnings for the calendar year 1995 and 15.0x forecasted earnings for
the calendar year 1996. These trading multiples compared to the Comparable
Companies' range of multiples of 11.9x to 36.2x forecasted earnings for the
calendar year 1995, with a mean (excluding the minimum and maximum) of 17.2x,
and a range of multiples of 9.6x to 24.1x for the calendar year 1996 for the
Comparable Companies, with a mean (excluding the minimum and maximum) of 13.9x.

Analysis of Comparable Acquisition Transactions. DLJ reviewed the financial
terms, to the extent publicly available, of forty-one selected pending and
completed merger and acquisition transactions in the healthcare services
industry announced since January 1, 1993 (collectively, the "Comparable
Acquisition Transactions"). DLJ reviewed the prices paid in such transactions in
terms of the equity value as a multiple of latest twelve months ("LTM")
earnings, and in terms of the aggregate enterprise value (defined as equity

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<PAGE> 39

value plus long-term debt and short-term debt less cash and cash equivalents
(the "Aggregate Enterprise Value")) as a multiple of LTM revenue, as a multiple
of LTM EBITDA and as a multiple of LTM earnings before interest and taxes
("EBIT"). DLJ noted that no transaction reviewed was identical to the Merger and
that, accordingly, the foregoing analysis necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Lincare and other factors that would affect the acquisition
value of the companies to which it is being compared. The analysis indicated
that, for the Comparable Acquisition Transactions, the range of multiples of
equity value to LTM earnings was 13.3x to 86.1x, with a mean (excluding the
minimum and maximum) of 29.2x, the range of multiples of Aggregate Enterprise
Value to LTM revenue was 0.5x to 5.4x, with a mean (excluding the minimum and
maximum) of 1.5x, the range of Aggregate Enterprise Value to LTM EBITDA was 5.7x
to 31.9x, with a mean (excluding the minimum and maximum) of 12.6x, and the
range of multiples of Aggregate Enterprise Value to LTM EBIT was 8.4x to 50.0x,
with a mean (excluding the minimum and maximum) of 18.3x.

Acquisition Premiums Analysis. DLJ reviewed the purchase premiums of the
Comparable Acquisition Transactions. DLJ calculated premiums paid to the public
stock price one month, one week and one day prior to the announcement of such
transactions. Such premiums were applied to Lincare's stock price on April 12,
1995, the day the Exchange Ratio was determined, on April 5, 1995, one week
prior to the day the Exchange Ratio was determined, and on March 13, 1995, one
month prior to the day the Exchange Ratio was determined to imply hypothetical
Aggregate Enterprise Values and common stock values for Lincare. The
acquisitions premiums analysis indicated a hypothetical reference per share
range for the Lincare Common Stock value of between $40.06 and $41.47, with a
mean of $40.96.

Discounted Cash Flow Analysis. DLJ calculated the estimated unlevered
after-tax cash flows that Lincare could be expected to generate over the
five-year period ending December 31, 1999, using Lincare management's
projections of Lincare's future financial performance. Using these projections,
DLJ then calculated estimated terminal values for Lincare at the end of the
five-year period by applying multiples ranging from 8.0x to 11.0x (which DLJ
believed to be appropriate for Lincare's business based on DLJ's experience and
judgment) to such projections' projected 1999 EBITDA. The unlevered cash flows
for the projected five-year period and the range of terminal values were then
discounted to December 31, 1994 using annual discount rates ranging from 10.0%
to 14.0% (chosen to reflect the weighted average cost of capital of Lincare and
other similar healthcare companies) to imply the hypothetical Aggregate
Enterprise Value and common stock value of Lincare. The discounted cash flow
analysis indicated a hypothetical reference range for the Lincare common stock
value of between $53.80 and $60.83 per share before considering the value of
free cash flows resulting from expected cost savings and other potential
synergies.

Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects resulting
from the Merger, including the effect of the consummation of the Merger,
assuming the Exchange Ratio, on the earnings per share of Coram Common Stock
following the Merger. In arriving at its opinion, DLJ's analysis considered,
among other things, (i) selected analysts' estimates of Coram's 1995 and 1996
earnings per share before the Merger, (ii) Coram's and Lincare's internal
management projections regarding future results and (iii) Coram's management
estimates of future synergies and cost savings associated with the Merger. The
actual operating results or financial position achieved by the combined company
may vary from the projected results and the variations may be material.

Contribution Analysis. DLJ compared the relative contribution of Coram and
Lincare to pro forma combined revenue, EBITDA and EBIT for the calendar year
1994 on a historical basis, and for 1995 and 1996 on a projected basis both
before and after giving effect to certain anticipated cost savings. DLJ noted
that Lincare would have contributed on a pro forma basis during the three year
period approximately 18.4% to 24.8% of combined revenue, approximately 39.9% to
58.7% of combined EBITDA and approximately 38.1% to 65.2% of combined EBIT.

In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, DLJ confirmed the appropriateness of its reliance on the
analyses used to render its April 17, 1995 opinion by performing procedures to
update certain of such analyses and by reviewing the assumptions upon which such
analyses were based and the factors considered in connection therewith.

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In connection with the review of the Merger by the Coram Board of
Directors, DLJ performed a variety of financial and comparative analyses for
purposes of its opinion given in connection therewith. The summary set forth
above does not purport to be a complete description of the presentation by DLJ
to the Coram Board of Directors or the analyses performed by DLJ in arriving at
its opinion.

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. DLJ
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create a misleading view of the
processes underlying its opinion. In addition, DLJ may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that the range of
valuations resulting for any particular analysis described above should not be
taken to be DLJ's view of the actual value of Coram or Lincare. In performing
its analyses, DLJ made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of Coram or Lincare. Any estimates contained
therein are not necessarily indicative of future results or actual values, which
may be significantly more or less favorable than those suggested by such
estimates. In addition, estimates relating to the value of businesses or assets
do not purport to be appraisals or to necessarily reflect the prices at which
businesses or assets may actually be sold. The analyses performed were prepared
solely as part of DLJ's analysis of the fairness of the consideration, from a
financial point of view, to the holders of Coram Common Stock of the
consideration to be paid by Coram pursuant to the Merger Agreement and were
provided to the Coram Board of Directors in connection with the delivery of
DLJ's opinion.

The Coram Board of Directors retained DLJ to render a financial opinion
letter based upon its qualifications, experience and expertise. DLJ is an
internationally recognized investment banking and advisory firm. DLJ, as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. DLJ
has performed investment banking and other services for both Coram and Lincare
in the past and has been compensated for such services. On April 6, 1995, an
affiliate of DLJ made a bridge loan to Coram in the amount of $150 million, the
proceeds of which were to be used in connection with the acquisition of the
Caremark Business. In connection therewith, pursuant to letter agreements dated
March 30, 1995 and April 6, 1995, Coram agreed to pay DLJ certain customary fees
and further agreed that DLJ would have the right but not the obligation to
provide certain investment banking services to Coram while the bridge loan is
outstanding for which it would also receive customary fees. Coram also agreed to
reimburse DLJ for its out-of-pocket expenses, including the fees of its legal
counsel, and to indemnify DLJ and its affiliates, their respective directors,
officers, agents and employees, and each person, if any, controlling DLJ or any
of its affiliates against certain liabilities and expenses, including
liabilities under the federal securities laws, incurred in connection with its
services. In addition, DLJ acted as an underwriter in connection with two 1992
public offerings of common stock by Lincare and was compensated for such
services. In the ordinary course of DLJ's trading and brokerage activities, DLJ
or its affiliates may at any time hold long or short positions, may trade or
otherwise effect transactions, for its own account or for the account of
customers, in debt or equity securities of Coram or Lincare.

Pursuant to a letter agreement dated as of April 15, 1995, between Coram
and DLJ, Coram retained DLJ to render a financial opinion letter to the Coram
Board of Directors in connection with the Merger. Coram has paid DLJ its
customary fee for delivering its opinion. Coram has also agreed to reimburse DLJ
for its out-of-pocket expenses, including the fees of its legal counsel, and to
indemnify DLJ and its affiliates, their respective directors, officers, agents
and employees, and each person, if any, controlling DLJ or any of its affiliates
against certain liabilities and expenses, including liabilities under the
federal securities laws, incurred in connection with its services.

LINCARE'S REASONS FOR THE MERGER AND BOARD OF DIRECTORS' RECOMMENDATION

The Lincare Board of Directors has unanimously approved the Merger
Agreement, the Merger and the transactions contemplated thereby and recommends
that the Lincare stockholders vote to approve the Merger.

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In evaluating the proposed Merger, the Lincare Board of Directors, with the
assistance of Alex. Brown and Lincare's outside legal counsel and other
advisors, considered a variety of factors, including, but not limited to, the
following:

1. The Lincare Board of Directors concluded that in a rapidly changing
healthcare industry, a combined Coram/Lincare business would have enhanced
opportunities in the marketplace by providing a comprehensive range of
alternate site infusion, respiratory therapy and other health care
services. The Lincare Board of Directors believes that pricing pressures by
third party payors, increased competition for patients and the increasing
influence of managed care organizations, such as HMOs, will create
competitive advantages for alternate site health care providers that are
horizontally integrated and can offer a broad range of patient services,
so-called "one-stop shopping." Many payors, including managed care
organizations, have expressed a preference for the convenience and reduced
administrative expenses associated with having fewer providers responsible
for a broader range of patient needs.

2. The Lincare Board of Directors has observed the rapid consolidation
of the alternate site health care industry, including the recently
announced merger of Abbey and Homedco, and concluded that the Merger would
enhance Lincare's ability to compete more effectively against other
companies in the industry. The Lincare Board of Directors believes that the
rapid changes in the entire health care industry, including the growing
cost containment efforts of government and private insurance reimbursement
programs, will continue to drive the pace of consolidation in the industry.

3. The Lincare Board of Directors has observed that managed care
organizations and indemnity insurers increasingly are demanding capitated
fee structures and other arrangements requiring health care providers to
assume all or a portion of the financial risk of providing care. The
Lincare Board of Directors concluded that a strategic combination with
Coram, a large national alternate site provider, would permit Lincare to
compete more effectively in a risk sharing environment and achieve greater
potential penetration of the managed care market, which favors providers
who are larger, have a broader range of services and serve broader
geographic areas.

4. The Lincare Board of Directors concluded that the businesses of
Coram and Lincare are compatible and do not overlap. As a result, the
combined enterprise would be able to offer a broad range of alternate site
health care services without a loss of momentum or significant disruption
to either business. The Lincare Board of Directors also concluded that
Coram's senior management has a well-defined business strategy and
considerable operational experience, which, combined with the experience of
Lincare's key employees, would enable Coram's senior management to realize
the full potential of a combined Lincare/Coram business.

5. The Lincare Board of Directors concluded that the Merger would
position Lincare to enhance its presence in certain geographic markets and
facilitate more rapid entry into other markets through Coram's existing
operations. This would not only provide opportunities for increased sales,
but would also increase Lincare's visibility and enhance its opportunities
to acquire other respiratory therapy companies in existing Coram and
Lincare markets.

6. The Lincare Board of Directors concluded that a strategic
combination with Coram would diversify Lincare's payor mix and would
increase Lincare's managed care business by providing access to Coram's
managed care relationships and its dedicated managed care sales force.

7. The Lincare Board of Directors concluded that the Merger would
provide Lincare stockholders with the opportunity to have a continued
equity participation in a larger, more diversified enterprise with market
capitalization that will be considerably larger than Lincare's current
market capitalization.

8. The Lincare's Board of Directors concluded that the terms and
conditions of the proposed Merger Agreement, generally, are favorable to
Lincare's stockholders.

9. The Lincare Board of Directors considered the presentation of Alex.
Brown on April 17, 1995, including Alex. Brown's opinion that, based upon
and subject to the various considerations set forth in the opinion, the
Exchange Ratio was fair, from a financial point of view, to the holders of
Lincare Common Stock. See "The Merger--Opinion of Lincare's Financial
Advisor."

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For all of the foregoing reasons, Lincare's Board of Directors has also
concluded that a combination with Coram, on the terms set forth in the Merger
Agreement, is in the best interest of Lincare's stockholders. Due to the wide
variety of factors considered in connection with the evaluation of the Merger,
the Lincare Board of Directors did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific factors
considered in reaching its determination.

THE BOARD OF DIRECTORS OF LINCARE UNANIMOUSLY RECOMMENDS THAT LINCARE
STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.

OPINION OF LINCARE'S FINANCIAL ADVISOR

The Lincare Board of Directors retained Alex. Brown to act as its financial
advisor in connection with the Merger. On April 17, 1995, Alex. Brown made a
presentation to the Lincare Board of Directors with respect to the Merger and
rendered its oral opinion, which was subsequently confirmed in writing, that, as
of such date, based upon the facts and circumstances as they existed at the
time, and subject to certain assumptions, factors and limitations set forth in
such opinion, the Exchange Ratio pursuant to the Merger Agreement was fair from
a financial point of view to the Lincare stockholders. Alex. Brown subsequently
confirmed its April 17, 1995 opinion by delivery of a written opinion dated as
of the date of this Proxy Statement/Prospectus.

THE FULL TEXT OF THE WRITTEN OPINION OF ALEX. BROWN, DATED AS OF THE DATE
OF THIS PROXY STATEMENT/PROSPECTUS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN, IS INCLUDED AS APPENDIX C
TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE.
LINCARE STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY. ALEX.
BROWN'S OPINION IS DIRECTED ONLY TO THE EXCHANGE RATIO TO BE RECEIVED BY LINCARE
STOCKHOLDERS PURSUANT TO THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY LINCARE STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE
AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF ALEX. BROWN SET FORTH IN
THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.

In arriving at its opinion dated April 17, 1995, Alex. Brown (i) reviewed
the Merger Agreement; (ii) reviewed certain publicly available information
concerning Lincare and Coram; (iii) reviewed certain internal financial analyses
and other information concerning Lincare and Coram made available to Alex. Brown
by their respective managements; (iv) held discussions with members of the
senior management of Lincare and Coram regarding the business and the prospects
of their respective companies and the joint prospects of a combined company; (v)
held discussions with consultants to Coram regarding the business and prospects
of Coram and the home infusion business which it recently acquired from
Caremark; (vi) reviewed the reported price and trading activity for Lincare
Common Stock and Coram Common Stock; (vii) compared certain financial and stock
market information for Lincare and Coram with similar information for certain
other companies whose securities are publicly traded; (viii) reviewed the
financial terms of certain recent business combinations which Alex. Brown deemed
comparable in whole or in part; and (ix) performed such other studies and
analyses and considered such other factors as Alex. Brown deemed appropriate.

As described in the opinion, Alex. Brown assumed and relied upon, without
independent verification, the accuracy and completeness of the information
furnished to or otherwise reviewed by or discussed with it for the purposes of
its opinions. With respect to the financial projections used in its analyses,
Alex. Brown assumed that they had been reasonably prepared on bases reflecting
the best currently available estimates and judgements of the senior management
of Lincare and Coram as to the likely future financial performance of their
respective companies. Alex. Brown also assumed, with the consent of the Lincare
Board of Directors, that the Merger would be treated as a pooling-of-interests
in accordance with generally accepted accounting principles and as a tax-free
reorganization for federal income tax purposes. Alex. Brown did not make an
independent evaluation or appraisal of the assets of Lincare or Coram, nor was
it furnished with any such evaluation or appraisal. Alex. Brown's opinions
stated that such opinions were based on market, economic and other conditions as
they existed and could be evaluated as of the dates of its opinions. Alex.
Brown's opinions do not imply any conclusion as to the likely trading range of
the Coram Common Stock following consummation of the Merger nor do they
constitute a recommendation to any stockholder of Lincare as to how such
stockholder should vote with respect to the Merger.

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The following is a summary of the presentation Alex. Brown made to the
Lincare Board of Directors on April 17, 1995:

Stock Price Analysis. Alex. Brown reviewed and analyzed the trading
prices and volume for Lincare since March 19, 1992, the date of its initial
public offering, and reviewed and analyzed the trading prices and volume
for Coram over a period from July 11, 1994, the date of its formation, to
April 13, 1995 (the "Comparison Period"). Alex. Brown also compared the
daily closing prices of the Common Stock of Lincare and Coram with a
composite index of certain selected home healthcare companies (discussed
below) and the Standard & Poor's 500 Index during the Comparison Period.

Alex. Brown also analyzed the historical exchange ratio of Lincare and
Coram and noted that the Exchange Ratio represents a premium of 32.3% to
the exchange ratio for the two companies as of April 13, 1995, a premium of
34.1% to the average exchange ratio during the twenty trading days prior to
April 13, 1995 and a premium of 32.2% to the average exchange ratio during
the thirty trading days prior to April 13, 1995.

Analysis of Selected Publicly Traded Companies. Alex. Brown analyzed
and compared certain publicly available information for Lincare and Coram
with corresponding data and ratios for the following group of six publicly
traded home healthcare companies: Abbey/Homedco, American HomePatient,
Inc., The Olsten Corporation, Pediatric Services of America, Inc., Quantum
Health Resources, Inc. and RoTech Medical Corporation (the "Selected
Companies"). Coram's publicly reported latest twelve months ("LTM") net
revenues and earnings before interest, taxes, depreciation and amortization
("EBITDA") were adjusted to reflect the Caremark and HMSS acquisitions for
the full year 1994, to eliminate restructuring and non-recurring charges
and to assume the realization of annualized cost savings achieved at Coram
through February 28, 1995.

Alex. Brown noted that the multiple of market value to projected
calendar year 1995 earnings per share ("EPS"), based on the compilation of
publicly available research estimates available through the Institutional
Brokers Estimate Systems, for Lincare was 17.6x and for Coram was 23.2x,
compared to a range for the Selected Companies of 11.6x to 23.6x, with a
mean of 18.3x; and the multiple of market value to projected calendar year
1996 EPS for Lincare was 14.7x and for Coram was 15.1x, compared to a range
for the Selected Companies of 9.2x to 19.2x, with a mean of 14.6x. Alex.
Brown further noted that the multiple of adjusted market value (market
value adjusted for debt and cash) to LTM net revenues for Lincare was 4.1x
and for Coram was 1.6x, compared to a range for the Selected Companies of
0.7x to 3.4x, with a mean of 1.7x; and the multiple of adjusted market
value to LTM EBITDA for Lincare was 9.9x and for Coram was 12.8x, compared
to a range for the Selected Companies of 7.5x to 13.8x, with a mean of
10.0x. Alex. Brown also noted that no company used in the Selected
Companies analysis was identical to Lincare or Coram and that, accordingly,
an analysis of the results of the foregoing necessarily involved complex
considerations and judgements concerning differences in the financial and
operating characteristics of Lincare and Coram and other factors that could
affect the public trading value of the companies to which they were being
compared.

Analysis of Selected Merger Transactions. Alex. Brown reviewed and
analyzed twenty selected pending and completed mergers and acquisitions in
the home healthcare industry which had been announced since 1987 (the
"Selected Transactions"). Alex. Brown also reviewed the price paid and the
implied multiples paid in the pending merger of Abbey Healthcare Group
Incorporated and Homedco Group, Inc. ("Abbey/Homedco"), the most recent
significant transaction in the home healthcare industry.

Alex. Brown noted that, for the Selected Transactions, the range of
multiples of equity value to projected forward year EPS were 9.6x to 31.4x
with a mean of 21.2x, compared to 23.3x for the Merger; the range of
multiples of adjusted purchase price (purchase price adjusted for debt and
cash) to LTM net revenues was 0.6x to 5.5x with a mean of 1.8x, compared to
5.5x for the Merger; and the range of multiples of adjusted purchased price
to LTM EBITDA was 5.4x to 34.0x with a mean of 14.7x, compared to 13.3x for
the Merger. In addition, Alex. Brown compared the implied multiples for the
Merger to the Abbey/Homedco transaction in which the multiple of equity
purchase price to projected forward year EPS was 16.0x, the multiple of
adjusted purchased price to LTM net revenues was 1.6x and

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<PAGE> 44

the multiple of adjusted purchase price to LTM EBITDA was 8.7x. Alex. Brown
noted that no transaction reviewed was identical to the Merger and that,
accordingly, an analysis of the results of the foregoing necessarily
involved complex considerations and judgements concerning differences in
the financial and operating characteristics of Lincare and other factors
that would affect the acquisition value of the companies to which it was
being compared.

Discounted Cash Flow Analysis. Alex. Brown performed discounted cash
flow analyses for both Lincare and Coram, based upon estimates of projected
financial performance for Lincare and Coram for the years 1995 through 1999
prepared by their respective managements. For each company, Alex. Brown
aggregated the present value of the cash flows through 1999 with the
present value of a range of terminal values. Alex. Brown discounted these
cash flows at discount rates ranging from 16.0% to 20.0%. The terminal
value was computed based on projected EBITDA in calendar year 1999 and a
range of terminal multiples of 8.0x to 10.0x. This analysis indicated a
range of values per fully diluted share of $34.52 to $49.89 for Lincare and
$20.08 to $29.29 for Coram. Due to the uncertainty in the healthcare
industry and the difficulty, in general, of projecting future cash flows,
Alex. Brown did not place significant emphasis on this analysis.

Pro Forma Analysis. Alex. Brown analyzed certain pro forma financial
effects of the Merger, including the effect on the projected EPS of Coram
following the Merger. Based on managements' projections of earnings, cost
savings and revenue synergies for calendar year 1996 EPS, this analysis
showed the Merger to be accretive to Coram's fully taxed, projected
calendar year 1996 EPS. The actual operating results or financial position
achieved by the combined company may vary from the projected results, and
the variations may be material.

Contribution Analysis. Alex. Brown analyzed the relative contributions
of Lincare and Coram to the pro forma income statement of the combined
company based on managements' projections for their respective companies
and compared such contributions to the 49.6% pro forma ownership of Coram
by the Lincare stockholders. This analysis indicated that (i) for 1995,
Lincare would contribute 22.6% of net revenues, 40.1% of EBITDA and 52.3%
of net income, and (ii) for 1996, Lincare would contribute 24.9% of net
revenues, 39.9% of EBITDA and 45.0% of net income.

The summary set forth above does not purport to be a complete description
of the presentation by Alex. Brown to the Lincare Board of Directors or the
analyses performed and factors considered by Alex. Brown in connection with its
opinion dated April 17, 1995. Alex. Brown believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, or selecting
portions of the above summary, without considering all factors and analyses,
could create an incomplete view of the process underlying the analyses set forth
in Alex. Brown's opinions. In performing its analyses, Alex. Brown made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Lincare or Coram. In connection with its opinion, dated the date of
this Proxy Statement/Prospectus, Alex. Brown confirmed its April 17, 1995
opinion by using procedures to update certain of such analyses and by reviewing
the assumptions underlying such analyses and the factors considered in
connection therewith. The analyses performed by Alex. Brown are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses.

Alex. Brown is an internationally recognized investment banking firm and,
as a customary part of its investment banking business, is engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements and valuations for
corporate and other purposes. The Lincare Board of Directors selected Alex.
Brown to serve as its financial advisor because of Alex. Brown's reputation and
healthcare expertise as well as its familiarity with Lincare, Coram and their
respective businesses. Alex. Brown regularly publishes research reports
regarding the healthcare industry and the businesses and securities of publicly
traded companies in that industry, including Lincare. In the ordinary course of
its trading and brokerage activities, Alex. Brown may, from time to time, hold
long or short positions in, may trade or may otherwise effect transactions, for
its own account or for the account of customers, in securities of Lincare or
Coram.

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<PAGE> 45

Pursuant to the terms of an engagement letter dated August 10, 1993, as
amended, Lincare has agreed to
pay Alex. Brown a transaction fee, upon consummation of the Merger, equal to
0.8% of the aggregate value of the consideration paid in connection with the
Merger. Lincare has also agreed to pay Alex. Brown a fee of $500,000 for
rendering its opinion as to the fairness, from a financial point of view, of the
Exchange Ratio. Such fee will be credited to the transaction fee payable upon
consummation of the Merger. In addition, Lincare has agreed to reimburse Alex.
Brown for its reasonable out-of-pocket expenses, including fees and
disbursements of counsel, and to indemnify Alex. Brown and certain related
persons against certain liabilities, including certain liabilities under the
federal securities laws, relating to, or arising out of, its engagement.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendations of the Boards of Directors of Lincare
and Coram with respect to the Merger Agreement and the transactions contemplated
thereby, stockholders should be aware that certain members of the management of
Lincare and Coram, certain members of the Boards of Directors of Lincare and
Coram and certain other persons have interests in the Merger that are in
addition to the interests of stockholders of Lincare and Coram generally.

Employment Agreements. Upon the execution of the Merger Agreement, Coram
executed employment agreements with Mr. Howard R. Deutsch, Executive Vice
President and a director of Lincare, and with Mr. John P. Byrnes, Senior Vice
President of Lincare, setting forth certain terms and conditions concerning
Coram's employment of Messrs. Deutsch and Byrnes after the Effective Time. At
the Effective Time, Mr. Deutsch and Mr. Byrnes will each become an employee of
Coram.

Mr. Deutsch's Employment Agreement provides for an annual salary of
$ , plus an annual bonus which for the first three years shall not be
less than $ . Mr. Deutsch will also receive options to acquire
shares of Coram Common Stock with an exercise price per share equal to
the fair market value of the Coram Common Stock on the grant date. The option
shares will vest over four years; however, if Mr. Deutsch is terminated within
the first two years, the remaining unvested options may lapse. If Mr. Deutsch is
terminated for any reason other than for "cause" (as defined), Coram will be
obligated to pay Mr. Deutsch only the pro rata share of his base salary and
guaranteed bonus to which he was entitled as of the date of termination.
Effective as of the date his employment is terminated, Coram may elect to engage
Mr. Deutsch as a consultant for a period which shall not exceed five years from
the Effective Time. During the term of the agreement (which includes any
consulting period), Mr. Deutsch is subject to a non-competition provision which
prohibits him from (i) personally engaging in a competitive business and (ii)
prior to the third anniversary of the Effective Time, directly or indirectly,
being associated with any business or organization that competes with Lincare or
its affiliates, subject to a de minimus exception.

Mr. Byrnes's Employment Agreement provides for an annual salary of
$ , plus an annual bonus which for the first three years shall not be
less than $ . Mr. Byrnes will also receive options to acquire
shares of Coram Common Stock with an exercise price per share equal to
the fair market value of the Coram Common Stock on the grant date. The option
shares will vest over four years; however, if Mr. Byrnes is terminated within
the first two years, the remaining unvested options may lapse. If Mr. Byrnes is
terminated for any reason other than for "cause" (as defined), Coram will be
obligated to pay Mr. Byrnes only the pro rata share of his base salary and
guaranteed bonus to which he was entitled as of the date of termination;
provided, however, that if such termination without cause occurs prior to the
second anniversary of the Effective Time, Mr. Byrnes will receive (i) a lump sum
equal to twelve months salary at his then-current annual salary rate, (ii) an
amount equal to his most recent annual bonus (which shall not be less than his
guaranteed bonus) and (iii) any options held by Mr. Byrnes granted prior to the
Effective Time by Lincare will continue to vest in accordance with their terms.
Effective as of the date his employment is terminated, Coram may elect to engage
Mr. Byrnes as a consultant for a period which shall not exceed five years from
the Effective Time. During the term of the agreement (which includes any
consulting period), Mr. Byrnes is subject to a non-competition provision which
prohibits him from (i) personally engaging in a competitive business and (ii)
prior to the third anniversary of the Effective Time, directly or indirectly,
being associated with any business or organization that competes with Lincare or
its affiliates.

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<PAGE> 46

It is anticipated that, prior to the Effective Time, Coram will enter into
an agreement with James T. Kelly, Lincare's President, Chairman and CEO. The
agreement is expected to provide that, as of the Effective Time, Mr. Kelly will
become an executive of Coram. The agreement provides that Mr. Kelly will receive
an annual salary of $ and a bonus of up to $ . If Mr.
Kelly is terminated for any reason other than cause, Coram will be obligated to
pay Mr. Kelly only the pro rata share of his salary to which he was entitled as
of the date of termination. Effective as of the date his employment is
terminated, Coram may elect to engage Mr. Kelly as a consultant for a period
which shall not exceed five years from the Effective Time. During the term of
the agreement (which includes any consulting period), Mr. Kelly is subject to a
non-competition provision which prohibits him from (i) personally engaging in a
competitive business and (ii) prior to the third anniversary of the Effective
Time, directly or indirectly, being associated with any business or organization
that competes with Lincare or its affiliates subject to a de minimis exception.

Severance Payments. Because the Merger will effect a change in control of
Lincare, pursuant to their respective Employment Agreements dated November 1,
1993 with Lincare, Messrs. Kelly, Deutsch and James M. Emanuel will receive
payments of $1,356,000, $1,016,000 and $703,000, respectively. These individuals
will also receive the pro rata share of their respective 1995 bonuses through
the Effective Time.

Option Assumption. As provided in the Merger Agreement, by virtue of the
Merger, all Lincare Options outstanding at the Effective Time under the Lincare
Stock Option Plans, whether or not then exercisable, will be assumed by Coram
and become exercisable for shares of Coram Common Stock. Each Lincare Option
assumed by Coram will be exercisable upon the same terms and conditions as under
the applicable Lincare Stock Option Plan (with appropriate adjustments to the
number of shares and the exercise price to reflect the Exchange Ratio) and
applicable option agreements issued thereunder, and Coram will assume the
Lincare Stock Option Plans for such purposes. As of March 31, 1995, employees
(or former employees) of Lincare held Lincare Options to purchase an aggregate
of 2,268,750 shares of Lincare Common Stock at a weighted average price of
$15.23 per share (at exercise prices ranging from $0.25 to $25.00 per share).
Approval of the Merger Agreement by the stockholders of Coram will constitute
stockholder approval of the assumption by Coram of the Lincare Stock Option
Plans, together with the outstanding Lincare Options thereunder, and each
assumed Lincare Option will be converted at the Effective Time into an option to
purchase shares of Coram Common Stock based upon the Exchange Ratio. See "The
Merger Agreement--Treatment of Stock Options."

Acceleration of Options. At the Effective Time, options to purchase an
aggregate 492,624 shares of Lincare Common Stock will immediately and fully vest
(and be converted into options to acquire approximately 756,375 shares of Coram
Common Stock), as more particularly set forth below:

<TABLE>
<CAPTION>
ACCELERATED
OPTION HOLDER OPTIONS
--------------------------------------------------------- -----------
<S> <C>
James T. Kelly........................................... 100,000
Howard R. Deutsch........................................ 73,000
James M. Emanuel......................................... 51,000
Francis J. Sullivan...................................... 76,979
Byron R. Krogen.......................................... 58,734
John P. Byrnes........................................... 77,059
Steven K. Boyd........................................... 36,651
Peter E. Mosby........................................... 9,123
Helen M. Sheridan........................................ 9,123
Michael T. Fricke........................................ 960
-----------
Total:................................................... 492,629*
</TABLE>

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

*Five share difference attributable to rounding of fractional shares.

Indemnification and Insurance. Under the terms of the Merger Agreement,
Coram is required to ensure that all provisions for indemnification (including
insurance coverage) existing on the date of the Merger Agreement in favor of any
current and former officers, directors, employees and agents of Lincare or its
subsidiaries (the "Indemnified Parties"), as set forth in the respective
charter, bylaws, or pursuant to other agreements in effect on the date of the
Merger Agreement, survive the Merger, without modification, for a

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<PAGE> 47

period of at least six years from the Effective Time; provided, however, that
Coram is obligated to maintain such insurance coverage, (i) only to the extent
that it is available for an annual premium not in excess of two times the last
annual premium paid by Lincare or its subsidiaries prior to the date of the
Merger Agreement and (ii) for six years after the Effective Time.

Board of Directors. Pursuant to the Merger Agreement, if the Merger
Agreement is approved and the Merger is consummated, Coram has agreed to cause
James T. Kelly and Frank T. Cary, now members of the Lincare Board of Directors,
to be elected to Coram's Board of Directors, which will consist of seven
members.

Interest of Lincare's Counsel. A partner of Reboul, MacMurray, Hewitt,
Maynard & Kristol, counsel to Lincare, owns an aggregate of 700 shares of
Lincare Common Stock.

Other Employee-Related Matters. As of the Effective Time, Coram will
continue to employ all of the employees of Lincare and its subsidiaries,
provided, however, that nothing in the Merger Agreement or in any other
agreement will be deemed to create any other employment status other than
employment at will with respect to such employees. Lincare's current employee
benefit plans will remain in effect immediately following the Effective Time.
Such benefit plans may be terminated to the extent that reasonably comparable
benefits (including credit for past service) are made available to such former
employees of Lincare under Coram's employee benefit plans.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a summary of the principal federal income tax
consequences of the Merger to holders of shares of Lincare Common Stock who hold
their shares as capital assets. The discussion is based on laws, regulations,
rulings and decisions currently in effect. The discussion does not take account
of rules that are applicable to stockholders of Lincare that are subject to
special treatment under the Code, including without limitation, insurance
companies, dealers in stocks and securities, financial institutions, tax-exempt
organizations, foreign persons and stockholders who acquired shares pursuant to
the exercise of employee stock options or rights or otherwise as compensation.
The discussion also does not address state, local or foreign tax consequences of
the Merger. No rulings have been or will be requested from the Internal Revenue
Service with respect to the tax consequences of the Merger. Each holder of
shares of Lincare Common Stock should consult its own tax advisor as to the
specific tax consequences of the Merger to that holder.

General. It is a condition to the obligation of Lincare to consummate the
Merger that Lincare shall have received an opinion of its counsel, Reboul,
MacMurray, Hewitt, Maynard & Kristol, to the effect that: (i) the Merger will
constitute a reorganization for United States federal income tax purposes within
the meaning of section 368(a) of the Code; (ii) Lincare, Merger Sub and Coram
will each be a party to the reorganization within the meaning of section 368(b)
of the Code; (iii) no gain or loss will be recognized by Lincare, Merger Sub or
Coram as a result of the consummation of the Merger; and (iv) no gain or loss
will be recognized by a holder of shares of Lincare Common Stock to the extent
the holder exchanges its shares of Lincare Common Stock solely for shares of
Coram Common Stock pursuant to the Merger (except with respect to cash received
in lieu of a fractional share interest in Coram Common Stock and except with
respect to the conversion and exchange of any shares of Lincare Common Stock
that were acquired by the holder thereof pursuant to any employee stock option,
employee stock purchase plan or otherwise as compensation). It is a condition of
the obligation of Coram to consummate the Merger that Coram shall have received
an opinion to the same effect from its counsel, Brobeck, Phleger & Harrison.
Each such opinion may be based upon certain representations and assumptions.
Lincare and Coram may each waive the requirement that it receive such an opinion
as a condition to its obligation to consummate the Merger. Assuming the Merger
qualifies as a reorganization, the principal federal income tax consequences of
the Merger to holders of Lincare Common Stock will be as described below.

Receipt Solely of Coram Common Stock. A holder of Lincare Common Stock who
receives solely Coram Common Stock in the Merger (except for cash in lieu of a
fractional share interest as described below) in exchange for all shares of
Lincare Common Stock owned by such holder will not recognize gain or loss upon
such exchange for federal income tax purposes. The tax basis of the Coram Common
Stock received in such an exchange will be equal to the basis of the Lincare
Common Stock exchanged therefor (except for the basis

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<PAGE> 48

attributable to any fractional share interest in Coram Common Stock, as
discussed below). The holding period of such Coram Common Stock will include the
holding period of the Lincare Common Stock surrendered in exchange therefor,
provided that the Lincare Common Stock is held as a capital asset at the
Effective Time.

Cash Received in Lieu of Fractional Shares. A holder of Lincare Common
Stock who receives cash in the Merger in lieu of a fractional share interest in
Coram Common Stock will be treated for federal income tax purposes as having
received such fractional share interest and sold it for the cash received. Such
stockholder will recognize gain or loss as of the Effective Time equal to the
difference between the amount of cash received and the portion of the
stockholder's adjusted tax basis in the shares of Lincare Common Stock exchanged
for the fractional share interest that is deemed sold. Such gain or loss will be
capital gain or loss if the stockholder holds the Lincare Common Stock exchanged
for the fractional share as a capital asset at the Effective Time and will be
long-term capital gain or loss if such Lincare Common Stock is considered to
have been held for more than one year.

REGULATORY APPROVALS

Under the HSR Act, and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division"), and specified waiting period requirements have been satisfied. Coram
and Lincare filed premerger notification and report forms with the FTC and the
Antitrust Division on May 9, 1995.

The waiting period under the HSR Act for Coram and Lincare will expire on
June 8, 1995 (thirty days after the date of filing), unless the period is
terminated sooner pursuant to Coram's and Lincare's request for early
termination of the waiting period. If Coram or Lincare receive a request for
additional information from the FTC or the Antitrust Division prior to the
expiration of the waiting period, the period will terminate twenty days after
Coram and Lincare have substantially complied with the request.

At any time before or after the Effective Time, the Justice Department, FTC
or a private person or entity could seek under the antitrust laws, among other
things, to enjoin the Merger or to cause Coram to divest itself, in whole or in
part, of Lincare or of other businesses conducted by Coram. There can be no
assurance that a challenge to the Merger will not be made or that, if such a
challenge is made, Coram will prevail. The obligations of Coram and Lincare to
consummate the Merger are subject to the condition that there be no temporary
restraining order, preliminary or permanent injunction or other order by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger. Each party has agreed to use its best
efforts to have any such injunction or order lifted. See "The Merger
Agreement--Conditions of the Merger" and "-- Termination."

Coram and Lincare are not aware of any license or regulatory permit which
is material to the business of Coram or Lincare and which is likely to be
adversely affected by consummation of the Merger or of any approval or other
action by any state, federal or foreign government or governmental agency (other
than routine re-licensing procedures) that would be required prior to the
Merger.

ACCOUNTING TREATMENT

The Merger is intended to qualify as a pooling-of-interests for accounting
and financial reporting purposes. Consummation of the Merger is conditioned upon
Coram and Lincare receiving letters from Ernst & Young LLP and KPMG Peat Marwick
LLP, respectively, regarding those firms' concurrence with Coram management's
and Lincare management's conclusions, respectively, as to the appropriateness of
pooling-of-interests accounting for the Merger under Accounting Principles Board
Opinion No. 16 if consummated in accordance with the Merger Agreement. See "The
Merger Agreement--Conditions of the Merger." Under the pooling-of-interests
accounting method, (i) the recorded historical cost basis of the assets and
liabilities of both Coram and Lincare will be carried forward to the operations
of Coram generally at their recorded amounts and (ii) financial statements of
Coram issued subsequent to the consummation of the Merger will be restated to
include the combined financial position, results of operations and cash flows
for Coram and Lincare for all periods presented therein. Certain events,
including certain transactions with respect to Coram

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<PAGE> 49

Common Stock or Lincare Common Stock by affiliates of Coram or Lincare,
respectively, may prevent the Merger from qualifying as a pooling-of-interests
for accounting and financial reporting purposes. See "The Merger--Resale
Restrictions."

RESALE RESTRICTIONS

All shares of Coram Common Stock received by Lincare stockholders in the
Merger will be freely transferable, except that shares of Coram Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of Coram or Lincare prior to the Merger may be resold
by them only in transactions permitted by the resale provisions of Rule 145
promulgated under the Securities Act (or Rule 144 in the case of such persons
who become affiliates of Coram or as otherwise permitted under the Securities
Act). Persons who may be deemed to be affiliates of Coram or Lincare generally
include individuals or entities that control, are controlled by, or are under
common control with, such party and may include certain officers and directors
of such party as well as principal stockholders of such party. The Merger
Agreement requires each of Coram and Lincare to exercise its reasonable efforts
to cause each of its affiliates to execute a written agreement to the effect
that such person will not offer to sell, transfer or otherwise dispose of any of
his or her shares of Lincare Common Stock or Coram Common Stock (other than
through conversion to Coram Common Stock pursuant to the Merger) until such time
as financial results covering at least 30 days of post-merger combined
operations of Coram have been published, either by issuance of a quarterly
earnings report on a Form 10-Q or other public issuance which includes such
information. A Coram or Lincare affiliate will not be prohibited from selling up
to 10% of the shares such affiliate holds during the aforementioned period if
the requirements of Rule 145 are met.

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<PAGE> 50

THE MERGER AGREEMENT

THE DETAILED TERMS OF AND CONDITIONS TO THE MERGER ARE CONTAINED IN THE
MERGER AGREEMENT, WHICH IS INCLUDED IN FULL AS APPENDIX A TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY
DESCRIPTION OF THE TERMS OF THE MERGER AGREEMENT IS QUALIFIED IN ITS ENTIRETY
BY, AND MADE SUBJECT TO, THE MORE COMPLETE INFORMATION SET FORTH IN THE MERGER
AGREEMENT.

THE MERGER

Subject to the terms and conditions of the Merger Agreement, at the
Effective Time, Merger Sub will be merged with and into Lincare and thereupon
Lincare will become a wholly-owned subsidiary of Coram. The Merger will have the
effects specified in the DGCL.

EFFECTIVE TIME OF THE MERGER

Upon the satisfaction or waiver of all conditions to the Merger, and
provided that the Merger Agreement has not been terminated or abandoned, Coram
and Lincare will cause the Certificate of Merger to be filed with the Secretary
of State of the State of Delaware. The Merger will become effective upon the
filing of the Certificate of Merger or at such later time as Coram and Lincare
have agreed upon and designated in such filing as the Effective Time.

CONVERSION OF SECURITIES

Pursuant to the Merger Agreement, as of the Effective Time, each issued and
outstanding share of Lincare Common Stock will be converted into the right to
receive 1.5354 shares of Coram Common Stock. All shares of Lincare Common Stock
converted in the Merger will no longer be outstanding and will automatically be
cancelled and retired and will cease to exist, and each holder of a certificate
representing any such shares will cease to have any rights with respect thereto,
except the right to receive, without interest, shares of Coram Common Stock upon
surrender of such certificate and cash in lieu of fractional shares of Coram
Common Stock.

TREATMENT OF STOCK OPTIONS

Pursuant to the Merger Agreement, at the Effective Time, all Lincare
Options then outstanding under the Lincare Stock Option Plans will remain
outstanding and will be assumed by Coram. Each Lincare Option assumed by Coram
will be exercisable upon the same terms and conditions as under the applicable
Lincare Stock Option Plan and the applicable option agreement issued thereunder,
except that (i) the number of shares of Coram Common Stock subject to each
Lincare Option will be determined by multiplying the number of shares of Lincare
Common Stock subject to the Lincare Option immediately prior to the Effective
Time by the Exchange Ratio and rounding down to the next whole share and (ii)
the per share exercise price will be determined by dividing the per share
exercise price in effect immediately prior to the Effective Time under the
Lincare Option by the Exchange Ratio and rounding down to the next whole share.
Approval of the Merger Agreement by the stockholders of Coram will constitute
stockholder approval of the assumption by Coram of the Lincare Stock Option
Plans under which the Lincare Options were granted.

EXCHANGE OF CERTIFICATES

As of the Effective Time, Coram will deposit with , as exchange
agent for the Lincare Common Stock (the "Exchange Agent"), for the benefit of
the holders of shares of Lincare Common Stock, for exchange in accordance with
the Merger Agreement, certificates representing the shares of Coram Common Stock
to be issued in exchange for certificates that represented shares of Lincare
Common Stock immediately prior to the Effective Time.

Promptly after the Effective Time, Coram will cause the Exchange Agent to
mail to all holders of record of Lincare Common Stock a letter of transmittal to
be used by such holders in forwarding their certificates representing such
shares ("Certificates") and instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Coram
Common Stock and cash in lieu of fractional shares.

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<PAGE> 51

LINCARE STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE A NOTICE AND TRANSMITTAL FORM FROM THE EXCHANGE
AGENT.

No fractional shares of Coram Common Stock will be issued and any holder of
shares of Lincare Common Stock entitled under the Merger Agreement to receive a
fractional share will be entitled to receive only a cash payment in lieu
thereof, which payment will be in an amount equal to such holder's proportionate
interest in the net proceeds from the Exchange Agent's sale in the open market
of the aggregate fractional shares of Coram Common Stock issuable in the Merger.

No dividends or other distributions declared after the Effective Time on
Coram Common Stock will be paid to the holder of any shares represented by a
Certificate until such Certificate is surrendered for exchange. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
will be paid to the holder of the certificates representing whole shares of
Coram Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time therefor payable with respect to such whole
shares of Coram Common Stock, less the amount of any withholding taxes which may
be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender, and a payment date subsequent to surrender, payable with
respect to such whole shares of Coram Common Stock, less the amount of any
withholding taxes which may be required thereon.

At or after the Effective Time, there will be no transfers on the transfer
books of Lincare of shares of Lincare Common Stock which were outstanding
immediately prior to the Effective Time.

Any portion of the monies from which cash payments in lieu of fractional
interests in shares of Coram Common Stock will be made (including the proceeds
of any investments thereof) and any shares of Coram Common Stock that are
unclaimed by the former stockholders of Lincare six months after the Effective
Time will be delivered to Coram. Any former stockholders of Lincare who have not
theretofore complied with the exchange procedures in the Merger Agreement may
thereafter look to Coram only as a general creditor for payment of their shares
of Coram Common Stock, cash in lieu of fractional shares, and any unpaid
dividends and distributions on shares of Coram Common Stock, deliverable in
respect of each share of Coram Common Stock such stockholder holds.

No interest will be paid or accrued on cash in lieu of fractional shares
and unpaid dividends and distributions, if any, which will be paid upon
surrender of Certificates.

In the event any Certificate is lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the appropriate amount of Coram Common Stock.
The Board of Directors of Coram may, as a condition to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to give Coram a
bond in such sum as it may direct as indemnity against any claim that may be
made against Coram with respect to the Certificate alleged to have been lost,
stolen or destroyed.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various customary representations and
warranties relating to, among other things, each of Coram's and Lincare's: (i)
organization and similar corporate matters; (ii) authorization, execution,
delivery, performance and enforceability of the Merger Agreement; (iii) capital
structure and the ownership of their respective subsidiaries; (iv) other
material investment interests; (v) conflicts under certificates of incorporation
or bylaws or comparable organizational documents, required consents and
approvals, and breaches of material contracts; (vi) compliance with material
laws and regulations; (vii) documents filed by each of Coram and Lincare with
the Commission and the accuracy of information contained therein; (viii)
litigation; (ix) absence of certain material changes; (x) tax matters; (xi)
employee benefit plans; (xii) labor matters; (xiii) absence of actions
preventing the accounting for the Merger as a pooling-of-interests; (xiv) the
use of brokers in arranging the Merger; (xv) related party transactions, and
(xvi) no undisclosed material liabilities. The Merger Agreement contains a
further representation and

43
<PAGE> 52

warranty by Coram relating to the authorization of the Coram Common Stock to be
issued in the Merger and the reasonableness of certain cost savings estimates
provided by Coram to Alex. Brown.

COVENANTS; CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME

Each of Coram and Lincare has agreed (and has agreed to cause its
subsidiaries), among other things, prior to the Effective Time, unless the other
agrees in writing or as otherwise required or permitted by the Merger Agreement,
(i) to conduct its operations only according to their usual, regular and
ordinary course; and (ii) to use all reasonable efforts, and to cause each of
its subsidiaries to use all reasonable efforts, to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationship with those persons having business
relationships with them. In addition, each of Coram and Lincare has also agreed
among other things, prior to the Effective Time, unless the other agrees in
writing or as otherwise required or permitted by the Merger Agreement, that each
of them shall not: (i) amend its certificate of incorporation or bylaws; (ii)
except pursuant to the exercise of options, warrants, conversion rights and
other contractual rights existing on April 17, 1995 (and, in the case of Coram,
except pursuant to the terms of other agreements and instruments outstanding as
of April 17, 1995 and except for up to 500,000 additional shares of Coram Common
Stock that may be issued for general corporate purposes), issue any shares of
its capital stock or change its capitalization as it existed on April 17, 1995;
(iii) issue any option, warrant or conversion right or other right not existing
on April 17, 1995 to acquire any shares of its capital stock, other than
employee stock options, stock benefits and stock purchases under any stock
option, stock benefit or stock purchase plan existing on April 17, 1995; (iv)
increase any compensation or enter into or amend any employment agreement with
any of its present or future officers or directors, except for normal increases
consistent with past practice and the payment of cash bonuses to officers
pursuant to and consistent with existing plans or programs; (v) adopt any new
employee benefit plan or amend any existing employee benefit plan in any
material respect other than, in the case of Coram, to increase the number of
shares authorized to be issued under the Coram Option Plan; (vi) declare, set
aside or pay any dividend or make any other distribution or payment with respect
to any shares of its capital stock; (vii) directly or indirectly acquire any
shares of its capital stock or capital stock of any of its subsidiaries; (viii)
change the number of shares of Coram Common Stock or Lincare Common Stock, as
the case may be, issued and outstanding by effecting a stock split, reverse
stock split, stock dividend, recapitalization or other similar transaction, (ix)
permit any of its subsidiaries to sell, lease or otherwise dispose of any of its
assets which are material, individually or in the aggregate, except in the
ordinary course of business, (x) other than in the ordinary course of business
and consistent with past practice, incur any material indebtedness for borrowed
money, except under credit facilities existing as of April 17, 1995 as they may
be amended from time to time or pursuant to a substitute credit facility on
terms comparable to credit facilities existing as of April 17, 1995, (xi) except
as provided in clause (xii) below, merge or consolidate with any person or adopt
a plan of liquidation or dissolution, or (xii) acquire, propose to acquire or
enter into an agreement to acquire, any assets, stock or other interests of a
third party except, in the case of Lincare, cash acquisitions utilizing existing
cash resources and amounts available under Lincare's credit facilities as of
April 17, 1995 and pending transactions as of April 17, 1995, or, in the case of
Coram, cash transactions permitted under Coram's credit facilities (in each case
which are of a nature so as not to cause the filing or effectiveness of the
Joint Proxy Statement/Prospectus to be delayed).

Coram and Lincare have agreed that, during the period from April 17, 1995
until the Effective Time, neither Coram nor Lincare will take any action that
would interfere with the ability of the parties to treat the Merger as a
"pooling-of-interests" for accounting purposes.

Both Coram and Lincare have agreed (i) to cooperate in the prompt
preparation and filing of certain documents under federal and state securities
laws and filing of certain documents under federal and state securities laws and
with applicable government entities, and (ii) to use all reasonable efforts to
obtain and deliver to each other certain letters from "affiliates," as such term
is defined under Rule 145 of the Securities Act.

44
<PAGE> 53

NEGOTIATIONS WITH OTHERS

The Merger Agreement provides that, prior to the Effective Time, each of
Coram, Lincare, and their subsidiaries shall not, and shall cause each of their
officers, directors, employees, agents, legal and financial advisors or
affiliates not to, directly or indirectly, make, solicit, encourage, initiate or
enter into any agreement or agreement in principle, or announce any intention to
do any of the foregoing, with respect to any offer or proposal to acquire all or
a substantial part of such party's business and properties or any interest in
such party's securities or debt securities whether by purchase, merger, purchase
of assets, tender offer, exchange offer, business combination or otherwise (a
"Third Party Transaction"). Neither party, nor any subsidiary of such party, nor
any of their respective officers, directors, legal and financial advisors,
agents and affiliates shall, directly or indirectly, participate in any
negotiations or discussions regarding, or furnish any information with respect
to, or otherwise cooperate in any way in connection with, or assist or
participate in, facilitate or encourage, any effort or attempt to effect a Third
Party Transaction involving any person other than Coram and Lincare unless a
party shall have received an unsolicited written offer from a person other than
Coram or Lincare to effect a Third Party Transaction and such party determines
in good faith with the advice of outside legal counsel that, in the exercise of
the fiduciary obligations of the Board of Directors under applicable law, such
information is required to be provided to or such discussions or negotiations
are required to be undertaken with the person submitting such unsolicited
written offer. Prior to the Effective Time, each of Coram and Lincare will
promptly communicate to the other party the terms of any proposal which it may
receive in respect of any Third Party Transaction and will keep such other party
informed as to the status of any actions, including negotiations or discussions,
taken pursuant to the immediately preceding sentence. As soon as practicable
following the Effective Time, each of Coram and Lincare will promptly request
that each person who has executed a confidentiality agreement in connection with
the consideration of a Third Party Transaction return all confidential
information furnished to such person by or on behalf of Coram or Lincare, as the
case may be.

MANAGEMENT AFTER THE MERGER

Coram is obligated to take all action necessary to cause James T. Kelly and
Frank T. Cary to be elected as directors of Coram for terms expiring at the 1996
Annual Meeting of Stockholders.

INDEMNIFICATION AND INSURANCE

Coram will ensure that all provisions for indemnification existing on the
date of the Merger Agreement in favor of the Indemnified Parties as set forth in
the respective charter, bylaws or pursuant to other agreements of Lincare or its
subsidiaries survive the Merger without modification for a period of at least
six years from the Effective Time.

For a period of six years after the Effective Time, Coram is obligated to
maintain in effect policies of directors' and officers' liability insurance
covering the Indemnified Parties, who are presently covered by Lincare insurance
policies, that are substantially no less advantageous to such Indemnified
Parties than such existing policies; provided, that Coram will not be required,
in order to maintain or procure such coverage, to pay an annual premium in
excess of two times the current annual premium paid by Coram for its existing
coverage (the "Cap"); provided, that if equivalent coverage cannot be obtained,
or can be obtained only by paying an annual premium in excess of the Cap, Coram
will only be required to obtain as much coverage as can be obtained by paying an
annual premium equal to the Cap.

Coram will pay all expenses, including attorneys' fees, that may be
incurred by any of the Indemnified Parties in enforcing the indemnity and other
obligations referred to above. The rights of each Indemnified party will be in
addition to any other rights such person may have under the Coram Certificate,
the Coram Bylaws, the DGCL or otherwise.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or other persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is therefore unenforceable.

45
<PAGE> 54

CONDITIONS OF THE MERGER

The respective obligations of Coram and Lincare to consummate the Merger
are subject to the fulfillment of certain conditions, including, without
limitation, the following: (i) the Merger Agreement and the transactions
contemplated thereby shall have been approved in the manner required by
applicable law by the holders of the issued and outstanding shares of capital
stock of Coram and Lincare entitled to vote thereon; (ii) the waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated; (iii) neither Coram nor Lincare shall be subject to
any order or injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by the Merger Agreement; (iv) the
Registration Statement shall have become effective and no stop order with
respect thereto shall be in effect; (v) all necessary approvals under state
securities laws relating to the issuance or trading of the Coram Common Stock to
be issued in connection with the Merger shall have been received; (vi) Lincare
and Coram shall have received letters from Ernst & Young LLP and KPMG Peat
Marwick LLP, respectively, regarding those firms' concurrence with Coram
management's and Lincare management's conclusions, respectively, as to the
appropriateness of pooling-of-interests accounting for the Merger under
Accounting Principles Board Opinion No. 16 if consummated in accordance with the
Merger Agreement; (vii) the shares of Coram Common Stock issuable to the holders
of the Lincare Common Stock and the Lincare Options shall have been approved for
listing on the NYSE and (viii) all consents authorizations, orders and approvals
of (or filings or registrations with) any governmental commission, board or
other regulatory body required in connection with the execution, delivery and
performance of the Merger Agreement shall have been obtained or made.

The obligations of each of Coram and Lincare to effect the Merger also are
subject to the fulfillment or waiver by the other party prior to the Effective
Time of certain conditions including, without limitation, the following: (i) the
other party shall have performed in all material respects its agreements
contained in the Merger Agreement required to be performed by it under the
Merger Agreement and the representations and warranties of the other party
contained in the Merger Agreement shall be true and correct (other than
representations made as of a particular time); (ii) Coram and Lincare shall have
received the opinion of their respective tax counsel that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that Coram and Lincare will each be a party
to that reorganization within the meaning of Section 368(b) of the Code; (iii)
Coram and Lincare shall have received a "comfort" letter from Ernst & Young LLP
and KPMG Peat Marwick LLP, respectively, covering matters customarily included
in comfort letters relating to transactions similar to the Merger and (iv) from
the date of the Merger Agreement through the Effective Time, there will not have
occurred any change in the financial condition, business, properties, or results
of operations or prospects of the other party that would have a material adverse
effect on such other party and its subsidiaries, taken as a whole.

TERMINATION

The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, before or after approval by the stockholders of
Coram and Lincare:

(a) by the mutual consent of Coram and Lincare;

(b) by either Lincare or Coram, if (i) the Merger has not been
consummated by October 31, 1995; (ii) the approval of Coram's stockholders
or Lincare's stockholders has not been obtained prior to October 31, 1995
at a meeting duly convened therefor or at any adjournment thereof, or (iii)
a United States federal or state court of competent jurisdiction or United
States federal or state governmental, regulatory or administrative agency
or commission has issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree,
ruling or other action has become final and non-appealable;

(c) by Coram, at any time prior to the Effective Time, before or after
the adoption and approval by the stockholders of Coram, by action of the
Coram Board of Directors, if (i) a Third Party Transaction has been
proposed and the Coram Board determines that termination is required to
comply with its

46
<PAGE> 55

fiduciary duties to the Coram stockholders; (ii) there has been a breach by
Lincare of any representation or warranty contained in the Merger Agreement
which would have a material adverse effect on Lincare; (iii) there has been
a material breach of any of the covenants or agreements set forth in the
Merger Agreement on the part of Lincare, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Coram to Lincare or (iv) the Lincare Board of Directors has
modified or withdrawn its determination to recommend that the stockholders
of Lincare approve the Merger Agreement and the transactions contemplated
thereby (other than a modification indicating that the Lincare Board of
Directors is considering a Third Party Transaction in the exercise of its
fiduciary duties to the stockholders of Lincare).

(d) by Lincare, at any time prior to the Effective Time, before or
after the adoption and approval by the stockholders of Lincare, by action
of the Lincare Board of Directors, if (i) a Third Party Transaction has
been proposed and the Lincare Board of Directors determines that
termination is required to comply with its fiduciary duties to the Lincare
stockholders; (ii) there has been a breach by Coram of any representation
or warranty contained in the Merger Agreement which would have a material
adverse effect on Coram; (iii) there has been a material breach of any of
the covenants or agreements set forth in the Merger Agreement on the part
of Coram, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by Lincare to Coram or
(iv) the Coram Board of Directors has modified or withdrawn its
determination to recommend that the stockholders of Coram approve the
Merger Agreement and the transactions contemplated thereby (other than a
modification indicating that the Coram Board of Directors is considering a
Third Party Transaction in the exercise of its fiduciary duties to the
stockholders of Coram).

EFFECT OF TERMINATION AND ABANDONMENT

If (i) Lincare terminates the Merger Agreement in favor of a Third Party
Transaction or (ii) Coram terminates the Merger Agreement pursuant to the events
discussed in clause (iv) of paragraph (c) above, then, within ten days following
such termination, Lincare (or the successor thereto) will pay Coram by wire
transfer in immediately available funds a fee of $15 million, plus expenses of
up to $3 million. Thereafter, if a Third Party Transaction is consummated by
Lincare within nine months of the date the Merger Agreement is terminated,
Lincare (or any successor thereto) will pay to Coram an additional $15 million
by wire transfer of same day funds within ten days following the closing date of
such Third Party Transaction.

If (i) Coram terminates the Merger Agreement in favor of a Third Party
Transaction or (ii) Lincare terminates the Merger Agreement pursuant to the
events discussed in clause (iv) of paragraph (d) above, then, within ten days
following such termination, Coram (or the successor thereto) will pay Lincare by
wire transfer in immediately available funds a fee of $15 million, plus expenses
of up to $3 million. Thereafter, if a Third Party Transaction is consummated by
Coram within nine months of the date the Merger Agreement is terminated, Coram
(or any successor thereto) will pay to Lincare an additional $15 million by wire
transfer of same day funds within ten days following the closing date of such
Third Party Transaction.

AMENDMENT AND WAIVER

Subject to applicable law, (a) the Merger Agreement may be amended at any
time by action taken by the respective Boards of Directors of the parties, and
(b) the parties, by action taken by their respective Boards of Directors, may,
at any time prior to the Effective Time, extend the time for performance of any
obligation or action required of the other party under the Merger Agreement, may
waive inaccuracies in representations and warranties made to it in the Merger
Agreement and any document delivered pursuant thereto and may waive compliance
with any agreements or conditions for their respective benefit contained in the
Merger Agreement. Any such amendment or waiver will only be valid if set forth
in a written instrument signed on behalf of each of the parties to the Merger
Agreement.

47
<PAGE> 56

CAPITALIZATION

The following table sets forth the capitalization of Coram, the Caremark
Business and Lincare as of March 31, 1995 and the pro forma capitalization of
Coram as of March 31, 1995, after giving effect to the consummation of the
Caremark Transaction and the proposed Merger. This table should be read in
conjunction with "Unaudited Pro Forma Condensed Combined Financial Statements,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Coram," "--The Caremark Business," "--Lincare," "Selected Historical
Consolidated Financial Data of Coram," "Selected Historical Financial Data of
the Caremark Business" and "Selected Consolidated Financial Data of Lincare."

<TABLE>
<CAPTION>
MARCH 31, 1995
---------------------------------------------------
HISTORICAL
HISTORICAL CAREMARK HISTORICAL PRO FORMA
CORAM BUSINESS LINCARE COMBINED
---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash.............................................. $ 21,580 $ -- $ 7,266 $ 21,546
---------- ---------- ---------- ---------
Short-term debt:
Current portion of long-term debt(1)............ 5,562 -- 5,857 42,019
---------- ---------- ---------- ---------
Total short-term debt........................ 5,562 -- 5,857 42,019
---------- ---------- ---------- ---------
Long-term debt, net of current portion:
Former Credit Facility.......................... 122,300 --
Senior Credit Facility:
Revolving Credit Facility.................... 10,000 10,000
Term Loan.................................... 173,426
Bridge Notes................................. 150,000
Junior Convertible Subordinated PIK Note........ 75,000
Junior Non-Convertible Subordinated PIK Note.... 25,000
Other indebtedness(1)(2)........................ 10,801 -- 4,026 10,801
---------- ---------- ---------- ---------
Total long-term debt......................... 133,101 -- 14,026 444,227
---------- ---------- ---------- ---------
Stockholders' equity:
Coram common stock, par value $.001, 75,000,000
shares authorized 39,454,218 shares issued
and outstanding as of March 31, 1995(3) $ 39 $ 39
Lincare common stock, par value $.01,
100,000,000 shares authorized; 27,472,262
shares issued and outstanding as of March 31,
1995......................................... 275 28
Additional paid-in capital...................... 347,071 82,469 429,787
Unrealized loss in available-for-sale
securities................................... (193) (193 )
Retained earnings(Accumulated deficit)(4)....... (14,238) 330,400 95,880 79,642
---------- ---------- ---------- ---------
Total stockholders' equity................... 332,679 330,400 178,624 509,303
---------- ---------- ---------- ---------
Total capitalization......................... $ 471,342 $ 330,400 $ 198,507 $995,549
======== ======== ======== ========
</TABLE>

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

(1) Generally consist of unsecured, non-interest bearing deferred acquisition
obligations for Lincare.
(2) Includes $9.8 million of capital leases secured by equipment and
approximately $6.6 million of convertible subordinated debentures issued by
HealthInfusion prior to the Four-Way Merger.
(3) Does not include an aggregate of up to 8,527,627 shares issuable upon
exercise of options, warrants and other rights to purchase shares of Coram
Common Stock upon the consummation of the Caremark Transaction, including
2,777,775 shares issuable upon conversion of the Junior Convertible
Subordinated PIK Note.
(4) Represents the accumulated deficit related to the operations of Coram prior
to the Caremark Transaction.

48
<PAGE> 57

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CORAM

SELECTED HISTORICAL FINANCIAL DATA OF CORAM

The following table sets forth selected historical financial data and other
operating information of Coram. The information as of December 31, 1994 and for
the year then ended has been derived from the consolidated financial statements
of Coram which have been audited by Ernst & Young LLP, independent auditors. The
information as of December 31, 1993 and for each of the two years in the period
ended December 31, 1993 have been derived from financial statements audited by
other auditors. Ernst & Young's report on the consolidated financial statements
for the three years in the period ended December 31, 1994, which appears
elsewhere herein, includes an explanatory paragraph regarding the combination of
T2, Curaflex, Medisys and HealthInfusion and that the consolidated financial
statements for the two years in the period ended December 31, 1993 were audited
by other independent auditors. The information as of December 31, 1990, 1991,
1992 and 1993 and for the two years in the period ended December 31, 1991 has
been derived from the separate financial statements of T2, Curaflex, Medisys and
HealthInfusion which were audited by other independent auditors. Interim
unaudited information for the three months ended March 31, 1994 and 1995,
reflect, in the opinion of the management of Coram, all adjustments necessary
for a fair presentation of such information. Results for the three months ended
March 31, 1995 are not necessarily indicative of results which may be expected
for any other interim period or for the year as a whole. The following selected
historical financial data should be read in conjunction with Coram's
consolidated financial statements and schedules and accompanying notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Coram" appearing elsewhere herein.

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- --------- --------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenue..................... $162,214 $299,851 $ 413,100 $ 462,304 $ 450,496 $113,065 $104,778
Cost of service................. -- -- 224,356 285,023 313,182 77,015 75,609
-------- -------- --------- --------- --------- -------- --------
Gross profit.................... -- -- 188,744 177,281 137,314 36,050 29,169
Selling, general &
administrative expenses ...... -- -- 48,927 75,706 81,907 19,584 17,885
Provision for estimated
uncollectible accounts........ -- -- 24,036 29,751 19,517 4,732 4,013
Amortization of goodwill........ -- -- 4,832 7,824 8,971 2,135 2,790
Provision for litigation
settlement.................... -- -- -- -- 23,220 -- --
Merger costs.................... -- -- -- 2,868 28,500 -- --
Restructuring costs............. -- -- 2,385 1,600 95,500 -- (4,131)
Special provision for
uncollectible accounts........ -- -- -- -- 17,300 -- --
-------- -------- --------- --------- --------- -------- --------
Operating income (loss)......... 34,178 82,144 108,564 59,532 (137,601) 9,599 8,612
Interest income................. -- -- 4,940 3,746 2,469 715 402
Interest expense................ -- -- (2,860) (3,916) (7,414) (1,168) (3,436)
Minority interest............... -- -- (4,638) (9,715) (12,622) (2,391) (2,432)
Other income (loss)............. -- -- 3,969 7,862 865 151 338
-------- -------- --------- --------- --------- -------- --------
Income (loss) before income
taxes......................... -- -- 109,975 57,509 (154,303) 6,906 3,484
Provision (benefit) for income
taxes(1)...................... -- -- 38,117 28,848 (26,231) 3,695 (1,105)
-------- -------- --------- --------- --------- -------- --------
Net income (loss)............... $ 22,412 $ 56,009 $ 71,858 $ 28,661 $(128,072) $ 3,211 $ 4,589
========= ========= ========== ========== ========== ========= =========
Net income (loss) per common
share:
Primary....................... $ .82 $ 1.67 $ 1.95 $ .76 $ (3.32) $ .08 $ .11
Weighted average common shares
outstanding:
Primary....................... 27,189 33,632 36,812 37,778 38,633 38,616 40,939
</TABLE>

49
<PAGE> 58

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------------------- ----------
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ -- $ -- $ -- $ 22,971 $ 20,046 $ 21,580
Working capital....................... 69,977 123,563 165,150 124,992 83,395 94,274
Total assets.......................... 207,340 334,613 476,422 555,877 576,115 597,451
Long-term debt, net of current
portion............................. 4,121 15,257 20,653 40,156 120,817 133,101
Stockholders' equity.................. 143,257 230,539 394,514 438,872 322,261 332,679
</TABLE>

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

(1) Assumes "normal" federal income tax rate of 41% applied to taxable income.
Taxable income is income before the provision for income taxes plus
non-deductible goodwill amortization.

50
<PAGE> 59

SELECTED HISTORICAL FINANCIAL DATA OF THE CAREMARK BUSINESS

The following table sets forth selected historical financial data and other
operating information of the Caremark Business. The information as of December
31, 1994 and 1993 and for the three years in the period ended December 31, 1994
has been derived from the consolidated financial statements of the Caremark
Business which have been audited by Price Waterhouse LLP, independent auditors,
as indicated in their report included elsewhere in this Joint Proxy
Statement/Prospectus. The information as of December 31, 1992, 1991 and 1990 and
for the two years in the period ended December 31, 1991 has been derived from
unaudited financial statements; however, such data reflect all adjustments
which, in the opinion of management, are necessary to present fairly the results
of operations and financial position of the Caremark Business. Interim unaudited
information for the three months ended March 31, 1995 reflect, in the opinion of
the management, all adjustments necessary for a fair presentation of such
information except that Coram anticipates that it will record a special charge
associated with a revaluation of specific accounts, including accounts
receivable. The charges associated with such revaluation cannot be presently
estimated. Results for the three months ended March 31, 1995 are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole. The following selected historical financial data should be
read in conjunction with the consolidated financial statements and schedules of
the Caremark Business and accompanying notes, and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations--The Caremark
Business" appearing elsewhere herein.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenue......................... $391,200 $430,800 $457,000 $420,500 $441,900 $101,000 $ 96,100
Cost of service..................... 241,000 272,400 321,200 300,600 338,200 74,200 76,200
-------- -------- -------- -------- -------- -------- --------
Gross profit........................ 150,200 158,400 135,800 119,900 103,700 26,800 19,900
-------- -------- -------- -------- -------- -------- --------
Selling general & administrative
expenses.......................... 56,200 63,900 82,200 68,300 58,700 19,400 14,200
Provision for estimated
uncollectible accounts............ 45,700 30,400 25,400 31,100 22,600 6,300 4,300
Amortization of goodwill............ 2,200 9,600 -- -- -- 500 1,300
Provision for litigation
settlements....................... -- -- -- -- -- --
Merger costs........................ -- -- -- -- -- --
Restructuring costs................. -- -- 26,700 -- 25,000 25,000 --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)............. 46,100 54,500 1,500 20,500 (2,600) (24,400) 100
Interest income..................... -- -- -- -- -- --
Interest expense.................... -- -- -- -- -- --
Minority interest................... (10,100) (12,300) (10,700) (9,900) (3,500) (800) (500)
Other (loss)........................ 100 1,200 5,400 500 2,000 100 (100)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes... 36,100 43,400 (3,800) 11,100 (4,100) (25,100) (500)
Provision for taxes(1).............. 15,000 18,500 (1,000) 4,700 (1,700) -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................... $ 21,100 $ 24,900 $ (2,800) $ 6,400 $ (2,400) $(25,100) $ (500)
========= ========= ========= ========= ========= ========= =========
Net income (loss) per common share:
Primary............................. N/A N/A N/A N/A N/A N/A N/A
Weighted average common shares and
common share equivalents
outstanding:...................... N/A N/A N/A N/A N/A N/A N/A
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1995
DECEMBER 31, ------------------
----------------------------------------------------
1990 1991 1992 1993 1994 (UNAUDITED)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 18,200 $ 21,400 $ 12,600 $ 1,600 $ 4,700 $ --
Working capital...................... 89,700 117,400 102,300 80,400 103,200 112,500
Total assets......................... 187,000 219,100 278,200 206,600 418,700 373,000
Long-term debt....................... -- -- -- 300 600 --
Divisional equity.................... 130,200 141,500 153,200 123,400 301,100 330,400
</TABLE>

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

(1) Assumes "normal" federal income tax rate of 40% applied to taxable income.
Taxable income is income before the provision for income taxes plus
non-deductible goodwill amortization.

51
<PAGE> 60

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--CORAM

HISTORY

The operations of Coram commenced on July 8, 1994 as a result of a merger
of T2, Curaflex, HealthInfusion, and Medisys, each of which was a publicly held
national or regional provider of alternate site infusion therapy and related
services. Pursuant to the Four-Way Merger, which was accounted for as a pooling
of interests, each of these companies became and is now a wholly-owned
subsidiary of Coram. On September 12, 1994, Coram acquired all of the capital
stock of HMSS, a leading regional provider of home infusion therapies, in a
transaction accounted for as a purchase. On April 6, 1995, Coram completed the
Caremark Transaction as a result of which it became the largest provider of
alternate site infusion therapy services in the United States, with branches
covering geographic locations in which over 90% of the population of the United
States resides. Coram is led by a newly formed management team with extensive
background in the health care industry, including James M. Sweeney, Chairman and
Chief Executive Officer.

RECENT DEVELOPMENTS

On April 17, 1995, Coram entered into an agreement to merge with Lincare.
Upon the consummation of the Merger, Coram believes it will become the largest
provider of alternate site health care in the United States based on pro forma
1994 net revenue. The combination of Coram and Lincare is expected to accelerate
revenue growth through the expansion of Lincare's respiratory therapy business
into existing Coram markets and through cross-marketing activities involving
Coram and Lincare customer relationships. Lincare's financial performance is
expected to enhance Coram's financial position by providing additional revenue,
earnings and cash flow and by strengthening key financial ratios. No assurances
can be made as to the amount of revenue growth that can be realized or the level
of financial enhancement that will actually be realized, if any.

Coram is also in the process of soliciting offers for its institutional
pharmacy business known as Pharmcare, Inc. ("Pharmcare"), which had revenues of
approximately $20 million and contributed approximately $0.8 million to Coram's
operating income in 1994. Coram expects the sale of Pharmcare to be completed in
the second quarter of 1995. Coram is continuing to evaluate the strategic fit
and short-term value of each of the partnerships and businesses inherited from
its predecessor entities, and management will consider additional divestitures
of other non-strategic businesses during 1995. Coram does not anticipate that
such divestitures will be material to its business. As part of its strategy,
Coram engages in acquisition discussions from time to time with alternate site
providers, some of which acquisitions, if consummated, would be material to
Coram.

IMPACT OF FOUR-WAY MERGER AND POST FOUR-WAY MERGER CONSOLIDATION

During the quarter ended September 30, 1994, Coram recorded a special
charge of $17.3 million to provide for anticipated uncollectible accounts and
other receivables as a result of Coram's decision to implement standardized
policies for recognition of contractual and other allowances and to provide for
the disruptions experienced before and during the Four-Way Merger and post
Four-Way Merger transition process.

Coram also recorded charges of $23.2 million, representing the estimated
cash and non-cash costs of settling certain pre-Four-Way Merger litigation
matters, including an agreement in principle to settle the T2 shareholders
litigation, the T2 OIG Settlement and the settlement of a dispute with the
former principals of a company acquired by T2 in 1992.

52
<PAGE> 61

During the same quarter, Coram initiated a merger and restructuring plan to
reduce future operating costs, improve productivity and gain efficiencies
through consolidation of redundant infusion centers and corporate offices,
reductions in personnel and elimination or discontinuance of investments in
certain joint ventures and other non-infusion facilities. The Coram
Consolidation Plan provides for the elimination of approximately 100 of Coram's
home infusion branch facilities and the consolidation of corporate
administrative operations into one location, with a corresponding significant
reduction of branch and corporate personnel. In connection with the Coram
Consolidation Plan, Coram recorded charges of $28.5 million in estimated merger
costs and $95.5 million in estimated restructuring costs in the quarter ended
September 30, 1994, including charges to assimilate HMSS. Management believes
these costs to be non-recurring; however, actual costs may vary from the
recorded charges as the Coram Consolidation Plan continues. Coram anticipates
that the branch and corporate consolidation portions of the Coram Consolidation
Plan are expected to be substantially completed by the third quarter of 1995 and
that the Coram Consolidation Plan, when fully implemented, will generate annual
cost savings of approximately $70 million. Coram expects these savings will
result from reductions in personnel described above and related costs,
facilities rent, operating and depreciation costs, corporate overhead and
procurement savings. In the first half of 1995, these savings will be partially
offset by the costs of relocation, retention and retraining of personnel,
currently expected to range between $3.0 million and $5.0 million. No assurances
can be given, however, as to the aggregate cost savings to be achieved by Coram
or the timing thereof.

In the aggregate, Coram recorded non-recurring charges of approximately
$164.5 million in the second and third quarters of 1994 related to the Four-Way
Merger and the implementation of the Coram Consolidation Plan.

THE CAREMARK TRANSACTION

Effective as of April 1, 1995, Coram acquired the Caremark Business from
Caremark International Inc. and its wholly-owned subsidiary, Caremark, Inc.
("Caremark"), for $309 million, consisting of (i) $209 million in cash and (ii)
$100 million principal amount of Junior Subordinated PIK Notes payable to
Caremark, consisting of a $75 million 7% Convertible Subordinated PIK Note (the
"Junior Convertible Subordinated PIK Note") and a $25 million 12%
Non-Convertible Subordinated PIK Note (the "Junior Non-Convertible Subordinated
PIK Note"). The Caremark Transaction was structured as an asset purchase.
Accordingly, Coram assumed only certain specified liabilities of the Caremark
Business, which, in particular, expressly exclude any liabilities associated
with the pending investigation of Caremark by the Office of Inspector General of
the U.S. Department of Health and Human Services. See "Business of Coram--The
Caremark Transaction."

In connection with the Caremark Transaction, Coram repaid all of its $123.8
million indebtedness under its former credit facility with Toronto Dominion
(Texas) Inc. (the "Former Credit Facility"). The cash paid by Coram in
connection with the Caremark Transaction and the repayment of indebtedness under
the Former Credit Facility, together with related fees and expenses, were
financed through: (i) borrowings under a new credit facility (the "Senior Credit
Facility") with Chemical Bank, as Agent, providing for aggregate commitments of
up to $300 million, including a $100 million revolving credit facility, and (ii)
$150 million from the issuance of Senior Subordinated Bridge Notes (the "Bridge
Notes"). See "Business of Coram--The Caremark Transaction."

Effective as of the Caremark Transaction, Coram has become highly
leveraged. Coram believes that its primary liquidity needs will be cost of debt
service, restructuring costs and working capital and that cash generated by
operations and amounts available under the revolving credit portion of the
Senior Credit Facility will be sufficient to meet its liquidity needs.

Coram believes that the combination of Coram and the Caremark Business has
created an entity which will be able to leverage its cost base more efficiently
through a reduction in branch facilities, and which is expected to be able to
benefit from significant economies of scale and operating synergies,
particularly with regard to procurement, regulatory compliance and patient
outcomes tracking. Substantial cost savings are expected to be realized from
elimination of geographically duplicative branches, the elimination of
duplicative

53
<PAGE> 62

corporate overhead expenses, procurement savings and the implementation of the
best demonstrated business practices of Coram's predecessor entities and the
Caremark Business throughout the combined entity. No assurances can be made as
to the amount of cost savings, if any, that actually will be realized. Coram
expects to record a charge against earnings in the second quarter of 1995 in
connection with the Caremark Consolidation Plan.

IMPACT OF PRICING/VOLUME TRENDS

Coram has recently experienced pricing pressure from payors related to its
alternate site infusion therapy services. Coram believes, however, that
short-term pricing declines within individual payor groups have moderated in
late 1994 and the first quarter of 1995. Moreover, alternate site infusion
therapy patient volume has increased since the Four-Way Merger. No assurance can
be given, however, that such trends will continue. The increasing prevalence and
influence of managed care payors are expected to continue to apply pressure on
pricing for Coram's services. Coram believes that alternate site health care
providers will increasingly face lower operating margins as managed care
organizations constitute an increasing percentage of the mix of the industry's
revenues, and that maintaining growth in patient volumes will be necessary to
offset lower margins. In addition, there can be no assurance that Coram's
lithotripsy operations will not also experience pricing pressure in the future.
HCFA has issued a proposed rule that would, if implemented, significantly reduce
the amount Medicare would reimburse its beneficiaries for the cost of
lithotripsy procedures performed in an ambulatory surgery center or on an
out-patient basis at a hospital. Such a proposal might result in similar efforts
by other third-party payors to limit reimbursement for lithotripsy procedures.
Coram is in the process of developing new revenue enhancing programs such as
one-stop shopping for managed care payors, physician practice management
services and disease-state carve-outs to offset future pricing declines.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------- MARCH 31,
1992 1993 1994 1995
----- ----- ----- ---------
<S> <C> <C> <C> <C>
Net revenue..................................... 100.0% 100.0% 100.0% 100.0%
Cost of service................................. 54.3 61.6 69.5 72.2
----- ----- ----- ---------
Gross margin.................................. 45.7 38.4 30.5 27.8
Selling, general and administrative expenses.... 11.8 16.4 18.2 17.1
Provision for estimated uncollectible
accounts...................................... 5.8 6.4 4.3 3.8
Amortization of goodwill........................ 1.2 1.7 2.0 2.6
Provision for litigation settlements............ -- -- 5.2 --
Merger costs.................................... -- 0.6 6.3 --
Restructuring costs............................. 0.6 0.4 21.2 (3.9)
Special provision for uncollectible accounts.... -- -- 3.8 --
----- ----- ----- ---------
Total operating expenses...................... 19.4 25.5 61.0 19.6
Operating income (loss)....................... 26.3 12.9 (30.5) 8.2
Interest income................................. 1.2 0.8 0.6 .4
Interest expense................................ (0.7) (0.9) (1.7) (3.3)
Minority interest in net income of consolidated
joint ventures................................ (1.1) (2.1) (2.8) (2.3)
Other income, net............................... 0.9 1.7 0.2 .3
----- ----- ----- ---------
Income (loss) before income taxes............... 26.6 12.4 (34.2) 3.3
Provision (benefit) for income taxes............ 9.2 6.2 (5.8) (1.1)
----- ----- ----- ---------
Net income (loss)............................... 17.4% 6.2% (28.4)% 4.4%
===== ===== ===== ==========
</TABLE>

54
<PAGE> 63

THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994

Net Revenue. Net revenue for the first quarter of 1995 decreased by $8.3
million or 7.3% to $104.8 million compared to the same period in 1994.
Management believes that the decrease was attributable to a variety of factors
including: (i) the industry pricing pressures discussed above, (ii) therapy and
payor mix shifts, (iii) the restructuring and, in some cases, termination of
physician relationships (including in-office infusion services) which were
potentially incompatible with new regulatory requirements and (iv) the
implementation of consistent company-wide policies for the recognition of
contractual and other allowances. Approximately $5.9 million, or 71% of the
decrease, was attributable to discontinued in-office infusion services
("Intra-Care"). From the first quarter of 1994 to the first quarter of 1995,
prices for infusion therapy services declined in the range of 11% to 12%, with
the majority of such decline occurring during the first and second quarters of
1994.

Gross Profit. Gross profit for the first quarter of 1995 decreased $6.9
million to $29.2 million, a decrease of 19.1%, as compared to the same period in
1994. Gross margin decreased to 27.8% in the first quarter of 1995 compared to
31.9% for the same period in 1994. The primary source of this decrease was
related to price reductions resulting from the industry pricing pressures
discussed above and other causes included therapy and payor mix shifts, the
implementation of consistent company-wide policies for the recognition of
contractual allowances and policies and procedures related to accounting for
inventory. Offsetting the gross profit decrease was a reduction in clinical
services expenses of $4.0 million resulting from the partial completion of the
Coram Consolidation Plan.

In the first quarter of 1995, Coram converted from five separate
decentralized accounts payable systems to a new centralized system. At the same
time, accounts payable accrual procedures were standardized, resulting in $1.7
million of drugs and supplies being expensed in the first quarter 1995 that were
utilized in prior periods. Adjusting for this charge, the gross margin for the
first quarter of 1995 was 29.5%.

Operating Expenses. Selling, general and administrative expenses decreased
$1.7 million or 8.7% for the first quarter of 1995 compared to the same period
in 1994. This decrease was primarily due to a $2.1 million credit pertaining to
an agreement by one of Coram's insurance carriers to pay for certain legal fees
incurred in conjunction with the T2 shareholder litigation. In addition, a $1.1
million reduction in salaries resulted from the closure of two corporate offices
and the elimination of 100 corporate staff positions and a $1.4 million
reduction in general expenses was realized in connection with the partial
completion of the Coram Consolidation Plan. These reductions were offset by
temporary costs necessary to support the restructuring activities which were not
chargeable to restructuring reserves. These costs included (i) training, (ii)
travel, (iii) consulting fees, (iv) system implementation costs and (v)
additional audit and tax work. Additional costs were incurred during the first
quarter of 1995 associated with the initiation and development of certain
revenue enhancing programs.

A benefit of $4.1 million was recorded to restructuring costs in the first
quarter as a result of the sale of Coram's home pediatrics business ("Kid's
Medical") which was originally expected to result in a loss. Kid's Medical had
historically accounted for approximately $5 million in quarterly gross revenue.
In total, operating expenses, including the benefit from the sale of Kid's
Medical, were $5.9 million less in the first quarter of 1995 than in the same
period in the prior year, a decrease of 22.3%.

Operating Income. Operating income for the first quarter of 1995 decreased
from the first quarter of 1994 by $1.0 million or 10.3% as a result of the $6.9
million decrease in gross profit, which was offset, in part, by the $5.9 million
reduction in operating expenses.

Other Income and Expenses. Interest expense increased by $2.3 million for
the first quarter of 1995 over the same period in the prior year primarily due
to increased borrowings by Coram in order to finance acquisitions, merger costs
and other working capital needs.

Provision (Benefit) for Income Taxes. During the first quarter of 1995,
Coram recorded a tax benefit in the amount of $1.1 million compared to a $3.7
million expense in the same period in the prior year. The tax benefit was the
result of tax deductions from the continued consolidation activities of Coram
during the

55
<PAGE> 64

quarter. While no assurance can be given in this regard, it is expected that
these tax deductions will enable Coram to recover taxes that have been paid in a
prior year.

Net Income. Net income for the first quarter of 1995 increased $1.4
million to $4.6 million, an increase of 42.9% as compared to the same period in
1994. Major components of this increase include: (i) the $4.8 million favorable
tax variance, (ii) the $4.1 million benefit from the sale of Kid's Medical and
(iii) the $2.1 million benefit to operating expenses for the legal fees to be
paid by one of Coram's insurers in connection with the T2 shareholders
litigation.

Restructuring costs. Restructuring costs reflect a $4.1 million gain on
the sale of Kid's Medical. The potential divestiture of additional non-strategic
businesses are currently being evaluated. Management monitors restructuring
costs on an ongoing basis and believes that the Coram Consolidation Plan will be
substantially completed by the third quarter of 1995. Currently, management
believes that remaining reserves as of March 31, 1995 are sufficient to provide
for remaining costs to be incurred to complete the Coram Consolidation Plan.

Through March 31, 1995, Coram had completed a significant portion of the
branch consolidation process, including the closure of 115 infusion branch
facilities, two corporate facilities, and a reduction of approximately 650
employees. The following table summarizes the utilization of restructuring
reserves through March 31, 1995 (in thousands):

<TABLE>
<CAPTION>
NON-CASH
--------------------------- TOTAL
ACCRUALS/ --------------------
CASH ASSET WRITEDOWN DISPOSALS RECORDED COMPLETED
------- --------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Merger Costs........................ $25,100 $ 600 $ 600 $ 25,700 $25,700
======= ============ ======= ======= ========
Personnel Reduction Costs........... $11,200 $ 600 $ 600 $ 11,800 $11,800
Facility Reduction Costs............ 3,800 16,300 9,600 20,100 13,400
Discontinuance Costs................ 100 32,600 12,300 32,700 12,400
------- --------------- --------- -------- ---------
Restructuring Costs................. $15,100 $49,500* $22,500* $ 64,600 $37,600
======= ============ ======= ======= ========
</TABLE>

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

* The accompanying balance sheet reflects assets net of the $49,500 of
established accruals and reserves. Charges against those established reserves
pertaining to disposals completed through March 31, 1995 aggregate $22,500.

CERTAIN TRENDS FROM PRIOR QUARTER

Management believes that comparisons of financial results between the first
quarter of 1995 and the first quarter of 1994 should be supplemented in the case
of Coram because, prior to July 8, 1994, the activities of Coram were conducted
separately by each of the predecessor entities. Accordingly, the following
discussion provides certain comparative information between the first quarter of
1995 and the fourth quarter of 1994.

Net revenue decreased by $8.8 million or 7.7% from the fourth quarter of
1994. The major source of the decrease is the normal seasonality exhibited by
both the infusion and the lithotripsy businesses between the fourth and first
quarters. The restructuring and termination of physician contracts and the
closure of Intracare facilities represented the majority of the remainder. Price
and payor mix effects were partially offset by an increase in patient days.
Gross profit decreased $4.3 million to $29.2 million or 27.8% of revenue in the
first quarter of 1995 from $33.5 million or 29.5% of revenue in the fourth
quarter of 1994. The decrease is attributable to a $1.7 million one-time out of
period costs related to the standardization of accounts payable accrual
procedures in the first quarter of 1995. Total clinical services costs were
reduced by more than $3.9 million or 9.2% between the fourth quarter of 1994 and
the first quarter of 1995, 60% of which was due to a reduction in salaries as
non-sales field positions were eliminated through operation consolidation. The
remaining 40% arose from facility closures which reduced both general support
and lease costs.

Operating expenses, including the benefit from the sale of Kid's Medical,
decreased by $9.0 million from the fourth quarter of 1994 to the first quarter
of 1995. The balance of the decrease resulted from permanent

56
<PAGE> 65

reductions in selling, general and administrative expenses due to the
implementation of the Coram Consolidation Plan, which was offset by a number of
one-time or short-term cost increases associated with establishing a single
corporate headquarters and with increases resulting from continuing merger and
acquisition activity. Partially offsetting both one-time and recurring benefits
were one-time or short-term costs and recurring costs associated with new
programs. Coram incurred short-term costs attributable to consolidation,
restructuring, and merger and acquisition activity totaling approximately $2.0
million to $3.0 million which were expensed in the first quarter of 1995.
Selling, general and administrative expenses were reduced by $4.5 million to
$17.9 million from the fourth quarter of 1994 to the first quarter of 1995. $2.1
million of this reduction resulted from an insurance carrier's one-time payment
of certain legal fees incurred in connection with the T2 shareholder litigation.
The remaining $2.4 million resulted from the implementation of the Coram
Consolidation Plan.

Operating income increased by $4.7 million to $8.6 million from the fourth
quarter of 1994 to the first quarter of 1995. This was achieved through the
continuing implementation of the Coram Consolidation Plan, as well as the
recording of one-time favorable transactions in operating expenses related to
legal expenses covered by an insurance carrier and the divestiture of Kid's
Medical, partially offset by short-term and other non-recurring costs described
above.

1994 COMPARED TO 1993

Net revenue. Net revenue for the year ended December 31, 1994 declined by
2.6% from the prior year. Net revenue from Coram's home infusion therapy
business declined primarily due to the pricing pressures imposed by third-party
indemnity and managed care payors discussed above and the termination of certain
physician relationships by Coram. Net revenue from Coram's IntraCare (outpatient
infusion therapy) business declined by approximately $12.2 million due to direct
competition from physicians. This decline in net revenue was offset by a $9.5
million increase in net revenue from Coram's lithotripsy business and the
addition of an estimated $14 million of net revenue resulting from the HMSS
acquisition. Additional factors affecting 1994 net revenue were the
implementation of consistent company-wide policies for recognition of
contractual and other allowances, an effort to eliminate unprofitable business
relationships and the renegotiation of physician relationships which were
potentially incompatible with new regulatory requirements. Revenues for the
fourth quarter of 1994 were $113.6 million, as compared to $119.9 million in the
third quarter of 1994 on a pro forma basis including the HMSS acquisition for a
full quarter, representing a decline of 5.3%. While no assurance can be given
regarding Coram's future revenues, management believes that its fourth quarter
net revenue may be a more accurate reflection of Coram's current operating
environment than Coram's 1994 reported revenue taken as a whole.

Gross margin. Gross margin decreased to 30.5% in 1994 from 38.4% in 1993.
This decrease was related primarily to the decline in pricing, changes in payor
mix, and the revenue recognition policy changes discussed above and the fact
that branch consolidations and corresponding reductions in fixed costs had not
been fully completed by year end. Other factors that affected gross margin
included patient and therapy mix changes and short-term costs not includable in
the restructuring charges which were necessary to facilitate the integration of
Coram's operating companies. However, despite this year-to-year decrease, gross
margin increased from 28.5% in the third quarter of 1994 to 29.5% in the fourth
quarter of 1994, primarily due to the implementation of the Coram Consolidation
Plan and reduced pricing pressures. Coram expects gross margin to increase from
its current level as cost savings are realized in connection with the Coram
Consolidation Plan.

Selling, general and administrative expense. Selling, general and
administrative expenses ("SG&A") increased 8.2% over the prior year primarily as
a result of the acquisition of HMSS. Excluding duplicative costs related to the
Four-Way Merger and the acquisition of HMSS, SG&A expenses for 1994 remained
substantially constant as compared to the prior year. Reductions in overall
payroll and other administrative costs since consummation of the Four-Way Merger
were partially offset by costs incurred in the same period to establish a new
corporate office prior to the realization of cost savings through planned
reductions of the corporate staffs of the merged companies. Due to the
integration process, certain personnel and professional fees, special incentive
programs, travel, recruiting, relocation and other administrative expenses
charged to operations, but necessary and related to the merger and consolidation
activities, contributed to the increase in

57
<PAGE> 66

SG&A. Coram estimates that the incremental expense related to these items was
approximately $3.0 million. Additional costs of this type are expected to be
incurred during the balance of the consolidation process.

Provision for estimated uncollectible accounts. The provision for
estimated uncollectible accounts (including a special provision of $17.3 million
in 1994 in connection with the Four-Way Merger) increased to 8.2% of net revenue
in 1994 from 6.4% in 1993. This increase was related to disruptions in Coram's
collection activities experienced during the Four-Way Merger and post-Four-Way
Merger transaction process as well as continuing changes in reimbursement
patterns, including the retroactive effect of case management discounts and
discounts demanded by indemnity insurers.

Amortization of Goodwill. Amortization of goodwill increased in 1994 as a
result of a full year of amortization being taken for acquisitions completed
during 1993, as well as the acquisition of HMSS on September 12, 1994.

Provision for Litigation Settlements. The provision for litigation
settlements represents the estimated cash and non-cash costs of settling certain
litigation matters, including the T2 shareholder litigation, the T2 OIG
Settlement and the settlement of a dispute with the former principals of a
company acquired by T2 in 1992.

Operating Income (Loss). Coram incurred an operating loss of $137.6
million in 1994, compared to operating income of $59.5 million in the prior
year. Excluding the merger, restructuring and litigation charges and special
accounts receivable provision aggregating $164.5 million, which were taken as
discussed above, Coram's operating income would have been $26.9 million. Coram's
lithotripsy business contributed approximately $19.9 million of operating income
in 1994 (after minority interest of $10.8 million) compared to a contribution of
$15.9 million (after minority interest of $8.9 million) in 1993, excluding the
allocation of certain corporate overhead costs. Based on its current
contribution to operating income, any material change in the operations of the
lithotripsy business could have a material adverse effect on the consolidated
operating results of Coram.

Net Interest Expense. Interest expense increased over the prior year
primarily due to increased borrowings used to finance acquisitions, merger costs
and other working capital needs.

Minority Interest. Minority interest in net income of consolidated joint
ventures increased primarily due to the acquisition of majority interests in
several lithotripsy companies during the latter half of 1993.

Other Income. The higher level of other income in 1993 compared to 1994 is
primarily due to the $6.4 million gain realized on the sale of T2's respiratory
business in 1993.

Taxes. Coram's effective tax benefit rate for 1994 was approximately 17%.
The rate was substantially below the expected benefit at combined statutory
federal and state rates due primarily to the non-deductibility of goodwill
amortization, certain merger costs and the inability of Coram to currently
recognize income tax benefit for losses created by certain restructuring,
litigation and receivable charges.

1993 COMPARED TO 1992

Net Revenue. Net revenue for the year ended December 31, 1993 increased by
11.9% over the prior year. The increase was primarily the result of increased
volume from acquisitions, offset by pricing pressures on Coram's home infusion
therapy business imposed by third-party indemnity and managed care payors.
IntraCare net revenue increased approximately $3.5 million over the prior year
while lithotripsy net revenue increased $30.3 million as a result of both
acquisitions and internal growth.

Gross Margin. Gross margin decreased to 38.4% in 1993 from 45.7% in the
prior year due primarily to the pricing pressures discussed above and changes in
patient and therapy mix.

Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A")expenses increased 54.7% over the prior year to 16.4% of
net revenue compared to 11.8% in the prior year. The increase was primarily the
result of lower than historical revenue gains without a corresponding decrease
in the fixed

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<PAGE> 67

components of SG&A, as well as legal and accounting fees associated with a
special internal inquiry conducted by T2.

Provision for Estimated Uncollectible Accounts. The provision for
estimated uncollectible accounts increased primarily as a result of changes in
reimbursement patterns, including the retroactive effect of case management
discounts and larger discounts demanded by indemnity insurance carriers,
although as a percentage of sales it remained the same as the prior year.

Operating Income. Coram's operating income in 1993 was $59.5 million
compared to $108.6 million in the prior year. Coram's lithotripsy business
contributed approximately $15.8 million of operating income in 1993 (after
minority interest of $8.9 million) compared to a contribution of $3.7 million in
1992 (after minority interest of $1.4 million), excluding the allocation of
certain corporate overhead costs and before reflecting the minority interest in
those operating results, which are reflected in the non-operating section of
Coram's consolidated statement of operations.

Other income. Other income includes net interest expense which increased,
compared to net interest income in the prior year, primarily due to increased
borrowings used to finance acquisitions. Minority interest in net income of
consolidated joint ventures increased primarily due to the acquisition of
majority interests in several lithotripsy companies. Other income in 1993
includes the gain of $6.4 million on the sale of T2's respiratory business.

LIQUIDITY AND CAPITAL RESOURCES

A number of events in fiscal 1994 had a significant impact on Coram's
financial statements, liquidity and results of operations. These events included
the Four-Way Merger, the settlement of the T2 OIG Investigation and the T2
shareholders litigation and the implementation of the Coram Consolidation Plan.

As of December 31, 1994, Coram had recorded restructuring charges of
approximately $95.5 million in connection with the implementation of the Coram
Consolidation Plan. Actual charges against the reserve were $56.8 million,
consisting principally of write downs to discontinue certain non-core
businesses. Of the total non-recurring charges of $164.5 million incurred in
1994 for the settlement of litigation, the Coram Consolidation Plan and the
special provision for uncollectible accounts, approximately $33.0 million of
such charges were paid in cash and charged against the reserves in 1994. Coram
anticipates that the remainder of these charges, totaling approximately $65.5
million, will be paid from cash from Coram's operations, cost savings recognized
from the Coram Consolidation Plan, proceeds from the sale of certain non-core
businesses and borrowings under the Senior Credit Facility.

The reserve for settlement of the T2 shareholder litigation represents
Coram's estimate of the net costs of the ultimate disposition of the litigation
based on discussions between the parties regarding the possible settlement of
such litigation. It is anticipated that such litigation will be resolved
pursuant to the terms of the proposed settlement agreement which was approved by
the court on May 5, 1995 or that Coram's ultimate liability will not exceed such
estimate.

Coram's cash, cash equivalents and marketable securities at March 31, 1995
was $37.1 million (including restricted cash of approximately $7.3 million), an
increase of $0.5 million from December 31, 1994. The ratio of total debt to
equity was .44 to 1 at March 31, 1995 compared to .42 to 1 at December 31, 1994.
The increase in the debt ratio is primarily attributable to borrowings by Coram
under the Former Credit Facility subsequent to the Four-Way Merger. Working
capital at March 31, 1995 was $94.3 million compared to $83.8 million at
December 31, 1994. The principal reason for the increase in working capital is
the receivable related to the sale of Kid's Medical.

Under the Senior Credit Facility, Coram has (i) a $200 million term loan
facility (the "Term Loan Facility") with a maturity date of April 6, 2000, and
(ii) a $100 million revolving credit facility (the "Revolving Credit Facility"),
with a maturity date of April 6, 2000, of which up to $20 million is available
in the form of letters of credit. As of April 30, 1995, the available borrowing
base under the Revolving Credit Facility was $100 million and the amount
borrowed under the term loan facility was $200 million. The loans under the
Senior Credit Facility bear interest at a rate equal to, at Coram's option, (i)
the Alternate Base Rate

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<PAGE> 68

(as defined hereafter) for the respective interest period plus the Applicable
Margin (as defined hereafter) ("ABR Loans") or (ii) the Eurodollar Rate (as
defined hereafter) as determined by Chemical for the respective interest period
plus the Applicable Margin ("Eurodollar Loans"). "Applicable Margin" means a
percentage per annum ranging (a) in the case of ABR Loans, from 1.50% to 0.50%,
and (b) in the case of Eurodollar Loans, from 2.50% to 1.50%, in each case based
upon Coram's ability to maintain certain financial ratios determined as provided
in the Senior Credit Facility. "Alternate Base Rate" means with respect to an
interest period, an interest rate per annum equal to the highest of (1) the rate
of interest publicly announced by Chemical as its prime rate in effect at its
principal office in New York City, (2) the secondary market rate for three month
certificates of deposit (adjusted for reserves and assessments) plus 1% and (3)
the federal funds rate in effect from time to time plus 0.5%. "Eurodollar Rate"
means, with respect to an interest period, an interest rate per annum equal to
the product of (a) the LIBO rate in effect for such interest period and (b)
Statutory Reserves (as defined in the Senior Credit Facility). The Senior Credit
Facility is secured by the stock of all of Coram's subsidiaries and contains
standard financial covenants and conditions limiting Coram's ability to engage
in certain activities. The proceeds of the loans under the Senior Credit
Facility were used to repay amounts outstanding under the Former Credit
Facility, to fund a portion of the cash purchase price for the Caremark Business
and to pay certain expenses in connection therewith.

Interest on the $75 million Junior Convertible Subordinated PIK Note is
payable semi-annually at the rate of 7% per annum. The Junior Convertible
Subordinated PIK Note will mature on the earlier to occur of October 1, 2005 or
an event of default. Prior to the second anniversary of the initial date of
issuance, interest is payable in cash or in additional Junior Convertible
Subordinated PIK Notes, at the election of Coram. Thereafter, interest will be
payable in cash, subject to the satisfaction of certain financial tests set
forth in the Senior Credit Facility. The Junior Convertible Subordinated PIK
Note may not be prepaid or redeemed for three years following the initial
issuance date without the written consent of the holder thereof. Thereafter, the
Junior Convertible Subordinated PIK Note is, at the option of Coram, redeemable,
in whole or in part, subject to normal redemption terms and conditions, and
subject to restrictions on optional redemption contained in the Senior Credit
Facility. The Junior Convertible Subordinated PIK Note will be convertible at
Coram's option at any time subsequent to one year following the date of
issuance, in whole or in part, into such number of shares of Coram Common Stock
determined by dividing the aggregate principal amount by the conversion price in
effect at the time of such conversion. The conversion price of the Junior
Convertible Subordinated PIK Note is $27 per share, subject to adjustment. Coram
is required to file, and to use its best efforts to cause to become effective on
or before the first anniversary of the initial date of issuance of the Junior
Convertible Subordinated PIK Note, a registration statement covering the shares
of Coram Common Stock issuable upon conversion thereof. Coram is required to
maintain the effectiveness of such registration statement for a three-year
period following the original effective date of the registration statement. In
the event that there is a "change in control" (as defined) of Coram, the holder
of the Junior Convertible Subordinated PIK Note may require Coram to repurchase
such note at a purchase price equal to the principal amount thereof, plus
accrued interest thereon.

Interest on the $25 million Junior Non-Convertible Subordinated PIK Note is
payable semi-annually at the rate of 12% per annum. The Junior Non-Convertible
Subordinated PIK Note will mature on the earlier to occur of September 30, 2005
or an event of default. Prior to the second anniversary of the initial date of
issuance, interest will be payable in cash or in additional Junior
Non-Convertible Subordinated PIK Notes, at the election of Coram. Thereafter,
interest will be payable in cash, subject to satisfaction of certain financial
tests set forth in the Senior Credit Facility. The Junior Non-Convertible
Subordinated PIK Note may be prepaid or redeemed, in whole or in part, at any
time at Coram's option, without penalty or premium, and subject to restrictions
on optional redemption contained in the Senior Credit Facility. In the event
that there is a change in control of Coram, the holder of the Junior
Non-Convertible Subordinated PIK Note may require Coram to repurchase such note
at a purchase price equal to the principal amount thereof, plus accrued interest
thereon.

The Bridge Note was issued on April 6, 1995 to an affiliate of DLJ Bridge,
Inc., pursuant to a securities purchase agreement, as an unsecured obligation of
Coram, in a principal amount of $150 million. The Bridge Note initially bears
interest at an annual rate equal to the sum of (i) the rate of interest publicly
announced by

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<PAGE> 69

The Bank of New York from time to time as its prime rate plus (ii) 3.00% plus
(iii) an additional percentage amount, equal to 1.00% from and including October
5, 1995 and increasing by an additional 0.50% from and including each quarterly
anniversary of such date for as long as the Bridge Note remain outstanding. Such
interest will be payable quarterly in arrears on the 30th day of March, June,
September and December commencing on June 30, 1995. The principal amount of the
Bridge Note, together with any accrued and unpaid interest thereon, will
initially be due and payable in full on April 5, 1996. Commencing on the six
month anniversary of issuance, the Bridge Note will also bear a duration fee,
payable in arrears on October 5, 1995 and on the 5th day of each January, April
and July 1996, of 0.25% of the average aggregate principal amount of the Bridge
Note outstanding during the three-month period (or, in the case of the payment
due in October 1995, the six-month period) then ended. Coram may, at its option,
redeem (and does intend to redeem as soon as reasonably practicable) the Bridge
Note, upon ten days' notice to the holder of the Bridge Note. The redemption
price therefor will be 100% of the principal amount of the Bridge Note plus
accrued and unpaid interest thereon; provided that the funds for such redemption
are raised in a transaction in which DLJ or any of its affiliates has acted as
exclusive agent or sole underwriter. The agreement pursuant to which the Bridge
Note was issued contains customary covenants and events of default.

FUTURE HEALTH CARE PROPOSALS AND LEGISLATION

Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Coram anticipates that
Congress and state legislatures will continue to review and assess alternative
healthcare delivery systems and payment methodologies and public debate of these
issues will likely continue in the future. Due to uncertainties regarding the
ultimate features of reform initiatives and their enactment and implementation,
Coram cannot predict which, if any, of such reform proposals will be adopted,
when they may be adopted or what impact they may have.

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<PAGE> 70

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--THE CAREMARK BUSINESS

GENERAL

Throughout 1993 and 1994, the Caremark Business experienced pricing
pressure from payors related to its home infusion therapy business, including
lower pricing as a result of increased emphasis on managed care growth. In
addition, subsequent to the acquisition of Critical Care of America, Inc.
("CCA"), the Caremark Business continued to experience a decline in revenue and
operating profitability. Negative publicity relating to the ongoing
investigation of Caremark by the OIG, together with the uncertainty caused by
the January 30, 1995 announced sale of the Caremark Business to Coram, has
contributed to these declines. These negative trends continued through the first
quarter of 1995. There can be no assurance that the quarterly declines in
revenue experienced during 1994 will not continue.

THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994

Net revenue. Net revenue for the three months ended March 31, 1995 of
$96.1 million were $4.9 million, or 4.8%, lower than the comparable 1994 period.
Effective March 1, 1994, the Caremark Business acquired CCA, which contributed
to higher net revenue for the quarter ended March 31, 1994. Subsequent to this
acquisition and continuing through 1994 and the quarter ended March 31, 1995,
the Caremark Business has experienced patient volume decreases as well as
downward pressure on pricing through increased emphasis on managed care growth.
In addition, Coram management believes that revenues were adversely affected by
adverse publicity surrounding the ongoing federal investigation by the OIG
during 1994 and 1995, together with the uncertainty caused by the January 30,
1995 announced sale of the Caremark Business to Coram.

Cost of services. Cost of services during the quarter ended March 31, 1995
was $76.2 million, or 79.3% of net revenue, compared to $74.2 million, or 73.5%
of net revenue, for the quarter ended March 31, 1994. The higher percentage
experienced during the quarter ended March 31, 1995 resulted from the allocation
of certain fixed branch facility network costs over the lower level of net
revenue. In addition, as plans to integrate the Caremark Business with Coram
were under development during the 1995 first quarter, the Caremark Business did
not reduce certain field service costs commensurate with the decline in net
revenue it experienced in 1995.

Amortization of goodwill. Amortization of goodwill during the quarter
ended March 31, 1995 was $1.3 million compared to $0.5 million for the quarter
ended March 31, 1994. This increase results from three months of goodwill
amortization associated with the CCA acquisition during the 1995 first quarter
compared to one month of goodwill amortization incurred during the 1994 first
quarter as the CCA acquisition was effective March 1, 1994.

Provision for estimated uncollectible accounts. The provision for
estimated uncollectible accounts was $4.5 million, or 4.7% of net revenue, for
the quarter ended March 31, 1995 compared to $6.3 million, or 6.2% of net
revenue, for the quarter ended March 31, 1994.

Selling, general and administrative expenses. Selling, general and
administrative expenses were $14.2 million, or 14.3% of net revenue, during the
quarter ended March 31, 1995 compared to 19.4 million, or 14.9% of net revenue,
for the quarter ended March 31, 1994.

1994 COMPARED TO 1993

Net revenue. Net revenue in 1994 increased $21.4 million, or 5.1%, over
1993 net revenue of $420.5 million. Effective March 1, 1994, the Caremark
Business acquired CCA. Pro forma for a full year impact of the CCA acquisition,
1994 net revenue were $473 million, or a 27.8% decrease from pro forma 1993 net
revenue of $656.6 million, including the CCA acquisition. Coram believes this
significant decrease in pro forma net revenue was due to a variety of factors
including a stronger emphasis on managed care growth, industry pricing declines,
as well as the adverse negative publicity surrounding the ongoing federal
investigation of Caremark by the OIG. In addition, the quarterly revenue trends
for the Caremark Business during

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<PAGE> 71

1994 was $123 million, $112 million and $105 million for the second, third and
fourth quarters, respectively. There can be no assurance that these quarterly
declines in revenues will not continue.

Cost of services. Cost of services in 1994 increased $37.6 million, or
12.5%, over 1993. The increase was due principally to the service costs added as
a consequence of the higher patient levels brought on by the CCA acquisition. As
a percentage of net revenue, cost of services in 1994 was 76.5% compared to
71.5%. This higher rate resulted from the patient volume and pricing declines
which occurred subsequent to the CCA acquisition.

Selling, general and administrative expenses. Selling, general and
administrative expenses in 1994 were $13.5 million, or 19.9% lower than in 1993,
principally due to the elimination of certain corporate office and field
administrative overhead in 1994, as well as a fourth quarter 1994 reduction in
the sales and marketing organization. Partially offsetting this reduction was an
increase in goodwill amortization of $3.9 million principally due to the CCA
acquisition. As a percentage of net revenue, selling, general and administrative
expenses were 12.3% and 16.1% in 1994 and 1993, respectively. The lower
percentage occurred as a result of both lower spending levels and the effects of
spreading certain fixed expenses over the higher level of 1994 net revenue.

Provision for estimated uncollectible accounts. The 1994 provision for
estimated uncollectible accounts was 5.1% of net revenues compared to 7.4% of
net revenues in 1993.

Restructuring and integration charges. The Caremark Business recorded a
pre-tax charge of $25.0 million in the first quarter of 1994 for estimated costs
to integrate the operations of CCA, acquired in March 1994. This charge consists
primarily of estimated exit costs to close redundant branch facilities and
related headcount reductions.

Minority interest. Minority interest decreased in 1994 as the Caremark
Business experienced a lower level of partnership activity than in 1993.

Other income net. In 1994, the Caremark Business sold a portion of its
interest in a partnership that provided durable medical equipment. This sale
resulted in a profit of $0.5 million.

Income tax expense. The effective rate of income tax benefit was 41.5% in
1994 compared to the effective rate of income tax expense of 42.3% in 1993. The
1994 effective rate was higher than the federal statutory rate of 35.0%
principally due to the effect of state income taxes. In 1993, the inclusion of
state income taxes was also the principal reason the effective income tax rate
increased from the federal statutory rate.

1993 COMPARED TO 1992

Net revenue. Net revenue in 1993 of $420.5 million were $36.5 million, or
8.0%, lower than 1992 net revenues. The decline in net revenue is primarily
attributable to industry pricing pressure, together with increased competition.

Cost of services. Cost of services decreased $20.6 million to $300.6
million in 1993 from $321.2 million in 1992. As a percentage of net revenue,
cost of services was 71.5% in 1993 and 70.3% in 1992. As a percentage of net
revenue, cost of services increased as a consequence of the decline in net
revenue. In response to the competitive pricing pressures being experienced, the
Caremark Business undertook a restructuring program designed to reduce certain
costs which lowered the amount of 1993 cost of services.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $13.9 million in 1993 compared to 1992 and
represented 16.2% and 18.0% of net revenues in 1993 and 1992, respectively. The
decrease is due to the reduction in marketing and administrative expenses that
occurred in connection with the restructuring program adopted in respect of the
Caremark Business.

Provision for estimated uncollectible accounts. The provision for
estimated uncollectible accounts was 7.4% of net revenue in 1993 compared to
5.6% in 1992. During 1992, reserves were adjusted downward based on positive
collection experience. The provision for doubtful accounts in 1993 is reflective
of more normalized

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<PAGE> 72

levels. During 1993 the Caremark Business began a program to reorganize its
billing and collection function to a regionalized basis from a local branch
office basis.

Restructuring and integration charges. During 1992, a pre-tax charge of
$26.7 million was recorded for a restructuring program to reorganize sales and
operations functions in the field, standardize operations throughout the
Caremark Business and consolidate certain facilities and administrative
functions.

Minority interest. In 1993, the Caremark Business' ownership interest in
one of its more significant hospital partnerships was reduced to a level
requiring a change from the consolidation to the equity method of accounting,
thus eliminating minority interest associated with this investment.

Sundry income net. In 1992, the Caremark Business received a payment of
$4.5 million as a settlement of a lawsuit.

Income tax expense. The effective rate of income tax expense in 1993 was
42.3% compared to the 1992 effective rate of income tax benefit of 26.3%. In
1993, the effective rate varied from the federal statutory rate of 35.0%
principally due to state income taxes. In 1992, the effective rate of income tax
benefit attributable to state income tax benefits was offset by the
non-deductibility of goodwill amortization and certain other expenses, lowering
the overall effective rate of income tax benefit.

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<PAGE> 73

SELECTED CONSOLIDATED FINANCIAL DATA OF LINCARE

The selected consolidated financial data presented below under the caption
"Statements of Operations Data" and "Balance Sheet Data" for the eleven months
ended November 30, 1990, as of and for the one month ended December 31, 1990,
and as of and for the years ended December 31, 1991, 1992, 1993, and 1994, are
derived from the consolidated financial statements of Lincare, which
consolidated financial statements have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The consolidated financial statements
as of and for the years ended December 31, 1992, 1993 and 1994, and the report
of KPMG Peat Marwick LLP thereon, are included elsewhere herein. The selected
consolidated financial data for the three months ended March 31, 1994, and as of
and for the three months ended March 31, 1995, have been derived from unaudited
consolidated financial statements. Interim unaudited information for the three
months ended March 31, 1994 and 1995 reflect, in the opinion of the management
of Lincare, all adjustments necessary for a fair presentation of such
information. Results for the three months ended March 31, 1995 are not
necessarily indicative of results that may be expected for any other interim
period or for the year as a whole.

The data set forth below are qualified by reference to, and should be read
in conjunction with, the consolidated financial statements as of December 31,
1993 and 1994 and for each of the years in the three-year period ended December
31, 1994, the related notes and the audit report, which refers to a change in
the method of accounting for income taxes, and Management's Discussion and
Analysis of Financial Condition and Results of Operations--Lincare included
elsewhere in this Joint Proxy Statement/Prospectus.

<TABLE>
<CAPTION>
LINCARE
PREDECESSOR LINCARE PRO --------------------------------------------------------------
------------ ----------- FORMA(1) THREE
ELEVEN ONE ---------- MONTHS ENDED
MONTHS ENDED MONTH ENDED YEAR ENDED YEAR ENDED DECEMBER 31, MARCH 31,
NOV. 30, DEC. 31, DEC. 31, ---------------------------------------- -------------------
1990 1990 1990 1991 1992 1993 1994 1994 1995
------------ ----------- ---------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF
OPERATIONS DATA:
Net revenues........... $ 63,646 $ 6,377 $ 70,024 $88,634 $117,403 $154,506 $201,142 $44,009 $61,223
Cost of goods and
services............. 8,024 810 8,834 10,631 16,215 21,115 29,058 6,027 9,112
Operating expenses..... 19,068 1,925 20,993 23,746 28,475 34,388 44,347 9,803 13,207
Selling, general and
administrative
expenses............. 17,971 1,979 19,949 24,499 28,354 34,623 43,249 9,818 12,664
Bad debt expense....... 1,299 (20) 1,279 1,006 1,591 1,832 1,546 433 489
Depreciation expense... 5,667 673 7,685 8,736 10,143 11,764 13,403 3,340 3,945
Amortization expense... 1,451 887 10,215 10,572 5,125 4,695 7,281 1,333 2,391
Non-recurring
expense.............. 800 -- 800 -- -- -- -- -- --
------------ ----------- ---------- ------- -------- -------- -------- -------- --------
Operating income....... 9,366 124 269 9,444 27,500 46,089 62,258 13,255 19,415
Interest income........ 1,045 -- 1,045 327 465 611 434 138 134
Interest expense....... (3,092) (419) (5,033) (4,902) (1,242) (387) (473) (63 ) (110 )
Gain on disposal of
property and
equipment............ 1 -- 1 58 16 233 101 79 7
------------ ----------- ---------- ------- -------- -------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary loss... 7,320 (295) (3,717) 4,927 26,739 46,546 62,320 13,409 19,446
Income tax expense
(benefit)............ 3,287 (123) (1,298) 2,080 10,600 18,294 24,367 5,280 7,584
------------ ----------- ---------- ------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary loss... 4,033 (172) (2,419) 2,847 16,139 28,252 37,953 8,129 11,862
Extraordinary loss, net
of taxes............. -- -- -- -- 1,000 -- -- -- --
------------ ----------- ---------- ------- -------- -------- -------- -------- --------
Net income (loss)...... 4,033 (172) (2,419) 2,847 15,139 28,252 37,953 8,129 11,862
------------ ----------- ---------- ------- -------- -------- -------- -------- --------
Less preferred
dividends............ 807 -- -- -- -- -- -- -- --
------------ ----------- ---------- ------- -------- -------- -------- -------- --------
Net income (loss)
available for
common............... $ 3,227 $ (172) $ (2,419) $ 2,847 $ 15,139 $ 28,252 $ 37,953 $ 8,129 $11,862
=========== =========== ========= ======= ======== ======== ======== ======= =======
Income (loss) per
common share:
Income (loss) before
extraordinary
loss............... $ (.01) $ .15 $ .64 $ 1.01 $ 1.34 $ .29 $ .42
=========== ======= ======== ======== ======== ======= =======
Net income
(loss)(2).......... $ (.01) $ .15 $ .60 $ 1.01 $ 1.34 $ .29 $ .42
=========== ======= ======== ======== ======== ======= =======
Weighted average common
and common equivalent
shares outstanding... 16,000 18,713 25,334 27,911 28,307 28,303 28,526
=========== ======= ======== ======== ======== ======= =======
Pro forma income (loss)
per common share(3)
Income before
extraordinary
loss............... $ .23
Extraordinary loss,
net of taxes....... (.05)
-------
Net income........... $ .18
=======
</TABLE>

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<PAGE> 74

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------ MARCH 31,
1990 1991 1992 1993 1994 1995
------- ------- -------- -------- -------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............... $ 7,445 $10,105 $ 26,134 $ 35,642 $ 18,517 $ 13,013
Total assets.................. 73,041 84,277 108,024 147,084 195,778 222,625
Long-term obligations,
excluding current
installments................ 41,884 42,486 6,233 7,512 6,717 14,026
Redeemable preferred stock.... 10,428 12,076 -- -- -- --
Stockholders' equity.......... 3,828 6,721 82,435 117,058 162,088 178,624
</TABLE>

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

(1) On November 30, 1990, Lincare acquired the outstanding capital stock of
Lincare Inc. in the Buyout. The pro forma statement of operations data for
the year ended December 31, 1990 gives effect to the Buyout as if it had
occurred on January 1, 1990. The pro forma adjustments as a result of the
Buyout reflect (i) increased depreciation expense relating to capitalized
software, (ii) increased amortization of intangible assets, (iii) interest
expenses relating to the additional indebtedness incurred and (iv) the
related income tax effects of such adjustments. The pro forma adjustments
do not reflect Lincare's acquisitions subsequent to the Buyout.

(3) For purposes of the pro forma income (loss) per common share calculations,
Lincare's March 1992 initial public offering and the application of the
proceeds therefrom is assumed to have been completed on January 1, 1991.

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<PAGE> 75

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- LINCARE

The following discussion should be read in conjunction with the historical
financial statements and notes thereto of Lincare included elsewhere herein.

NET REVENUES

The following table sets forth for the periods indicated a summary of
Lincare's net revenues by source:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------- ------------------
1992 1993 1994 1994 1995
-------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Oxygen and other respiratory therapy..... $106,200 $141,918 $184,927 $40,970 $55,880
Home medical equipment and other......... 11,203 12,588 16,215 3,039 5,343
-------- -------- -------- ------- -------
Total.................................... $117,403 $154,506 $201,142 $44,009 $61,223
======== ======== ======== ======= =======
</TABLE>

Net revenues for the three months ended March 31, 1995 increased by
$17,214,000 (or 39.1%) compared with the three months ended March 31, 1994.
Approximately $8,729,000 of the net revenue increase is attributable to
acquisitions and the balance of approximately $8,485,000 reflects internal
growth.

Net revenues for the year ended December 31, 1994 increased by $46,636,000
(or 30.2%) over 1993. Net revenues for the year ended December 31, 1993
increased by $37,103,000 (or 31.6%) over 1992. The increases are attributable to
Lincare's sales and marketing efforts that emphasize quality and customer
service, and the effect of the acquisitions completed by Lincare. Lincare
estimates that approximately $29,948,000 of the increase in revenues for year
ended December 31, 1994, and $18,791,000 of the increase in revenues for the
year ended December 31, 1993, were attributable to the acquired businesses.
Approximately $20,788,000 of the net revenue increase for the year ended
December 31, 1994 and $14,272,000 for the year ended December 31, 1993, was
attributable to volume growth in Lincare's core business.

The annual Medicare inflation price adjustments and certain other price
increases contributed approximately $4,040,000 to the increase for the year
ended December 31, 1993. On August 10, 1993, Congress passed the Omnibus
Reconciliation Act of 1993 ("OBRA 93") which required changes to be made
effective January 1, 1994, in the Medicare reimbursement of certain items of
home medical equipment. Lincare estimates that these Medicare price changes
resulted in a revenue reduction of approximately $4,100,000 for the year ended
December 31, 1994. The OBRA 93 legislation provides for a consumer price index
update, effective January 1, 1995, of approximately 2.5%. No additional impact
from OBRA 93 is expected in 1995.

COST OF GOODS AND SERVICES

Cost of goods and services as a percentage of net revenues was 14.9% for
the three months ended March 31, 1995 compared with 13.7% for the three months
ended March 31, 1994. The increase is primarily attributable to the increased
home medical equipment product mix of some of the acquisitions made in 1994.

Cost of goods and services as a percentage of net revenues was 14.4% in
1994 and was 13.7% and 13.8% for the years ended December 31, 1993 and 1992,
respectively. The increase in 1994 is primarily attributable to the nebulizer
product line which had a significant reduction in reimbursement resulting from
OBRA 1993 and the increased home medical equipment product mix of some of the
acquisitions made during the year.

OPERATING AND OTHER EXPENSES

Operating expenses as a percentage of net revenues was 21.6% for the three
months ended March 31, 1995 compared with 22.3% for the three months ended March
31, 1994. This improvement was primarily due to Lincare's successful integration
of acquired businesses into its existing locations and internal sales growth.

Operating expenses for the year ended December 31, 1994 decreased to 22.0%
of net revenues, compared to 22.3% and 24.3% for the years ended December 31,
1993 and 1992, respectively. This improvement is

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primarily due to Lincare's successful integration of acquired businesses into
its existing operations. Lincare has been able to maintain a cost structure
that, with increases in net revenues, has permitted Lincare to spread its
overhead over a larger base of revenues, resulting in significant improvements
in operating income.

Selling, general and administrative expenses as a percentage of net
revenues decreased to 20.7% for the three months ended March 31, 1995 compared
with 22.3% for the three months ended March 31, 1994. The improvement is
attributable to Lincare's ability to leverage its infrastructure, with selling,
general and administrative expenses increasing by 29.0% while revenues grew by
39.1%.

Selling, general and administrative expenses have increased each year in
absolute dollars by reason of increased net revenues but have decreased as a
percentage of net revenues as a result of Lincare's continued cost containment
efforts. Selling, general and administrative expenses expressed as a percentage
of net revenues decreased to 21.5% for the year ended December 31, 1994 compared
with 22.4% and 24.2% for the years ended December 31, 1993 and 1992,
respectively.

Bad debt expense as a percentage of net revenues was 0.8% for the year
ended December 31, 1994 compared with 1.2% and 1.4% for the years ended December
31, 1993 and 1992, respectively. The reduction in bad debt expense during these
periods is attributable to the implementation of additional procedures for
handling reimbursement claims, which have decreased the time required for the
submission and processing of third party payor claims. In addition, Lincare's
accounts receivable collection in 1994 equaled 99.7% of the sales revenue
recorded for the year.

Lincare's increased depreciation expense reflects increased capital
expenditures primarily for additional oxygen equipment to service Lincare's
growing customer base. Depreciation expense as a percentage of net revenues
decreased to 6.7% for the year ended December 31, 1994 compared with 7.6% and
8.6% for the years ended December 31, 1993 and 1992, respectively.

AMORTIZATION EXPENSE

Amortization expense for the three months ended March 31, 1995 increased to
$2,391,000 compared with $1,333,000 for the three months ended March 31, 1994.
The increase is attributable to the amortization of intangible assets acquired
in 1994 and the first quarter of 1995.

Lincare's intangible assets were $98,055,000 as of December 31, 1994. Of
this total, $9,205,000 (consisting of the value assigned to customer lists) is
being amortized over a period of 10 to 36 months, $6,055,000 (consisting of
various covenants not to compete) over a period of three to eight years, and
$82,795,000 (consisting of goodwill) over a period of 40 years. In March 1992
unamortized loan origination fees aggregating $990,000 pertaining to the senior
bank loans were expensed as an extraordinary non-cash item upon the repayment of
Lincare's senior debt with a portion of the proceeds of Lincare's March 1992
initial public offering.

During 1994, Lincare amortized $7,281,000 of its intangible assets (3.6% of
net revenues) compared to $4,695,000 (3.0% of net revenues) in 1993 and
$5,125,000 (4.4% of net revenues) in 1992.

OPERATING INCOME

As shown in the table below, operating income for the three months ended
March 31, 1995 increased to $19,415,000 compared with $13,255,000 for the three
months ended March 31, 1994 and operating income for the year ended December 31,
1994 increased by $16,169,000 over 1993. Operating income for the year ended
December 31, 1993 increased by $18,589,000 over 1992. The percentage increases
in operating income are attributable to Lincare's revenue growth and efforts to
control costs.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating income........................ $27,500 $46,089 $62,558 $13,255 $19,415
Percentage of net revenue............... 23.4% 29.8% 31.0% 30.1% 31.7%
</TABLE>

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INTEREST EXPENSE

Interest expense for the year ended December 31, 1994 was $473,000,
compared to $387,000 and $1,242,000 for the years ended December 31, 1993 and
1992, respectively. The increase in 1994 is attributable to Lincare's use of its
revolving line of credit during the year. The decrease in 1993 is attributable
to Lincare's repayment of its $30,623,000 senior term loan and $12,000,000 of
subordinated debt obligations, which were outstanding during the first quarter
1992, with the net proceeds of Lincare's initial public stock offering in March
1992.

INCOME TAXES

Lincare's effective income tax rate was 39.1% for the year ended December
31, 1994, 39.3% for 1993 and 39.6% for 1992.

Effective January 1, 1993 Lincare changed its method of accounting for
income taxes to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Standards No. 109, "Accounting for Income Taxes."
Upon adoption, the provisions of the statement were applied without restating
prior years' financial statements. The cumulative effect of the change in the
method of accounting for income taxes was not material.

ACQUISITIONS

For a description of business combinations entered into by Lincare during
1994 and 1993, see "Business of Lincare-Recent Acquisitions" and Note 12 to the
Consolidated Financial Statements.

The intangible assets acquired in the Buyout resulted in amortization
expense of $443,000, $1,090,000 and $2,312,000 in 1994, 1993 and 1992,
respectively. Depreciation expense associated with the computer software
acquired in the Buyout was $1,344,000 and $1,467,000 in 1993 and 1992
respectively. The computer software was fully amortized in 1993.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided from operating activities was $20,088,000 for the three
months ended March 31, 1995 compared with $12,000,000 for the three months ended
March 31, 1994.

At December 31, 1994, Lincare's working capital was $18,517,000, as
compared to $35,642,000 at December 31, 1993, and $26,134,000 at December 31,
1992.

Net cash provided by operating activities was $66,018,000 for the year
ended December 31, 1994, compared with $51,392,000 for the year ended December
31, 1993, and $32,176,000 for the year ended December 31, 1992. A significant
portion of Lincare's assets consists of accounts receivables from third party
payors that provided reimbursement for the services provided by Lincare. Because
of Lincare's ability to collect its accounts receivable on a timely basis,
Lincare has not been required to obtain interim financing of its accounts
receivable to satisfy operating needs.

Net cash used in investing and financing activities was $28,845,000 for the
three months ended March 31, 1995 compared with $30,850,000 for the three months
ended March 31, 1994. First quarter activity included Lincare's investment of
$27,033,000 in business acquisitions, payments of $4,075,000 related to deferred
acquisition obligations and the borrowing of $8,000,000 from its available
$50,000,000 revolving line of credit.

Net cash used in investing and financing activities amounted to
$79,733,000, $41,530,000 and $24,035,000 for the years ended December 31, 1994,
1993 and 1992, respectively. These amounts primarily represent capital
expenditures, business acquisitions, loan repayments and capital leases.

In March 1992, Lincare issued 6,700,000 shares of Common Stock in its
initial public offering and received net proceeds of $42,446,000. The net
proceeds were used to repay $42,623,000 in outstanding debt. In April 1992,
Lincare's underwriters purchased an additional 1,005,000 shares of Common Stock
upon exercise

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of their over-allotment option which generated an additional $6,543,000 in net
proceeds. These proceeds were primarily used by Lincare to redeem $6,312,000 of
Lincare's Series A Preferred Stock.

In December 1992, Lincare completed a second public offering of 3,550,000
shares of its common stock, including 2,950,000 shares sold by certain selling
shareholders. This offering generated $6,475,000 of net proceeds to Lincare.
These proceeds were used to redeem outstanding shares of Lincare's Series A
Preferred Stock and increase working capital for general corporate purposes.

As of December 31, 1994, Lincare's principal sources of liquidity consisted
of $18,517,000 of working capital and $23,000,000 available under its revolving
line of credit. On February 10, 1995, Lincare increased the amount it may borrow
under the revolving line of credit from $25,000,000 to $50,000,000. Lincare
believes that internally generated funds, together with funds that may be
borrowed under such credit facility, will be sufficient to meet Lincare's
anticipated capital requirements over the foreseeable future.

Upon the repayment of Lincare's debt in March 1992, Lincare recorded an
extraordinary loss, net of taxes, of $1,000,000. Such extraordinary loss, before
applicable tax effect, is comprised of (i) $990,000 of unamortized loan
origination fees pertaining to Lincare's senior debt, (ii) $300,000 of
prepayment premium for the early payment of such debt, and (iii) $357,000 of
unamortized original issue discount attributable to Lincare's subordinated debt.
Of such amounts, only the $300,000 prepayment premium and $357,000 of
unamortized original issue discount required the use of cash. The unamortized
original discount on the subordinated debt is included with the $12,000,000
principal amount of subordinated debt that was repaid with the net proceeds of
Lincare's March 1992 initial public offering.

Lincare anticipates that capital expenditures for 1995 will be
approximately $28.0 million and that over the next several years its capital
expenditure requirements will grow faster than the growth in its revenue.
Lincare believes that it will be able to generate sufficient funds internally to
meet its short-term and long-term capital expenditure requirements.

Lincare's future liquidity will continue to be dependent upon its operating
cash flow and management of accounts receivable. In view of Coram's intention to
operate Lincare as a stand-alone business unit following the consummation of the
Merger, the Merger should not have an immediate impact on Lincare's liquidity
although there can be no assurance that Lincare's liquidity will not be affected
by the debt service, working capital or other capital needs of the combined
enterprise.

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BUSINESS OF LINCARE

GENERAL

On November 30, 1990, Lincare acquired all of the outstanding capital stock
of Lincare, Inc. from Union Carbide Corporation and members of management in the
Buyout.

THE HOME RESPIRATORY MARKET

Lincare estimates that the home respiratory therapy market (including home
oxygen equipment and respiratory therapy services) had revenues of approximately
$1.5 to $2.0 billion in 1994, having grown by an estimated 8% to 10% per year
over the last five years. This growth reflects the significant increase in the
number of persons afflicted with chronic obstructive pulmonary disease, which is
attributable, to a large extent, to the increasing proportion of the population
over the age of 65.

OPERATIONS AFTER THE MERGER

Coram presently intends to continue the operations of Lincare as a
stand-alone business unit following the Merger, while integrating certain
marketing and corporate functions. See "The Merger--Coram's Reasons for the
Merger and Board of Directors' Recommendation."

BUSINESS STRATEGY

Lincare's strategy has been to increase its market share through internal
growth and acquisitions. During the three months ended March 31, 1995, Lincare
purchased the outstanding stock or certain assets of ten businesses with
combined annual revenues of approximately $17 million. In 1994, Lincare acquired
twenty local and regional competitors with combined annual revenue of
approximately $35 million. In addition to expanding Lincare's presence in
current markets, several of these acquisitions also established Lincare in two
new states.

Revenue growth has been dependent upon the overall growth rate of the home
respiratory care market, as well as on opportunities to increase market share
through effective marketing efforts and selective acquisitions of local or
regional competitors. Lincare believes that the growing cost containment efforts
of government and private insurance reimbursement programs and an increasingly
competitive environment have accelerated consolidation trends within the home
health care industry and that the Merger would permit Lincare to achieve certain
competitive advantages. See "The Merger--Lincare's Reasons for the Merger and
Board of Directors' Recommendation."

Lincare will continue to concentrate on providing oxygen and other
respiratory therapy services to patients in the home and to provide home medical
equipment and other services where it believes such services will enhance
Lincare's primary business. In 1994, oxygen and other respiratory therapy
services accounted for over 90% of Lincare's revenues.

OXYGEN AND OTHER RESPIRATORY SERVICES

Lincare's primary business is to provide oxygen and other respiratory
therapy items and services to patients in the home. When a patient is referred
to one of Lincare's operating centers by a physician, hospital discharge planner
or other source, Lincare's customer representative obtains the necessary medical
and insurance coverage information and coordinates the delivery of patient care.
The prescribed respiratory equipment is delivered by one of Lincare's
representatives to the customer's home, where instructions and training are
given to the customer regarding appropriate equipment use and maintenance.
Following the initial setup, Lincare representatives make periodic visits to the
customer's home, the frequency of which is dictated

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by the type of equipment. Lincare's services are coordinated with the customer's
physician. During the period that Lincare performs services for a customer, the
customer remains under the physician's care and medical supervision. Lincare
employs respiratory therapists to perform certain training and other functions
in connection with its services. The respiratory therapists are licensed where
required by applicable law.

Home Oxygen Equipment. The major types of oxygen delivery equipment are
oxygen concentrators and liquid oxygen systems. Each method of delivery has
different characteristics that make it more or less suitable to specific patent
applications.

Oxygen concentrators are stationary units that provide a continuous
flow of oxygen by filtering ordinary room air. Concentrators are most
commonly used by patients confined to the home or with only minimal
mobility.

Liquid oxygen systems are thermally insulated containers of liquid
oxygen, consisting of a stationary unit and a portable unit, which are most
commonly used by ambulatory patients.

Other Respiratory Therapy Services. The other respiratory therapy
services of Lincare consist primarily of:

Nebulizers and associated respiratory medications therapy provide
aerosol therapy;

Apnea monitors provide respiratory alarm systems for infants at risk
for sudden infant death syndrome;

Continuous positive airway pressure devices maintain open airways in
patients suffering from obstructive sleep apnea by providing airflow at
prescribed pressures during sleep;

Non-invasive bi-level ventilation provides nocturnal ventilatory
support for neuromuscular and chronic obstructive pulmonary disease
patients. This therapy improves daytime function and decreases incidents of
acute illness; and

Ventilators support respiratory function in severe cases of
respiratory failure where the patient can no longer sustain the mechanics
of breathing without the assistance of a machine.

Through a limited number of operating centers, Lincare provides home sleep
studies, infusion therapy and enteral nutritional care, prenatal care, and
prosthetic care.

Lincare also supplies home medical equipment, such as hospital beds,
wheelchairs and other supplies that may be required by respiratory patients.

LINCARE OPERATIONS

Management. Each of Lincare's 190 operating centers is managed by a center
manager who has responsibility and accountability for the operating and
financial performance of the center. This decentralization of managerial
decision-making enables Lincare's operating centers to respond promptly and
effectively to local market demands and opportunities. Lincare believes that the
personalized nature of customer requirements and referral relationships
characteristic of the home health care business mandates Lincare's localized
operating structure.

Service and marketing functions are performed at the local operating level,
while strategic development, financial control and operating policies are
administered at the executive level. Reporting mechanisms are in place at the
operating center level to monitor performance and ensure field accountability.

A regional management layer consisting of 22 area managers directly
supervises individual operating center managers, serving as an additional
mechanism for assessing and improving performance of Lincare's operations.
Lincare's operating centers are served by nine regional billing centers which
control all billing and reimbursement functions.

MIS Systems. Lincare believes that the proprietary management information
systems developed by it is one of its key competitive advantages and provide
management with a critical tool to measure and evaluate performance levels
throughout Lincare. Management reviews numerous reports, including monthly
reports

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containing information critical to the evaluation process, detailing revenues
and profitability by individual center, accounts receivable and cash collection
management, equipment controls and utilization, customer activity, and manpower
trends. Lincare has a staff of nine full-time computer programmers which permits
Lincare to continually enhance its computer systems in order to provide timely
financial and operational information and to respond promptly to changes in
reimbursement regulations and policies.

Account Receivable Management. Lincare derives a majority of its revenues
from reimbursement by third party payors. In most instances, Lincare invoices
and collects payments directly from Medicare, Medicaid and private insurance
carriers, as well as directly from customers under co-insurance provisions. The
following table sets forth the approximate percentages of Lincare's revenues
derived from various payor categories.

<TABLE>
<CAPTION>
YEAR ENDED
PAYORS DECEMBER 31, 1994
----------------------------------------------------- -----------------
<S> <C>
Medicare and Medicaid programs....................... 58%
Private insurance.................................... 25
Direct payment and other(1).......................... 17
---
100%
</TABLE>

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

(1) The direct payment category is comprised primarily of co-insurance amounts
received from beneficiaries of Medicare and private insurance coverage.

While reimbursement is a complicated process involving the submission of
claims to multiple payors, each having its own claims requirements, Lincare's
proprietary MIS systems have decreased the time required for the submission and
processing of these claims. Lincare's systems are capable of tailoring the
submission of claims to the specifications of the individual payors. Lincare's
in-house MIS capability also enables it to adjust quickly to any regulatory or
reimbursement changes. These features serve to decrease the processing time of
claims by payors, resulting in a more rapid turnover of accounts receivable. In
addition, Lincare is capable of submitting claims electronically to any Medicare
carrier or other third party payor that can receive electronic claims
submissions.

Lincare's net accounts receivable in terms of days sales outstanding was 45
days as of December 31, 1993 and 40 days as of December 31, 1994.

SALES AND MARKETING

Favorable trends affecting the U.S. population and home health care have
created an environment which should produce increasing demand for the services
provided by Lincare. The average age of Americans is increasing, and as a person
ages more health care services are required. In addition, the well-documented
major structural changes in health care are moving more services into the home
and out of institutions.

Sales activities are generally carried out by Lincare's full-time sales
representatives located at its operating centers with assistance from the center
managers. In addition to promoting the high quality of Lincare's services, the
sales representatives are trained to provide information concerning the
advantages of home respiratory care. Sales representatives are often licensed
respiratory therapists who are highly knowledgeable in the provision of
supplemental oxygen.

Lincare primarily acquires new customers through referrals. Lincare's
principal sources of referrals are physicians, hospital discharge planners,
prepaid health plans, clinical case managers and nursing agencies. Lincare's
sales representatives maintain continual contact with these medical
professionals in order to strengthen these relationships.

Lincare's current base of referral sources provides a steady flow of
customers in recognition of Lincare's reputation for providing high-quality
service to patients. While Lincare views its referral sources as fundamental to
its business, no single referral source accounts for more than 1.0% of Lincare's
revenues.

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Lincare has more than 70,000 active customers, and the loss of any single
customer or group of customers would not materially impact Lincare's business.

Joint Commission on Accreditation of Healthcare Organizations. Lincare has
received accreditation from JCAHO, a private non-profit organization that has
established voluntary standards for the provision of home health care services,
for all its operating centers.

Accreditation by the JCAHO represents a marketing benefit to Lincare's
operating centers and provides for a recognized quality assurance program
throughout Lincare. Lincare anticipates that referral sources may in the future
require accreditation as a prerequisite to referring patients to individual home
health care companies. Several proposals have been made to require health care
providers to be accredited or licensed by independent agencies in order to
participate in government reimbursement programs, and such a requirement has
been adopted by certain payors.

RECENT ACQUISITIONS

In 1993, Lincare acquired, in unrelated acquisitions, certain operating
assets of ten local and regional competitors and, in a single transaction, the
common stock of five related companies. The operations acquired in 1993 had
aggregate annualized revenues of approximately $18.0 million at the time of
acquisition. These acquisitions resulted in the addition of 17 new operating
centers.

In 1994, Lincare acquired, in unrelated acquisitions, certain operating
assets of 16 local and regional competitors, the common stock of three companies
and, in a single transaction, certain assets of five related companies. The
operations acquired in 1994 had aggregate annualized revenues of approximately
$35.0 million at the time of acquisition. These acquisitions resulted in the
addition of 35 new operating centers.

In the three months ended March 31, 1995, Lincare acquired, in unrelated
transactions, the capital stock of five local and regional competitors and
certain operating assets of five companies. The operations acquired through
March 31, 1995 had aggregate annualized revenues of approximately $17 million at
the time of acquisition. These acquisitions resulted in the addition of 8 new
operating centers.

QUALITY CONTROL

Lincare is committed to providing consistently high quality products and
services. Lincare's quality control procedures are designed to promote greater
responsiveness and sensitivity in dealing with individual customer needs and to
provide the highest level of quality assurance and convenience to the referring
physician. Licensed respiratory therapists and registered nurses provide
professional health care support and assist in Lincare's sales and marketing
efforts.

SUPPLIERS

Lincare purchases its oxygen and equipment from a variety of suppliers.
Lincare is not dependent upon any single supplier and believes that its oxygen
and equipment needs can be provided by several manufacturers.

COMPETITION

The home respiratory care market is a fragmented and highly competitive
market that is served by Lincare and other national providers and, Lincare
estimates, by over 2,000 regional and local companies.

The quality of service is the single most important competitive factor
within the home respiratory care market. The relationships between a home
respiratory care company and its customers and referral sources are highly
personal. There is no incentive for either the physician or the patient to alter
this relationship so long as the home respiratory care company is providing
responsive, professional and high-quality service. Other key competitive factors
are strength of local ties to the referral community and efficiency of
reimbursement and accounts receivable management systems.

Home respiratory care companies normally compete based on service.
Reimbursement levels are established by the fee schedules promulgated by
Medicare, Medicaid or by the individual determinations of

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private insurance companies. Furthermore, marketing efforts by home respiratory
care companies are directed toward referral sources which do not share financial
responsibility for the payment of services provided to customers.

MEDICARE AND OTHER THIRD PARTY REIMBURSEMENT

As a supplier of home oxygen and other respiratory therapy services for the
home health care market, Lincare files claims with Medicare Part B, the
Supplementary Medical Insurance Program, which was established by the Social
Security Act of 1965. Suppliers of home oxygen and other respiratory therapy
services have historically been heavily dependent on Medicare reimbursement due
to the high proportion of elderly suffering from respiratory disease.

Congress enacted legislation passed as part of the Omnibus Budget
Reconciliation Act of 1987 ("OBRA 1987") that significantly changed
reimbursement for home oxygen, respiratory therapy services and home medical
equipment. This legislation changed reimbursement from charged-based pricing by
individual suppliers to a single price for each item paid to all suppliers in
specific geographic areas within each Medicare carrier's jurisdiction. Under the
provisions of OBRA 1987, home oxygen equipment is generally reimbursed at a set
single monthly payment amount, regardless of the type of oxygen equipment
provided. OBRA 1987 also defined whether certain home medical equipment would be
paid on a rental or sale basis and established 15 month rental payment ceiling
on certain home medical equipment.

The Omnibus Budget Reconciliation Act of 1990 ("OBRA 1990") provided that
the fee schedules established under OBRA 1987 were to be adjusted annually at a
rate equal to the change in the Consumer Price Index less 1 percent through
December 31 1992, and increased by the Consumer Price Index in 1993. OBRA 1990
also made new changes to Medicare Part B reimbursement which were implemented in
1991. These changes included a national standardization of Medicare rates for
certain equipment categories, as well as reductions in amounts paid for home
medical equipment rentals.

The Omnibus Reconciliation Act of 1993 ("OBRA 93") reduced the rate of
increase allowed for certain items of home medical equipment. Lincare estimates
a net reduction, due to OBRA 93, in its Medicare reimbursement of approximately
$4 million for 1994. The OBRA 93 legislation provides a consumer price index
update, effective January 1, 1995, of approximately 2.5%. No additional impact
from OBRA 93 is expected for 1995.

Federal and state budgetary and other cost-containment pressures will
continue to impact the home respiratory care industry. Lincare cannot predict
what new federal and state budgetary proposals will be adopted and, if adopted,
what effect, if any, such proposals would have on Lincare's business.

Claims under the federal Medicare program are processed by private
insurance companies under contract arrangements with HCFA. In 1993, the Medicare
program began implementing a plan to reduce the number of carriers administering
Part B of the Medicare program from approximately sixty carriers to four
regional carriers. This transition to regional carriers was completed in 1994.

A significant portion of Lincare's revenues are attributable to payments
received from the Medicare and Medicaid programs. The levels of revenues and
profitability of Lincare are affected by the continuing efforts of these
programs to contain or reduce the costs of health care. A number of changes to
the Medicare and Medicaid programs are being considered in connection with
recent efforts to reduce budget deficits at the federal and state levels. Among
the changes under consideration is a proposal to convert all or part of Medicare
into a managed care payor program. Other proposals would reduce Medicare and
Medicaid expenditures by lowering reimbursement rates, increasing case
management review of services and negotiating reduced contract pricing. In
January 1995, HCFA announced its intention to adjust Medicare payment amounts
for oxygen and oxygen equipment on the grounds that such amounts are not
"inherently reasonable." To make such adjustments, HCFA is required to consider
specific economic factors and to provide notice and an opportunity for public
comment. It is expected that this process could take at least one year. Lincare
cannot predict whether any reductions will ultimately be adopted or the impact
any such adjustment would have on Lincare's business. In addition, HCFA and the
Medicare carriers are currently considering a draft medical

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policy that would require repeated attempts to use a metered dose inhaler
("MDI") prior to approving Medicare coverage for a nebulizer. There have also
been reduced payments for bronchodilator medications used with nebulizers. These
efforts could result in reductions in Medicare coverage or payment for certain
of Lincare's products. A significant change in coverage or a reduction in
payment rates by Medicare or Medicaid could have a material adverse effect upon
Lincare's business and financial condition. Because of restrictions on
reimbursement by government programs and the pressures to contain the growth in
the costs of such programs, Lincare also bears the risk that reimbursement rates
set by such programs will not keep pace with inflation. Although the moderate
inflation rates of the past several years have not posed significant problems
for Lincare, a substantial increase in the rate of inflation without a
corresponding increase in reimbursement rates would adversely affect Lincare's
business.

GOVERNMENTAL REGULATION

The federal government and all states in which Lincare currently operates
regulate various aspects of its business. In particular, Lincare's operating
centers are subject to federal laws covering the repackaging and dispensing of
drugs (including oxygen) and regulating interstate motor-carrier transportation.
Lincare's locations also are subject to state laws governing, among other
things, pharmacies, nursing services and certain types of home health agency
activities. Certain of Lincare's employees are subject to state laws and
regulations governing the ethics and professional practice of respiratory
therapy, pharmacy and nursing.

Fraud and Abuse. Lincare's operations are subject to the illegal
remuneration provisions of the Social Security Act (sometimes referred to as the
"anti-kickback" statute) and similar state laws that impose criminal and civil
sanctions on persons who knowingly and willfully solicit, offer, receive or pay
any remuneration, whether directly or indirectly, in return for, or to induce,
the referral of a patient for treatment, or, among other things, the ordering,
purchasing, or leasing, of items or services that are paid for in whole or in
part by Medicare, Medicaid or similar state programs. Violations of the federal
anti-kickback statute are punishable by criminal penalties, including
imprisonment, fines and exclusion of the provider from future participation in
the Medicare and Medicaid programs. Civil exclusion for anti-kickback violations
also can be imposed through an administrative process, without the imposition of
civil monetary penalties. In addition, the government contends that violations
of the anti-kickback statute may be prosecuted as false claims under Medicare
law, the penalties for which include return of payments received, fines and
exclusion from participation. Federal enforcement officials may also attempt to
use other general federal statutes to reach behavior considered fraudulent or
abusive, including the Federal False Claims Act, which provides for penalties of
up to $10,000 per claim plus treble damages, and permits private persons to sue
on behalf of the government in qui tam actions. While the federal anti-kickback
statute expressly prohibits transactions that have traditionally had criminal
implications, such as kickbacks, rebates or bribes for patient referrals, its
language has been construed broadly and has not been limited to such obviously
wrongful transactions. Court decisions state that, under certain circumstances,
the statute is also violated when one purpose (as opposed to the "primary" or a
"material" purpose) of a payment is to induce referrals. However, a Federal
Appeals Court recently held that Medicare program exclusion and other sanctions
were not appropriate unless the person or entity knew the complained of behavior
violated the statute and the person or entity intended to violate the statute.
The government is seeking a rehearing of that decision. Congress has considered
federal legislation that would expand the federal anti-kickback statute to
include the same broad prohibitions regardless of payor source. In addition to
the payment or receipt of illegal remuneration for the referral or generation of
Medicare or Medicaid business, the fraud and abuse law covers other billing
practices that are considered fraudulent (such as presentation of duplicate
claims, or claims for services not actually rendered or for procedures that are
more costly than that actually rendered) or abusive (such as claims presented
for services not medically necessary based upon a misrepresentation of fact),
subject to the same remedies described above.

In addition, an increasing number of states in which Lincare operates have
laws, which vary from state to state, prohibiting certain direct or indirect
remuneration or fee-splitting arrangements between health care

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<PAGE> 85

providers for the referral of patients to a particular provider, including
pharmacies and home health agencies. Possible sanctions for violation of these
restrictions include loss of licensure and civil and criminal penalties.

Prohibition on Physician Referrals. Under the Omnibus Budget
Reconciliation Act of 1993 ("Stark II"), it is unlawful for a physician to refer
patients for certain designated health services to an entity with which the
physician has a financial relationship. While respiratory therapy is not a
"designated health service," component parts of such therapy are: specifically,
outpatient prescription drugs, durable medical equipment and home health
services are included as designated health services under Stark II. A "financial
relationship" under Stark II is defined as an ownership or investment interest
in, or a compensation arrangement between, the physician and the entity. The
entity is prohibited from claiming payment under the Medicare or Medicaid
programs for services rendered pursuant to a prohibited referral and is liable
for the refund of amounts received pursuant to prohibited claims. The entity
also can receive civil penalties of up to $15,000 per improper claim and can be
excluded from participation in the Medicare and Medicaid programs. Comparable
provisions applicable to clinical laboratory services became effective in 1992.
Stark II provisions which may be relevant to Lincare became effective on January
1, 1995. Although Lincare believes that Stark II is not applicable in any
material respect to Lincare's operations, because of its broad language, Stark
II may be interpreted by the OIG of HHS to apply to Lincare's operations.

About one-half of all states have enacted some form of physician
self-referral law that regulates ownership interests in or compensation
arrangements between physicians and health care service providers to which they
refer patients. These laws vary from measures that require physicians to
disclose their financial interests to outright prohibitions similar to Stark II.
In most cases, state physician self-referral laws apply to all payors,
government and private. Lincare believes that most state laws are inapplicable
to the businesses in which Lincare operates or contain exemptions that appear to
be applicable to Lincare's operations.

Health care is an area of rapid legislative and regulatory change. Changes
in the law or new interpretations of existing laws can have an effect on
permissible activities, the relative costs associated with doing business, and
the amount of reimbursement by government and third party payors. Lincare cannot
predict the future course of federal, state and local regulation or legislation,
including Medicare and Medicaid statutes and regulations, and of possible
changes in national health care policies, including those pertaining to managed
care organizations, which are currently the focus of national political
discussion. Future legislative and regulatory changes could have an adverse
impact on Lincare.

INSURANCE

Lincare currently has in force general liability and product liability
insurance, each with a coverage limit of $10.0 million. In addition, Lincare has
professional liability insurance with a coverage limit of $1.0 million per
occurrence and $3.0 million in the aggregate. Lincare's product liability
insurance provides coverage on a claims-made basis, while its general liability
insurance is on an occurrence basis, and all policies are subject to annual
renewal.

EMPLOYEES

As of April 30, 1995, Lincare had approximately 1,900 employees. None of
Lincare's employees are currently covered by collective bargaining agreements.
Lincare believes that the relations between Lincare's management and its
employees are good.

ENVIRONMENTAL MATTERS

Management believes that Lincare is currently in compliance in all material
aspects with applicable federal, state and local statutes and ordinances
regulating the discharge of materials into the environment. Management does not
believe it will be required to expend any material amounts in order to remain in
compliance with these laws and regulations or that compliance will materially
affect its capital expenditures, earnings or competitive positions.

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<PAGE> 86

PROPERTIES

Lincare leases under third party lease arrangements all of Lincare's
facilities, except two locations which it owns. Lincare believes that its
facilities are adequate for present and foreseeable operations.

LEGAL PROCEEDINGS

Lincare is also involved in certain other claims and legal actions arising
in the ordinary cause of business. In the opinion of Lincare, the ultimate
disposition of all matters will not have a material adverse impact on Lincare's
financial position or results of operations.

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<PAGE> 87

MANAGEMENT OF LINCARE

DIRECTORS AND EXECUTIVE OFFICERS

The following table provides information regarding the current executive
officers and directors of Lincare.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
James T. Kelly................ 48 Chairman of the Board, Chief Executive Officer,
President and Director
Howard R. Deutsch............. 41 Executive Vice President, General Counsel and Director
James M. Emanuel.............. 46 Chief Financial Officer, Secretary and Director
Andrew M. Paul................ 39 Director
Chester B. Black.............. 49 Director
Frank T. Cary................. 74 Director
Thomas O. Pyle................ 55 Director
</TABLE>

All directors are elected annually and hold office until the next annual
meeting of stockholders and until their successors are duly elected and
qualified. Executive officers serve at the discretion of the Board of Directors.

JAMES T. KELLY was elected Chairman of the Board in April 1994 and has
served as the Chief Executive Officer of Lincare's business since June 1986. Mr.
Kelly has been the President and a director of Lincare's predecessor since its
founding in November 1987, and the President, Chief Executive Officer and a
director of Lincare since its formation in November 1990. Prior to becoming
Lincare's Chief Executive Officer, Mr. Kelly served in a number of capacities
within the Mining and Metals Division of Union Carbide Corporation ("Union
Carbide") over a nineteen-year period, departing as Director of Marketing in May
1986.

HOWARD R. DEUTSCH has served as Executive Vice President and General
Counsel and as a director of Lincare's predecessor since its founding in 1987
and as Executive Vice President and General Counsel and as a director of Lincare
since its formation in November 1990. From 1980 to 1987, Mr. Deutsch served as
Division Counsel for Union Carbide. Mr. Deutsch is responsible for managing and
implementing Lincare's acquisition program.

JAMES M. EMANUEL has served as the Chief Financial Officer of Lincare's
business since January 1984, and has been Chief Financial Officer of Lincare's
predecessor since November 1987. Mr. Emanuel has served as the Chief Financial
Officer and as a director of Lincare since November 1990. Mr. Emanuel served in
numerous financial capacities at Union Carbide between 1973 and 1984, and acted
as Business Controller of Union Carbide's Cryogenic Equipment Business
immediately prior to joining the Lincare business.

ANDREW M. PAUL has been a director of Lincare since its formation in 1990.
Mr. Paul was Chairman of the Board of Lincare from November 1990 to April 1994.
Mr. Paul is a general partner of Welsh, Carson, Anderson, and Stowe ("WCAS"), a
private venture capital partnership. Previously he was an associate in the
venture capital group of Hambrecht & Quist Incorporated for one year. Mr. Paul
is also a director of Quorum Health Group, Inc., a company that owns hospitals
and provides management and consulting services to third party owners, Emcare
Holdings Inc., a leading provider of physician services management in hospital
emergency departments and related urgent care centers, Medcath Inc., a provider
of cardiology and cardiovascular services through the operation of specialized
facilities and the management of physician practices, and several private
companies.

CHESTER B. BLACK has been a director of Lincare since January 1991. Since
November 1990, Mr. Black has served as Chairman and Vice Chairman of Med
Alliance, Inc. From June 1989 until November 1990, Mr. Black was Chairman and
President of RB Diagnostic, which also provides diagnostic imaging services.
From May 1986 until June 1989, Mr. Black was President of AdvaCare, Inc., a
predecessor in interest to RB Diagnostic.

FRANK T. CARY has been a director of Lincare since July 1991. Mr. Cary
served as IBM's Chief Executive Officer from 1973 to 1981. He retired from IBM
on July 1, 1983. He continued as a member of the

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<PAGE> 88

IBM board and its executive committee until April 30, 1991. Mr. Cary is also a
director of AEA Investors, Inc., Capital Cities/ABC, Inc., Celgene Corporation,
Cygnus Therapeutic Systems, ICOS Corporation, Lexmark International, Inc.,
ONTOS, Inc., and SPS Transaction Services, Inc.

THOMAS O. PYLE became a director of Lincare in 1995. Mr. Pyle served as
Chief Executive Officer of Harvard Community Health Plan from 1978 to 1991. From
1993 to 1994, he served as Chief Executive Officer of MetLife HealthCare
Management Company. He is now Senior Advisor to The Boston Consulting Group and
serves as a director of Millipore Corporation, Unilab Corporation, Codman
Research Group, Employee Managed Care Corporation, Coordinated Care Corporation,
Controlled Risk Insurance Company, Ltd., and as Chairman of the Health Outcomes
Institute.

DIRECTOR'S FEES

Other than Chester B. Black, Frank T. Cary and Thomas O. Pyle, who each
receive $20,000 per annum, directors do not receive any compensation for their
services, but are reimbursed for expenses. Lincare's directors are also eligible
to participate in Lincare's stock option plans.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The committees of the Board of Directors consist of an Audit Committee, a
Compensation Committee and a Stock Plan Committee. During fiscal 1994, all
directors attended 75% or more of the total meetings of the Board of Directors
and Committees of the Board of Directors on which they served. The Board of
Directors held four meetings during 1994.

Audit Committee. The Audit Committee recommends to the Board of Directors
the annual appointment of independent accountants with whom the committee
reviews the audit fees, scope and timing of the audit, the adequacy of internal
controls and any other services rendered. The Audit Committee held one meeting
for fiscal 1994. The Audit Committee is comprised of Messrs. Cary, Emanuel, and
Pyle. Mr. Pyle replaced Mr. Mannion, a former director of Lincare, as a member
of the Audit Committee effective February 1, 1995.

Compensation Committee. The Compensation Committee reviews and recommends
the executive compensation and bonuses of the executives of Lincare. The
Compensation Committee is comprised of Messrs. Paul and Black and held one
meeting in fiscal 1994.

Stock Plan Committee. The Stock Plan Committee administers the stock
option plans of Lincare and held two meetings during fiscal 1994. The Stock Plan
Committee is comprised of Messrs. Paul and Black. Mr. Black replaced Mr.
Mannion, a former director of Lincare, as a member of the Stock Plan Committee,
effective January 23, 1995.

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<PAGE> 89

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by Lincare to each of
its executive officers.

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ---------------------------
---------------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED # COMPENSATION(1)
- ----------------------------------------- ---- -------- -------- --------- ---------------
<S> <C> <C> <C> <C> <C>
James T. Kelly........................... 1994 $200,280 $472,000 -0- $ 7,500
Chief Executive Officer 1993 $195,000 $409,575 606,000 $9,750
1992 $189,300 $293,000 -0- $9,465
Howard R. Deutsch........................ 1994 $157,140 $346,500 -0- $ 7,500
Executive V.P. 1993 $153,000 $297,650 294,000 $7,650
1992 $148,700 $213,800 -0- $7,435

James M. Emanuel......................... 1994 $108,900 $239,500 -0- $ 5,445
Chief Financial Officer 1993 $106,000 $205,525 150,000 $5,300
1992 $102,804 $148,825 -0- $5,140
</TABLE>

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

(1) Lincare makes a contribution of 5% of each participating employee's annual
base salary to Lincare's 401(k) Plan, however in 1994 the plan had a
maximum annual base salary level of $150,000 as a result of changes made by
the Code.

OPTION GRANTS SINCE DECEMBER 31, 1993

No options were granted to Lincare's executive officers in fiscal 1994. The
following options were granted to Lincare's executive officers in 1995:

<TABLE>
<CAPTION>
NUMBER OF OPTION
NAME SHARES GRANTED
---------------------------------------------------- ----------------
<S> <C>
James T. Kelly...................................... 100,000
Howard R. Deutsch................................... 73,000
James M. Emanuel.................................... 51,000
</TABLE>

The following table sets forth aggregate options exercised by Lincare's
executive officers in fiscal 1994.

AGGREGATE OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END FY-END(1)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- --------- -------------- --------------
<S> <C> <C> <C> <C>
James T. Kelly.......................... 106,798 $2,282,856 606,000/-0- $8,810,000/-0-
Howard R. Deutsch....................... 100,000 $2,626,250 312,482/-0- $4,502,607/-0-
James M. Emanuel........................ 105,000 $2,875,000 181,044/-0- $3,080,015/-0-
</TABLE>

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

(1) Value is calculated using the Lincare closing stock price on December 31,
1994 of $29.00 per share less the exercise price for such shares.

EMPLOYMENT AGREEMENTS

Lincare has employment agreements expiring on December 31, 1996 with each
of its executive officers. Under the employment agreements, Mr. Kelly serves as
CEO and President of Lincare at a current annual

81
<PAGE> 90

salary of $205,740, Mr. Deutsch serves as Executive Vice President and General
Counsel at a current annual salary of $161,400 and Mr. Emanuel serves as Chief
Financial Officer at a current annual salary of $111,840. Each agreement
provides for annual cost of living adjustments and for such salary increases as
may be determined by the Board of Directors in its sole discretion. In addition
to salary, the employment agreements provide for bonus compensation, if certain
financial targets are met, equal to the employees' respective shares of a bonus
pool computed as a percentage of Lincare's cash flow from operations.
Furthermore, each employment agreement provides that, if Lincare terminates the
employee other than "for cause", or if there is a "Change of Control of
Lincare", such employee shall receive an amount equal to his then-current annual
base salary plus an amount equal to his bonus compensation in respect of the
immediately preceding calendar year. The employment agreements also provide that
in consideration of each employee's covenant not to compete he shall be entitled
to receive upon the termination of the employment term an amount equal to his
then current annual salary plus an amount equal to his bonus compensation in
respect of the immediately preceding calendar year; provided, however, that
Lincare shall not be obligated to pay such amounts to the employee if the
employee voluntarily terminates his employment with Lincare prior to December
31, 1996. See "The Merger--Interests of Certain Persons in the Merger."

COMPENSATION COMMITTEE REPORT

Lincare's executive compensation programs are intended to attract, retain
and motivate high quality executives with a performance-based compensation
package that promotes its growth and enhancement of Stockholder value. The
compensation programs consist of two significant portions, (i) cash compensation
and (ii) equity-based incentive compensation, generally through the grant of
stock options pursuant to Lincare's Non-Qualified Plan, its 1991 Option Plan,
and its 1994 Option Plan.

Lincare's executive compensation programs are administered by two
committees of the Board of Directors--the Compensation Committee and the Stock
Plan Committee (collectively, the "Committees"). The role of each Committee is
distinct from that of the other. The Compensation Committee administers the cash
portion of the executive compensation package, and the Stock Plan Committee
administers the equity-based incentive portion. The Committees are made up of
outside directors.

CASH COMPENSATION

The Compensation Committee views the cash compensation component to be in
recognition of the contribution by the executive officers of Lincare to its
historical financial performance. Determination of the size of this portion of
the compensation package, as described below, is based on an objective,
performance-based formula.

The cash compensation of each of Lincare's executive officers, including
its Chief Executive Officer and President, James T. Kelly, was determined for
fiscal 1994 pursuant to each executive officer's Employment Agreement. See
"Executive Compensation." The base salary component of cash compensation is
indexed for inflation, and no merit salary increases were granted in 1992, 1993
or 1994. The bonus component of the executive officer's cash compensation is
determined under an objective formula based on Lincare's cash flow from
operations in accordance with the Employment Agreements. As a result of
significant improvements in Lincare's cash flow from operations from 1993 to
1994, the cash bonuses paid to executive officers increased commensurately in
1994. See "Executive Compensation."

The base salaries and bonus formula were negotiated by the executive
officers, on the one hand, and an independent committee of the board of
directors on the other, as of November 1, 1993, the date the Employment
Agreements were executed.

EQUITY-BASED INCENTIVE COMPENSATION

Non-Qualified Stock Option Plan. On November 30, 1990, the Board of
Directors approved the Non-Qualified Plan, which provides an opportunity for
selected employees, officers and directors of Lincare to purchase Lincare Common
Stock. Lincare is authorized to issue an aggregate 2,973,768 shares over the ten
(10)-year term of the Non-Qualified Plan. The terms and conditions of each
option granted under the Non-

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<PAGE> 91

Qualified Plan are specified by the Plan Administrator, in its sole discretion,
and are to be set forth in a written option agreement between Lincare and the
participant in such form as the Plan Administrator shall approve. The terms and
conditions of each option are such (and each option agreement is to expressly so
state) that each option issued thereunder shall not constitute nor be treated as
an "incentive stock option" as defined in Section 422A of the Internal Revenue
Code of 1986 but will be a "non-qualified stock option" for federal, state and
local income tax purposes.

The Plan Administrator is the Stock Plan Committee of the Board of
Directors. The Stock Plan Committee determines (i) which participants shall be
granted an option to purchase Lincare Common Stock under the Non-Qualified Plan;
(ii) the number of shares for which a participant will be granted such an
option; (iii) the amount to be paid by a participant and the exercise price of
the granted option; (iv) the time or times and the conditions subject to which
options may be made and become exercisable; (v) the form of consideration that
may be used to pay for shares issued upon exercise of an option; (vi) the
circumstances under which shares of Lincare Common Stock acquired upon exercise
of any option may be subject to repurchase by Lincare; and (vii) a vesting
provision for any option relating to the time (or the circumstance) when the
option may be exercised by a participant.

The Plan Administrator is authorized to grant options under the
Non-Qualified Plan which have exercise prices below the fair market value of the
Lincare Common Stock on the grant date. The Plan Administrator also has the
authority under the Non-Qualified Plan to grant options which have a term in
excess of ten (10) years.

1991 Option Plan. As of December 31, 1991, the Board of Directors approved
the 1991 Option Plan. The 1991 Option Plan provides an opportunity for
employees, officers and directors of Lincare and its subsidiaries to purchase
Lincare Common Stock. The 1991 Option Plan provides for the granting of
"non-qualified stock options" and "incentive stock options" to acquire Lincare
Common Stock and/or the granting of rights (an "Award") to purchase Lincare
Common Stock on a "restricted stock" basis. Lincare is authorized to issue an
aggregate 1,600,000 shares of Lincare Common Stock over the ten (10)-year term
of the 1991 Option Plan. The terms and conditions of individual option
agreements may vary, subject to the following guidelines: (i) the option
exercise price of incentive stock options may be no less than market value on
the date of grant; the option price on non-qualified options may be less than
market value on the date of grant; (ii) the term of all incentive stock options
may not exceed ten years from the date of grant; the term of all non-qualified
options may exceed ten years; and (iii) no options may be granted after December
31, 2001.

The 1991 Option Plan is administered by the Stock Plan Committee. The Stock
Plan Committee determines (i) which employees, officers and directors of Lincare
and its subsidiaries shall be granted an option or Award under the 1991 Option
Plan; (ii) the number of shares for which an employee will be granted such an
option or Award; (iii) the amount to be paid by the grantee upon exercise of an
option or Award; (iv) the time or times and the conditions subject to which
options or Awards may be made and become exercisable; and (v) the form of
consideration that may be used to pay for shares issued upon exercise of such
option or Award.

1994 Option Plan. As of May 31, 1994, the Board of Directors approved the
1994 Option Plan. The 1994 Option Plan provides an opportunity for employees,
officers and directors of Lincare and its subsidiaries to purchase Lincare
Common Stock. The 1994 Option Plan provides for the granting of "non-qualified
stock options" and "incentive stock options" to acquire Lincare Common Stock
and/or the granting of rights (an "Award") to purchase Lincare Common Stock on a
"restricted stock" basis. Lincare is authorized to issue an aggregate 500,000
shares of Lincare Common Stock over the ten (10)-year term of the 1994 Option
Plan. The terms and conditions of individual option agreements may vary, subject
to the following guidelines: (i) the option exercise price of incentive stock
options may be no less than market value on the date of grant; the option price
on non-qualified options may be less than market value on the date of grant;
(ii) the term of all incentive stock options may not exceed ten years from the
date of grant; the term of all non-qualified options may exceed ten years; and
(iii) no options may be granted after May 31, 2004.

The 1994 Option Plan is administered by the Stock Plan Committee. The Stock
Plan Committee determines (i) which employees, officers and directors of Lincare
and its subsidiaries shall be granted an

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<PAGE> 92

option or Award under the 1994 Option Plan; (ii) the number of shares for which
an employee will be granted such an option or Award; (iii) the amount to be paid
by the grantee upon exercise of an option or Award; (iv) the time or times and
the conditions subject to which options or Awards may be made and become
exercisable; and (v) the form of consideration that may be used to pay for
shares issued upon exercise of such option or Award.

The options outstanding under the Lincare Stock Option Plans are
non-assignable except upon death and generally become exercisable in
installments over the optionee's period of continued service with Lincare. All
options granted to date under the three plans have an exercise price equal to
the fair market value of the Lincare Common Stock on the grant date and have a
maximum term of approximately ten (10) years. As previously indicated, a number
of outstanding options under the Lincare Stock Option Plans will accelerate and
become fully exercisable for all the option shares at the Effective Time of the
Merger. The three plans will be assumed by Coram in the Merger and will
thereafter be administered by the Compensation Committee of the Coram Board of
Directors.

The focus of the Stock Plan Committee in administering the equity
incentives awarded to executive officers is on providing incentive to Lincare's
senior management team to remain with Lincare and to continue to contribute
significantly to its performance record.

In the opinion of the Stock Plan Committee, stock option grants are by
definition performance-based, in that the value of the option only increases
through an increase in Lincare's stock price. Thus, to the extent of their
option holdings, the interests of the executive officers are aligned with the
interests of the stockholders in maximizing Lincare's stock price. This approach
is evidenced by the fact that to date, (i) all grants to executive officers
under Lincare's stock plans have been subject to some delay in exercisability
based on performance or continued employment, and (ii) all grants under
Lincare's stock plans have been made at an exercise price equal to the fair
market value of Lincare's stock as of the date of grant. Therefore, without an
increase in stock price, the options are of no value. While Lincare's stock
plans reserve the flexibility to issue options without a delay in exercisability
or at an exercise price less than fair market value, the Stock Plan Committee's
general philosophy is that option grants should be made with an exercise price
equal to fair market value, with some element of forfeitability.

The Stock Plan Committee also believes that it is in the best interest of
the stockholders for the executive officers to have a significant equity
incentive to maximize the value of Lincare's stock. The amount of this
incentive, in the Committee's view, should be determined based on long-term
considerations, to balance the short-term formula-based mechanism contained in
Lincare's cash compensation system. Therefore, by design, the award of option
grants is based on the Stock Plan Committee's perception of the overall value of
the executive officer to Lincare's long-term growth potential.

GRANTS TO EXECUTIVE OFFICERS

No options were granted to Lincare's executive officers in fiscal 1994. In
fiscal 1995, James T. Kelly, Howard R. Deutsch and James M. Emanuel received
options to acquire 100,000, 73,000 and 51,000 shares of Lincare Common Stock,
respectively.

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<PAGE> 93

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT OF LINCARE

The following table sets forth information as of March 31, 1995 with
respect to the beneficial ownership of Lincare's Common Stock by each person who
is known by Lincare to beneficially own more than 5% of the Common Stock and by
each director and by all directors and executive officers as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENT
- --------------------------------------------------------------------- ------------------- -------
<S> <C> <C>
Putnam Investments, Inc.(1).......................................... 3,428,514 12.5
One Post Office Square
Boston, Massachusetts 02109
FMR Corporation(2)................................................... 3,149,828 11.5
82 Devonshire Street
Boston, Massachusetts 02109
James T. Kelly(3).................................................... 652,000 2.3
Howard R. Deutsch(4)................................................. 691,394 2.5
James M. Emanuel(5).................................................. 377,676 1.4
Andrew M. Paul(6).................................................... 43,853 .2
Chester B. Black(7).................................................. 6,000 --
Frank T. Cary(7)..................................................... 30,032 .1
Thomas O. Pyle....................................................... -- --
All Executive Officers and Directors
as a Group (seven persons)........................................... 1,800,955 6.3
</TABLE>

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

(1) The shares reported are held by two subsidiaries of Putnam Investments,
Inc., both of which subsidiaries are registered investment advisers. All
information relating to shares held by Putnam Investments, Inc. and its
subsidiaries is derived from a Schedule 13G filed with the Securities and
Exchange Commission and received by Lincare on February 7, 1995.

(2) All information relating to shares held by FMR Corporation is derived from a
Schedule 13G filed with the Securities and Exchange Commission and received
by Lincare on February 13, 1995.

(3) Includes options to purchase 506,000 shares of Common Stock that are
currently exercisable. Does not include options to purchase 100,000 shares
of Common Stock that will become exercisable upon consummation of the
Merger. See "The Merger--Interests of Certain Persons in the Merger."

(4) Includes options to purchase 294,000 shares of Common Stock that are
currently exercisable. Does not include options to purchase 73,000 shares
of Common Stock that will become exercisable upon consummation of the
Merger. See "The Merger--Interests of Certain Persons in the Merger."

(5) Includes options to purchase 150,000 shares of Common Stock that are
currently exercisable. Does not include options to purchase 51,000 shares
of Common Stock that will become exercisable upon consummation of the
Merger. See "The Merger--Interests of Certain Persons in the Merger."

(6) Includes options to purchase 18,000 shares of Common Stock that are
currently exercisable.

(7) Includes options to purchase 6,000 shares of Common Stock that are currently
exercisable.

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<PAGE> 94

COMPARATIVE RIGHTS OF STOCKHOLDERS

GENERAL

As a result of the Merger, holders of Lincare Common Stock will become
stockholders of Coram and the rights of all such former Lincare stockholders
will thereafter be governed by the Coram Certificate, the Coram Bylaws and the
DGCL. The rights of the holders of Lincare Common Stock are presently governed
by the Restated Certificate of Incorporation of Lincare (the "Lincare
Certificate"), the Bylaws of Lincare (the "Lincare Bylaws") and the DGCL. The
following summary, which does not purport to be a complete statement of the
general differences among the rights of the stockholders of Coram and Lincare,
sets forth certain differences between the Coram Certificate and the Lincare
Certificate and between the Coram Bylaws and the Lincare Bylaws. This summary is
qualified in its entirety by reference to the full text of each of such
documents and the DGCL. For information as to how such documents may be
obtained, see "Available Information."

NUMBER AND ELECTION OF DIRECTORS

The Coram Bylaws provide that Coram's Board of Directors will initially
consist of seven members. Thereafter, the number of directors will be fixed or
altered exclusively by resolutions adopted by the Coram's Board of Directors.
Each director will hold office until his or her successor is elected and
qualified or until his or her earlier resignation.

Under the DGCL, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may only be removed by
the stockholders for cause. The Coram Bylaws provide that, at a special meeting
of stockholders called for that purpose, the Coram Board, or any individual
director, may be removed from office only for cause or by the affirmative vote
of the holders of 80% or more of the outstanding shares of capital stock
entitled to vote at a special meeting called for that purpose.

The Lincare Board currently consists of seven directors. The Lincare Bylaws
provide that the number of directors will be fixed from time to time by the
Lincare Board, but shall not be less than five nor more than eleven. Directors
are elected at the annual meeting and hold office until the next meeting and
until their successors are elected and qualify or until they sooner die, resign
or are removed. Any vacancy in the Lincare Board may be filled by the action of
the holders of a majority of the issued and outstanding stock (i) present in
person or by proxy at a meeting of holders of such stock and entitled to vote
for the election of directors or (ii) by written consent of such holders.

In addition, the Lincare Bylaws provide that, with certain exceptions, any
director or directors may be removed either for or without cause at any time by
the action of the holders of a majority of the issued and outstanding stock (i)
present in person or by proxy at a meeting of holders of such stock and entitled
to vote for the election of directors or (ii) by written consent of such
holders.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT

The Coram Certificate provides that stockholder action can be taken only at
an annual or special meeting of stockholders and prohibits stockholder action by
written consent in lieu of a meeting, except as permitted by resolutions of
Coram's Board of Directors fixing the powers and preferences of any class or
series of shares as to which Coram's Board of Directors has been expressly
vested with authority to fix the powers and preferences.

The Lincare Bylaws provide that, unless otherwise provided in the Lincare
Certificate, any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing setting forth the action so
taken will be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.

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The provisions of the Coram Certificate prohibiting stockholder action by
written consent may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting of stockholders. These provisions would
also prevent the holders of a majority of the voting power of Coram Common Stock
from unilaterally using the written consent procedure to take stockholder
action.

COMMON STOCK

The terms of the Coram Common Stock are substantially identical to those of
the Lincare Common Stock.

PREFERRED STOCK

Pursuant to the Coram Certificate, Coram's Board of Directors is
authorized, subject to the limitations prescribed by law, to provide for the
issuance of shares of Preferred Stock in one or more series, to establish the
number of shares of each such series and to fix the designation, powers,
preferences and rights of the shares of each such series and any qualifications,
limitations or restrictions thereof. See "Description of Coram Capital
Stock--Preferred Stock." The Lincare Certificate contains substantially similar
provisions relating to Lincare Preferred Stock.

AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS

Each of the Coram Certificate and the Lincare Certificate is silent as to
amendment. Section 242 of the DGCL provides that, except for certain
circumstances, amendments to a corporation's certificate of incorporation are to
be approved at the annual or a special meeting of stockholders by a majority of
the outstanding stock entitled to vote.

The Coram Certificate and the Coram Bylaws provide that the Coram Bylaws
may ordinarily be amended or repealed, or new Bylaws may ordinarily be adopted,
(i) by the affirmative vote of the holders of at least a majority of Coram
Common Stock, (ii) by unanimous written consent of Coram's Board of Directors,
or (iii) by the affirmative vote of the majority of Coram's Board of Directors
at any regular or special meeting. Any Bylaws adopted or amended by the
stockholders may be amended or repealed by the Board of Directors or the
stockholders. However, the Coram Certificate provides that the affirmative vote
of the holders of at least 80% of Coram Common Stock is required to alter, amend
or repeal Bylaws relating to quorum and voting at stockholders' meetings, the
number and term of office of directors, filling vacancies of directors, removal
and resignation of directors, and the rights of directors with respect to
indemnification.

The Lincare Certificate and the Lincare Bylaws provide that the Lincare
Bylaws may be altered, amended or repealed (i) by the Board of Directors at any
regular or special meeting, except that any alteration of the provisions
relating to the number of directors requires the written consent of all
directors, or (ii) by the affirmative vote or written consent of the holders of
a majority of the issued and outstanding stock.

BUSINESS COMBINATIONS

Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation will not engage in any business combination
with an "interested stockholder" for a three-year period following the date that
such stockholder becomes an interested stockholder unless (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares held by
directors who are also officers and shares subject to employee stock purchase
plans in which employee participants do not have the right to determine
confidentially whether plan shares will be tendered in a tender or exchange
offer) or (iii) on or subsequent to such date, the business combination is
approved by the board of directors of the corporation and by the affirmative
vote at an annual or special meeting, and not by written consent, of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 203 of the DGCL, an interested
stockholder is defined to include (a) any

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person that is the owner of 15% or more of the outstanding voting stock of the
corporation or is an affiliate or associate of the corporation and was the owner
of 15% or more of the outstanding voting stock of the corporation, at any time
within three years immediately prior to the relevant date, and (b) the
affiliates and associates of any such person.

Under certain circumstances, Section 203 of the DGCL may make it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the corporation's certificate of incorporation or stockholders may
elect to exclude a corporation from the restrictions imposed thereunder. The
Coram Certificate does not exclude Coram from the restrictions imposed under
Section 203 of the DGCL. Similarly, the Lincare Certificate does not exclude
Lincare from the restrictions imposed under Section 203. It is anticipated that
the provisions of Section 203 of the DGCL may encourage companies interested in
acquiring Coram to negotiate in advance with Coram's Board of Directors, since
the stockholder approval requirement would be avoided if a majority of the
directors then in office approve either the business combination or the
transaction which results in the stockholder becoming an interested stockholder.

LIMITATION OF LIABILITY OF DIRECTORS

The DGCL permits a corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director or
officer to the corporation or its stockholders for damages for breach of the
director's fiduciary duty of care, subject to certain limitations. Each of the
Coram Certificate and the Lincare Certificate includes such a provision to the
maximum extent permitted by law.

While the Coram Certificate and the Lincare Certificate provide directors
with protection from awards for monetary damages for breaches of their duty of
care, they do not eliminate such duty. Accordingly, these provisions will have
no effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care. The
provisions described above apply to an officer of the corporation only if he or
she is a director of the corporation and is acting in his or her capacity as
director and do not apply to officers of the corporation who are not directors.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The DGCL permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The DGCL provides that a corporation may advance expenses
of defense (upon receipt of a written undertaking to reimburse the corporation
if indemnification is not appropriate) and must reimburse a successful defendant
for expenses, including attorneys' fees, actually and reasonably incurred and
permits a corporation to purchase and maintain liability insurance for its
directors and officers. The DGCL provides that indemnification may not be made
for any claim, issue or matter as to which a person has been adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, unless and only to the extent a court determines that
the person is entitled to indemnity for such expenses as the court deems proper.

Coram's Certificate limits Coram's directors' liability for monetary
damages to Coram and its stockholders for breaches of fiduciary duty to the
fullest extent permitted under the DGCL. In addition, Coram's Certificate
provides that Coram shall, to the fullest extent permitted by law, indemnify its
directors and officers against any liabilities, losses or related expenses which
they may incur by reason of serving or having served as directors and officers
of Coram.

The Coram Bylaws provide that each person who is involved in any actual or
threatened action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he or she is or was a director,
officer, employee or agent of Coram, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise including service
with respect to an employee benefit plan, will be indemnified by the corporation
to the full extent permitted by the DGCL, as the same exists or may hereafter be
amended against all costs,

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charges, expenses, liabilities and losses reasonably incurred or suffered by
such person in connection therewith, and such indemnification will continue as
to a person who has ceased to be a director, officer, employee or agent and will
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that Coram will indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by Coram's Board of Directors. The right to
indemnification will be a contract right and will include the right to be paid
by Coram the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that if DGCL so requires, the payment
of such expenses incurred by a director or officer in advance of the final
disposition of a proceeding will be made only upon delivery to Coram of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it will ultimately be determined that such director or officer is
not entitled to be indemnified. Coram may provide indemnification to employees
and agents of Coram with the same scope and effect as the foregoing
indemnification of directors and officers.

The indemnification rights conferred by Coram are not exclusive of any
other right to which a person seeking indemnification may be entitled under any
laws, bylaw, agreement, vote of stockholders or disinterested directors or
otherwise. Coram may maintain insurance on behalf of its directors, officers,
employees and agents. Additionally, the Merger Agreement requires such insurance
to be maintained by Coram covering present and former officers, directors,
employees, trustees and agents of Lincare for a period of at least six years
from the Effective Date, subject to certain limitations. See "The Merger
Agreement--Indemnification and Insurance."

The Lincare Bylaws provide for indemnification of directors and officers on
terms substantially similar to the Coram Bylaws. The Lincare Bylaws do not
provide for indemnification for employees and agents of Lincare.

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BUSINESS OF CORAM

GENERAL

As a result of the Caremark Transaction, Coram is the largest provider of
alternate site infusion therapy services in the United States, based on
revenues, number of branches and patients served. Coram operates 220 branch
facilities (150 after giving effect to anticipated closings under the Coram
Consolidation Plan and the Caremark Consolidation Plan) located throughout the
United States. Coram seeks to be the industry's low cost provider of alternate
site health care services by maximizing economies of scale. Through economies of
scale, combined with a broadening product line and a geographically diverse
network of field locations, Coram intends to provide "one-stop shopping" to
managed care organizations, the fastest growing segment of the health care payor
market. By combining the HCMS business with its existing operations, Coram
believes that it is has significantly improved its ability to market its
services to managed care organizations. Coram also believes that the Caremark
Business has the industry's leading management information systems. Coram
believes that access to these systems will accelerate its development of patient
costs and outcomes tracking systems, which will allow Coram to offer managed
care payors increased services, including the use of risk sharing and capitated
contracts.

HISTORY

James M. Sweeney, Coram's Chairman and Chief Executive Officer, is widely
regarded as having pioneered the development of the home infusion industry when
he founded Home Health Care of America, Inc. ("HHC") in 1979, which later
changed its name to Caremark, to provide home infusion services to patients who
would otherwise have had to remain in hospitals. While the concept of home
health care initially received little support, its growth accelerated in the
1980s spawning several national companies, including Caremark, T2, CCA and
National Medical Care. Caremark was acquired by Baxter International Inc. in
1987, and later spun off as a part of Caremark International in 1992. The
Caremark Business acquired in the Caremark Transaction is the successor to HHC.

Coram and its predecessors, T2, Curaflex, HealthInfusion and Medisys, have
been engaged in the business of providing alternate site health care treatment
services since 1984. Coram was formed on July 8, 1994 pursuant to the Four-Way
Merger by and among T2, Curaflex, HealthInfusion and Medisys, each of which were
publicly-held national and/or regional providers of home infusion therapy and
related services, in order to become a national provider of home infusion and
other alternate site health care services. On September 12, 1994, Coram further
broadened its geographic coverage by acquiring HMSS, a leading regional provider
of home infusion therapies based in Houston, Texas. Since closing the HMSS
transaction, Coram has implemented and is in the process of completing a branch
and corporate office consolidation of its five existing companies which is
expected to result in significant annual cost savings and operating
efficiencies.

INDUSTRY OVERVIEW

The alternate site health care industry, which consists in large part of
home nursing, intravenous infusion and respiratory therapy services, durable
medical equipment, physical therapy services and pharmaceutical therapies
delivered primarily in the home, physicians' offices and outpatient centers, has
grown dramatically over the past decade. According to a report published by
HCFA, total expenditures for alternate site health care increased from
approximately $3.8 billion in 1985 to approximately $22 billion in 1994. The
industry's rapid growth has been primarily due to the cost effectiveness of
alternate site treatment as compared to hospital treatment, continued advances
in medical technology which have facilitated the provision of sophisticated care
in non-traditional settings and increased acceptance of alternate site care by
the medical community, patients and payors. Also contributing to the growth of
the industry is the increase in the over-65 population, which has a higher
incidence of illness and disability.

The alternate site intravenous infusion industry, the principal market
segment in which Coram currently participates, has historically been the
fastest-growing segment of the alternate site health care market, with total
revenues of approximately $4.4 billion in 1994. During 1993 and early 1994, the
alternate site infusion industry experienced severe reductions in the pricing of
its products and services, primarily due to the efforts of

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third party and governmental payors to monitor and reduce the cost of services
provided by alternate site infusion companies. Accordingly, alternate site
infusion companies, including Coram, have reported decreased operating margins
and declining growth rates as a result of such cost containment efforts.
Although Coram believes that such cost containment efforts will continue, Coram
believes that short-term pricing pressures in the alternate site infusion
industry have stabilized.

Coram believes that the following trends, among others, will continue to
have a significant impact on the alternate site health care industry: (i)
increasing utilization of alternate site health care services, (ii) increasing
influence of managed care organizations, (iii) growing cost containment
pressures and (iv) accelerating consolidation and merger trends.

Since the early 1980's, providing acute and chronic care for serious
illnesses outside the hospital has been recognized as a critical component of
health care cost containment because the delivery of certain therapies in an
alternate site setting is considerably more effective than those associated with
inpatient hospital stays. Coram believes that the alternate site health care
industry will continue to benefit from cost containment measures which
governmental and private payors have adopted to encourage reduced hospital
admissions and reduced lengths of stays in hospitals. Such measures should
continue to lead to an increase in the use of alternate site health care due to
its significantly lower cost when compared to similar care provided in
traditional settings. In addition to cost savings, the alternate site health
care industry should continue to benefit from advances in medical technology.
Significant progress has been made to simplify, miniaturize, computerize and
create more portable medical care equipment and disposable devices, allowing for
the maintenance of high medical standards in alternate site settings. As a
result, many medical conditions can currently be treated in alternate site
settings, including pulmonary diseases, neurological conditions, infectious
diseases, digestive disorders, AIDS-related symptoms, various forms of cancer
and conditions related to the primary diseases such as pain and nausea. Growth
in alternate site health care has also been facilitated by increased acceptance
on the part of physicians, payors and patients. The American Medical Association
Council on Scientific Affairs and Medical Education has recommended that
training in the principles and practice of home health care be incorporated into
the undergraduate, graduate and continuing education of physicians. Managed care
organizations and other third-party payors are also encouraging alternate site
care as a cost-effective alternative to extended hospital stays. Coram believes
that as alternate site care becomes more and more prevalent, patients will
generally become more receptive to it as well.

In response to rapidly rising health care costs, health care payors are
increasingly utilizing managed care organizations such as HMOs and PPOs as
cost-effective alternatives to traditional fee-for-service health insurance
plans. In many major markets and larger cities where managed care organizations
have focused their cost containment efforts, their market share has grown
rapidly at the expense of traditional indemnity insurers. The annual growth in
health care patients covered by managed care is estimated to be approximately 7%
to 10% per year, and managed care payors currently account for approximately 32%
to 37% of all alternate site health care patients. As managed care organizations
have grown in size and power, they have increased their ability to influence or
dictate patient referrals by physicians to alternate site health care providers.
Coram believes that the terms upon which alternate site health care providers
deliver their services will increasingly be determined by contracts with managed
care organizations, and that revenues from the patients of managed care
organizations will continue to increase as a percentage of Coram's overall
revenues.

In response to escalating health care costs, government and private payors
have undertaken substantial revisions in their payment methodologies and have
increased significantly the degree to which they monitor the utilization of all
health care services including alternate site health care services. Discounted
pricing structures on infusion therapies have increasingly been imposed on
alternate site health care providers by third party payors. Coram believes that
arrangements with HMOs and PPOs, pursuant to which alternate site health care
providers contract to provide services on a discounted fixed-fee basis or a
capitated basis based on the number of members of the HMO or PPO, regardless of
the actual costs incurred and services provided, will become increasingly
popular. Coram believes that cost containment pressures on the health care
industry will continue to increase as managed care organizations become more
active in monitoring, reviewing and managing care programs and comprise a
greater share of the industry's revenues relative to traditional fee-for-service
indemnity insurers. However, Coram believes that increasing patient volumes
attributable to the

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relative cost-effectiveness of alternate site health care will offset, to some
extent, pressures on prices resulting from the increase in managed care
organizations as a percentage of payor mix. Coram also believes that managed
care organizations will begin to focus more strongly on reducing total health
care systems costs as opposed to focusing solely on the prices providers charge
for individual therapies.

The alternate site health care industry is highly fragmented, with few
providers offering a broad range of services on a national basis. Coram believes
that the cost containment pressures and the increasing influence of managed care
organizations will result in increased consolidation among alternate site health
care providers. Smaller providers will typically lack the regulatory expertise,
operating efficiencies and economies of scale to operate in a low-cost
environment and contract with large managed care organizations. Larger providers
will increasingly be motivated to obtain significant operating leverage through
expansion of economies of scale, market share and geographic coverage through
acquisitions. In addition, trends toward a more consolidated industry have grown
since increased economies of scale have come to be viewed as a necessary
response to increased cost containment pressure as the alternate site health
care industry has evolved from a revenue to a revenue/cost basis of competition.

BUSINESS STRATEGY

To achieve its objective of becoming the leading provider of alternative
site health care services in the United States, management has implemented a
strategic plan which has four key elements:

- NATIONAL DELIVERY SYSTEM WITH LOCAL MARKET FOCUS. As a result of the
Caremark Transaction, Coram has the broadest nationwide presence of any
alternate site infusion therapy services provider, with centers covering
geographic locations in which over 90% of the population of the United
States resides. Coram believes that managed care organizations and other
third party payors seeking to ease the administrative burden associated
with managing multiple provider relationships will increasingly turn to
those alternate site health care providers who are able to meet their
needs for multiple therapies and types of services on a national level.
In operating its national network, Coram intends to emphasize a local
market focus in order to manage the varying mix of payor groups and
customer needs in each of the markets it serves. Coram believes that this
strategy will make Coram the provider of choice for local, regional and
national payors.

- HIGHEST QUALITY, LOWEST COST CARE. Coram is positioning itself to offer
patients, physicians and payors the highest quality, lowest cost national
and local delivery system for home infusion and other alternate site
health care services. Through expanded use of management and clinical
information systems, Coram will seek to improve clinical and economic
outcomes for a variety of patient groups, with the intention of reducing
overall health care systems costs to payors and providers. In addition,
Coram believes that economies of scale, procurement savings and operating
efficiencies resulting from the Coram Consolidation Plan and the Caremark
Consolidation Plan will enable it to offer the lowest cost delivery
system in the industry. In particular, management believes that utilizing
the most efficient operating practices from each of the predecessor
companies will enable Coram to take advantage of the increasingly cost
conscious managed care environment.

- "ONE STOP SHOPPING" FOR ALTERNATE SITE HEALTH CARE PRODUCTS AND
SERVICES. Coram believes that alternate site providers who are able to
offer managed care organizations and other third party payors a single
source from which to obtain a broad range of products and services will
have a competitive advantage in attracting health care payors seeking to
improve the overall management of health care. In order to become a
single source provider, Coram is pursuing a horizontal integration
strategy primarily through acquisitions, and, to the extent necessary, by
seeking to subcontract the services that it currently does not provide
directly to specialized providers. This strategy positions Coram as a
"one-stop shop" for alternate site services and products, including
infusion therapy, respiratory therapy, home nursing, medical equipment
supply, and physical therapy services. Coram's scale, broad product line,
high quality and national presence should enable it to successfully
market its products and services to managed care organizations, the
fastest growing segment of the payor market.

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- INTEGRATED MANAGEMENT OF DISEASE STATES. Coram has identified
significant opportunities to eliminate unnecessary costs related to the
treatment of certain high cost diseases such as cancer and AIDS/HIV. As
part of its longer term strategy, Coram plans to offer disease state
management to regional and national payors on a risk sharing and
capitated basis. Coram intends to develop its own internal capabilities
as well as developing the necessary physician and hospital networks,
clinical protocols, counseling and hospice services required to provide
comprehensive care to particular disease categories. Coram believes that
this vertical integration along disease specific categories will be
attractive to payors and will lead them to "carve out" and assign the
care of such diseases to those providers most capable of providing such
care.

CORAM CONSOLIDATION PLAN

Subsequent to the Four-Way Merger, Coram developed and began to implement
the Coram Consolidation Plan, which it publicly announced on September 7, 1994.
The objective of the Coram Consolidation Plan has to significantly reduce
Coram's cost structure through the elimination of duplicative corporate and
administrative expenses and the closure of overlapping branch facilities. Coram
expects to realize additional cost savings through the renegotiation of its
procurement contracts. Coram identified 101 branches, representing 42% of its
240 branches, to be closed, with a targeted headcount reduction of approximately
20%. As of March 31, 1995, Coram had closed 115 branches, terminated
approximately 656 employees and renegotiated approximately ten vendor contracts.
Coram expects to complete the Coram Consolidation Plan during the third quarter
of 1995, resulting in estimated annualized cost savings of approximately $70
million; however, no assurance can be given as to the aggregate cost savings to
be achieved by Coram from the Coram Consolidation Plan or the timing thereof.

Beyond consolidation, Coram views continued cost reduction and quality
improvement as key strategic imperatives. Coram is developing a broad set of low
cost provider initiatives whose main components are defining and disseminating
best demonstrated operating practices from "benchmark" branches to those
branches in which performance can be upgraded and reengineering the basic
processes that operate within branches in order to create improved performance.
These techniques are well developed outside of the health care industry and
Coram believes that they will be applicable to the alternate site health care
industry. Coram believes that savings from these programs will begin to be
realized in late 1995; such savings are not included in the above estimates.

THE CAREMARK TRANSACTION

Effective as of April 1, 1995 Coram consummated the Caremark Transaction by
purchasing substantially all of the assets of Caremark's alternate site infusion
business, the HCMS business and the Women's Health Business for $309 million
consisting of (i) $209 million in cash and (ii) $100 million aggregate principal
amount of Junior Subordinated PIK Notes.

The purchase price may be increased or decreased by up to $15 million, plus
an additional increase or decrease of up to $3 million depending upon the amount
of certain employee health plan liabilities, based on the net assets of the
Caremark Business on April 1, 1995. Up to $5 million of such net asset
adjustment is payable by Caremark or Coram, as the case may be, in cash. Any
such purchase price increase or decrease in excess of $5 million is payable by
Caremark or Coram, as the case may be, by surrendering or issuing, respectively,
additional Junior Convertible Subordinated PIK Notes.

The Caremark Transaction was structured as an asset purchase pursuant to
which all of the assets of Caremark and Caremark International used in or
related to the Caremark Business (collectively, the "Acquired Assets") and only
the liabilities of the Caremark Business (i) adequately reflected or fully
reserved against in a net assets statement of the Caremark Business dated as of
December 31, 1994, (ii) which are immaterial and incurred in the ordinary course
of business, (iii) which arise after the closing of the Caremark Transaction
(the "Caremark Closing") under contracts assumed by Coram at the Caremark
Closing and (iv) certain specified employee liabilities (collectively, the
"Assumed Liabilities") were assumed by Coram at the Caremark Closing. Other
assets (the "Excluded Assets") and all remaining liabilities of Caremark and
Caremark International (the "Excluded Liabilities"), including, without
limitation, liabilities associated with

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the pending investigation of Caremark by the OIG, remain the responsibility of
Caremark and Caremark International.

The Purchase Agreement provides for indemnification by each of the parties
thereto of the other within certain limits. Under the terms of the Purchase
Agreement, Caremark and Caremark International, jointly and severally, will
indemnify Coram and its affiliates against any liabilities arising out of (i)
the breach by Caremark of any of its covenants under the Purchase Agreement,
(ii) the failure of any representation or warranty made by Caremark in the
Purchase Agreement to be true in all respects as of the date of the Purchase
Agreement and the Caremark Closing, (iii) the use, operation or ownership of any
of the Excluded Assets, (iv) any Excluded Liability and (v) certain other
liabilities, including the failure of Caremark to obtain certain consents and
approvals necessary to transfer the assets of the Caremark Business; provided,
however, that with respect to breaches by Caremark of any representation or
warranty the aggregate of all such liabilities and damages exceeds $10 million.
With respect to breaches by it of any representation or warranty, the total
amount Caremark may be required to pay is limited to $130 million and the
representations and warranties, subject to certain exceptions, will expire on
the second anniversary of the Caremark Closing. With respect to all other claims
for indemnification (including any claims related to the pending investigation
of Caremark by the OIG), Caremark must indemnify Coram without any minimum
threshold and without limitation as to time or amount. Pursuant to the Purchase
Agreement, Coram will indemnify Caremark and Caremark International against any
liabilities arising out of the (i) material breach by Coram of any of its
covenants under the Purchase Agreement, (ii) the failure of any representation
or warranty made by Coram in the Purchase Agreement to be true in all respects
as of the date of the Purchase Agreement and the Caremark Closing, (iii) the
use, operation or ownership of any of the Acquired Assets after the Caremark
Closing or (iv) any Assumed Liabilities.

Concurrently with the Caremark Transaction, Coram contributed the Caremark
Business to a subsidiary of Coram, Inc., a newly formed wholly-owned subsidiary
("CI") and Coram contributed to CI all of the outstanding capital stock of its
direct or indirect subsidiaries. As a result of these transactions, all of the
operations conducted by Coram immediately prior to the Caremark Closing and the
Caremark Business are conducted through subsidiaries of CI, and the only asset
of Coram is all of the capital stock of CI.

CAREMARK CONSOLIDATION PLAN

Coram expects to realize substantial cost savings from the Caremark
Consolidation Plan. Coram has tentatively identified 66 of 77 total Caremark
Business treatment centers which have significant geographical overlap with
Coram's existing facilities. The Caremark Consolidation Plan includes the
elimination of duplicative overhead expenses, the closure of overlapping branch
facilities, systems integration and the renegotiation of procurement contracts.
In conjunction with the Caremark Consolidation Plan, it is currently estimated
that a charge to earnings will be incurred to reflect the estimated costs of
integrating the operations of Caremark into Coram. Total annualized savings
expected to be realized from the Caremark Consolidation Plan are estimated to be
in excess of $45 million based on current information available to management;
however, no assurance can be given regarding the aggregate cost savings to be
achieved by Coram from the Caremark Consolidation Plan.

DELIVERY OF ALTERNATE SITE HEALTH CARE SERVICES

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

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Branch Facilities. The delivery of infusion services is coordinated
through regional infusion centers or "branches," whose functions include (i)
patient intake (usually physician-based), (ii) a pharmacy/mixing facility
staffed by pharmacists and pharmacy technicians, (iii) materials management,
including drug and supply inventory and delivery, (iv) billings, collections and
benefit verification, (v) sales to local referral services, including doctors,
hospitals and payors, and (vi) general management. Coram's branch facilities
typically are leased and consist of 2,000 to 20,000 square feet of office space
in suburban office parks in close proximity to major medical facilities. A
typical branch has a fully equipped pharmacy, offices for administrative
personnel and a small storage warehouse. Facilities are staffed with three to
fifteen full-time employees, and a typical branch includes a manager, a licensed
pharmacist, registered nurses and sales and administrative personnel. Each
facility serves the metropolitan area in which it is located, generally within a
two-hour driving radius, as well as outlying locations where it can arrange
appropriate nursing services. Satellite facilities are also used. These smaller
centers contain limited supplies and pharmacy operations, and are used as
dispatch centers serving a specified geographical area. Coram currently has 40
full centers and 100 satellite centers. The Caremark Business has 78 full
centers, with no true satellite facilities.

In-Home Patient Care. Before accepting a patient for home infusion
treatment, the staff of the local branch works closely with the patient's
physician or clinicians and hospital personnel in order to assess the patient's
suitability for home care. This assessment process includes an analysis of the
patient's physical condition and of social factors such as the stability of the
patient's home life and the availability of family members or others who can
assist in the administration of the patient's therapy, if necessary. It also
includes a review of compliance with the requirements of the patient's insurance
carrier.

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

Prior to the patient receiving treatment services from Coram, the treating
physician devises the patient's plan of care and transmits it to the local
branch's clinical support team, including its nurses and pharmacists. This team
will work with the treating physician to administer the plan of care and monitor
the patient's progress. Throughout the patient's therapy, the local branch's
clinical support team will regularly provide the treating physician with reports
on the patient's condition, allowing the treating physician to play an active
role in the patient's treatment. The treating physician always remains
responsible for the patient's care, including changing the patient's plan of
care to meet the patient's needs and handling patient emergencies.

Upon the patient's arrival home, a nurse from the local branch typically
oversees the administration of the patient's first home infusion treatment.
Thereafter, the frequency of nursing visits depends upon the particular therapy
of the patient involved. During these subsequent visits, the nurse may check and
adjust the patient's infusion site, intravenous lines and related equipment,
obtain blood samples, change the pump settings and/or drug administration after
consulting with the physician and assess the patient's condition and compliance
with the plan of care. The patient's nutrition supplies and prescription drugs
are typically delivered on a weekly basis, depending on the therapy and the
particular drugs being used. Nurses will visit the patient as needed to monitor
the therapy, draw blood tests, check wounds and catheter insertion points, and
check the patient's overall medical condition.

The treating physician remains actively involved in monitoring his or her
patient's treatment by devising the patient's initial plan of treatment,
monitoring the plan's administration and revising the plan as necessary. In
addition, each branch has a medical advisory board comprised of local physicians
who review quality assurance and patient services issues and consult with Coram
on maintaining and improving its quality of care and patient service at the
local level.

Outpatient Facilities. Coram's ambulatory outpatient infusion therapy
centers have proven to be synergistic with its core home infusion therapy
business. Physicians use outpatient facilities to treat their patients when the
patient does not require hospitalization, but is not an ideal candidate for home
care because of severity of illness, complexity of therapy or environmental
concerns. Patients report to the facility for administration of the required
therapy and return home that day. Therapies commonly administered at

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outpatient facilities include first dose antibiotics, complex or lengthy
chemotherapy regimens and transfusion of both red blood cells and platelets.
Other procedures may include the insertion of long line venous catheters,
aerosol therapies for prophylaxis and instruction related to such therapies.

The Caremark Business offers a coordinated range of infusion therapy and
related services targeted to specific disease states such as HIV/AIDS and
transplant therapies through its network of outpatient centers that serve major
U.S. metropolitan markets. The centers, called "Caremark Connections(TM)." and
"Caremark Corners(TM).", provide infusion therapies, aerosolized pentamidine,
nutritional assessment, counseling and support services and educational
programs. The Caremark Business's transplant therapies program offers a range of
infusion therapies directed at the special needs of transplant patients. Such
patients are discharged from hospital care yet require continuing anti-infective
therapy since the patients have their immune systems suppressed in order to
reduce the risk of graft-versus-host-disease and organ/tissue infection. Such
therapies include antibiotic, antiviral and antifungal therapies.

PRODUCTS AND SERVICES OF CORAM

Infusion Therapy. Coram provides a variety of infusion therapies,
principally anti-infective therapy, parenteral nutrition, chemotherapy and pain
management therapy. The initiation and duration of these therapies is determined
by a physician based upon a patient's diagnosis, treatment plan and response to
therapy. Certain therapies, such as anti-infective therapy, are generally used
in the treatment of temporary conditions such as infections, while others, such
as parenteral nutrition, may be required on a long-term or permanent basis. The
infusion therapies are either administered at the patient's home by an employee
of Coram or the Caremark Business or at a regional outpatient facility operated
by Coram or the Caremark Business. In patient groups such as immune repressed
patients (e.g., AIDS/HIV, cancer and transplant patients) anti-infective therapy
must be provided episodically over the duration of the primary disease or for
the remainder of the patient's life.

The following table sets forth the aggregate percentages of patient
revenues derived by Coram and the Caremark Business from the designated types of
infusion therapies during the year ended December 31, 1994:

<TABLE>
<CAPTION>
CAREMARK
CORAM BUSINESS
----- --------
<S> <C> <C>
Anti-Infective............................................................ 40% 33%
Parenteral and Enteral Nutrition.......................................... 27% 37%
Chemotherapy.............................................................. 11% 3%
Pain Management........................................................... 10% 3%
Other Therapies........................................................... 12% 24%
----- --------
Total..................................................................... 100% 100%
===== =======
</TABLE>

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

Parenteral and Enteral Nutrition. Total parenteral nutrition therapy or
"TPN" involves the intravenous feeding of life-sustaining nutrients to patients
with impaired or altered digestive tracts due to a gastrointestinal illness or
condition, such as an intestinal obstruction or inflammatory bowel disease. The
therapy is administered through a central catheter, surgically implanted into a
major blood vessel to introduce the nutrient solution into the bloodstream. The
nutrient solutions may contain amino acids, dextrose, fatty acids, electrolytes,
trace minerals and vitamins. In many cases, the underlying illness or condition
from which parenteral nutrition patients suffer is recurrent in nature,
requiring periodic re-hospitalization for treatment followed by resumption of
parenteral nutrition at home. Some patients must continue this type of therapy
for life. Enteral nutrition therapy is administered to patients who cannot eat
as a result of an obstruction to the

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upper gastrointestinal tract or other medical condition. Enteral nutrition
therapy is often administered over a long period, generally for more than six
months.

Chemotherapy. Chemotherapy is the administration of cytotoxic drugs to
patients suffering from various types of cancer either alone or as adjuvant (an
immunological agent that increases the antigenic response) to other therapies
such as radiation or surgery. Coram has been advised that breast, lung, colon,
prostate and ovarian cancer, among others, are most conducive to outpatient
chemotherapy treatment. Chemotherapy generally is administered periodically for
several weeks or months. A majority of the nurses employed by Coram are
certified to administer chemotherapy. The nature of drugs that are used to treat
cancer is such that side effects such as nausea and amnesia occur in most
patients. This requires the administration of additional agents to treat those
side effects.

Pain Management Therapy. Pain management therapy is the administration of
analgesic drugs to patients suffering from acute or chronic pain. It is often
administered in conjunction with intravenous chemotherapy or intravenous therapy
given to patients with cancer or AIDS. This type of therapy is often
administered in a way that permits the patient to regulate the infusion of
analgesic drugs in proportion to the severity of the pain the patient
experiences, improving the medical outcome at the same time as drug use is
reduced.

Other Therapies. Coram and the Caremark Business provide other
technologically advanced therapies such as intravenous inotrope therapy for
patients with congestive heart failure or for those who are awaiting cardiac
transplants, intravenous anti-coagulant therapy for prevention of blood clots,
myeloid growth factor therapy for various anemias, and anti-nauseant therapy for
chemotherapy induced emesis. Hydration therapy involves the intravenous
administration of fluids to increase the patient's fluid volume; it is often
administered in conjunction with intravenous chemotherapy. Coram also provides
patients with biological response modifiers including recently FDA approved
drugs available due to breakthroughs in recombinant DNA technology. These drugs
include colony stimulating factors such as G-CSF, GM-CSF, Erythropoietin and
interferons that enhance the hematopoietic system to boost production of white
or red blood cells. In addition, Coram provides therapies for other diseases
such as thalassemia, alpha-1-antititrypsin (AAT) deficiency, hemophilia, primary
immune deficiencies, growth deficiencies and recurring gastrointestinal
diseases. Coram continually evaluates new infusion therapies and intends to add
therapies which enable it to continue providing full service to its patients and
payors.

Lithotripsy. Lithotripsy is a non-invasive technique that uses shock waves
to disintegrate kidney stones. Depending on the particular lithotripter used,
the patient is sedated using either a general or an epidermal anesthetic while
seated in a bath or lying on a treatment table. The operator of the lithotripter
machine locates the stone using fluoroscopy or ultrasound and directs the shock
waves toward the stone either through the water in the bath or across a fluid
membrane placed next to the patient's body. The shock waves then fragment the
stone thereby enabling the patient to pass the fragments through his or her
urinary tract. Because lithotripsy is non-invasive and is provided on an
outpatient basis, lithotripsy is an attractive alternative to other more
invasive techniques otherwise used in treating urinary tract stones or to
extended hospital stays waiting for the stone to pass.

As of May 1, 1995, Coram owned a controlling interest in 15 lithotripsy
partnerships as well as a wholly owned lithotripter maintenance company. Coram's
lithotripsy partnerships currently operate an aggregate of 31 lithotripsy
machines that provide services in 180 locations in 18 states. The other owners
of the partnerships are primarily physicians, many of whom utilize the
partnership's equipment to treat their patients. Ten of the 31 lithotripsy
machines are stationary and located at hospitals or ambulatory surgery centers,
while the other 21 machines are mobile, allowing them to be moved in order to
meet patient needs and market demands. Coram's lithotripsy partnerships
typically lease the machine on a per procedure basis to the hospital, ambulatory
surgery center or other facility providing care to the patient. In some cases,
the lithotripsy partnership bills the patient directly for the use of the
partnership's machine.

Coram's agreements with its lithotripsy physician partners contemplate that
Coram will acquire the remaining interest in each partnership at a defined price
in the event that legislation is passed or regulations are adopted that would
prevent the physician from owning an interest in the partnership and using the

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partnership's lithotripsy equipment for the treatment of his or her patients.
While current interpretations of existing law are subject to considerable
uncertainty, Coram believes that physician participation in its partnership
arrangements fall within exemptions provided under current law. If, however,
Coram were required to acquire the minority interest of its physician partners
in each of its lithotripsy partnerships, the cost would be material to Coram.

Coram's lithotripsy operations have contributed an increasing amount to
Coram's operating income. However, there can be no assurance that lithotripsy
reimbursement rates will remain at their current levels and Coram believes the
amounts the partnerships currently receive for their machines will be
increasingly subject to pricing pressures similar to the pricing pressures that
have been exerted on Coram's infusion therapy business. Recently, HCFA released
a proposed rule reducing the rate at which ambulatory surgery centers and
certain hospitals would be reimbursed for the technical component of a
lithotripsy procedure. Coram cannot predict what the final rate for such
reimbursement will be or what effect, if any, the adoption of this proposed rule
would have on lithotripsy revenues and whether this decreased reimbursement rate
will be applied to lithotripsy procedures performed at hospitals, where a
majority of Coram's lithotripsy machines are currently utilized. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Coram."

Physician Practice Management Services. Coram is implementing a physician
practice management business that will provide a variety of consulting and
administrative services to small and medium-sized physician groups. Coram
estimates that over 80% of the physicians in the United States practice either
alone or in a small group practice. As a result of growing pressure on
physicians to control costs and the rising influence of managed care
organizations, Coram believes that physicians have a growing need for external
management services. Through its physician services business, Coram intends to
provide consulting and administrative services in the following areas:
development and management; office systems, including computerization, financial
management, billing and collections; practice marketing and development; other
in-office services such as infusion therapy; mergers, acquisitions, affiliations
and ventures; and managed care and third party payor contract opportunities. In
addition, Coram intends to offer consulting and management services to service
organizations and other health care providers that will offer a package of
health care services to third party payors.

HCMS. The HCMS is a proprietary system developed in 1993 which provides
utilization and physician network management services to large managed care
organizations through the use of a sophisticated information system. HCMS
provides one stop shopping for alternate site health care services through
network management of alternate site providers and services. HCMS allows the
Caremark Business to accept and manage capitated contracts with managed care
organizations and is marketed to HMOs and PPOs. As of January 31, 1995, HCMS had
11 such arrangements (eight of which are fully capitated) covering approximately
1.8 million covered lives.

Immune Deficiency Therapy. The Caremark Business provides therapies and
services to individuals suffering from immune system deficiencies as well as
certain diseases (e.g., hepatitis) of non-specific origins. Products provided in
such therapies include immune globulin for the treatment of immune system
deficiencies.

Women's Health. The Women's Health business provides alternate site
obstetrical and gynecological support services. The Women's Health services
include: monitoring for uterine contraction, blood pressure, heart rate, weight,
urine protein and glucose level; pharmaceutical products distribution; dietitian
services; integrated nursing support; diabetes management; pregnancy-induced
hypertension management; and fertility management.

Other Health Care Businesses. In addition to operating infusion therapy
companies and providing the other services described above, Coram was also
involved during 1994 in certain other health care businesses. Such complementary
businesses amounted to less than 1% of Coram's net revenues for the fiscal year
ended December 31, 1994, and some or all of such businesses are under review for
possible divestiture. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Coram."

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ORGANIZATION AND OPERATIONS

General. Coram, prior to the integration of the Caremark Business,
conducts its alternate site health care business operations through
approximately 143 branches which are managed through six area offices reporting
to the Executive Vice President. The area office provides each of its branches
with key management direction and support services. Coram's organizational
structure is designed to create operating efficiencies associated with
centralized services and purchasing while also promoting local decision making.
Coram believes that its decentralized approach to management facilitates high
quality local decision making, allows it to attract and retain experienced local
managers and allows it to be responsive to local market needs.

Operating Systems and Controls. An important factor in Coram's ability to
closely monitor its operating locations will be the reliability of its
management information systems. Besides routine revenue and cost reporting,
Coram is developing a performance model for monitoring district and branch
operations. Actual operating results derived from Coram's management information
systems will be compared to the performance model, enabling all levels of
management to identify areas requiring improvement. Coram believes that the use
of common, specific performance matrixes and the identification of best
demonstrated practices will expedite operating improvement.

Coram has begun to implement standardized management information systems
throughout Coram. This has enabled Coram to begin standardizing operating
processes, track profit and loss performance by branch, control and manage
accounts receivable, process customer orders, reduce administrative overhead and
gather branch operating statistics for comparisons and management decision
making.

Coram has recently begun to standardize and simplify its financial systems.
This will enable Coram to access more detailed financial information and respond
accordingly. Moreover, Coram expects that managed care organizations and other
referral sources and health care providers will benefit from these sophisticated
reporting capabilities, thereby giving Coram a further competitive advantage.

Coram endeavors to ensure that its local managers have the autonomy and
ability to perform effectively by providing them with training, comprehensive
policies and procedures and standardized systems. Coram is designing management
incentive plans that reward performance based on revenue increases, earnings
contribution, accounts receivable collection, inventory control and control of
capital expenditures.

The HCMS maintains a clinical outcomes management and reporting program
which is a key resource in contracting with managed care organizations. The data
base of over 60,000 patients, which Coram believes is the industry's largest and
most comprehensive, allows the Caremark Business to monitor trends and provide
specific patient and therapy census data to payors. Each of the 77 branches of
the Caremark Business operates on a common systems platform which is linked to
corporate headquarters through a wide area network. The functional capabilities
of this management information system, which Coram believes is the leading
system in the industry, includes patient registration, pharmacy, ancillary order
processing, purchasing and inventory management, contracts, pricing, accounts
receivable, billing, cash application, fixed asset (e.g., pumps) tracking,
general ledger, outcomes monitoring and utilization review. The system is fully
integrated with the patient data base which facilitates the tracking of
operating activities such as nursing visits and outcomes reporting.

REIMBURSEMENT OF SERVICES

Virtually all of the revenues of Coram are derived from third-party payors,
including private insurers, managed care organizations such as HMOs and PPOs,
and governmental payors such as Medicare and Medicaid. Similar to other medical
service providers, Coram experiences lengthy reimbursement periods as a result
of third-party payment procedures. Consequently, management of accounts
receivable through effective patient registration, billing, collection and
reimbursement procedures is critical to financial success and continues to be a
high priority for all levels of management. Coram has developed substantial
expertise in processing claims and carefully screens new cases to determine
whether adequate reimbursement will be available. Individual branches are
responsible for their own billing and collections, within strict guidelines.
Coram believes that accounts receivable management is best accomplished at the
local level because of direct

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relationships with payors and the ability of branch personnel to identify and
react promptly to billing discrepancies.

The reimbursement systems of the Caremark Business, which Coram believes
are the leading systems in the industry, are in the process of being
regionalized into four locations. The Caremark Business has adopted a
regionalized approach to reimbursement management to facilitate billing and
collection efforts from managed care organizations, to reduce costs and leverage
its investment in systems, training and managerial supervision and to enhance
financial control over collections and regulatory compliance. System
enhancements to the reimbursement systems have been made to facilitate
regionalized reimbursement from local branch reimbursement. The Caremark
Business currently performs Medicare billing out of its corporate headquarters.

Medicare has developed a national fee schedule for respiratory therapy,
home medical equipment and infusion therapy which provides reimbursement for 80%
of the amount of any fee on the schedule. The remaining 20% co-insurance portion
is not paid by Medicare. In most cases, Medicaid reimburses the remaining 20%
for "medically indigent" patients. In other cases, Coram bills and actively
monitors other third-party payors or patients responsible for co-insurance
reimbursement.

Reimbursement coverage is provided through private sources, such as
insurance companies, self-insured employers and patients, and through the
federal Medicare and Medicaid programs. Private payors typically reimburse a
higher amount for a given service and provide a broader range of benefits than
governmental payors, although net revenues and gross profits from private payors
have been affected by the continuing efforts of private payors to contain or
reduce the costs of health care. An increasing percentage of Coram's private
payor revenue has been derived in recent years from contracts with HMOs, PPOs
and other managed care providers. Although these contracts often provide for
negotiated reimbursement at reduced rates, they generally result in lower bad
debts, provide for faster payment terms and generate a greater volume than other
third-party payors.

The following table sets forth the approximate percentages of Coram's and
the Caremark Business's net revenue attributable to private, governmental and
managed care payors, respectively, for the year ended December 31, 1994:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------
COMBINED
CORAM CAREMARK PRO FORMA
----- -------- ---------
<S> <C> <C> <C>
Private Insurance and Other Payors.............................. 58% 48% 53%
Medicare and Medicaid Programs.................................. 28% 22% 25%
Managed Care Organizations...................................... 14% 30% 22%
----- -------- ---------
Total......................................................... 100% 100% 100%
===== ======= ========
</TABLE>

QUALITY ASSURANCE

Coram has established quality assurance programs to ensure that service
standards are implemented and that the objectives of those standards are met. As
of May 1, 1995, all of the branch offices of Coram and the Caremark Business had
received or are in the process of applying for accreditation by JCAHO. Coram's
quality assurance program also includes quality audits of branches by a member
of Coram's quality assurance department.

COMPETITION

The alternate site health care market is highly competitive and is
experiencing both horizontal and vertical consolidation. Some of Coram's current
and potential competitors include hospital chains and providers of multiple
products and services for the alternate site health care market. On March 3,
1995, two of the largest companies in the alternate site health care industry,
Abbey and Homedco, announced an agreement to merge. The size, purchasing power,
ability to bundle products and services; and relationships with physicians and
payors which certain of these providers enjoy make them formidable competitors
to Coram. Moreover, there are relatively few barriers to entry in the local
markets that Coram serves. Local or

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regional companies have entered the home health care market in the past and
others may do so in the future. There can be no assurance that Coram will not
encounter increased competition in the future that could limit its ability to
maintain or increase its market share. Such increased competition could have a
material adverse effect on Coram's business and results of operations.

Coram competes on the basis of a number of factors, including quality of
care and service, reputation within the medical community, geographical scope
and price. As it achieves low cost provider status, Coram believes that it can
compete effectively in each of its service areas with respect to all of the
above factors. The achievement of the operating scale required to achieve low
cost provider status is a critical source of competitive advantage and a major
objective of Coram's consolidation strategy.

Competition within the alternate site health care delivery system has been
affected by the decision of third party payors and their case managers to become
more active in monitoring and directing the care delivered to their
beneficiaries. Accordingly, relationships with such payors and their case
managers and inclusion within preferred provider and other networks of approved
or accredited providers may become a prerequisite to Coram's ability to serve
many of the patients treated by it. Similarly, the ability of Coram and its
competitors to align themselves with other health care service providers may
increase in importance as managed care providers and provider networks seek out
providers who offer a broad range of services that may exceed the range of
services currently offered by Coram.

SALES AND MARKETING

Coram's products and services are marketed through its field sales force,
branch sales personnel and various media formats. Most of Coram's new patients
are referred by hospitals, medical groups, home care agencies and case managers.
Coram's sales force is responsible for establishing and maintaining referral
sources. All sales employees receive a base salary plus incentive bonuses based
on collected net revenue. Coram recently established improved sales training
programs enabling its sales force to generate more revenue from current referral
sources and to assist them in targeting and developing new referral sources.
Coram believes that JCAHO accreditation of its branches is important to its
sales and marketing efforts, particularly with large customers.

Coram's network of field representatives enables it to market its home
health care services to numerous sources of patient referrals, including
physicians, hospital discharge planners, hospital personnel and HMOs. Marketing
is focused on specific product lines and in specific payor groups. Products such
as physician services and disease state carveouts that are considerably
different than the base infusion therapy and ancillary service business are
supported by specialty marketing and sales support personnel. The sales
resources of the Caremark Business include specialists focused on the Women's
Health Business and disease states such as transplants and AIDS/HIV.

As a result of escalating pressures to contain health care costs,
third-party payors are participating to a greater extent in decisions regarding
health care alternatives and are more important in the referral process. In
response, Coram has modified its sales and development focus and is aggressively
pursuing agreements with third party payors and is seeking to participate in
managed service organizations and provider networks that will provide high
quality, cost effective care. Coram has recruited a dedicated sales force to
enhance Coram's efforts to market and sell its services to managed care payors.
Managed care sales representatives are deployed in each branch and a separate
national accounts sales force reports to the Vice President, Managed Care Sales
and Marketing. Since commencing such marketing efforts, Coram has successfully
negotiated approximately 400 managed care contracts, including agreements with
CIGNA and Travelers Health Network ("Travelers"). Pursuant to these
arrangements, Coram provides services to members of the managed care
organization on a non-exclusive basis at negotiated prices in specified
geographic areas. For example, Coram was recently awarded a nationwide contract
to be one of three providers authorized to coordinate the delivery of infusion,
durable medical equipment, respiratory therapy, home nursing and other services
to the approximately 5.3 million beneficiaries of Travelers. Coram has
subcontracted for those alternate site services it has agreed to deliver under
the Travelers contract which it is currently unable to provide directly. The

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Caremark Business also has a sales force dedicated to managed care
organizations, and currently has agreements with over 350 managed care accounts
including Metropolitan Life, CIGNA and Prudential.

CUSTOMERS AND SUPPLIERS

Coram provides alternate site health care services and products to a large
number of patients and no single payor accounted for more than 5% of the net
revenue of either Coram or the Caremark Business during the year ended December
31, 1994, excluding Medicare and Medicaid payors. Coram purchases products from
a large number of suppliers. Coram considers its relationships with its vendors
to be good and believes that substantially all of its products are available
from alternative sources on terms not materially less favorable to Coram than
its present sources.

GOVERNMENTAL REGULATION

General. Coram's alternate site infusion facilities are subject to
extensive federal and state law regulating, among other things, the provision of
pharmacy, home care, and nursing services, health planning, health and safety,
environmental compliance and toxic waste disposal. Coram is also subject to
fraud and abuse and self-referral laws which affect Coram's business
relationships with physicians and other health care providers and its
reimbursement from government payors. Generally, all states require infusion
companies to be licensed pharmacies and to have appropriate state and federal
registrations for dispensing controlled substances. Some states require infusion
companies to be licensed as nursing or home health agencies and to obtain
medical waste permits. In addition, certain employees of Coram are subject to
state laws and regulations governing the ethics and professional practice of
pharmacy and nursing. Coram may be required to obtain additional certification
to continue to participate in governmental payment programs, such as Medicare
and Medicaid.

The failure to obtain, renew or maintain any of the required regulatory
approvals or licenses could adversely affect Coram's business and could prevent
the location involved from offering products and services to patients. Coram's
revenues and net earnings could be adversely affected as a result of any such
change or sanctions. Coram believes it complies in all material respects with
these and all other applicable laws and regulations. The health care services
industry will continue to be subject to intense regulation at the federal and
state levels, the scope and effect of which cannot be predicted. No assurance
can be given that the activities of Coram will not be reviewed and challenged or
that health care reform, if enacted, will not result in a material adverse
change to Coram.

Fraud and Abuse. Coram's operations are subject to the illegal
remuneration provisions of the Social Security Act (sometimes referred to as the
"anti-kickback" statute) and similar state laws that impose criminal and civil
sanctions on persons who knowingly and willfully solicit, offer, receive or pay
any remuneration, whether directly or indirectly, in return for, or to induce,
the referral of a patient for treatment, or, among other things, the ordering,
purchasing, or leasing, of items or services that are paid for in whole or in
part by Medicare, Medicaid or similar state programs. Violations of the federal
anti-kickback statute are punishable by criminal penalties, including
imprisonment, fines and exclusion of the provider from future participation in
the Medicare and Medicaid programs. Civil exclusion for anti-kickback violations
also can be imposed through an administrative process, without the imposition of
civil monetary penalties. In addition, the government contends that violations
of the anti-kickback statute may be prosecuted as false claims under Medicare
law, the penalties for which includes return of payments received, fines and
exclusion from participation. Federal enforcement officials may also attempt to
use other general federal statutes to reach behavior considered fraudulent or
abusive, including the Federal False Claims Act, which provides for penalties of
up to $10,000 per claim plus treble damages, and permits private persons to sue
on behalf of the government in qui tam actions. While the federal anti-kickback
statute expressly prohibits transactions that have traditionally had criminal
implications, such as kickbacks, rebates or bribes for patient referrals, its
language has been construed broadly and has not been limited to such obviously
wrongful transactions. Court decisions state that, under certain circumstances,
the statute is also violated when one purpose (as opposed to the "primary" or a
"material" purpose) of a payment is to induce referrals. However a Federal
Appeals Court recently held that Medicare program exclusion and other sanctions
were not appropriate unless the person or

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entity knew the complained of behavior violated the statute and the person or
entity intended to violate the statute. The government is seeking a rehearing of
that decision. Congress has considered federal legislation that would expand the
federal anti-kickback statute to include the same broad prohibitions regardless
of payor source. In addition to the payment or receipt of illegal remuneration
for the referral or generation of Medicare of Medicaid business, the fraud and
abuse law covers other billing practices that are considered fraudulent (such as
presentation of duplicate claims, or claims for services not actually rendered
or for procedures that are more costly than that actually rendered) or abusive
(such as claims presented for services not medically necessary based upon a
misrepresentation of fact), subject to the same remedies described above.

In addition, an increasing number of states in which Coram operates have
laws, which vary from state to state, prohibiting certain direct or indirect
remuneration or fee-splitting arrangements between health care providers for the
referral of patients to a particular provider, including pharmacies and home
health agencies. Possible sanctions for violation of these restrictions include
loss of licensure and civil and criminal penalties.

Coram is developing an internal regulatory compliance review program and
has retained Richard J. Kusserow, the former Inspector General of the HHS, to
act as a consultant to assist Coram in developing its compliance program. There
can be no assurance that such laws will ultimately be interpreted in a manner
consistent with the practices of Coram.

Prohibition on Physician Referrals. Under Stark II, it is unlawful for a
physician to refer patients for certain designated health services to an entity
with which the physician has a financial relationship. While infusion therapy is
not a "designated health service," component parts of such therapy are:
specifically, outpatient prescription drugs, parenteral and enteral nutrition
equipment and supplies, durable medical equipment and home health services are
included as designated health services under Stark II. A "financial
relationship" under Stark II is defined as an ownership or investment interest
in, or a compensation arrangement between, the physician and the entity. The
entity is prohibited from claiming payment under the Medicare or Medicaid
programs for services rendered pursuant to a prohibited referral and is liable
for the refund of amounts received pursuant to prohibited claims. The entity
also can receive civil penalties of up to $15,000 per improper claim and can be
excluded from participation in the Medicare and Medicaid programs. Comparable
provisions applicable to clinical laboratory services became effective in 1992.
Stark II provisions which may be relevant to Coram became effective on January
1, 1995. Because of its broad language Stark II may be interpreted by the OIG of
HHS to apply to Coram's operations. Consequently, Stark II has required Coram to
restructure certain existing compensation agreements with physicians or, in the
alternative, to refuse to accept referrals for designated health services from
such physicians to bring its financial relationships with referring physicians
into material compliance with the provisions of Stark II, including relevant
exceptions. Coram is reviewing all of its business arrangements with physicians
that may be questionable in the current regulatory environment to determine
whether such arrangements need to be restructured or terminated. However, if
Coram does not achieve such material compliance, and Stark II is broadly
interpreted by HHS to apply to Coram, such application of Stark II could have a
material adverse effect on Coram.

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

Medicare and Health Care Reform. Because the Medicare program represents a
substantial portion of the federal budget, Congress takes action in almost every
legislative session to modify the Medicare program for the purpose of reducing
the amounts otherwise payable by the program to health care providers in order
to achieve deficit reduction targets, among other reasons. Legislation or
regulations may be enacted in the future that may substantially reduce the
amount paid for Coram's services. Further, statutes or regulations may be
adopted which impose additional requirements in order for Coram to be eligible
to participate in the federal

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and state payment programs. Such new legislation or regulations may adversely
affect Coram's business operations. There is significant national concern today
about the availability and rising cost of health care in the United States. It
is anticipated that new federal and/or state legislation will be passed and
regulations adopted to attempt to provide broader and better health care and to
manage and contain its cost. Coram is unable to predict the content of any
legislation or what, if any, changes may occur in the method and rates of its
Medicare and Medicaid reimbursement or in other government regulations that may
affect its businesses, or, whether such changes, if made, will have a material
adverse effect on its revenues and net earnings.

State Laws Regarding Provision of Medicine and Insurance. The laws of many
states prohibit physicians from splitting fees with non-physicians and prohibit
non-physician entities from practicing medicine. These laws vary from state to
state and are enforced by the courts and by regulatory authorities with broad
discretion. Although Coram believes its operations as currently conducted are in
material compliance with existing applicable laws, certain aspects of Coram's
business operations have not been the subject of state or federal regulatory
interpretation. There can be no assurance that review of Coram's business by
courts or regulatory authorities will not result in determinations that could
adversely affect the operations of Coram or that the health care regulatory
environment will not change so as to restrict Coram's existing operations or
their expansion. In addition, expansion of the operations of Coram to certain
jurisdictions may require structural and organizational modifications of Coram's
form of relationships with physician groups, would could have an adverse effect
on Coram.

Most states have laws regulating insurance companies and HMOs. Coram is not
qualified in any state to engage in the insurance or HMO businesses. As the
managed care business evolves, state regulators may begin to scrutinize the
practices of, and relationships between, third-party payors, medical service
providers and entities providing management and other services to medical
service providers with respect to the application of insurance and HMO laws and
regulations. Coram does not believe that its practices, which are consistent
with those of other health care companies, would subject it to such laws and
regulations. However, given the limited regulatory history with respect to such
practices, there can be no assurance that states will not attempt to assert
jurisdiction. Coram may be subject to prosecution by state regulatory agencies,
and accordingly may be required to change or discontinue certain practices which
could have a material adverse effect on Coram.

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

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

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Coram believes it is in material compliance with current applicable laws
and regulations. In September 1994, Coram entered into a settlement with the OIG
regarding an investigation of T2's financial arrangements with physicians which
requires T2 to adhere to a compliance program in rendering its services. No
assurance can be made that in the future Coram's business arrangements, past or
present, will not be the subject of an investigation or prosecution by a federal
or state governmental authority. Such investigation could result in any, or any
combination, of the penalties discussed above depending upon the agency involved
in such investigation and prosecution. No assurance can be given that Coram's
activities will not be reviewed or challenged by regulatory authorities. Coram
monitors legislative developments and would seek to restructure a business
arrangement if Coram determined that one or more of its business relationships
placed it in material noncompliance with such a statute. The health care service
industry will continue to be subject to substantial regulation at the federal
and state levels, the scope and effect of which cannot be predicted by Coram.
Any loss by Coram of its various federal certifications, its authorization to
participate in the Medicare and Medicaid programs or its licenses under the laws
of any state or other governmental authority from which a substantial portion of
its revenues are derived would have a material adverse effect on its business.

POTENTIAL LIABILITY AND INSURANCE

Participants in the health care market are subject to lawsuits alleging
negligence, product liability or other similar legal theories, many of which
involve large claims and significant defense costs. Coram is from time to time
subject to such suits as a result of the nature of its business. Coram maintains
general liability insurance with coverage limits of $1 million per occurrence
and in the aggregate annually, professional liability insurance on each of its
professionals with coverage limits of $1 million per claim and in the aggregate
annually and excess liability coverage of $25 million per occurrence and in the
aggregate annually. In addition, Coram maintains a $25 million excess umbrella
insurance policy that covers liabilities in excess of Coram's other liability
policies subject to certain exclusions. Each of these policies provides coverage
on an "occurrence" basis and has certain exclusions from coverage. Coram's
insurance policies must be renewed annually.

A successful claim against Coram in excess of Coram's insurance coverage
could have a material adverse effect upon Coram's business and results of
operations. Claims against Coram, regardless of their merit or eventual outcome,
also may have a material adverse effect upon Coram's reputation. There can be no
assurance that the coverage limits of Coram's insurance policies will be
adequate. While Coram has been able to obtain liability insurance in the past,
such insurance varies in cost, is difficult to obtain and may not be available
in the future on acceptable terms, if available at all.

EMPLOYEES

As of March 31, 1995, Coram had approximately 2,350 full-time employees,
600 part-time and 600 per diem employees and the Caremark Business had
approximately 3,325 employees, 1,350 of which are part-time. None of such
employees is currently represented by a labor union or other labor organization.
Approximately 50% of such employees are nurses and pharmacists, with the
remainder consisting primarily of sales and marketing representatives,
reimbursement representatives, financial and systems professionals and managers.
Coram believes that its employee relations are good.

FACILITIES

Coram's headquarters are temporarily located in Denver, Colorado and
consist of approximately 16,000 square feet of office space leased through July
1996. Coram has entered into a ten year lease for 35,000 square feet of office
space in a new headquarters facility near Boulder, Colorado, commencing July
1996. Pending the closure of such facilities pursuant to the Coram Consolidation
Plan, Coram leases facilities which formerly were the corporate headquarters of
Curaflex, HealthInfusion, Medisys and HMSS. Coram also owns a building
containing approximately 27,000 square feet of space which formerly served as
the headquarters of T2. As of May 1, 1995, Coram had 143 branch facilities in
the United States. The Caremark Business has 77 branch facilities.

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LITIGATION

Coram has entered into a Stipulation dated as of January 27, 1995 which
sets forth the principal terms of a settlement of shareholder litigation which
was originally initiated against T2 in 1992. The settlement provides for Coram
to pay the shareholder class $25 million in cash (of which approximately $7.8
million will be contributed by one of Coram's insurance carriers), and to issue
warrants to acquire an aggregate of 2.52 million shares of Coram Common Stock at
an exercise price of $20.25, subject to adjustment. The Stipulation was approved
by the court on May 5, 1995 and is expected to be consummated in the near
future. However, if the settlement is not consummated and the shareholder claims
continue to be pressed, the resulting distraction of management, the costs of
defending such claims and the payment of any settlement or damage award could
have a material adverse effect on Coram's results of operations and financial
position.

In September, 1994, T2 entered into the T2 OIG Settlement. T2, in expressly
denying liability, agreed to a civil order which enjoins it from violating
federal anti-kickback and false claims laws related to Medicare/Medicaid
reimbursement. The order further requires T2 to comply with certain standards
when providing management or other services to physicians. Coram is implementing
programs to ensure that it is in compliance with the terms and conditions of the
T2 OIG Settlement and has engaged Richard P. Kusserow, the former Inspector
General of the U.S. Department of Health and Human Services, as a consultant to
assist Coram in developing its compliance program. However, in the event that T2
violates the T2 OIG Settlement or Coram engages in conduct that violates Federal
or state laws, rules or regulations, Coram may be subject to a risk of increased
sanctions or penalties; including, but not limited to, partial or complete
exclusion from the Medicare/Medicaid program.

Coram is subject to certain claims and lawsuits, the outcome of which are
not determinable at this time. In the opinion of management, any liability that
might be incurred by Coram upon the resolution of these claims and lawsuits will
not, in the aggregate, have a material adverse effect on the consolidated
financial condition or results of operations of Coram.

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DESCRIPTION OF CORAM CAPITAL STOCK

The authorized capital stock of Coram consists of 75,000,000 shares of
Common Stock, par value $.001 per share, and 10,000,000 shares of Preferred
Stock, par value $.001 per share.

COMMON STOCK

As of May 8, 1995, there were 39,682,277 shares of Common Stock outstanding
held by approximately 3,150 shareholders of record and Coram believes that it
had more than 36,850 beneficial owners of its Common Stock as of such date.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of Coram, the holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior distribution rights of Preferred Stock, if any,
then outstanding. There are no redemption or sinking fund provisions applicable
to the Common Stock. Holders of Common Stock are not entitled to cumulate their
votes in the election of directors. All outstanding shares of Common Stock are
fully paid and non-assessable, and the shares of Common Stock to be issued upon
completion of this offering will be fully paid and non-assessable. See "Dividend
Policy."

PREFERRED STOCK

The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the rights, preferences, powers and restrictions,
including the liquidation preferences and the dividend, conversion, voting,
redemption (including sinking fund provisions) and other rights, and the number
of shares constituting any series and the designations of such series, without
any further vote or action by the stockholders. Because the terms of the
Preferred Stock may be fixed by the Board of Directors without stockholder
action, the Preferred Stock could be issued quickly with terms calculated to
delay or prevent a change in control of Coram, or to make the removal of
management more difficult. Under certain circumstances this could have the
effect of decreasing the market price of the Common Stock. One advantage of the
Preferred Stock is that it could be issued by Coram as consideration for an
acquisition. Coram has no outstanding Preferred Stock and does not presently
contemplate the issuance of any Preferred Stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is the Bank of
Boston.

DIVIDEND POLICY

Coram has not paid or declared any cash dividends on its capital stock
since its inception. Coram currently intends to retain all future earnings for
use in the expansion and operation of its business. Accordingly, Coram does not
anticipate paying cash dividends on the Coram Common Stock in the foreseeable
future. The payment of any future dividends will be at the discretion of Coram's
Board of Directors and will depend upon, among other things, future earnings,
operations, capital requirements, the general financial condition of Coram,
contractual restrictions and general business conditions. The Senior Credit
Facility and the Bridge Note generally prohibit Coram from paying dividends or
making distributions to its stockholders without the consent of the lenders and
contains restrictions on the ability of Coram to pay such dividends or make such
distributions. Future borrowings with other lenders, if any, may also limit
Coram's ability to pay cash dividends.

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MANAGEMENT OF CORAM

DIRECTORS AND EXECUTIVE OFFICERS OF CORAM

The following table sets forth the name, age, principal occupations and
business experience during the last five years of each of the directors and
executive officers of Coram. The executive officers serve at the pleasure of the
Board of Directors of Coram. Each member of the Board of Directors holds office
until the next meeting of the stockholders of Coram or until his successor is
elected and qualified.

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------ --- ----------------------------------------------------
<S> <C> <C>
James M. Sweeney.............. 52 Chairman and Chief Executive Officer
Patrick J. Fortune............ 47 President, Chief Operating Officer and Director
Olav B. Bergheim.............. 44 Executive Vice President
Sam R. Leno................... 49 Vice President, Secretary and Chief Financial
Officer
Tommy H. Carter............... 52 Vice Chairman of the Board of Directors
Richard A. Fink............... 40 Director
Stephen G. Pagliuca........... 40 Director
L. Peter Smith................ 45 Director
Dr. Gail R. Wilensky.......... 50 Director
</TABLE>

Mr. Sweeney has been Chairman and Chief Executive Officer of Coram since
July 1994. Mr. Sweeney was the Chairman and Chief Executive Officer of McGaw,
Inc., and served as a member on the Board of Directors of McGaw, Inc. from
October 1990 until he resigned effective February 7, 1994. From February 1988 to
October 1990, Mr. Sweeney was the Chairman and Chief Executive Officer of
CarePartners, Inc., a provider of patient monitoring services and home
therapies. Mr. Sweeney was the founder of Caremark, Inc., formerly the largest
home infusion therapy company in the United States, and served as its Chairman
and Chief Executive Officer from June 1979 to February 1988.

Mr. Fortune has been President and Chief Operating Officer of Coram since
August 1994, and a Director since November, 1994. Between 1991 and August 1994,
Mr. Fortune served as Corporate Vice President--Information Management, at
Bristol-Myers Squibb where he was responsible for worldwide information
technology, planning, systems integration and organization consolidation. Prior
to 1991, Mr. Fortune was Senior Vice President and Group Executive at Packaging
Corporation of America and a Group Corporate Vice President at Baxter Healthcare
Corporation ("Baxter Healthcare").

Mr. Bergheim has been Executive Vice President of Coram since March 1995.
Prior to March 1995, Mr. Bergheim held various positions with Baxter Healthcare
for 18 years, most recently as Group Corporate Vice President and President,
Baxter Cardiovascular Group.

Mr. Leno has been Vice President and Chief Financial Officer of Coram since
July, 1994, and Secretary since November, 1994. Between October, 1989 and July,
1994, Mr. Leno served as Vice President of Finance and Information Technology
for the Hospital Business of Baxter Healthcare. Prior to October, 1989, Mr. Leno
held various executive positions with Baxter Healthcare and American Hospital
Supply Corporation.

Mr. Carter has served as a director of Coram since July 1994. Between
September 1993 and July 1994, Mr. Carter was Chief Executive Officer and
President of T2. Prior to September 1993, Mr. Carter, a co-founder of T2, served
as President of T2 from 1984 to October 1988 and as a director from 1984 to
1990. Mr. Carter came out of retirement to assume the duties of President and
Chief Executive Officer in September 1993. From November 1978 to May 1984, Mr.
Carter served in various capacities with Kendall McGaw Corporation, a
manufacturer of intravenous fluids and equipment, including Regional Manager,
National Sales Administration Manager, and Vice President of Sales and Marketing
for the United States.

Mr. Fink has served as a director of Coram since July 1994. Mr. Fink has
been a partner of the law firm of Brobeck, Phleger & Harrison since October 1987
and is currently Chairman of that firm's 140-attorney Business & Technology
Group.

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Mr. Pagliuca has served as a director of Coram since July 1994. Mr.
Pagliuca founded Information Partners, a venture capital and management buyout
company based in Boston, Massachusetts, in 1989 and has been Managing Director
since that time, focusing on health care and information industry private-equity
investment opportunities. Prior to 1989, Mr. Pagliuca was a partner at Bain &
Company, a management consulting firm based in Boston, Massachusetts, where he
concentrated on the health care and information industries.

Mr. L. Peter Smith has served as a director of Coram since July 1994.
Between November 1993 and July 1994, Mr. Smith was director of Medisys, Inc.
("Medisys"). Mr. Smith served as the Managing Partner of AllCare Health
Services, Inc., which was acquired by Medisys in December of 1992. Mr. Smith is
also President and serves on the Board of Directors of Ralin Medical, Inc.
("Ralin"), a company specializing in ambulatory cardiac monitoring. Prior to
joining Ralin in 1990, Mr. Smith served in various capacities with Baxter
Healthcare. From 1984 through 1989 he was president of the home infusion therapy
division of Baxter Healthcare. Mr. Smith also serves on the Board of Directors
of Sabratek, Inc. and AMSYS, Inc.

Dr. Wilensky has served as a director of Coram since November 1994. Since
January 1993, Dr. Wilensky has served as a Senior Fellow at Project HOPE. From
March 1992 to January 1993, Dr. Wilensky served in the Bush Administration as
Deputy Assistant to the President for Policy Development, responsible for
advising the President on health and welfare issues. From January 1990 to March
1992, Dr. Wilensky served in the Department of Health and Human Services, where
she directed the Medicare and Medicaid programs. From April 1983 to January
1990, Dr. Wilensky was Vice President, Division of Health Affairs at Project
HOPE. Dr. Wilensky is an elected member of the Institute of Medicine of the
national Academy of Sciences. She has also served as a member of the Physician
Payment Review Commission and the Health Advisory Committee of the General
Accounting Office. Dr. Wilensky also serves as a Director of United HealthCare
Corporation, Syncor International Corporation and Advanced Tissue Sciences, Inc.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The Coram Board of Directors met five times during the fiscal year ended
December 31, 1994. Each director attended at least 75% of the aggregate of (i)
the total number of meetings of the Coram Board of Directors held subsequent to
the date of their election or appointment to the Board and (ii) the total number
of meetings held by all committees of the Board of Directors on which such
director served. The directors also took actions by unanimous written consent
seven times.

Coram has an Audit Committee, a Compensation Committee and a Compliance and
Quality Assurance Committee. Coram does not have an executive or nominating or
similar committee. The Board generally acts in its entirety upon matters which
might otherwise be the responsibility of such committees.

Coram Audit Committee. The Coram Audit Committee is composed of Messrs.
Smith and Pagliuca, each a non-employee director of Coram. The Audit Committee's
principal functions are: (i) to recommend to the Coram Board of Directors the
independent public accountants to be engaged by Coram and to arrange or approve
the details of their engagement, including the remuneration to be paid; (ii) to
review on a continuing basis the independence of the public accountants; (iii)
to review with the independent public accountants, the Chief Financial Officer
and other personnel of Coram, Coram's general policies and procedures with
respect to audits and accounting and financial controls, the general accounting
and reporting principles and practices applied in preparing the financial
statements and conducting financial audits of Coram, the interim and year-end
financial statements and any certification, report or opinion which the
independent public accountants propose to render in connection with such
statements; (iv) to implement changes suggested by the independent public
accountants or the Audit Committee; and (v) and to maintain the adequacy of
Coram's accounting practices and system of internal accounting controls. The
Audit Committee did not meet during the fiscal year ended December 31, 1994.

Coram Compensation Committee. The Coram Compensation Committee consists of
Messrs. Fink and Pagliuca, each a non-employee director of Coram. The
Compensation Committee's principal functions are: (i) to recommend to the Coram
Board of Directors the salaries and other terms of employment for the senior
executive officers of Coram and make recommendations to the Coram Board of
Directors with respect to

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proposals for new benefits, incentive plans or programs; (ii) to approve the
grant of options for all employees of Coram and establish the proper level of
stock options to be granted to the executive and managerial group; and (iii) to
review the recommendations of the Chairman of the Coram Board and Chief
Executive Officer for grants of stock options and ensure that such
recommendations are within the guidelines authorized by the Coram Board of
Directors. The Compensation Committee met seven times during the fiscal year
ended December 31, 1994 and informally at various other times.

The Coram Compliance and Quality Assurance Committee, established by the
Coram Board of Directors in February 1995, consists of Dr. Gail R. Wilensky and
Richard A. Fink. The Compliance and Quality Assurance Committee is responsible
for overseeing and ensuring Coram's compliance with applicable laws,
regulations, and a corporate code of conduct currently under development by
Coram, as well as providing oversight of Coram's corporate compliance program as
it relates to the conduct of its business to ensure that the highest standards
of business, professional, legal and personal ethics are being met by Coram in
the delivery of its services and products.

COMPLIANCE WITH SECTION 16

Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Coram's directors, executive officers and persons who
beneficially own greater than 10% of a registered class of Coram's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission") and the New York Stock
Exchange. Based solely upon its review of copies of the Section 16 reports Coram
has received and written representations from certain reporting persons, Coram
believes that during its fiscal year ended December 31, 1994, all of its
directors, executive officers and greater than 10% beneficial owners were in
compliance with their filing requirements.

EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

Fees for Board Service. Directors who are employees of Coram receive no
additional compensation for service on the Board of Directors. Non-employee
directors of Coram receive no compensation for each Board meeting attended;
however, all out-of-pocket expenses of directors related to meetings attended
are reimbursed by Coram.

Outside Directors' Automatic Option Grant Program. Non-employee members of
the Coram's Board of Directors participate in the Automatic Option Grant Program
in effect under the Coram Option Plan. Each individual who served as a
non-employee Board member on July 28, 1994 (other than Mr. Carter) received an
automatic option grant under the program for 75,000 shares of Coram Common Stock
at an exercise price of $11.00 per share, the fair market value on such date.
Accordingly, Messrs. Fink, Pagliuca and Smith each received such a 75,000-share
option grant. On November 7, 1994, the date of her appointment to the Coram
Board of Directors, Dr. Wilensky received an automatic option grant for 75,000
shares of Coram Common Stock at an exercise price of $15.375 per share. Each
75,000-share option grant is immediately exercisable for all of the option
shares. However, any shares purchased under the option will be subject to
repurchase by Coram at the original exercise price paid per share upon the
optionee's cessation of Board service prior to vesting in such shares. With
respect to the options granted to Messrs. Fink, Pagliuca and Smith, the optionee
will vest in twenty-five percent (25%) of the option shares upon completion of
one year of Board service measured from July 8, 1994 and will vest in the
balance in a series of equal monthly installments over the next thirty-six (36)
months of Board service thereafter. Dr. Wilensky will vest in 25% of the option
shares upon completion of one year of service measured from the grant date and
will vest in the balance in a series of equal monthly installments over the next
thirty-six (36) months of Board service thereafter.

On July 28, 1994, Mr. Carter received a non-statutory stock option grant to
purchase 94,500 shares of Coram Common Stock at an exercise price of $11.00 per
share. The option becomes exercisable in a series of three (3) successive equal
annual installments over Mr. Carter's period of Board service, with the first
such installment to become exercisable on the first anniversary of the option
grant date.

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On the date of each annual stockholders meeting, beginning with the 1995
Annual Meeting, each individual who will continue to serve as a non-employee
Board member will receive a non-statutory stock option to purchase 2,500 shares
of Coram Common Stock at an exercise price equal to the fair market value of the
Coram Common Stock on the automatic option grant date. Each option will be
immediately exercisable for all of the option shares. However, any shares
purchased under the option will be subject to repurchase by Coram at the
original exercise price paid per share upon the optionee's cessation of Board
service prior to vesting in such shares. The optionee will vest in the option
shares in a series of equal monthly installments over twelve (12) months of
Board service measured from the automatic option grant date.

The shares subject to the option granted to Mr. Carter and to each
automatic option granted to the other non-employee Board members under the Coram
Option Plan will vest in full upon (i) the optionee's cessation of Board service
due to death or disability, (ii) an acquisition of Coram by merger or asset sale
or (iii) a hostile change in control of Coram.

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

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS

The following table provides certain summary information concerning the
comp ensation paid by Coram to Coram's Chief Executive Officer and each of the
other two most highly compensated executive officers (collectively, the "Named
Executive Officers"), determined as of the end of Coram's fiscal year for the
fiscal year ended December 31, 1994. Information with respect to fiscal years
prior to the last completed fiscal year is not provided because the registrant
was not a reporting company pursuant to Section 13(a) or 15(d) of the Exchange
Act at any time prior to July 8, 1994.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION(1) ------------
--------------------------------- STOCK
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION (#) COMPENSATION
- ------------------------------- ----- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James M. Sweeney............... 1994 $ -0- $ -- $ -- 3,000,000 $3,596,918(2)
Chairman and Chief Executive
Officer
Patrick J. Fortune............. 1994 161,762 87,000 171,129(3) 350,000 --
President and Chief Operating
Officer

Sam R. Leno.................... 1994 126,202 -- 31,769(4) 150,000 --
Vice President and Chief
Financial Officer
</TABLE>

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

(1) Reflects salary, bonus and other annual compensation paid by the registrant
since its formation on July 8, 1994.

(2) Consists of a cash fee paid to Mr. Sweeney for financial advisory services
rendered in connection with the formation of Coram pursuant to an agreement
with T2. See "Certain Relationships and Related Transactions."

(3) Consists of reimbursed expenses paid to Mr. Fortune in connection with his
move to Denver, Colorado.

(4) Consists of reimbursed expenses paid to Mr. Leno in connection with his move
to Denver, Colorado.

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<PAGE> 120

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning captions granted to
each of the Named Executive Officers during the fiscal year ended December 31,
1994. In addition, in accordance with the rules of the Commission, there are
shown hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. Except for the limited stock appreciation rights described in
footnote (3) below, no stock appreciation rights were granted to the Named
Executive Officers during the fiscal year ended December 31, 1994.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
--------------------------------------------------------------- RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE PRICE OPTION TERM(1)
OPTIONS EMPLOYEES IN PER SHARE -------------------------
NAME GRANTED(2)(3) FISCAL YEAR ($/SH)(4) EXPIRATION DATE 5% 10%
- ------------------- ------------- ------------ -------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
James M. Sweeney... 3,000,000 60.0 $11.00 July 27, 2004 $20,753,522 $52,593,503
Patrick J.
Fortune.......... 350,000 7.0 11.75 July 31, 2004 2,586,329 6,554,266
Sam R. Leno........ 150,000 3.0 11.00 July 27, 2004 1,037,676 2,629,675
</TABLE>

- ---------------
(1) Potential realizable value is determined by taking the exercise price per
share and applying the stated annual appreciation rate compounded annually
for the remaining term of the option (ten years), subtracting the exercise
price per share at the end of the period and multiplying the remaining
number by the number of options granted. Actual gains, if any, on stock
options exercises and Coram Common Stock holdings are dependent on the
future performance of the Coram Common Stock and overall stock market
conditions.

(2) The options granted to Messrs. Sweeney, Fortune and Leno are immediately
exercisable for all the option shares. However, any shares purchased under
the options will be subject to repurchase by Coram at the original exercise
price paid per share upon the optionee's cessation of service prior to
vesting in such shares. The optionee will vest in twenty-five percent (25%)
of the option shares upon completion of one year of service measured from
the grant date and will vest in the balance in a series of equal monthly
installments over the next thirty-six (36) months of service thereafter. The
shares subject to Mr. Sweeney's options will immediately vest in full upon
(i) an acquisition of Coram by merger or asset sale or (ii) a hostile change
in control of Coram, and the options will remain exercisable for such vested
shares until the expiration of the ten (10)-year option term. The shares
subject to Messrs. Fortune and Leno's options will immediately vest in full
upon an acquisition of Coram by merger or asset sale, unless Coram's
repurchase right with respect to the unvested option shares is transferred
to the acquiring entity. In the event either Messrs. Fortune or Leno's
service is involuntarily terminated within eighteen (18) months following
(i) an acquisition of Coram by merger or asset sale in which Coram's
repurchase right is assigned to the acquiring entity or (ii) a hostile
change in control of Coram, all unvested shares subject to such options will
immediately vest in full. Each of Messrs. Fortune and Leno's options have a
maximum term of 10 years, subject to earlier termination in the event of the
cessation of their service with Coram.

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

(4) The exercise price for each option may be paid in cash, in shares of Coram's
Common Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. Coram may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any Federal and state income tax liability incurred by the
optionee in connection with such exercise.

112
<PAGE> 121

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

The following table sets forth information concerning the aggregate number
of options exercised during the fiscal year ended December 31, 1994, by each of
the Named Executive Officers of Coram and outstanding options held by each such
officer at December 31, 1994. None of the Named Executive Officers exercised any
stock appreciation rights during the 1994 fiscal year. The stock appreciation
held by such individuals at the end of that fiscal year are described at
footnote (3) above, under "Option Grants in Last Fiscal Year."

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS AT DECEMBER VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
31, 1994 AT DECEMBER 31, 1994(2)
------------------------------------------- -------------------------------------------
SHARES EXERCISABLE/ EXERCISABLE/
ACQUIRED ON VALUE SUBJECT TO SUBJECT TO
NAME EXERCISE REALIZED EXERCISABLE REPURCHASE(1) UNEXERCISABLE EXERCISABLE REPURCHASE(1) UNEXERCISABLE
- ------------- ----------- -------- ----------- ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James M.
Sweeney..... -- -- 0 3,000,000 0 $ 0 $16,500,000 $ 0
Patrick J.
Fortune..... -- -- 0 350,000 0 0 1,662,500 0
Sam R.
Leno........ -- -- 0 150,000 0 0 825,000 0
</TABLE>

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

(1) The options granted to Messrs. Sweeney, Fortune and Leno are immediately
exercisable for all the option shares. However, any shares purchased under
the options are subject to repurchase by Coram, at the original exercise
price paid per share, upon the optionee's cessation of service prior to
vesting in such shares. Each optionee will vest in the option shares in a
series of installments upon the optionee's continued service over a four
(4)-year period measured from the option grant date. No option shares have
vested as of December 31, 1994.

(2) Value is determined by subtracting the exercise price from the fair market
value (the closing price for the Common Stock as reported by the New York
Stock Exchange) as of December 30, 1994 ($16.50) and multiplying the
resulting number by the number of underlying shares of Common Stock.

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

Coram does not presently have any employment contracts in effect with the
Chief Executive Officer or any of the other executive officers named in the
Summary Compensation Table.

The shares subject to the options granted to Coram's Chief Executive
Officer under the 1994 Stock Option/Stock Issuance Plan (as described above in
Footnote (2) to the Individual Grants Table in the section entitled "Option
Grants in Last Fiscal Year") will immediately vest in full upon (i) an
acquisition of Coram by merger or asset sale or (ii) a hostile change in control
of Coram. The Merger will not cause such shares to vest in full.

The shares subject to the options granted to the other Named Executive
Officers will immediately vest in full upon an acquisition of Coram by merger or
asset sale, unless such options are assumed by the acquiring entity. In the
event the optionee's service is involuntarily terminated within eighteen (18)
months following (i) an acquisition of Coram by merger or asset sale in which
the option is assumed by the acquiring entity or (ii) a hostile change in
control of Coram, the shares subject to such options will immediately vest in
full.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Richard A. Fink and Stephen G. Pagliuca were the only two members of the
Compensation Committee of Coram during the last completed fiscal year. Messrs.
Fink and Pagliuca are both non-employee directors of Coram who have not
previously been in Coram's employ. Mr. Fink is a partner in a law firm that
rendered various legal services to Coram in 1994. No executive officer of Coram
serves as a member of the board of directors or compensation committee of any
entity which has one or more executive officers serving as a member of Coram's
Board of Directors or Compensation Committee.

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<PAGE> 122

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

As members of the Compensation Committee of Coram's Board of Directors, it
is our duty to set the base salary of certain executive officers each fiscal
year and to approve the individual bonus programs to be in effect for those
individuals. In addition, we have the exclusive authority to award stock options
under the Coram Option Plan to Coram's executive officers and other key
employees. The following is a summary of the policies which governed our
decisions concerning the compensation paid to Coram's executive officers for the
fiscal year ended December 31, 1994, including the compensation reflected in the
tables which appear elsewhere in this Proxy Statement.

GENERAL COMPENSATION POLICY

Introduction. Coram was established in July 1994 through the merger of four
separate publicly-held corporations. Our major objective for the 1994 fiscal
year was to implement a compensation structure which would retain the services
of those executive officers of the four merged companies who we identified as
essential to Company's long-term financial success. Accordingly, we developed a
compensation policy with three major objectives: (i) maintain the base salary
levels of the executive officers at substantially the level in effect for them
at the time of the merger, (ii) provide a significant equity component in the
form of stock option grants which would serve to strengthen the mutuality of
interests between the executive officers and Coram's shareholders, and (iii)
establish an annual bonus program tied to both Coram's attainment of financial
objectives and the individual's level of performance.

Factors. The primary factors which we considered in establishing the
components of each executive officer's compensation package for the 1994 fiscal
year are summarized below. We may, however, apply entirely different factors,
particularly different measures of performance, in setting executive
compensation for future fiscal years.

* Base Salary. As indicated, the base salary of each executive officer for
the 1994 fiscal year was maintained at substantially the same level in effect
for that individual at the time of the merger. As a result, we did not exercise
any independent judgment with respect to the base salary levels in effect for
Coram's executive officers for the 1994 fiscal year and simply retained the
rates of base salary previously established for those individuals by the merged
companies with which they were employed at the time of the merger. On the basis
of our knowledge of the home health care industry, we believe that these base
salary levels are competitive with the companies in the home health care
industry with which Coram competes for executive talent. However, we did not,
through one or more external salary surveys for the industry, independently
confirm the specific percentiles at which the base salary levels in effect for
Coram's executive officers stood in relation to other companies in the industry.
We felt that the most appropriate vehicle to incent Coram's executive officers
to remain with the company and to contribute to Coram's financial success was to
have a substantial portion of their total compensation package be in the form of
the long-term equity component described below.

Because it was not our intent for the 1994 fiscal year to target the base
salary levels in effect for the executive officers at a designated percentile of
the salary levels in effect for other companies in the home health care
industry, there is no meaningful correlation between Coram's salary levels and
the rates of base salary in effect for those companies which are taken into
account in the Industry Index utilized for purposes of the stock price
performance graph which follows this report.

* Long-Term Incentive Compensation. The option grants which we make under
the Coram Option Plan to the executive officers are intended to advance our
overall objective in subjecting a substantial portion of each officer's
compensation package to Company performance measured in terms of stock price
appreciation. Accordingly, the option grants were designed to align the
interests of Coram's executive officers with those of the shareholders and
provide each officer with a significant incentive to manage Coram from the
perspective of an owner with an equity stake in the business. Each grant allows
the executive officer to acquire shares of Coram Common Stock at a fixed price
per share (the market price on the grant date) over a specified period of time
(up to ten years). The option shares vest in periodic installments over a
specified period (generally four years), contingent upon the executive officer's
continued employment with Coram. Accordingly, the

114
<PAGE> 123

option will provide a return to the executive officer only if he or she remains
with Coram, and then only if the price of Coram's Common Stock appreciates.

The size of the option grant to each executive officer was set at a level
which we felt was appropriate to create a meaningful opportunity for stock
ownership based upon the executive officer's current position with Coram,
internal comparability with option grants made to other Company executives, the
executive officer's current level of performance and his or her potential for
future responsibility and promotion over the option term. We also took into
account the number of unvested options held by the executive officer at the time
of the new grant, including options granted to such individual prior to the July
1994 merger by his or her former employer and assumed by Coram in the merger.

We have established certain general guidelines by which we seek to target a
fixed number of unvested option shares for each executive officer based upon his
or her current position with Coram and his or her potential for growth within
Coram, i.e. future responsibilities and possible promotions over the option
term. However, we do not strictly adhere to these guidelines in making stock
option grants, and the relative weight which we give to the various factors
varies from individual to individual, as the circumstances warrant.

* Annual Incentive Compensation. For the 1994 fiscal year, we awarded a
performance bonus to Mr. Fortune, Coram's President and Chief Operating Officer,
in an amount equal to 54% of his base salary. This bonus was awarded in lieu of
a bonus that Mr. Fortune would have been entitled to receive had he remained
with his previous employer. No other executive officers were awarded bonuses for
the 1994 fiscal year.

CEO COMPENSATION

Coram's Chief Executive Officer, Mr. James M. Sweeney, did not receive a
salary with respect to services rendered to Coram in the 1994 fiscal year. Mr.
Sweeney was a paid a consulting fee of approximately $3.5 million for financial
services rendered pursuant to an agreement which he entered into with T2
Medical, Inc. prior to the consummation of the July, 1994 merger of that company
with Coram. The amount of the fee paid to Mr. Sweeney was determined as a fixed
percentage of the average total market capitalization of Coram, as determined
over the ten (10) trading day period immediately following the merger.
Accordingly, we did not exercise any discretion with respect to this particular
payment. In addition, Mr. Sweeney will not be paid any base salary for his
continued service as Chief Executive Officer during the 1995 fiscal year.

On the effective date of the Four-Way Merger, Mr. Sweeney was granted an
option for 3,000,000 shares of Coram Common Stock as the principal inducement
for him to serve as Coram's Chairman of the Board. The option has an exercise
price per share of $11 based on the market price of the common stock on the
grant date and will vest in a series of installments as Mr. Sweeney continues in
Coram's service over the four year period measured from the grant date.
Accordingly, Mr. Sweeney's compensation is tied directly to shareholder value in
the form of stock price appreciation over the period of his continued service
with Coram, and there is no guaranteed level of compensation in effect for him.

COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)

As a result of Section 162(m) of the Internal Revenue Code, Coram is
allowed a federal income tax deduction for compensation paid to certain
executive officers, to the extent that compensation does not exceed $1 million
per officer in any one year. This limitation applies to all compensation paid to
the covered executive officers which is not considered to be performance based.
However, any payments which qualify as performance-based compensation are not
taken into account for purposes of this limitation. On the basis of this
distinction, the Coram Option Plan has been specifically designed to assure that
any compensation deemed paid in connection with the exercise of stock options
granted under that plan with an exercise price equal to the fair market value of
the option shares on the grant date will qualify for performance-based
treatment.

We do not expect that the compensation to be paid to Coram's executive
officers for the 1995 fiscal year will exceed the $1 million limit per officer.
Accordingly, until final Treasury regulations are issued with respect

115
<PAGE> 124

to the new $1 million limitation, we will defer any decision on whether or not
to restructure one or more components of the compensation paid to the executive
officers so as to qualify those components as performance-based compensation
that will not be subject to the $1 million limitation.

The foregoing report has been submitted by the undersigned in our capacity
as members of the Compensation Committee of Coram's Board of Directors.

Richard A. Fink
Stephen G. Pagliuca

STOCK PERFORMANCE GRAPH

The following graph shows a comparison of the cumulative total stockholder
returns assuming reinvestment of dividends for (i) Coram, (ii) the companies
included in the Standard & Poor 500 Stock Index and (iii) the companies
comprising the Dow Jones Industry Index for Health Care Providers for the period
commencing July 11, 1994, the date Coram Common Stock was first publicly traded,
through December 31, 1994. The stockholder returns are based upon an assumed
$100 investment made on July 11, 1994 in each of three charted alternatives.

<TABLE>
<CAPTION>
CORAM HEALTH- DJ HEALTH
Measurement Period CARE COR- CARE PROVID-
(Fiscal Year Covered) PORATION S&P 500 ERS
--------------------- ------------- ------- ------------
<S> <C> <C> <C>
7/94 100 100 100
12/94 115 104 101
</TABLE>

116
<PAGE> 125

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT OF CORAM

The following table sets forth as of April 27, 1995, the number of owners
of Coram's outstanding Common Stock, beneficially owned by (i) each person known
to Coram to be the owner of more than 5% of any such class, (ii) each of Coram's
directors, (iii) each of the Named Executive Officers and (iv) all directors and
executive officers of Coram as a group. All information is taken from or based
upon ownership filings made by such persons with the Commission or upon
information provided by such persons to Coram. Unless otherwise indicated, the
address of each person named below is 1125 Seventeenth Street, Suite 1500,
Denver, Colorado 80202.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK(1) COMMON STOCK OUTSTANDING(1)
- --------------------------------------------------- ------------------ ---------------------------
<S> <C> <C>
James M. Sweeney(2)................................ 3,000,000 7.0*
Patrick J. Fortune(3).............................. 350,000 *
Olav B. Bergheim(4)................................ -0- --
Sam R. Leno(5)..................................... 150,000 *
Tommy H. Carter(6)................................. 77,587 *
Richard A. Fink(7)................................. 75,000 *
Stephen G. Pagliuca(8)............................. 75,000 *
L. Peter Smith(9).................................. 135,081 *
Dr. Gail R. Wilensky(10)........................... 75,000 *
All Executive Officers and Directors as a group (9
persons)(11)..................................... 3,937,668 9.0%
Tiger Management Corporation(12)................... 3,672,596 9.3%
</TABLE>

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

* Less than 1%

(1) Shares of Coram Common Stock subject to options or warrants which are
currently exercisable or exercisable within 60 days are deemed outstanding
for computing the percentage of the person holding such options or warrants
but are not deemed outstanding for computing the percentage of any other
person. Except as indicated by footnote, Coram understands that the persons
named in the table above have sole voting and investment power with respect
to all shares of Coram Common Stock shown as beneficially owned by them. No
percent of class is shown for holdings of less than 1%. Percentage
computations are based on 39,682,277 shares of Coram Common Stock
outstanding as of April 27, 1995.

(2) Includes 3,000,000 shares subject to an option granted to Mr. Sweeney on
July 28, 1994, which option is immediately exercisable, but any option
shares purchased thereunder will be unvested and subject to repurchase by
Coram at the original exercise price paid per share upon the optionee's
cessation of service prior to the vesting of such shares. The optionee will
vest as to 25% of the option shares upon July 7, 1995 and will vest as to
the balance of the option shares in a series of successive equal monthly
installments upon his completion of each additional month of service with
Coram over the next thirty-six (36) months thereafter.

(3) Includes 350,000 shares subject to an option granted to Mr. Fortune on
August 1, 1994 (the "August Option Grant"), which option is immediately
exercisable, but any option shares purchased thereunder will be unvested
and subject to repurchase by Coram at the original exercise price paid per
share upon the optionee's cessation of service prior to the vesting of such
shares. The optionee will vest as to 25% of the option shares upon August
1, 1995 and will vest as to the balance of the option shares in a series of
successive equal monthly installments upon his completion of each
additional month of service with Coram over the next thirty-six (36) months
thereafter. Does not include 50,000 shares subject to an option granted to
Mr. Fortune on February 1, 1995, which options will vest as to 25% of the
option shares upon February 1, 1996, and will vest as to the balance in the
same manner as the August Option Grant.

(4) Does not include 300,000 shares subject to an option granted to Mr.
Bergheim on March 8, 1995, which option will vest as to 25% of the option
shares on March 8, 1996, and will vest as to the balance of the option
shares in a series of successive equal monthly installments upon his
completion of each additional month of service with Coram over the next
thirty-six (36) months hereafter.

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<PAGE> 126

(5) Includes 150,000 shares subject to an option granted to Mr. Leno on July
28, 1994, which option is immediately exercisable, but any option shares
purchased thereunder will be unvested and subject to repurchase by Coram at
the original exercise price paid per share upon the optionee's cessation of
service prior to the vesting of such shares. The optionee will vest as to
25% of the option shares upon July 7, 1995 and will vest as to the balance
of the option shares in a series of successive equal monthly installments
upon his completion of each additional month of service with Coram over the
next thirty-six (36) months thereafter.

(6) Does not include 94,500 shares subject to an option granted to Mr. Carter
on July 28, 1994, which option will vest in three equal and successive
annual installments over Mr. Carter's continued period of service with
Coram measured from July 28, 1994 and which was granted to Mr. Carter in
cancellation of his existing contractual right to receive an option grant
for 150,000 shares of T2 Common Stock in September 1994.

(7) Includes 75,000 shares subject to an option granted to Mr. Fink on July 28,
1994, which option is immediately exercisable, but any option shares
purchased thereunder will be unvested and subject to repurchase by Coram at
the original exercise price paid per share upon the optionee's cessation of
services prior to the vesting of such shares. The optionee will vest as to
25% of the option shares upon July 7, 1995 and will vest as to the balance
of the option shares in a series of successive equal monthly installments
upon his completion of each additional month of Board service with Coram
over the next thirty-six (36) months thereafter.

(8) Includes 75,000 shares subject to an option granted to Mr. Pagliuca on July
28, 1994, which option is immediately exercisable, but any option shares
purchased thereunder will be unvested and subject to repurchase by Coram at
the original exercise price paid per share upon the optionee's cessation of
service prior to the vesting of such shares. The optionee will vest as to
25% of the option shares upon July 7, 1995 and will vest as to the balance
of the option shares in a series of successive equal monthly installments
upon his completion of each additional month of Board service with Coram
over the next thirty-six (36) months thereafter.

(9) Includes 75,000 shares subject to an option granted to Mr. Smith on July
28, 1994, which option is immediately exercisable, but any option shares
purchased thereunder will be unvested and subject to repurchase by Coram at
the original exercise price paid per share upon the optionee's cessation of
service prior to the vesting of such shares. The optionee will vest as to
25% of the option shares upon July 7, 1995 and will vest as to the balance
of the option shares in a series of successive equal monthly installments
upon his completion of each additional month of Board service with Coram
over the next thirty-six (36) months thereafter.

(10) Includes 75,000 shares subject to an option granted to Dr. Wilensky on
November 7, 1994, which option is immediately exercisable, but any option
shares purchased thereunder will be unvested and subject to repurchase by
Coram at the original exercise price paid per share upon the optionee's
cessation of service prior to the vesting of such shares. The optionee will
vest as to 25% of the option shares upon November 7, 1995 and will vest as
to the balance of the option shares in a series of successive equal monthly
installments upon her completion of each additional month of Board service
with Coram over the next thirty-six (36) months thereafter.

(11) Includes an aggregate of 3,800,000 shares subject to options that have been
granted to Messrs. Sweeney, Fortune, Bergheim, Leno, and all non-employee
directors of Coram following consummation of the Merger, which options have
the terms and conditions described in footnotes (2)-(10).

(12) Includes an aggregate of 3,672,596 shares of Coram Common Stock which may
be deemed to be beneficially owned by Tiger Management Corporation, a
Delaware Corporation ("TMC"), Panther Partners L.P., a Delaware limited
partnership ("Panther"), Panther Management Company L.P., a Delaware
limited partnership ("PMCLP"), and Julian H. Robertson, Jr.

118
<PAGE> 127

CERTAIN RELATIONSHIPS AND TRANSACTIONS

Mr. Sweeney was paid a fee of approximately $3.5 million for financial
advisory services pursuant to an agreement with T2 in connection with the merger
(the "Merger") which formed Coram on July 8, 1994. The fee paid to Mr. Sweeney
was determined as a percentage of the average total market capitalization of
Coram as determined over the ten trading day period immediately following the
Merger. In connection with the relocation of Coram's corporate headquarters to
Denver, Colorado, Coram made a loan of $650,000 to Mr. Leno which loan bears
interest at the applicable interest rate under the Internal Revenue Code. The
principal amount of such loans is due no later than one year from the date of
origination. Mr. Fink is a partner in a law firm that rendered various legal
services to Coram in 1994 and continuing to render such services in 1995.

Mr. Charles A. Laverty served briefly as an executive officer and director
of Coram during the last fiscal year. As a result of the Merger and
restructuring of Coram, Mr. Laverty became eligible to receive certain payments
pursuant to the terms of an Employment Contract dated as of July 8, 1994 between
Mr. Laverty and Coram, including a severance/noncompete payment of $2.5 million
payable in 36 monthly installments. In 1994, payments under such contract
totaled approximately $536,300. Coram also forgave a note in the amount of
approximately $400,000 from Mr. Laverty, payable to a predecessor entity of
Coram, as part of Mr. Laverty's severance.

Mr. Miles E. Gilman served briefly as an executive officer and director of
Coram during the last fiscal year. As a result of the Merger and restructuring
of Coram, Mr. Gilman received certain payments pursuant to the terms of a
Severance/Non-Compete Agreement dated as of July 8, 1994 between Mr. Gilman and
Coram, including a severance payment of $326,000 and a post-termination
noncompete covenant payment of $2,000,000.

Mr. William J. Brummond served briefly as an executive officer and director
of Coram during the last fiscal year. As a result of the Merger and
restructuring of Coram, Mr. Brummond became eligible to receive certain payments
pursuant to the terms of a Severance/Noncompete Agreement dated as of July 8,
1994, between Mr. Brummond and Coram, including a severance/noncompete payment
of approximately $822,000, payable in 36 monthly installments. In 1994, payments
under such contract totaled approximately $400,000.

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<PAGE> 128

AMENDMENT OF CORAM'S
CERTIFICATE OF INCORPORATION

Approval and adoption of the Merger Agreement by the holders of the
outstanding shares of Coram Common Stock will also constitute approval of the
amendment of Coram's Certificate of Incorporation to increase the number of
authorized shares of Coram Common Stock (the "Authorized Shares Amendment"). The
Authorized Shares Amendment would increase the number of authorized shares of
Coram Common Stock from 75,000,000 shares to 200,000,000 shares effective upon
consummation of the Merger. Without such amendment, Coram would have
insufficient shares of Common Stock authorized to consummate the Merger. In
addition, the Coram Board of Directors believes that the adoption of the
Authorized Shares Amendment is advantageous to Coram and its stockholders,
providing additional authorized shares of Coram Common Stock that could be used
from time to time, without further action or authorization by the stockholders
(except as may be required by law or by any stock exchange on which Coram
securities may then be issued), for corporate purposes which the Coram Board may
deem desirable, including, without limitation, stock splits, stock dividends or
other distributions, financings, acquisitions, stock grants, stock options and
employee benefit plans. While Coram has no present plans, agreements or
commitments for the issuance of additional shares of Coram Common Stock (except
in connection with the Merger as described herein), other than pursuant to its
employee benefit plans, upon the exercise of stock options and warrants and the
conversion of outstanding debt securities, the Coram Board of Directors believes
that the availability of these shares would allow Coram to issue additional
shares of Coram Common Stock if market or other conditions indicate that such a
course of action is advisable.

The foregoing is a summary of the proposed amendment to Coram's Certificate
of Incorporation. The foregoing summary is qualified in its entirely by
reference to the complete text of such amendment, a copy of which is attached as
Appendix D hereto and is underscored to reflect changes from Coram's current
Certificate of Incorporation.

APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY THE HOLDERS OF CORAM
COMMON STOCK WILL CONSTITUTE APPROVAL OF THE FOREGOING AMENDMENT TO THE CORAM
CERTIFICATE OF INCORPORATION.

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<PAGE> 129

PROPOSAL TO ELECT CORAM DIRECTORS

INTRODUCTION

Seven directors are to be elected and qualified at the Coram Meeting. In
the absence of written instructions to the contrary, proxies representing shares
of Coram Common Stock will be voted FOR the election of each of the persons
listed in the following paragraph as directors of Coram for a term commencing on
the date of the Coram Meeting and continuing until the next Annual Meeting of
Stockholders and until their successors have been duly elected and qualified;
provided, however, that if the Merger Agreement and the transactions
contemplated thereby (including the amendment to the Coram Certificate of
Incorporation) are approved and the Merger is consummated, pursuant to the
Merger Agreement, James T. Kelly and Frank T. Cary will be appointed to Coram's
Board of Directors. See "The Merger Agreement--Management After the Merger." In
the event that any nominee for director should become unavailable or declines to
serve, it is intended that votes will be cast, pursuant to the enclosed proxy,
for an additional nominee designated by Coram. As of the date of this Joint
Proxy Statement/Prospectus, the Coram Board of Directors has no knowledge that
any of the persons named will be unavailable or will decline to serve. None of
the nominees has any family relationship among themselves or with any executive
officer of Coram.

INFORMATION CONCERNING INCUMBENT DIRECTORS AND NOMINEES TO THE CORAM BOARD OF
DIRECTORS

Information is set forth below concerning the nominees for election as
directors of Coram. All of the incumbent directors are nominees for election as
directors at the Coram Meeting. Each nominee has furnished information as to his
beneficial ownership of Coram Common Stock as of May , 1995, and, if not
employed by Coram, the nominee's principal occupation. Each nominee has
consented to being named in this Joint Proxy Statement/Prospectus, as a nominee
for director of Coram and has agreed to serve as a director of Coram if elected.
None of the nominees for director has entered into any arrangement or
understanding pursuant to which such person is to be selected as a director or
nominee for director.

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH CORAM SINCE
- ---------------------------------------- --- ----------------------------------- --------
<S> <C> <C> <C>
James M. Sweeney........................ 52 Director, Chairman and Chief 1994
Executive Officer
Patrick J. Fortune...................... 47 Director, President and Chief 1994
Operating Officer
Tommy H. Carter......................... 52 Director 1994
Richard A. Fink......................... 40 Director 1994
Stephen G. Pagliuca..................... 40 Director 1994
L. Peter Smith.......................... 45 Director 1994
Dr. Gail R. Wilensky.................... 50 Director 1994
</TABLE>

For biographical information with respect to each of the nominees, see
"Management of Coram."

THE CORAM BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" APPROVAL OF ALL NOMINEES FOR DIRECTOR TO SERVE
UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED

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<PAGE> 130

PROPOSAL TO AMEND THE CORAM OPTION PLAN

INTRODUCTION

The stockholders are being asked to vote on a proposal to approve an
amendment to the Coram Option Plan which will increase the number of shares of
Common Stock reserved for issuance under the Coram Option Plan by an additional
4,400,000 shares. The Coram Board of Directors believes that the share increase
is appropriate in light of the significant increase in the number of outstanding
shares of Common Stock which will result from the consummation of the Merger.
The 7,600,000 shares reserved for issuance under the Coram Option Plan prior to
the share-increase amendment represent approximately 19% of the total number of
shares of Common Stock outstanding prior to the Merger. If both the 4,400,000
share increase to the Coram Option Plan and the Merger are approved by the
stockholders at the Annual Meeting, then the resulting 12,000,000 share reserve
under the Coram Option Plan will represent approximately 14% of the total number
of shares of Common Stock which will be outstanding immediately after the
Merger. The increased share reserve will allow Coram to continue to use equity
incentives as the primary vehicle to attract and retain the services of key
individuals essential to Coram's long-term success.

The Coram Option Plan originally became effective on July 8, 1994, and the
4,400,000 share increase was authorized by the Coram Board of Directors on
, 1995, subject to stockholder approval at the Annual Meeting. The
affirmative vote of a majority of the outstanding shares of Common Stock present
or represented by proxy and entitled to vote at the Annual Meeting is required
for approval of the amendment to the Coram Option Plan.

The terms and provisions of the Coram Option Plan are summarized below. The
summary, however, does not purport to be a complete description. Copies of the
actual plan document may be obtained by any stockholder upon written request to
Coram's Secretary at the corporate offices in Denver, Colorado.

EQUITY INCENTIVE PROGRAMS

The Coram Option Plan contains three separate equity incentive programs:
(i) the Discretionary Option Grant Program under which key employees, certain
non-employee directors and consultants may be granted options to purchase shares
of the Common Stock, (ii) the Automatic Option Grant Program under which option
grants are to be made at specific intervals to the non-employee members of the
Coram Board of Directors and (iii) the Stock Issuance Program under which
eligible individuals may be issued shares of Common Stock directly, either
through the immediate purchase of those shares or as a bonus tied to the
performance of services or Coram's attainment of financial milestones.

SHARE RESERVE

The maximum number of shares of Common Stock issuable over the term of the
Coram Option Plan may not exceed 12,000,000 shares (including the 4,400,000
shares subject to approval under this Proposal). The shares may be drawn from
either authorized but previously unissued shares of Coram's Common Stock or from
shares reacquired by Coram, including shares purchased by Coram on the open
market and held as treasury shares. In no event, however, may any one individual
be granted stock options, separately exercisable stock appreciation rights or
direct stock issuances for more than 5,000,000 shares of Common Stock in the
aggregate over the term of the Coram Option Plan.

If any change is made to the outstanding shares of Common Stock by reason
of any recapitalization, stock dividend, stock split, combination of shares,
exchange of shares or other change in corporate structure effected without
Coram's receipt of consideration, appropriate adjustments will be made to (i)
the maximum number and/or class of securities issuable under the Coram Option
Plan, (ii) the maximum number and/or class of securities for which any one
individual may be granted stock options, separately exercisable stock
appreciation rights and direct share issuances over the term of the Coram Option
Plan, (iii) the number and/or class of securities and price per share in effect
under each outstanding option and (iii) the number and/or class of securities
for which option grants will subsequently be made under the Automatic Option
Grant Program to each newly-elected or continuing non-employee Board member.

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<PAGE> 131

PLAN ADMINISTRATION

The Compensation Committee of the Coram Board of Directors serves as the
primary administrator of the Discretionary Option Grant and Stock Issuance
Programs, with full power and authority to determine the awards which are to be
made under those programs. The Coram Board of Directors or any other committee
of the Coram Board of Directors may exercise separate but concurrent
jurisdiction over those two programs with respect to option grants and stock
issuances made to individuals who are not subject to the short-swing profit
restrictions of the Federal securities laws. All grants under the Automatic
Option Grant Program will be made in strict compliance with the express
provisions of that program, and no administrative discretion with respect to
those grants will be exercised by the Compensation Committee, the Coram Board of
Directors or any other Board committee.

The Compensation Committee in its capacity as primary administrator of the
Discretionary Option Grant and Stock Issuance Programs and any other entity
exercising administrative discretion under those programs will be collectively
referred to in this summary as the Plan Administrator.

ELIGIBILITY

Officers and other key employees of Coram or its operating subsidiaries,
the non-employee members of the board of directors of any operating subsidiary
who are not otherwise serving as members of the Coram Board of Directors, and
independent consultants and advisors to Coram and its operating subsidiaries
will be eligible to participate in the Discretionary Option Grant and Stock
Issuance Programs. Non-employee members of the Coram Board of Directors will
only be eligible to participate in the Automatic Option Grant Program.

As of April 30, 1995, it was estimated that four (4) executive officers and
31 other key employees were eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs, and five (5) non-employee Board members were
eligible to participate in the Automatic Option Grant Program.

VALUATION

The fair market value per share of Coram Common Stock on any relevant date
under the Coram Option Plan will be the closing selling price per share on that
date, as reported on the New York Stock Exchange. If there is no reported
selling price for such date, then the closing selling price for the last
previous date for which such quotation exists will be determinative of fair
market value.

The fair market value of the Common Stock on the Record Date was $ per
share.

DISCRETIONARY OPTION GRANT PROGRAM

The principal features of the Discretionary Option Grant Program may be
summarized as follows:

The exercise price of each granted option will not be less than 85% of the
fair market value of the Coram Common Stock on the grant date. No option will
have a maximum term in excess of ten years measured from the grant date. The
Plan Administrator will have complete discretion to grant options (i) which are
immediately exercisable for vested shares, (ii) which are immediately
exercisable for unvested shares subject to Coram's repurchase rights or (iii)
which become exercisable in installments for vested shares over the optionee's
period of service.

Upon cessation of service, the optionee will have a limited period of time
in which to exercise his or her outstanding options for any or all vested shares
for which those options are exercisable at the time of such cessation of
service. The Plan Administrator will have complete discretion to extend the
period following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of those options in whole or in part. Such discretion may be exercised
at any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.

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<PAGE> 132

Any unvested shares of Coram Common Stock will be subject to repurchase by
Coram, at the original exercise price paid per share, upon the optionee's
cessation of service prior to vesting in those shares. The Plan Administrator
will have complete discretion in establishing the vesting schedules for such
unvested shares and will have full authority to cancel Coram's outstanding
repurchase rights with respect to those shares in whole or in part at any time.

The Plan Administrator may grant options with tandem or limited stock
appreciation rights. Tandem stock appreciation rights provide the holders with
the right to surrender their options for an appreciation distribution from Coram
equal in amount to the excess of (i) the fair market value of the vested shares
of Common Stock subject to the surrendered option over (ii) the aggregate
exercise price payable for such shares. Such appreciation distribution may, at
the discretion of the Plan Administrator, be made in cash or in shares of Coram
Common Stock. Officers of Coram subject to the short-swing profit restrictions
of the Federal securities laws may also be granted limited stock appreciation
rights in connection with their option grants. Any option with such a limited
stock appreciation right in effect for at least six months may be surrendered to
Coram upon the successful completion of a hostile tender offer for securities
possessing more than 50% of the combined voting power of Coram's outstanding
securities. In return for the surrendered option, the officer will be entitled
to a cash distribution from Coram in an amount per surrendered option share
equal to the excess of (i) the highest price per share of Coram Common Stock
paid in such hostile tender offer over (ii) the option exercise price.

The Plan Administrator will have the authority to effect, on one or more
separate occasions, the cancellation of outstanding options under the
Discretionary Grant Program which have exercise prices in excess of the then
current market price of the Coram Common Stock and to issue replacement options
with an exercise price based on the market price of the Coram Common Stock at
the time of the new grant.

AUTOMATIC OPTION GRANT PROGRAM

Under the Automatic Grant Option Program, each individual who was serving
as a non-employee Board member on July 28, 1994 (other than Mr. Carter) received
at that time an option grant for 75,000 shares of Coram Common Stock with an
exercise price of $11.00 per share. A similar 75,000-share option grant will be
made to each individual who first becomes a non-employee Board member after July
28, 1994, whether through election by Coram's stockholders or appointment by the
Coram Board of Directors. In addition, on the date of each Annual Stockholders
Meeting, beginning with the 1995 Annual Meeting, each individual who will
continue to serve as a non-employee Board member will automatically be granted,
whether or not he or she is standing for re-election at that particular Annual
Meeting, a stock option to purchase 2,500 shares of Coram Common Stock, provided
such individual has served as a non-employee Board member for at least six
months. There will be no limit on the number of such 2,500-share option grants
any one non-employee Board member may receive over his or her period of Board
service.

If the Lincare Merger is effected, then Messrs. Kelly and Cary will, upon
their subsequent appointment to the Board, each receive an automatic option
grant for 75,000 shares of Coram Common Stock.

Each option granted under the Automatic Grant Program will be subject to
the following terms and conditions:

- Each option granted will be a non-statutory option and will have a
maximum term of ten years measured from the grant date, subject to earlier
termination upon the optionee's cessation of Board service under certain
circumstances.

- The exercise price per share will be equal to 100% of the fair
market value per share of the Coram Common Stock on the automatic grant
date.

- Each option will be immediately exercisable for all the option
shares, but any purchased shares will be subject to repurchase by Coram, at
the exercise price paid per share, upon the optionee's cessation of Board
service prior to vesting in those shares.

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<PAGE> 133

- The 75,000 shares subject to the initial automatic option grant made
to each non-employee Board member will vest as follows: twenty-five percent
(25%) of the option shares will vest upon the optionee's completion of one
year of Board service measured from the grant date (or from July 8, 1994
for the grant made on July 28, 1994), and the balance of the option shares
will vest in a series of successive equal monthly installments upon the
optionee's completion of each additional month of Board service over the
next thirty-six (36) months thereafter. The 2,500 shares subject to each
annual automatic grant will vest in a series of twelve (12) successive
equal monthly installments, with the first such installment to vest one
month after the automatic grant date.

- The shares subject to each automatic option grant will immediately
vest should any of the following events occur while the optionee continues
to serve on the Board: (i) the optionee's death or permanent disability,
(ii) an acquisition of Coram by merger or asset sale or (iii) a hostile
change in control of Coram (whether by successful tender offer for more
than 50% of the outstanding voting stock or by proxy contest for the
election of Board members).

- Upon the successful completion of a hostile tender offer for
securities possessing more than 50% of the combined voting power of Coram's
outstanding securities, each automatic option grant which has been
outstanding for at least six months may be surrendered to Coram for a cash
distribution per surrendered option share in an amount equal to the excess
of (A) the highest price per share of Common Stock paid in such hostile
tender offer over (B) the exercise price payable per share.

STOCK ISSUANCE PROGRAM

Shares may be sold under the Stock Issuance Program at a price per share
not less than 85% of fair market value, payable in cash or through a promissory
note payable to the Corporation. Shares may also be issued solely as a bonus for
past services.

Shares issued under the Stock Issuance Program may either be vested upon
issuance or subject to a vesting schedule tied to the participant's period of
service or Coram's attainment of designated performance goals. Unvested shares
will be subject to certain transfer restrictions and to repurchase or
cancellation by Coram upon either the participant's cessation of service prior
to vesting in those shares or the non-attainment of the applicable performance
goals. The Plan Administrator will, however, have the discretionary authority to
accelerate the vesting of any unvested shares in whole or in part at any time.

GENERAL PROVISIONS

OPTION/VESTING ACCELERATION

In the event that Coram is acquired by merger or asset sale, each option at
the time outstanding under the Coram Option Plan will automatically become
exercisable for all of the shares of Coram Common Stock at the time subject to
that option and may be exercised for any or all of such shares as fully-vested
shares. However, an outstanding option under the Discretionary Option Grant
Program will not so accelerate if and to the extent: (i) such option is either
to be assumed by the successor corporation (or parent thereof) or is otherwise
to be replaced by a comparable option to purchase shares of the capital stock of
the successor corporation (or parent thereof) or (ii) the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at the
time of grant. However, any outstanding option under the Discretionary Grant
Program which does not accelerate at the time of the acquisition will
automatically accelerate in full in the event the optionee's service terminates
within eighteen (18) months after such acquisition. Immediately following the
consummation of the acquisition, all outstanding options under the Coram Option
Plan will terminate and cease to be exercisable, except to the extent assumed by
the successor corporation (or its parent company).

All of Coram's outstanding repurchase rights under the Discretionary Option
Grant and Stock Issuance Programs will also terminate, and the shares subject to
those terminated rights will become fully vested, upon the acquisition, except
to the extent (i) one or more of those repurchase rights are expressly assigned
to the

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<PAGE> 134

successor corporation (or its parent company) or (ii) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
of issuance. However, any repurchase rights which continue in effect with
respect to an individual's unvested shares under the Coram Option Plan will
automatically terminate should that individual's service with Coram terminate
within eighteen (18) months after the acquisition.

In connection with a hostile change in control of Coram (whether by
successful tender offer for more than 50% of the outstanding voting stock or by
proxy contest for the election of Board members), the Plan Administrator has
full power and authority to provide for the acceleration of one or more
outstanding options under the Discretionary Option Grant Program so that each
such option will, immediately prior to the change in control, become exercisable
for the total number of shares of Coram Common Stock at the time subject to such
option and may be exercised for any or all of such shares as fully-vested
shares. The Plan Administrator may also provide for the automatic termination of
all of the outstanding repurchase rights held by Coram under the Discretionary
Option Grant and Stock Issuance Programs (with the concurrent vesting of the
shares subject to those terminated rights) in the event of such change in
control. Alternatively, the Plan Administrator may condition such accelerated
option vesting and termination of the repurchase rights upon the optionee's
cessation of service under certain prescribed circumstances following the change
in control.

The acceleration of vesting in the event of a change in the ownership or
control of Coram may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts to
gain control of Coram.

FINANCIAL ASSISTANCE

The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options granted under the Discretionary Grant
Program or the purchase price of shares issued under the Stock Issuance Program
by delivering a promissory note payable in installments. The Plan Administrator
will determine the terms of any such promissory note. However, the maximum
amount of financing provided any participant may not exceed the cash
consideration payable for the issued shares plus all applicable taxes incurred
in connection with the acquisition of the shares. Any such promissory note may
be subject to forgiveness in whole or in part, at the discretion of the Plan
Administrator, over the participant's period of service.

SPECIAL TAX ELECTION

The Plan Administrator may provide one or more holders of non-statutory
options or unvested shares under the Discretionary Grant or Stock Issuance
Program with the right to have Coram withhold a portion of the shares of Coram
Common Stock otherwise issuable to such individuals in satisfaction of the
Federal and state income and employment tax liability incurred by such
individuals in connection with the exercise of those options or the vesting of
the shares. Alternatively, the Plan Administrator may allow such individuals to
deliver previously acquired shares of Coram Common Stock in payment of such tax
liability.

AMENDMENT AND TERMINATION

The Board may amend or modify the Coram Option Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the Coram Option Plan at any time, and the Coram Option Plan will in all events
terminate on December 31, 2003.

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OPTION GRANTS

The table below shows, as to the executive officers named in the Summary
Compensation Table below and the various indicated groups, the following
information with respect to option transactions effected during the period from
July 8, 1994 to May 1, 1995: (i) the number of shares of Coram Common Stock
subject to options granted under the Coram Option Plan during that period and
(ii) the weighted average exercise price payable per share under such options.

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE OF
NAME AND POSITION OPTION SHARES GRANTED OPTIONS($)
------------------------------------------------------ ------------- ------------------
<S> <C> <C>
James M. Sweeney...................................... 3,000,000 11.00
Chairman and Chief Executive Officer
Patrick J. Fortune.................................... 400,000 12.99
President, Chief Operating Officer and Director
Olav Bergheim......................................... 300,000 22.25
Executive Vice President
Sam R. Leno........................................... 150,000 11.00
Vice President and Chief Financial Officer
All current executive officers as a group (4
persons)............................................ 3,850,000 12.08
Tommy H. Carter....................................... 94,500 11.00
Director
Richard A. Fink....................................... 75,000 11.00
Director
Stephen G. Pagliuca................................... 75,000 11.00
Director
L. Peter Smith........................................ 75,000 11.00
Director
Dr. Gail R. Wilensky.................................. 75,000 15.375
Director
All non-employee directors as a group (5 persons)..... 394,500 11.83
All employees, including officers who are not
executive officers, as a group (36 persons)......... 1,875,000 16.53
</TABLE>

As of May 1, 1995, no shares of Coram Common Stock had been issued under
the Coram Option Plan, 6,094,500 shares of Coram Common Stock were subject to
outstanding options, and 5,905,500 shares of Coram Common Stock were available
for future option grants including the 4,400,000-share increase which the
stockholders are being asked to approve under this Proposal. As of May 1, 1995,
no options had been granted on the basis of the 4,400,000 share increase.

FEDERAL INCOME TAX CONSEQUENCES

OPTION GRANTS

Options granted under the Coram Option Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
described below:

Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of

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<PAGE> 136

disposition. For Federal tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. The optionee will make a
qualifying disposition of the purchased shares if the sale or other disposition
of such shares is made after the optionee has held the shares for more than two
years after the grant date of the option and more than one year after the
exercise date. If the optionee fails to satisfy either of these two minimum
holding periods prior to the sale or other disposition of the purchased shares,
then a disqualifying disposition will result.

Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for those shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of those
shares on the option exercise date over (ii) the exercise price paid for the
shares will be taxable as ordinary income. Any additional gain recognized upon
the disposition will be a capital gain.

If the optionee makes a disqualifying disposition of the purchased shares,
then Coram will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such those on the option exercise date over (ii) the exercise price paid for
the shares. In no other instance will Coram be allowed a deduction with respect
to the optionee's disposition of the purchased shares. Coram anticipates that
the ordinary income recognized in connection with most disqualifying
dispositions of incentive stock option shares under the Coram Option Plan will
be deductible by Coram and will not have to be taken into account for purposes
of the $1 million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers.

Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.

Special provisions of the Internal Revenue Code apply to the acquisition of
unvested shares of Coram Common Stock under a non-statutory option. These
special provisions may be summarized as follows:

- If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by Coram at the original exercise price in the event
of the optionee's termination of service prior to vesting in those shares,
then the optionee will not recognize any taxable income at the time of
exercise but will have to report as ordinary income, as and when the
corporation's repurchase right lapses, an amount equal to the excess of (i)
the fair market value of the shares on the date the repurchase right lapses
with respect to those shares over (ii) the exercise price paid for the
shares.

- The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of the
non-statutory option an amount equal to the excess of (i) the fair market
value of the purchased shares on the exercise date over (ii) the exercise
price paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the
repurchase right lapses.

Coram will be entitled to a business expense deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the corporation in which such ordinary income is recognized by the
optionee. Coram anticipates that the ordinary income recognized upon the
exercise of most non-statutory options under the Coram Option Plan will be
deductible by Coram and will not have to be taken into account for purposes of
the $1 million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers.

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<PAGE> 137

STOCK APPRECIATION RIGHTS

An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. Coram will be entitled to a business expense deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.

DIRECT STOCK ISSUANCES

The tax principles applicable to direct stock issuances under the Coram
Option Plan will be substantially the same as those summarized above for the
exercise of non-statutory option grants.

ACCOUNTING TREATMENT

Option grants or stock issuances with exercise or issue prices less than
the fair market value of the shares on the grant or issue date will result in a
compensation expense to Coram's earnings equal to the amount by which the fair
market value of the shares on the grant or issue date exceeds the exercise or
issue price of the shares. Such expense will be accruable by Coram over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances at 100% of fair market value will not result in any charge to
Coram's earnings. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining Coram's earnings per share on
a fully-diluted basis.

Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in a compensation expense to be
charged against Coram's earnings. Accordingly, at the end of each fiscal
quarter, the amount (if any) by which the fair market value of the shares of
Coram Common Stock subject to such outstanding stock appreciation rights has
increased from the prior quarter-end will be accrued as compensation expense, to
the extent such fair market value is in excess of the aggregate exercise price
in effect for those rights.

STOCKHOLDER APPROVAL

The affirmative vote of a majority of the shares of Coram's outstanding
Common Stock present or represented by proxy at the Annual Meeting and entitled
to vote on this Proposal is required for approval of the amendment to the Coram
Option Plan which will increase the number of shares of Coram Common Stock
authorized for issuance under such Plan by an additional 4,400,000 shares. If
such stockholder approval is not obtained, then any options granted on the basis
of such share increase will terminate without becoming exercisable for any of
the shares of Coram Common Stock subject to those options, no additional options
will be granted on the basis of such share increase, and the Coram Option Plan
will terminate once the balance of the share reserve as last approved by the
stockholders has been issued pursuant to outstanding option grants or direct
stock issuances under the Coram Option Plan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF
CORAM VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE CORAM OPTION PLAN.

129
<PAGE> 138

LEGAL MATTERS

The legality of the shares of Coram Common Stock to be issued in connection
with the Merger will be passed upon for Coram by Brobeck, Phleger & Harrison,
Newport Beach, California. Reboul, MacMurray, Hewitt, Maynard & Kristol, New
York, New York, is acting as counsel for Lincare in connection with certain
legal matters relating to the Merger and the transactions contemplated thereby.
A partner of Brobeck, Phleger & Harrison who serves as a director of Coram has
been granted an option to acquire up to 75,000 shares of Coram's Common Stock
pursuant to the Automatic Option Grant Program of the Coram Option Plan in his
capacity as a director. As of March 31, 1995, a partner of Reboul, MacMurray,
Hewitt, Maynard & Kristol owned an aggregate 700 shares of Lincare Common Stock.

EXPERTS

The consolidated financial statements of Coram as of December 31, 1994 and
for the year then ended included in this Joint Proxy Statement/Prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein. The consolidated financial statements
of Coram as of December 31, 1993 and for each of the two years in the period
ended December 31, 1993 have been audited as to combination only and, with
respect to T2 Medical, Inc. for the two years in the period ended December 31,
1993, as to the adjustments applied to present the statements of operations,
stockholders' equity, and cash flows on a December 31 rather than a September 30
year end by Ernst & Young LLP, independent auditors, and have been combined from
the financial statements of T2 Medical, Inc., Curaflex Health Services, Inc.,
HealthInfusion, Inc., and Medisys, Inc. (which are not presented separately
herein) audited by others. The financial statements of those entities as of
December 31, 1993 and for the two years in the period then ended were audited by
Deloitte & Touche LLP as it relates to T2 Medical, Inc., as of September 30,
1993, and for the two years in the period ended September 30, 1993 (whose report
expresses an unqualified opinion and includes an explanatory paragraph relating
to Material Uncertainties concerning certain pending claims against T2 Medical,
Inc.), KPMG Peat Marwick LLP, as it relates to Curaflex Health Services, Inc.,
Arthur Andersen LLP, as it relates to HealthInfusion, Inc., and Coopers &
Lybrand, Independent Accountants, as it relates to Medisys, Inc. whose reports
are included elsewhere herein. The financial statements referred to above are
included in the consolidated financial statements of Coram in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP as it relates to Curaflex and the
report of Coopers & Lybrand, Independent Accountants, as it relates to Medisys,
Inc., each covering the December 31, 1993, financial statements refer to a
change in method of accounting for income taxes to adopt the provisions of the
Financial Accounting Boards' Statement of Financial Accounting Standards No. 109
(Accounting for Income Taxes).

The financial statements of the Caremark Business at December 31, 1994 and
for the year then ended included in this Joint Proxy Statement/Prospectus have
been audited by Price Waterhouse LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report and upon the authority of that firm as experts in accounting
and auditing.

The consolidated financial statements and schedule of Lincare as of
December 31, 1993 and 1994, and for each of the years in the three-year period
ended December 31, 1994 have been included in this Joint Proxy
Statement/Prospectus in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the December 31, 1993, consolidated financial
statements refers to a change in the method of accounting for income taxes.

STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING

For proposals of stockholders to be considered for inclusion in the proxy
statement of the 1996 Annual Meeting of Stockholders of Coram, such proposals
must be received by the Corporate Secretary of Coram, no later than
, 1996.

130
<PAGE> 139

As described in Lincare's proxy statement relating to its 1995 Annual
Meeting of Stockholders, for stockholder proposals to be considered for
inclusion in the proxy statement for the 1996 Annual Meeting of Stockholders of
Lincare (if the Merger is not consummated), such proposals must be received by
the Corporate Secretary of Lincare no later than October 17, 1995.

Under Rule 14a-8 adopted by the Commission under the Exchange Act,
proposals of stockholders must conform to certain requirements as to form and
may be omitted from the proxy statement and proxy under certain circumstances.
In order to avoid unnecessary expenditures of time and money by stockholders,
stockholders are urged to review this rule and, if questions arise, to consult
legal counsel prior to submitting a proposal.

131
<PAGE> 140

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements
are presented assuming the Merger has been consummated and accounted for as a
pooling-of-interests. The acquisition of Caremark has been accounted for as a
purchase. The pro forma condensed combined statements of income for the years
ended December 31, 1992, December 31, 1993 and December 31, 1994 and for the
three months ended March 31, 1995 have been prepared as if the Merger and the
other transactions requiring pro forma adjustments had occurred on January 1,
1992. The pro forma condensed combined balance sheets as of March 31, 1995 have
been prepared as if the Merger and the other transactions requiring pro forma
adjustments had occurred on March 31, 1995. The pro forma statement of income
for the year ended December 31, 1994 and the three months ended March 31, 1995
have been adjusted to give effect to the acquisition of Caremark by Coram as of
January 1, 1994 and to 1995 Lincare acquisitions as if those acquisitions had
occurred as of January 1, 1994.

The pro forma combined data are based on the separate historical
consolidated financial statements of Coram and Lincare giving effect to the
transactions under the assumptions and adjustments outlined in the accompanying
Notes to Unaudited Pro Forma Condensed Combined Financial Statements. The pro
forma adjustments are based upon available information and upon certain
assumptions that management believes are reasonable given the circumstances. The
results of operations of the acquired companies were derived from unaudited
financial statements (if applicable). The unaudited pro forma condensed combined
financial statements are provided for comparative purposes only and are not
necessarily indicative of the results that would have been obtained had the
Merger occurred on the dates indicated or that may be achieved in the future.

For all applicable periods presented in the unaudited pro forma condensed
combined statements of income, shares used in the computation of earnings per
common and common equivalent share give effect to the Exchange Ratio. The
unaudited pro forma condensed combined financial statements and accompanying
notes should be read in conjunction with the respective historical audited
consolidated financial statements of Coram, the Caremark Business and Lincare
contained in this Joint Proxy Statement/Prospectus.

132
<PAGE> 141

CORAM HEALTHCARE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

March 31, 1995
(in thousands)

<TABLE>
<CAPTION>
COMBINED
CORAM
AND ALL
CAREMARK PRO FORMA CAREMARK PRO FORMA COMPANIES
CORAM BUSINESS ADJUSTMENTS BUSINESS LINCARE ADJUSTMENTS COMBINED
-------- -------- ----------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............. $ 21,580 $ -- $ (7,300)(A) $ 14,280 $ 7,266 $ -- $ 21,546
Accounts receivable net of
allowances.......................... 106,419 138,800 -- 245,219 29,504 -- 274,723
Investments........................... 15,499 -- -- 15,499 -- -- 15,499
Inventories........................... 11,250 10,900 -- 22,150 1,176 -- 23,326
Prepaid taxes......................... 9,739 -- -- 9,739 -- -- 9,739
Deferred income taxes, net............ 32,538 -- -- 32,538 -- -- 32,538
Other current assets.................. 20,784 -- -- 20,784 640 -- 21,424
-------- -------- ----------- -------- -------- ----------- ---------
Total current assets................ 217,809 149,700 (7,300) 360,209 38,586 -- 398,795
Property and equipment, net........... 23,744 26,700 (6,100)(B) 44,344 61,010 -- 105,354
Other assets.......................... 18,629 4,700 26,000(B) 47,329 18,196 -- 65,525
-- -- (2,000)(C) -- -- -- --
Goodwill, net......................... 337,269 191,900 (191,900)(B) 513,869 104,833 -- 618,702
-- -- 176,600(B) -- -- -- --
-------- -------- ----------- -------- -------- ----------- ---------
TOTAL ASSETS........................ $597,451 $373,000 $ (4,700) $965,751 $222,625 $ -- $1,188,376
======== ======== ========== ======== ======== ========== =========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable...................... $ 32,553 $ 23,800 $ -- $ 56,353 $ 9,609 $ -- $ 65,962
Current maturities of long-term
debt................................ 5,562 -- 30,600(A) 36,162 5,857 -- 42,019
Deferred income taxes................. 5,818 -- -- 5,818 -- -- 5,818
Securities sold for repurchase........ 7,365 -- -- 7,365 -- -- 7,365
Reserve for litigation................ 22,647 -- -- 22,647 -- -- 22,647
Accrued merger and restructuring...... 35,958 -- -- 35,958 -- -- 35,958
Other accrued liabilities............. 13,632 13,400 -- 27,032 10,107 -- 37,139
-------- -------- ----------- -------- -------- ----------- ---------
Total current liabilities........... 123,535 37,200 30,600 191,335 25,573 -- 216,908
Revolving lines of credit............. 122,300 -- (122,300)(A) -- 10,000 -- 10 ,000
-- -- -- -- -- -- --
Long-term debt........................ 10,801 -- 169,400(A) 430,201 4,026 -- 434,227
-- -- 150,000(A) -- -- -- --
-- -- 100,000(A) -- -- -- --
Minority interest..................... 4,729 5,200 -- 9,929 738 -- 10,667
Other liabilities..................... 1,885 200 -- 2,085 -- -- 2,085
Deferred income taxes, non current.... 1,522 -- -- 1,522 3,664 -- 5,186
-------- -------- ----------- -------- -------- ----------- ---------
Total non current liabilities....... 141,237 5,400 297,100 443,737 18,428 -- 462,165
-------- -------- ----------- -------- -------- ----------- ---------
TOTAL LIABILITIES................... 264,772 42,600 327,700 635,072 44,001 -- 679,073
STOCKHOLDERS' EQUITY
Common stock, par $.001............... 39 -- -- 39 275 (247)(J) 67
Additional paid in capital............ 347,071 -- -- 347,071 82,469 247(J) 429,787
Stock purchase note................... -- -- -- -- -- -- --
Unrealized loss on available for sale
securities.......................... (193) -- -- (193) -- -- (193)
Retained earnings (deficit)........... (14,238) 330,400 (330,400)(B) (16,238) 95,880 -- 79,642
-- -- (2,000)(C) -- -- -- --
-------- -------- ----------- -------- -------- ----------- ---------
Total stockholders' equity.......... 332,679 330,400 (332,400) 330,679 178,624 -- 509,303
-------- -------- ----------- -------- -------- ----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.............................. $597,451 $373,000 $ (4,700) $965,751 $222,625 $ -- $1,188,376
======== ======== ========== ======== ======== ========== =========
</TABLE>

See accompanying notes to unaudited pro forma condensed combined financial
statements.

133
<PAGE> 142

CORAM HEALTHCARE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the three months ended March 31, 1995
(in thousands, except per share data)

<TABLE>
<CAPTION>
COMBINED
CORAM AND ALL
CAREMARK PRO FORMA CAREMARK PRO FORMA COMPANIES
CORAM BUSINESS ADJUSTMENTS BUSINESS LINCARE ADJUSTMENTS COMBINED
-------- ------- ----------- --------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue...................... $104,778 $96,100 $ -- $ 200,878 $64,013 $ -- $264,891
Cost of service.................. 75,609 76,200 (305)(F) 151,504 9,743 17,975(G) 179,222
-------- ------- ----------- --------- ------- ----------- --------
Gross profit................... 29,169 19,900 305 49,374 54,270 (17,975) 85,669
Operating expenses:
Operating expenses............. -- -- -- -- 13,884 (13,884)(G) --
Selling, general and
administrative expenses...... 17,885 14,200 -- 32,085 12,932 -- 45,017
Provision for estimated
uncollectible accounts....... 4,013 4,300 -- 8,313 540 -- 8,853
Amortization of goodwill....... 2,790 1,300 172(E) 4,262 2,691 -- 6,953
Depreciation expense........... -- -- -- -- 4,091 (4,091)(G) --
Restructuring costs and
other........................ (4,131) -- -- (4,131) -- -- (4,131)
-------- ------- ----------- --------- ------- ----------- --------
Total operating expenses..... 20,557 19,800 172 40,529 34,138 (17,975) 56,692
Operating income................. 8,612 100 133 8,845 20,132 -- 28,977
Other income (expense)
Interest income................ 402 -- -- 402 135 -- 537
Interest expense............... (3,436) -- (7,809)(D) (11,245) (234) -- (11,479)
Minority interest.............. (2,432) (500) (2,932) -- -- (2,932)
Other income (loss)............ 338 (100) -- 238 7 -- 245
-------- ------- ----------- --------- ------- ----------- --------
Income (loss) before income
taxes.......................... 3,484 (500) (7,676) (4,692) 20,040 -- 15,348
-------- ------- ----------- --------- ------- ----------- --------
Provision (benefit) for income
taxes.......................... (1,105) -- --(J) (1,105) 7,816 -- 6,711
-------- ------- ----------- --------- ------- ----------- --------
Net income (loss)................ $ 4,589 $ (500) $(7,676) $ (3,587) $12,224 $ -- $ 8,637
========= ======== ========== ========= ======== ========== =========
Income (loss) per share.......... $ .11 $ (.09) $ .43 $ .10
========= ========= ======== =========
Shares used to compute income
(loss) per share............... 40,939 40,939 28,526 15,273(K) 84,738
========= ========= ======== ========== =========
</TABLE>

See accompanying notes to unaudited pro forma condensed combined financial
statements.

134
<PAGE> 143

LINCARE HOLDINGS INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the three months ended March 31, 1995
(in thousands, except per share data)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ---------------------------------------
------- AGGREGATE
LINCARE ACQUISITIONS ADJUSTMENTS COMBINED
------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Net revenue...................................... $61,223 $2,790 $ -- $64,013
Cost of service.................................. 9,112 631 -- 9,743
------- ------------ ----------- --------
Gross profit................................... 52,111 2,159 -- 54,270
Operating expenses:
Operating expenses............................. 13,207 677 -- 13,884
Selling, general and administrative expenses... 12,664 268 -- 12,932
Provision for estimated uncollectible
accounts.................................... 489 51 -- 540
Amortization expense........................... 2,391 -- 300(1) 2,691
Depreciation expense........................... 3,945 146 -- 4,091
------- ------------ ----------- --------
Operating income (loss).......................... 19,415 1,017 (300) 20,132
Other income (expense):
Interest income................................ 134 1 -- 135
Interest expense............................... (110) (7) (117)(2) (234 )
Net gain on sales of property and equipment.... 7 -- -- 7
------- ------------ ----------- --------
Income (loss) before income taxes................ 19,446 1,011 (417) 20,040
Provision (benefit) for income taxes............. 7,584 434 (202)(3) 7,816
------- ------------ ----------- --------
Net income (loss)................................ $11,862 $ 577 $(215) $12,224
======= ========= ========= =======
Net income per share........................... $ .42 $ .43
======= =======
Number of shares used to compute:
Income per share............................... 28,526 28,526
======= =======
</TABLE>

See accompanying notes to unaudited pro forma condensed combined financial
statements.

135
<PAGE> 144

CORAM HEALTHCARE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 1994
(in thousands, except per share data)

See accompanying notes to unaudited pro forma condensed combined financial
statements.

136
<PAGE> 145

LINCARE HOLDINGS INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 1994
(in thousands, except per share data)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -----------------------------------------
-------- AGGREGATE
LINCARE ACQUISITIONS ADJUSTMENTS COMBINED
-------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Net revenue................................... $201,142 $ 18,947 $ -- $220,089
Cost of service............................... 29,058 5,264 -- 34,322
-------- ------------ ----------- --------
Gross Profit................................ 172,084 13,683 -- 185,767
Operating expenses:
Operating expenses.......................... 44,347 5,480 -- 49,827
Selling, general and administrative
expenses................................. 43,249 2,443 -- 45,692
Provision for estimated uncollectible
accounts................................. 1,546 587 -- 2,133
Amortization expense........................ 7,281 -- 1,958(4) 9,239
Depreciation expense........................ 13,403 789 -- 14,192
-------- ------------ ----------- --------
Operating income (loss)....................... 62,258 4,384 (1,958) 64,684
Other income (expense):
Interest income............................. 434 14 -- 448
Interest expense............................ (473) (88) (560)(5) (1,121)
Net gain on sales of property and
equipment................................ 101 -- -- 101
-------- ------------ ----------- --------
Income (loss) before income taxes............. 62,320 4,310 (2,518) 64,112
Provision (benefit) for income taxes.......... 24,367 1,022 (322)(6) 25,067
-------- ------------ ----------- --------
Net income (loss)............................. $ 37,953 $ 3,288 $(2,196) $ 39,045
======== ========= ========= ========
Net income per share........................ $ 1.34 $ 1.38
======== ========
Number of shares used to compute:
Net income per share........................ 28,307 28,307
======== ========
</TABLE>

See accompanying notes to unaudited pro forma condensed combined financial
statements.

137
<PAGE> 146

CORAM HEALTHCARE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

For the Year Ended December 31, 1993
(in thousands, except per share data)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -------------------------
-------------------- PRO FORMA
CORAM LINCARE ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net revenue.................................... $462,304 $154,506 $ -- $616,810
Cost of service................................ 285,023 21,115 46,152(G) 352,290
-------- -------- ----------- --------
Gross profit................................. 177,281 133,391 (46,152) 264,520
Operating expenses........................... -- 34,388 (34,388)(G) --
Selling, general and administrative
expenses.................................. 75,706 34,623 -- 110,329
Provision for estimated uncollectible
accounts.................................. 29,751 1,832 -- 31,583
Amortization of goodwill..................... 7,824 4,695 -- 12,519
Depreciation................................. -- 11,764 (11,764)(G) --
Provision for litigation settlements......... -- -- -- --
Merger costs................................. 2,868 -- -- 2,868
Restructuring costs.......................... 1,600 -- -- 1,600
Special provision for uncollectible
accounts.................................. -- -- -- --
-------- -------- ----------- --------
Total operating expenses.................. 117,749 87,302 (46,152) 158,899
-------- -------- ----------- --------
Operating income............................... 59,532 46,089 -- 105,621
Other income (expense)
Interest income.............................. 3,746 611 -- 4,357
Interest expense............................. (3,916) (387) -- (4,303)
Minority interest............................ (9,715) -- -- (9,715)
Other income................................. 7,862 233 -- 8,095
-------- -------- ----------- --------
Income before income taxes..................... 57,509 46,546 -- 104,055
Provision for income taxes..................... 28,848 18,294 -- 47,142
-------- -------- ----------- --------
Net income..................................... $ 28,661 $ 28,252 $ -- $ 56,913
======== ======== ========= ========
Income per share............................... $ .76 $ 1.01 $ .71
======== ======== ========
Shares used to compute income per share........ 37,778 27,911 14,944(K) 80,633
======== ======== ========= ========
</TABLE>

See accompanying notes to unaudited pro forma condensed combined financial
statements.

138
<PAGE> 147

CORAM HEALTHCARE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

For the Year Ended December 31, 1992
(in thousands, except per share data)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -------------------------
-------------------- PRO FORMA
CORAM LINCARE ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net revenue.................................... $413,100 $117,403 $ -- $530,503
Cost of service................................ 224,356 16,215 38,618(G) 279,189
-------- -------- ----------- --------
Gross profit................................. 188,744 101,188 (38,618) 251,314
Operating expenses........................... -- 28,475 (28,475)(G) --
Selling, general and administrative
expenses.................................. 48,927 28,354 -- 77,281
Provision for estimated uncollectible
accounts.................................. 24,036 1,591 -- 25,627
Amortization of goodwill..................... 4,832 5,125 -- 9,957
Depreciation................................. -- 10,143 (10,143)(G) --
Provision for litigation settlements......... -- -- -- --
Merger costs................................. -- -- -- --
Restructuring costs.......................... 2,385 -- -- 2,385
Special provision for uncollectible
accounts.................................. -- -- -- --
-------- -------- ----------- --------
Total operating expenses.................. 80,180 73,688 (38,618) 115,250
-------- -------- ----------- --------
Operating income............................... 108,564 27,500 -- 136,064
Other income (expense)
Interest income.............................. 4,940 465 -- 5,405
Interest expense............................. (2,860) (1,242) -- (4,102)
Minority interest............................ (4,638) -- -- (4,638)
Other income................................. 3,969 16 -- 3,985
-------- -------- ----------- --------
Income before income taxes and extraordinary
item......................................... 109,975 26,739 -- 136,714
Provision for income taxes..................... 38,117 10,600 48,717
-------- -------- ----------- --------
Income before extraordinary loss............... $ 71,858 $ 16,139 $ -- $ 87,997
======== ======== ========= ========
Income per share before extraordinary item..... $ 1.95 $ .64 $ 1.16
======== ======== ========
Shares used to compute income per share........ 36,812 25,334 13,564(K) 75,710
======== ======== ========= ========
</TABLE>

See accompanying notes to the unaudited pro forma condensed combined financial
statements.

139
<PAGE> 148

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS

CAREMARK PURCHASE COMBINATION

On January 29, 1995, Coram entered into an agreement to acquire the
Caremark Business for $309 million, subject to a potential purchase price
adjustment of up to $18 million. On April 6, 1995, Coram completed the
acquisition of the Caremark Business. Concurrently with the acquisition, Coram
repaid $123.8 million ($122.3 million of which was outstanding on March 31,
1995) under long-term revolving lines-of-credit.

The purchase price consisted of (i) $209 million in cash and (ii) $100
million aggregate principal amount of junior subordinated pay-in-kind notes.

Coram financed the cash portion of the purchase price, costs associated
with the acquisition and the repayment of amounts outstanding under the Former
Credit Facility through (i) $200 million of borrowings under the Senior Credit
Facility, and (ii) $150 million from the issuance of the Bridge Notes. Coram
intends to redeem the Bridge Notes as promptly as practicable, subject to the
availability of financing on terms reasonably satisfactory to it.

Coram anticipates significant expenses to be incurred in connection with
the implementation of the Caremark Consolidation Plan subsequent to the
acquisition of the Caremark Business combination. Such expenses are expected to
include severance costs, costs to terminate leases on closed branches,
consolidation of information systems, and other costs related to consolidation
activities. Additionally, Coram anticipates that it will record a special charge
associated with a revaluation of specific assets including accounts receivable.
The expenses associated with these activities are not currently estimable with a
reasonable degree of accuracy. Accordingly, they have not been reflected in the
unaudited pro forma condensed combined financial statements of operations as it
will be a one time charge to operations within six months of the purchase
combination.

Coram expects to realize substantial cost savings and efficiencies from the
implementation of the Caremark Consolidation Plan. The Caremark Consolidation
Plan includes the elimination of duplicate or redundant facilities in
overlapping markets, the elimination of duplicative corporate and administrative
expenses and the renegotiation of procurement contracts. Coram has tentatively
identified 66 of 77 total Caremark Business treatment centers which have
significant geographical overlap with Coram's existing facilities. Based on
current information available, management estimates that total annualized
savings to be realized by the Caremark Consolidation Plan will approximate $45
million. No assurance, however, can be given regarding the aggregate amount or
the timing of cost savings to be achieved by Coram from the Caremark
Consolidation Plan. Management is currently developing a detailed Caremark
Consolidation Plan, therefore, the unaudited pro forma condensed combined
financial statements do not reflect such savings.

The historical balances related to the Caremark Business presented in the
pro forma information exclude certain assets and liabilities of the home
infusion business of Caremark which were not included in the acquisition.

140
<PAGE> 149

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)

(Dollars in thousands)

A. The Caremark acquisition was financed as presented below:

<TABLE>
<S> <C>
Proceeds from borrowing under the Senior Credit Facility of which $30,600
is classified as a current obligation.................................... $ 200,000
Proceeds from the Bridge Notes............................................. 150,000
Coram Junior Convertible Subordinated PIK Notes............................ 75,000
Coram Junior Non-Convertible Subordinated PIK Notes........................ 25,000
Purchase price for the Caremark Business including $26 million of fees and
expenses(1).............................................................. (335,000)
Refinancing of Former Credit Facility...................................... (122,300)
---------
Decrease in cash......................................................... $ (7,300)
=========
</TABLE>

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

(1) Includes approximately $4.8 million of fees and expenses related to a
permanent financing undertaken by Coram and deferred as of May 1, 1995,
which is expected to occur after the completion of this transaction.

B. Allocation of the purchase price of $335 million, based on the fair market
value of the assets of the Caremark Business acquired and liabilities
assumed results in the following:

<TABLE>
<S> <C>
Net assets of Caremark Business at historical amounts....................... $ 330,400
Write-off of previously recorded goodwill................................... (191,900)
Decrease in fair value of property and equipment............................ (6,100)
Deferred financing costs of the acquisition(1).............................. 26,000
Cost in excess of net assets acquired....................................... 176,600
---------
$ 335,000
=========
</TABLE>

C. Represents the write off of unamortized deferred financing costs associated
with Former Credit Facility repaid concurrently with the acquisition of the
Caremark Business. The write off of these costs is not reflected in the
unaudited pro forma condensed combined statements of operations.

D. Pro forma interest expense adjustment detailed below reflects the
elimination of interest expense related to the Former Credit Facility, and
to record interest expense associated with the Senior Credit Facility, the
Bridge Notes, the Junior Convertible Subordinated PIK Notes and Junior
Non-Convertible Subordinated PIK Notes and the amortization of deferred
financing costs.

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
------------------ ------------
<S> <C> <C>
Elimination of Former Credit Facility interest expense.... $ (2,921) $ (5,604)
Senior Credit Facility interest expense................... 2,948 13,335
Bridge Notes interest expense............................. 3,406 16,313
Junior Convertible Subordinated PIK notes interest
expense................................................. 1,314 5,334
Junior Non-Convertible Subordinated PIK notes interest
expense................................................. 750 3,083
Amortization of deferred financing costs(1)............... 2,312 9,247
---------- ------------
Net interest expense adjustment........................... $ 7,809 $ 41,708
=============== ==========
</TABLE>

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

141
<PAGE> 150

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)

(1) Excludes amortization of the $4.8 million of expenses related to a
permanent financing undertaken by Coram and deferred as of May 1, 1995,
which is expected to occur after the completion of this transaction.

E. Goodwill associated with the purchase of the Caremark Business is amortized
in the unaudited pro forma condensed combined statement of operations
assuming an estimated average aggregate 30-year useful life consistent with
Coram accounting policies currently in effect. However, Coram intends to
perform a study of the components of acquired goodwill and intangibles and
may adjust amortization based upon the results of this study. The pro forma
adjustment to record goodwill amortization is detailed below:

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
------------------ ------------
<S> <C> <C>
Elimination of goodwill amortization previously
recorded................................................ $ (1,300) $ (4,500)
Amortization of costs in excess of fair value of net
assets acquired......................................... 1,472 5,887
---------- ------------
Net goodwill adjustment................................. $ 172 $ 1,387
=============== ==========
</TABLE>

F. Depreciation expense related to the decrease in fair value of fixed assets
over five years on a straight-line basis.

LINCARE POOLING COMBINATION

G. Under the pooling of interests accounting method, accounting policies
followed by Coram and Lincare are conformed. The unaudited pro forma
condensed combined financial statements give effect to pro forma
adjustments to conform the accounting policies to reflect the
reclassification of operating and depreciation expense to conform to
Coram's presentation.

LINCARE PURCHASE COMBINATIONS

Lincare's pro forma condensed combined statements of operations for the
year ended December 31, 1994 and the three months ended March 31, 1995 give
effect to the 1995 acquisition of the outstanding stock or certain assets of ten
businesses in separate transactions for $27.3 million of cash (including cash
acquired of $275,000), $2.4 million of deferred acquisition obligations and the
assumption of $1.3 million of liabilities.

Lincare's pro forma financial statements have been prepared by Lincare
management based upon the historical financial statements of Lincare and the
acquired businesses. These pro forma financial statements may not be indicative
of the results of operations that actually would have occurred if the
combinations had been in effect on January 1, 1994 or January 1, 1995 or which
may be obtained in the future.

Lincare's pro forma financial statements combine the results of operations
of the companies for the year ended December 31, 1994 and for the three months
ended March 31, 1995. In combining the companies, the pro forma adjustments to
the unaudited pro forma condensed combined statement of operations for the three
months ended March 31, 1995 reflect the following:

(1) Amortization of customer list, covenants not to compete and
goodwill are recorded over the estimated useful lives of three years, three
to five years and forty years, respectively;

(2) Interest expense associated with $8.0 million of acquisition debt
is recorded at a 7% interest rate; and

(3) Income taxes and income tax effect of (1) and (2) are recorded at
39.0%.

142
<PAGE> 151

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)

In combining the companies, the pro forma adjustments to the unaudited pro
forma condensed combined statement of operations for the year ended December 31,
1994 reflect the following:

(4) Amortization of customer list, covenants not to compete and
goodwill are recorded over estimated useful lives of three years, three to
five years, and forty years respectively;

(5) Interest expense associated with $8.0 million of acquisition debt
is recorded at a 7% interest rate; and

(6) Income taxes and income tax effect of (4) and (5) are recorded at
39.1%.

TRANSACTION FEES

H. Under the pooling-of-interests accounting method, direct transaction costs
are expensed in the period in which the transaction is consummated. Such
costs are estimated to be $.5 million and include investment banking,
legal, accounting, printing, solicitation, filing fees and similar
expenses. The accrual of these expenses has been reflected in the unaudited
pro forma condensed combined balance sheet at March 31, 1995 but not in the
unaudited pro forma condensed combined income statement for the period then
ended.

INCOME TAXES

I. No tax benefits from the aforementioned pro forma adjustments have been
reflected in the unaudited pro forma condensed combined financial
statements.

STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE

J. Common stock and additional paid-in capital have been adjusted to reflect
the issuance of shares of Coram Common Stock with a par value of $.001 in
exchange for the issued and outstanding shares of Lincare Common Stock at
March 31, 1994.

K. The weighted average common share amounts represent the aggregate weighted
average shares of Coram and Lincare Common Stock adjusted to reflect the
Exchange Ratio.

143
<PAGE> 152

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<S> <C>
CORAM HEALTHCARE CORPORATION

Reports of Independent Auditors....................................................... F-3
Consolidated Balance Sheets -- As of December 31, 1994 and 1993....................... F-8
Consolidated Statements of Operations -- Years Ended December 31, 1994, 1993 and
1992................................................................................ F-9
Consolidated Statements of Stockholders' Equity -- Years Ended December 31, 1994, 1993
and 1992............................................................................ F-10
Consolidated Statements of Cash Flows -- Years Ended December 31, 1994, 1993 and
1992................................................................................ F-11
Notes to Consolidated Financial Statements............................................ F-12
Interim Financial Statements
Condensed Consolidated Balance Sheets -- As of March 31, 1995 and December 31,
1994............................................................................. F-26
Condensed Consolidated Statements of Operations -- Periods ended March 31, 1995 and
1994............................................................................. F-27
Condensed Consolidated Statements of Cash Flows -- Periods ended March 31, 1995 and
1994............................................................................. F-28
Notes to Condensed Consolidated Financial Statements................................ F-29
Schedule II -- Valuation and Qualifying Accounts...................................... F-33

THE CAREMARK BUSINESS

Report of Independent Accountants..................................................... F-34
Combined Statements of Operations..................................................... F-35
Combined Balance Sheets............................................................... F-36
Combined Statements of Cash Flows..................................................... F-37
Combined Statements of Divisional Equity.............................................. F-38
Notes to Combined Financial Statements................................................ F-39
Interim Financial Statements
Condensed Combined Statements of Operations......................................... F-47
Condensed Combined Balance Sheets................................................... F-48
Condensed Combined Statement of Cash Flows.......................................... F-49
Notes to Condensed Combined Financial Statements.................................... F-50
Schedule II--Valuation and Qualifying Accounts........................................ F-51

LINCARE HOLDINGS INC.

Independent Auditors Report........................................................... F-52
Consolidated Balance Sheets -- As of December 31, 1994 and 1993....................... F-53
Consolidated Statements of Operations -- Years Ended December 31, 1994, 1993 and
1992................................................................................ F-54
Consolidated Statements of Stockholders' Equity -- Years Ended December 31, 1994, 1993
and 1992............................................................................ F-55
Consolidated Statements of Cash Flows -- Years Ended December 31, 1994, 1993 and
1992................................................................................ F-56
Notes to Consolidated Financial Statements............................................ F-57
</TABLE>

F-1
<PAGE> 153

<TABLE>
<S> <C>
Interim Financial Statements (unaudited except for December 31, 1994):
Condensed Consolidated Balance Sheets as of December 31, 1994 and March 31, 1995.... F-66
Condensed Consolidated Statements of Operations -- Three Months Ended March 31, 1995
and 1994......................................................................... F-67
Condensed Consolidated Statements of Cash Flows -- Three Months Ended March 31, 1995
and 1994......................................................................... F-68
Notes to Condensed Consolidated Financial Statements................................ F-69
Schedule II -- Valuation and Qualifying Accounts...................................... F-70
</TABLE>

F-2
<PAGE> 154

Board of Directors
Coram Healthcare Corporation and subsidiaries

We have audited the accompanying consolidated balance sheet of Coram
Healthcare Corporation and subsidiaries as of December 31, 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1994. Our audit also included the 1994 financial
statement schedules listed in the index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audit.

We conducted our audit 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 and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement and schedule presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the 1994 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Coram Healthcare Corporation and subsidiaries at December 31, 1994,
and the consolidated results of their operations and their cash flows for the
year ended December 31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related 1994 financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.

We also have audited, as to combination only, the accompanying consolidated
balance sheet of Coram Healthcare Corporation and subsidiaries as of December
31, 1993, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1993. As described in Note 1 to such statements, these statements have been
combined from the financial statements of T(2) Medical, Inc., Curaflex Health
Services, Inc., HealthInfusion, Inc., and Medisys, Inc. (which are not presented
separately herein). The reports of Deloitte & Touche LLP, as it relates to T(2)
Medical, Inc., as of September 30, 1993, and for the two years in the period
ended September 30, 1993, KPMG Peat Marwick LLP, as it relates to Curaflex
Health Services, Inc., Arthur Andersen LLP, as it relates to HealthInfusion,
Inc., and Coopers & Lybrand, as it relates to Medisys, Inc., who have audited
these statements appear elsewhere herein. In our opinion, the accompanying
consolidated financial statements for 1993 and for the two years in the period
ended December 31, 1993 have been properly combined on the basis described in
Note 1.

We also audited the adjustments described in Note 1 that were applied to
present the statements of operations, stockholders' equity, and cash flows, of
T(2) Medical, Inc. for each of the two years in the period ended December 31,
1993. In our opinion, such adjustments are appropriate and have been properly
applied.

/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP

Orange County, California
February 17, 1995

F-3
<PAGE> 155

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of T2 Medical, Inc.

We have audited the accompanying consolidated balance sheet of T2 Medical, Inc.
and its subsidiaries (the "Company") as of September 30, 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the two years in the period ended September 30, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 present fairly, in all
material respects, the financial position of T2 Medical, Inc. and subsidiaries
at September 30, 1993, and the results of their operations and their cash flows
for each of the two years in the period ended September 30, 1993 in conformity
with generally accepted accounting principles.

As discussed in Note 12, the Company is a defendant in civil suits filed on
behalf of individuals claiming they have purchased Company stock at various
times during the time period from December 2, 1991 through August 12, 1993. The
ultimate outcome of the litigation cannot presently be determined. Accordingly,
no provision for any loss that may result upon resolution of these suits has
been made in the accompanying consolidated financial statements.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP

Atlanta, Georgia
November 17, 1993
(December 23, 1993 as to Note 17)

F-4
<PAGE> 156

INLAND EMPIRE OFFICE
ONE LAKESHORE CENTRE
3281 GUASTI ROAD, SUITE 550
ONTARIO, CA 91761

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Curaflex Health Services, Inc.:

We have audited the accompanying consolidated balance sheets of Curaflex Health
Services, Inc. and subsidiaries as of December 31, 1993, and the related
consolidated statements of operations, common stockholders' equity (deficit) and
cash flows for each of the years in the two-year period ended December 31, 1993.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects the financial position of Curaflex Health
Services, Inc. and subsidiaries as of December 31, 1993 and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1993 in conformity with generally accepted accounting
principles.

As discussed in note 8 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."

/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP

Ontario, California
February 28, 1994

F-5
<PAGE> 157

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders of
HealthInfusion, Inc. and subsidiaries:

We have audited the consolidated balance sheet of HealthInfusion, Inc. (a
Florida corporation) and subsidiaries as of December 31, 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of HealthInfusion, Inc. and
subsidiaries as of December 31, 1993 and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

Miami, Florida,
March 18, 1994.

F-6
<PAGE> 158

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and
Board of Directors of

Medisys, Inc.:

We have audited the consolidated balance sheet of Medisys, Inc. and
Subsidiaries as of December 31, 1993, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the years
in the two-year period then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

The 1992 consolidated financial statements of Medisys, Inc. and
Subsidiaries have been restated to give retroactive effect to the merger of
Medisys, Inc. and Subsidiaries and American Home Therapies, Inc., on July 30,
1993, which has been accounted for as a pooling-of-interests as described in
note 2 to the consolidated financial statements of Medisys, Inc. and
Subsidiaries.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Medisys,
Inc. and Subsidiaries as of December 31, 1993, and the consolidated results of
their operations and their cash flows for each of the years in the two-year
period then ended, in conformity with generally accepted accounting principles.

As discussed in note 1 to the consolidated financial statements of Medisys
Inc., and Subsidiaries, in 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."

/s/ COOPERS & LYBRAND
COOPERS & LYBRAND

Minneapolis, Minnesota
February 11, 1994

F-7
<PAGE> 159

CORAM HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 20,046 $ 22,971
Accounts receivable, net of allowances of $22,297 in 1994 and $25,076
in 1993........................................................... 111,000 112,944
Investment in available-for-sale securities.......................... 16,546 33,032
Inventories.......................................................... 11,064 11,158
Prepaid taxes........................................................ 11,430 --
Deferred income taxes, net........................................... 31,893 6,726
Other current assets................................................. 5,667 5,453
-------- --------
Total current assets......................................... 207,646 192,284
PROPERTY AND EQUIPMENT, NET............................................ 25,902 42,917
JOINT VENTURES AND OTHER ASSETS........................................ 8,651 26,558
DEFERRED INCOME TAXES NON-CURRENT...................................... 557 --
GOODWILL, NET.......................................................... 333,359 294,118
-------- --------
TOTAL ASSETS........................................................... $576,115 $555,877
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable..................................................... $ 26,897 $ 18,745
Taxes payable........................................................ -- 3,600
Revolving lines of credit............................................ -- 15,073
Current maturities of long-term debt................................. 5,911 13,684
Deferred income taxes................................................ 5,788 5,769
Liabilities for securities sold under agreement to repurchase........ 7,430 --
Reserve for litigation............................................... 22,720 --
Accrued merger and restructuring..................................... 42,794 --
Other accrued liabilities............................................ 12,711 10,421
-------- --------
Total current liabilities.................................... 124,251 67,292
REVOLVING LINES-OF-CREDIT.............................................. 108,099 22,093
LONG-TERM DEBT......................................................... 12,718 18,063
MINORITY INTEREST IN CONSOLIDATED JOINT VENTURES....................... 6,599 6,298
OTHER LIABILITIES...................................................... 665 499
DEFERRED INCOME TAXES NON-CURRENT...................................... 1,522 2,760
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.001, authorized 75,000 shares, issued
38,964 in 1994 and 37,793 in 1993................................. 39 38
Additional paid-in capital........................................... 341,328 328,390
Stock purchase note.................................................. -- (860)
Unrealized loss on available-for-sale securities..................... (279) --
Retained earnings (deficit).......................................... (18,827) 111,304
-------- --------
Total stockholders' equity................................... 322,261 438,872
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $576,115 $555,877
======== ========
</TABLE>

See accompanying notes.

F-8
<PAGE> 160

CORAM HEALTHCARE CORPORATION

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
NET REVENUE................................................. $ 450,496 $462,304 $413,100
COST OF SERVICE............................................. 313,182 285,023 224,356
--------- -------- --------
Gross profit.............................................. 137,314 177,281 188,744
OPERATING EXPENSES:
Selling, general and administrative expenses.............. 81,907 75,706 48,927
Provision for estimated uncollectible accounts............ 19,517 29,751 24,036
Amortization of goodwill.................................. 8,971 7,824 4,832
Provision for litigation settlements...................... 23,220 -- --
Merger costs.............................................. 28,500 2,868 --
Restructuring costs....................................... 95,500 1,600 2,385
Special provision for uncollectible accounts.............. 17,300 -- --
--------- -------- --------
Total operating expenses.......................... 274,915 117,749 80,180
--------- -------- --------
OPERATING INCOME (LOSS)..................................... (137,601) 59,532 108,564
OTHER INCOME (EXPENSE):
Interest income........................................... 2,469 3,746 4,940
Interest expense.......................................... (7,414) (3,916) (2,860)
Minority interest in net income of consolidated joint
ventures............................................... (12,622) (9,715) (4,638)
Equity in net income of unconsolidated joint ventures..... 800 1,357 2,918
Gain (loss) on sales of property and equipment............ (255) 5,359 (254)
Other income.............................................. 320 1,146 1,305
--------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... (154,303) 57,509 109,975
PROVISION (BENEFIT) FOR INCOME TAXES........................ (26,231) 28,848 38,117
--------- -------- --------
NET INCOME (LOSS)........................................... $(128,072) $ 28,661 $ 71,858
========= ======== ========
NET INCOME (LOSS) PER COMMON SHARE:
Primary................................................... $ (3.32) $ 0.76 $ 1.95
========= ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary................................................... 38,633 37,778 36,812
========= ======== ========
</TABLE>

See accompanying notes.

F-9
<PAGE> 161

CORAM HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
COMMON STOCK ADDITIONAL STOCK AVAILABLE- RETAINED
--------------- PAID-IN PURCHASE FOR-SALE EARNINGS
SHARES AMOUNT CAPITAL NOTE SECURITIES (DEFICIT) TOTAL
------ ------ ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1992................... 32,158 $ 32 $ 193,521 $ (860) $ -- $ 37,846 $ 230,539
Issuance of common stock, net............ 3,954 4 109,890 -- -- -- 109,894
Dividends................................ -- -- -- -- -- (2,349) (2,349)
Distribution of S Corporation earnings... -- -- -- -- -- (15,428) (15,428)
Net income............................... -- -- -- -- -- 71,858 71,858
------ ------ ---------- -------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1992................. 36,112 36 303,411 (860) -- 91,927 394,514
Issuance of common stock, net............ 1,681 2 24,979 -- -- -- 24,981
Dividends................................ -- -- -- -- -- (5,012) (5,012)
Distribution of S Corporation earnings... -- -- -- -- -- (4,272) (4,272)
Net income............................... -- -- -- -- -- 28,661 28,661
------ ------ ---------- -------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1993................. 37,793 38 328,390 (860) -- 111,304 438,872
Issuance of common stock, net (through
June 30, 1994)........................ 786 1 9,323 -- -- -- 9,324
Dividends (through June 30, 1994)........ -- -- -- -- -- (2,059) (2,059)
Net loss (through June 30, 1994)
(unaudited)........................... -- -- -- -- -- (5,788) (5,788)
------ ------ ---------- -------- ---------- --------- ---------
Balance, at June 30, 1994................ 38,579 39 337,713 (860) -- 103,457 440,349
Issuance of common stock, net............ 385 -- 3,615 -- -- -- 3,615
Unrealized loss on available-for-sale
securities............................ -- -- -- -- (279) -- (279)
Proceeds from stock purchase note........ -- -- -- 860 -- -- 860
Net loss from June 30, 1994 to December
31, 1994 (unaudited).................. -- -- -- -- -- (122,284) (122,284)
------ ------ ---------- -------- ---------- --------- ---------
BALANCE, DECEMBER 31, 1994................. 38,964 $ 39 $ 341,328 $ -- $ (279) $ (18,827) $ 322,261
====== ====== ======== ======= ======== ========= =========
</TABLE>

See accompanying notes.

F-10
<PAGE> 162

CORAM HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................................. $(128,072) $ 28,661 $ 71,858
Adjustments to reconcile net income (loss) to net cash provided (used) by operating
activities:
Provision for estimated uncollectible accounts................................... 19,517 29,751 24,036
Special provision for additional uncollectible amounts........................... 17,300 -- --
Depreciation and amortization.................................................... 22,871 18,983 11,876
Income tax benefit of exercise of stock options.................................. -- -- 15,464
Merger/restructuring costs not requiring cash.................................... 50,100 -- --
Litigation settlements not requiring cash........................................ 5,520 -- --
Deferred income taxes, net....................................................... (26,943) 377 (330)
Minority interest in net income of consolidated joint ventures, net.............. (978) 1,240 901
(Gain) loss on sales of property and equipment................................... 255 (5,359) 254
(Gain) loss on sales of investments, net......................................... (177) (115) 278
Equity in net income of unconsolidated joint ventures, net....................... 562 406 (1,154)
Other, net....................................................................... 675 (115) 1,165
Change in assets and liabilities, net of acquisitions:
Increase in accounts receivable................................................ (20,597) (17,683) (35,483)
Increase in prepaid expenses, inventories and other assets..................... (15,286) (4,451) (12,347)
Decrease in current and other liabilities...................................... (3,112) (3,834) (9,997)
Increase in accrued merger and restructuring................................... 37,787 -- --
Increase in reserve for litigation............................................. 17,200 -- --
--------- -------- --------
Net cash provided (used) by operating activities........................... (23,378) 47,861 66,521
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale securities.............................. 17,207 -- --
Purchases of available-for-sale securities....................................... (1,000) -- --
Purchases and sales of short-term investments, net............................... -- 35,785 (66,668)
Proceeds from sale of property and equipment..................................... 1,100 5,439 150
Proceeds from sales of joint ventures............................................ 1,050 -- --
Purchases of property and equipment.............................................. (8,950) (14,701) (11,101)
Payments for acquisition of businesses, net of cash acquired..................... (61,450) (60,364) (57,153)
Capital contributions to unconsolidated joint ventures........................... (3,945) (11,897) (7,380)
Distributions of S corporation earnings.......................................... -- (4,272) (15,427)
--------- -------- --------
Net cash used by investing activities...................................... (55,988) (50,010) (157,579)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net of repurchases and issuance costs..................... 2,597 1,296 50,887
Borrowings and repayments of lines of credit, net................................ 70,933 -- --
Securities sold under agreements to repurchase................................... 7,430 -- --
Debt borrowings.................................................................. 2,180 62,941 22,809
Repayment of debt................................................................ (11,655) (50,823) (49,465)
Cash dividends paid.............................................................. (2,059) (5,012) (2,349)
Exercise of stock options........................................................ 7,015 223 291
--------- -------- --------
Net cash provided by financing activities.................................. 76,441 8,625 22,173
--------- -------- --------
NET INCREASE (DECREASE) IN CASH.................................................... (2,925) 6,476 (68,885)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 22,971 16,495 85,380
--------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 20,046 $ 22,971 $ 16,495
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest....................................................................... $ 9,596 $ 3,868 $ 2,963
========= ======== ========
Income taxes................................................................... $ 16,692 $ 32,183 $ 28,174
========= ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock in connection with acquisitions................................ $ 4,022 $ 23,331 $ 38,261
========= ======== ========
Capital lease obligations for purchase of property and equipment................. $ -- $ 1,700 $ --
========= ======== ========
Conversion of preferred stock to common stock.................................... $ -- $ -- $ 20,009
========= ======== ========
</TABLE>

See accompanying notes.

F-11
<PAGE> 163

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Coram Healthcare Corporation and its subsidiaries ("Coram" or the
"Company") are primarily engaged in providing alternate site infusion therapy
and related services. Other services offered by the Company include the
provision of lithotripsy, non-intravenous infusion products and physician
support services.

The operations of the Company commenced on July 8, 1994, as a result of a
merger of T(2) Medical, Inc. ("T(2)"), Curaflex Health Services, Inc.
("Curaflex"), HealthInfusion, Inc. ("HealthInfusion") and Medisys, Inc.
("Medisys") (collectively, the "Merged Entities"). Each of these companies
became and are now wholly owned subsidiaries of the Company. Each outstanding
share of the Merged Entities was converted, at varying exchange rates, into
shares of the Company's common stock, resulting in the issuance of 38.6 million
shares of Coram common stock. The transaction was accounted for as a
pooling-of-interests. Accordingly, the accompanying financial information was
restated to include the accounts of the Merged Entities for all periods
presented.

The results of operations previously reported by the Merged Entities and
the combined amounts presented in the accompanying consolidated financial
statements are summarized below (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
SIX MONTHS ENDED ---------------------
JUNE 30, 1994 1993 1992
---------------- -------- --------
<S> <C> <C> <C>
Net Revenue:
T(2)........................................ $115,770 $265,090 $264,562
Curaflex.................................... 48,989 89,152 75,127
Medisys..................................... 27,438 51,381 23,662
HealthInfusion.............................. 34,515 56,681 49,749
---------------- -------- --------
Combined................................. $226,712 $462,304 $413,100
============= ======== ========
Net Income (Loss):
T(2)........................................ $ (3,387) $ 35,504 $ 64,859
Curaflex.................................... (4,400) (8,615) (875)
Medisys..................................... 599 652 1,551
HealthInfusion.............................. 1,703 1,120 6,323
Coram Holding............................... (304) -- --
---------------- -------- --------
Combined................................. $ (5,789) $ 28,661 $ 71,858
============= ======== ========
</TABLE>

HMSS Acquisition -- On September 12, 1994, the Company acquired all of the
capital stock of H.M.S.S., Inc. ("HMSS"), an alternate site infusion therapy
provider. The acquisition was accounted for by the purchase method of
accounting, and accordingly, the results of operations of HMSS have been
included in the accompanying consolidated financial statements subsequent to the
date of acquisition. The acquisition was not material to the Company's financial
position or results of operations.

Other Acquisitions -- During 1994, T(2) completed 55 acquisitions totaling
$22.8 million which were accounted for as purchases. Individually, the
acquisitions were not considered material to the Company's financial position or
results of operations. During the years ended December 31, 1993 and 1992, the
Merged Entities completed numerous acquisitions. Acquisitions accounted for as
poolings of interests (four in 1993 and five in 1992) are reflected in the
accounts and operations of the Merged Entities for all periods presented.
Acquisitions accounted for as purchases (15 in 1993 and 14 in 1992) are included
in the operations of the Merged Entities subsequent to the dates of
acquisitions.

F-12
<PAGE> 164

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with these purchase transactions, certain purchase agreements
provided for additional contingent consideration. The amount of additional
consideration, if any, is based on the financial performance levels of the
acquired companies. If these contingent payments are paid, they will be recorded
as additional costs in excess of fair value in the period in which the payment
becomes probable.

Fiscal Year -- In conjunction with the merger, Coram adopted a December 31
year end. While Curaflex, HealthInfusion and Medisys previously had year ends of
December 31, T(2) prepared its financial statements on the basis of a September
30 fiscal year end. The restated financial statements for 1993 and 1992 include
previously reported T(2) amounts adjusted to conform to a December 31 year end.
Accordingly, T(2)'s results of operations as previously reported have been
adjusted as follows (in thousands):

<TABLE>
<S> <C>
NET REVENUES:
As previously reported -- fiscal year ended September 30, 1992.......... $250,944
As adjusted to conform to the year ended December 31, 1992.............. $264,562

As previously reported -- fiscal year ended September 30, 1993.......... $273,199
As adjusted to conform to the year ended December 31, 1993.............. $265,090
NET INCOME:
As previously reported -- fiscal year ended September 30, 1992.......... $ 64,959
As adjusted to conform to the year ended December 31, 1992.............. $ 64,859

As previously reported -- fiscal year ended September 30, 1993.......... $ 41,468
As adjusted to conform to the year ended December 31, 1993.............. $ 35,504
</TABLE>

The adjustments made to conform T(2)'s previously reported amounts reflect
the inclusion and exclusion, as necessary, of T(2)'s results of operations for
the quarters ended December 31, 1993, 1992 and 1991.

Merger and Restructuring -- During September 1994, the Company initiated a
merger and restructuring plan ("the Coram Consolidation Plan") to reduce future
operating costs, improve productivity and gain efficiencies through
consolidation of redundant infusion centers and corporate offices, reductions in
personnel, and elimination or discontinuance of investments in certain joint
ventures and other non-infusion facilities. The Coram Consolidation Plan
anticipated the costs associated with consummation of the merger transaction
("Merger Costs"); it also anticipated costs associated with severance and fringe
benefits related to workforce reductions ("Personnel Reduction Costs"),
consolidation of existing operating and corporate office facilities and
disposition of redundant equipment and inventories ("Facility Reduction Costs")
and the impact of changes in strategic direction related to certain non-core
businesses ("Discontinuance Costs") (collectively "Restructuring Costs"). In
connection with the Coram Consolidation Plan, the Company recorded charges of
$28.5 million in estimated merger costs and $92.3 million in estimated
restructuring costs. Additionally, upon the completion of the HMSS acquisition,
the Company extended the Coram Consolidation Plan to include the consolidation
of HMSS operations. Accordingly, the Company recorded estimated restructuring
costs of $3.2 million related to the HMSS transaction. The estimated costs
associated with each component of the

F-13
<PAGE> 165

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Coram Consolidation Plan, including the writedown of existing assets to their
estimated net realizable value were as follows (in thousands):

<TABLE>
<CAPTION>
CASH NON-CASH
EXPENDITURES CHARGES TOTAL
------------ -------- -------
<S> <C> <C> <C>
Merger Costs....................................... $ 27,900 $ 600 $28,500
========= ======= =======
Personnel Reduction Costs.......................... $ 26,200 $ 600 $26,800
Facility Reduction Costs........................... 15,600 16,300 31,900
Discontinuance Costs............................... 4,200 32,600 36,800
------------ -------- -------
Restructuring Costs................................ $ 46,000 $49,500 $95,500
========= ======= =======
</TABLE>

Management believes these costs to be non-recurring; however, actual costs
may vary from the recorded charges as the Coram Consolidation Plan continues.

Implementation of the Coram Consolidation Plan began in September 1994. The
Coram Consolidation Plan provided for the elimination of approximately 100 of
the Company's home infusion branch facilities and the consolidation of corporate
administrative operations into one location, with a corresponding significant
reduction of branch and corporate personnel. The Company anticipates that the
branch and corporate consolidation portions of the Coram Consolidation Plan will
be substantially completed by March 31, 1995.

Through December 31, 1994, the Company had completed a significant portion
of the branch consolidation process, including the closure of 75 branch
facilities and a reduction of approximately 500 employees. The Company has made
total payments and recorded asset write-downs through December 31, 1994, as
follows (in thousands):

<TABLE>
<CAPTION>
CASH NON-CASH TOTAL
------- -------- -------
<S> <C> <C> <C>
Merger Costs.......................................... $25,100 $ 600 $25,700
======= ======= =======
Personnel Reduction Costs............................. $ 6,200 $ 600 $ 6,800
Facility Reduction Costs.............................. 1,200 16,200 17,400
Discontinuance Costs.................................. -- 32,600 32,600
------- -------- -------
Restructuring Costs................................... $ 7,400 $49,400 $56,800
======= ======= =======
</TABLE>

The accrued merger and restructuring includes the remaining portion of the
restructuring amount related to the HMSS acquisition.

As a result of the Company's decision to implement standardized policies
for recognition of contractual and other allowances, de-emphasize certain
businesses and provide for the disruptions experienced during the merger and
post-merger transition process, the Company also recorded a special charge of
$17.3 million in September 1994, for anticipated uncollectible accounts and
other receivables. In establishing this reserve, the Company evaluated the aging
of trade receivables since the merger process began and evaluated the impact of
ending relationships with certain centers.

Although subject to future adjustment, management of the Company believes
it had adequate reserves as of December 31, 1994, to complete the Coram
Consolidation Plan.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation -- The consolidated
financial statements include the accounts of Coram, its subsidiaries and joint
ventures in which ownership is 51% or greater. All material intercompany
accounts and transaction balances have been eliminated in consolidation. The
Company uses the equity method of accounting to account for investments in
entities in which it exhibits significant influence

F-14
<PAGE> 166

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and has an ownership interest of 20 to 50%. The cost method is used to account
for investments in which ownership is less than 20%.

Revenue Recognition -- Revenue is recognized as services are rendered or
products are delivered. Substantially all of the Company's revenue is billed to
third-party payors, including insurance companies, managed care plans,
governmental payors and contracted institutions. Revenue is recorded net of
contractual adjustments and related discounts. Contractual adjustments represent
estimated differences between service revenue at established rates and amounts
expected to be realized from third-party payors under contractual agreements.

Management fees, which are collected from entities managed by the Company,
are based on a percentage of the entities' annual pretax earnings or a
percentage of revenue.

Cash and Cash Equivalents -- Cash equivalents include all highly liquid
investments with an original maturity of three months or less. A portion of the
Company's cash balances were restricted as to their use. The restricted balances
totaled approximately $6.5 million and $5.0 million at December 31, 1994 and
1993, respectively.

Investments -- Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standard (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." As of December 31, 1994, the Company
had classified all of its investment securities as available-for-sale.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported on a net basis as a separate component of stockholders'
equity until realized. Realized gains and losses on the sale of securities are
computed using the specific identification method.

Provision for Estimated Uncollectible Accounts -- The Company records a
provision for estimated uncollectible accounts for the portion of recognized
revenues which it estimates may not be ultimately collected. The provision
includes any contractual adjustments in excess of those estimated at the time
revenue is recognized and other differences between recorded revenues and
collections from third party payors and patients. The provision and related
allowance are adjusted periodically, based upon the Company's evaluation of
historical collection experience with specific payors for particular services,
anticipated reimbursement levels with specific payors for new services for which
the Company may not have had significant historical collection experience,
industry reimbursement trends and other relevant factors.

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

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

Goodwill -- Goodwill represents the excess of the purchase price over the
fair value of net assets acquired through business combinations accounted for as
purchases and is amortized on a straight-line basis over the expected periods to
be benefited. At December 31, 1994 and 1993, total accumulated amortization of
goodwill was approximately $28.4 million and $19.1 million, respectively.

Goodwill from acquisitions consummated prior to the merger and the HMSS
acquisition is amortized over useful lives ranging from 30 to 40 years. Goodwill
will be amortized over an average useful life of approximately 30 years for all
companies purchased subsequent to December 31, 1994. The Company assesses the
recoverability of goodwill at least annually using estimated undiscounted future
cash flows determined based on its judgments as to the future profitability of
its operations and the changing dynamics of the healthcare industry.

F-15
<PAGE> 167

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes -- The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting
for Income Taxes". SFAS 109 requires an asset and liability approach to
financial accounting and reporting for income taxes.

Per Share Data -- Per share data have been computed by dividing net income
or loss by the weighted average number of common and common equivalent shares
outstanding during the period. The weighted average calculation also includes
common shares issuable. Common stock equivalents include dilutive stock options
and warrants. Fully diluted per share calculations are not presented in the
financial statements because the assumed conversions of convertible debt and any
additional incremental shares would be either antidilutive or cause de minimus
dilution.

2. INVESTMENTS

The carrying value of the Company's available-for-sale securities and their
approximate fair values at December 31, 1994 were as follows (in thousands):

<TABLE>
<CAPTION>
AMORTIZED UNREALIZED APPROXIMATE
COST LOSSES FAIR VALUE
--------- ---------- -----------
<S> <C> <C> <C>
U.S. Government agencies............................ $ 329 $ 4 $ 325
Asset and mortgage-backed securities................ 8,256 171 8,085
U.S. Treasury obligations........................... 7,531 93 7,438
Corporate obligations............................... 704 11 693
Other securities.................................... 5 -- 5
--------- ---------- -----------
Total..................................... $16,825 $279 $16,546
======= ======== =========
</TABLE>

In accordance with the Company's previous investment accounting policy, the
aggregate carrying value and estimated fair value of investments at December 31,
1993 were as follows (in thousands):

<TABLE>
<CAPTION>
APPROXIMATE
COST FAIR VALUE
-------- -----------
<S> <C> <C>
U.S. Government agencies...................................... $ 1,313 $ 1,323
Asset and mortgage-backed securities.......................... 18,438 18,484
U.S. Treasury obligations..................................... 12,296 12,307
Corporate obligations......................................... 985 986
-------- -----------
Total............................................... $ 33,032 $33,100
======= =========
</TABLE>

The amortized cost and approximate market value of investment securities at
December 31, 1994, by contractual maturity, are shown below (in thousands).
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED APPROXIMATE
COST FAIR VALUE
--------- -----------
<S> <C> <C>
Due in one year or less....................................... $ 5,618 $ 5,574
Due after one year through five years......................... 2,951 2,887
Asset and mortgage-backed securities.......................... 8,256 8,085
--------- -----------
$16,825 $16,546
======= =========
</TABLE>

On December 28, 1994, the Company entered into an agreement to sell and
repurchase U.S. Treasury obligations totaling approximately $7.4 million. The
liability to repurchase securities sold under this agreement reported as a
current liability in the accompanying consolidated balance sheet because of its
short-term maturity. The related investments were included as available-for-sale
securities at December 31, 1994.

F-16
<PAGE> 168

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Gross realized gains and losses on sale of available-for-sale securities
were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gain.......................................................... $ 8 $ 69 $182
Loss.......................................................... $136 $264 $506
</TABLE>

3. PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Land and buildings............................................... $ 3,135 $ 3,218
Leasehold improvements........................................... 4,943 4,570
Machinery and equipment.......................................... 50,940 51,703
Furniture and fixtures........................................... 5,898 9,848
Vehicles......................................................... 5,493 5,274
------- -------
70,409 74,613
Less accumulated depreciation and amortization................... 44,507 31,696
------- -------
$25,902 $42,917
======= =======
</TABLE>

4. LINES OF CREDIT AND LONG-TERM DEBT

Lines of credit and Long-term debt were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- -------
<S> <C> <C>
Revolving lines of credit....................................... $108,099 $37,166
Subordinated convertible debentures, at 9%, with semi-annual
interest payments, due June 30, 1996, convertible into common
stock at the conversion rate of $16.36........................ 7,000 7,000
Other obligations, including capital leases, at rates ranging
from 6% to 16%, collateralized by certain property and
equipment..................................................... 11,629 24,747
-------- -------
126,728 68,913
Less current maturities......................................... 5,911 28,757
-------- -------
$120,817 $40,156
======== =======
</TABLE>

On October 17, 1994, the Company entered into a $120 million revolving line
of credit agreement to replace its prior borrowing facility. This agreement,
which has a maturity date of June 30, 1996, bears interest at an adjusted LIBOR
and/or base borrowing rates. Base rate borrowings under this agreement were zero
to 1.125% over the greater of 1) prime rate or 2) Federal funds rate plus 0.5%,
and LIBOR borrowings at a rate of floating LIBOR plus 0.875% to 2.125%. The
revolving line of credit is collateralized by a pledge of the stock of the
Company's subsidiaries, as well as accounts receivable, investment securities
and all of the general assets of the Company and its subsidiaries. The agreement
also requires the maintenance of certain financial ratios and contains other
restrictive covenants. At December 31, 1994, borrowings on the revolving line of
credit were at a weighted average LIBOR rate of 7.822%. At December 31, 1994,
the available borrowings under the revolving credit facility, as defined in the
Agreement, were approximately $12 million.

F-17
<PAGE> 169

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On February 10, 1995, the Company entered into an amendment, which had an
effective date of December 31, 1994, to its revolving line of credit agreement.
Under this amendment, the revolving line of credit was increased to $150
million. The base rate borrowings were adjusted to zero to 1.25% over the
greater of 1) prime rate or 2) Federal funds rate plus 0.5%, and LIBOR
borrowings at a rate of floating LIBOR plus 0.875% to 2.25%. The covenants
include but are not limited to the restrictions in the payment of any dividends.
The agreement contains a commitment fee ranging from 0.25% to 0.5% on the unused
balance.

The Company was in compliance with financial ratios and restrictive
covenants at December 31, 1994 and for the year then ended.

At December 31, 1994, the Company was obligated to make principal payments
on long-term debt outstanding as follows (in thousands):

<TABLE>
<S> <C>
Year Ending December 31,
1995.................................................................... $ 5,911
1996.................................................................... 117,879
1997.................................................................... 866
1998.................................................................... 820
1999 and thereafter..................................................... 1,252
--------
$126,728
========
</TABLE>

5. INCOME TAXES

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................ $ 237 $27,019 $33,138
State.............................................. 68 3,479 4,793
-------- ------- -------
Total...................................... 305 30,498 37,931
-------- ------- -------
Deferred:
Federal............................................ $(17,676) $(1,440) $ 146
State.............................................. (8,860) (210) 40
-------- ------- -------
Total...................................... (26,536) (1,650) 186
-------- ------- -------
Provision (benefit) for income taxes....... $(26,231) $28,848 $38,117
======== ======= =======
</TABLE>

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate...................................... (35.0)% 35.0% 34.0%
Valuation allowance......................................... 15.9 6.8 --
S corporation income........................................ -- (3.0) (4.9)
State income taxes, net of federal income tax benefit....... (5.4) 5.8 3.9
Non-deductible merger costs................................. 3.2 0.3 --
Goodwill.................................................... 1.1 2.0 1.1
Other....................................................... 3.1 3.3 0.5
----- ----- -----
Effective income tax rate (benefit)......................... (17.1)% 50.2% 34.6%
===== ===== =====
</TABLE>

F-18
<PAGE> 170

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
-------- --------
<S> <C> <C>
Deferred tax assets:
Restructuring costs............................................ $ 33,320 $ --
Net operating loss carryforwards............................... 14,031 12,358
Accrued litigation............................................. 10,286 69
Allowance for doubtful accounts................................ 11,146 5,656
Accrued vacation............................................... 975 680
Other.......................................................... 1,303 383
-------- --------
Total gross deferred tax asset......................... 71,061 19,146
Less valuation allowance............................... (38,611) (12,420)
-------- --------
Net deferred tax asset................................. 32,450 6,726
Deferred tax liabilities:
State taxes.................................................... (4,911) (442)
Amortization of intangibles.................................... (1,492) (925)
Partnerships................................................... (608) (5,327)
Other.......................................................... (299) (1,835)
-------- --------
Total deferred tax liabilities......................... (7,310) (8,529)
-------- --------
Net deferred tax asset (liability)............................... $ 25,140 $ (1,803)
======== ========
</TABLE>

During the year ended December 31, 1992, the principal differences
resulting in the deferred income tax provision of $186,000 were not significant.

At December 31, 1994, the Company had net operating loss carryforwards
("NOL's") for federal income taxes of approximately $35 million which are
available to offset future federal taxable income, expiring in the years 2002
through 2008. The NOL carryforwards were generated by Curaflex prior to the
merger. Accordingly, the NOL's contain separate return limitations restricting
their use to Curaflex and its subsidiaries. In addition, the NOL's have a
maximum annual usage limitation of approximately $4.5 million as imposed under
Section 382 of the Internal Revenue Code.

For financial reporting purposes, a valuation allowance of approximately
$14 million has been recognized to offset the deferred tax assets related to
these NOL's. An additional valuation allowance has been recognized to offset the
deferred tax assets which cannot be realized as part of the Company's loss
carryback. Both valuation allowances when realized will benefit the Company's
income tax provision.

6. RELATED PARTY TRANSACTIONS

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

Receivables from officers and other related parties at December 31, 1993,
were approximately $1.6 million.

Certain executive officers and consultants to the Merged Entities had
employment, severance or consulting agreements that entitled such executive
officers or consultants to certain termination or severance payments upon
consummation of the merger or upon termination of employment following the
merger. In

F-19
<PAGE> 171

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

conjunction with the Coram Consolidation Plan (see Note 1), the Company accrued
$18.8 million for the termination of the existing employment, consulting and/or
severance agreements with these individuals. This accrual is included as a
component of the Coram Consolidation Plan.

All companies managed by the Company are considered related parties.
Management fee revenue from entities managed by the Company was approximately
$28.8 million, $51.6 million and $66.2 million in 1994, 1993 and 1992,
respectively. Receivables from managed companies were $4.8 million and $11.6
million at December 31, 1994 and 1993, respectively.

A former Director of one of the Merged Entities is associated with a law
firm that rendered various legal services to the Company. The legal fees to the
firm approximated $0.2 million in 1994 and $0.3 million in each of the years
1993 and 1992.

A Director of the Company is associated with a law firm that rendered
various legal services to the Company. The legal fees to the firm approximated
$1.4 million during 1994.

Certain former Directors of one of the Merged Entities were employed as
consultants. Consulting fees to these individuals approximated $2.5 million,
$0.3 million and $0.4 million during 1994, 1993, and 1992, respectively.

In 1994, a note receivable totaling $0.4 million from a former Director of
one of the Merged Entities was forgiven by the Company as part of his severance.

At December 31, 1994, the Company had outstanding loans to certain members
of management approximating $1.5 million. The loans are collateralized by the
individuals' former primary residences and had interest rates ranging from zero
to 6.6% per annum. The principal amount of the loans and all interest
accumulated is due no later than one year from the date of origination.

7. STOCKHOLDERS' EQUITY

At December 31, 1994, the Company was authorized to issue 10 million shares
of preferred stock, $.001 par value, which may be issued at the discretion of
the Company's Board of Directors without further stockholder approval. The Board
can also determine the preferences, rights, privileges and restrictions of any
series of preferred stock. At December 31, 1994, there were no shares of
preferred stock issued and outstanding.

In accordance with the Merger Agreement, Coram assumed the outstanding
obligations under the various stock option and stock purchase plans of the
Merged Entities. No further options will be granted under these plans, unless so
determined by the Company's Board of Directors. In addition, the Company has
implemented the 1994 Stock Option Plan (the "1994 Plan") and the Coram Employee
Stock Purchase Plan (the "Purchase Plan") pursuant to which an aggregate of up
to 7.9 million shares of common stock are reserved for issuance. In 1994,
options to purchase approximately 5.0 million shares of Coram stock were issued
under the 1994 Plan and no shares were issued under the Purchase Plan.

Common shares reserved for future issuance also include approximately 0.6
million shares related to options outside of the 1994 Plan, 0.4 million shares
related to convertible debt (see Note 4), and 3.2 million shares related to
stock purchase warrants.

F-20
<PAGE> 172

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock Option Plan

The 1994 Plan contains three separate incentive programs which provide for
the granting of stock options to certain officers, key employees, consultants
and non-employee members of Coram's Board of Directors. Options granted under
the 1994 Plan may constitute either incentive stock options, non-statutory
options or stock appreciation rights based on the type of incentive program
utilized. For each of the incentive programs, options may be granted at exercise
prices ranging from 85% to 100% of the fair market value of the Company's stock
at the date of grant. Options granted under the 1994 Plan expire ten years from
the date of grant and become exercisable at varying dates depending upon the
incentive program utilized. The 1994 Plan is administered by a committee of the
Board of Directors. The committee has the authority to determine the employees
to whom awards will be made and the incentive program to be utilized. During the
year ended December 31, 1994 the options granted under the 1994 Plan were all at
100% of fair market value of the Company's stock at the date of grant. A summary
of the stock option transactions under the prior stock option plans and the 1994
Plan is as follows (in thousands):

<TABLE>
<CAPTION>
SHARES EXERCISE PRICE
OUTSTANDING PER SHARE
----------- ---------------
<S> <C> <C>
Balance at January 1, 1992.............................. 2,750 $ 0.79 - $49.90
Options granted....................................... 1,469 7.60 - 92.26
Options exercised..................................... (385) 0.79 - 51.19
Options cancelled..................................... (296) 1.38 - 92.26
----------- ---------------
Balance at December 31, 1992............................ 3,538 0.79 - 92.26
Options granted....................................... 1,254 9.52 - 41.67
Options exercised..................................... (258) 0.79 - 32.92
Options cancelled..................................... (714) 1.38 - 51.19
----------- ---------------
Balance at December 31, 1993............................ 3,820 1.44 - 92.26
Options granted....................................... 5,080 11.00 - 18.41
Options exercised..................................... (867) 1.44 - 19.84
Options cancelled..................................... (914) 1.44 - 92.26
----------- ---------------
Balance at December 31, 1994............................ 7,119 $ 1.44 - $92.26
========= ==============
Total options exercisable at December 31, 1994.......... 1,732 $ 1.44 - $92.26
========= ==============
</TABLE>

The Company has an option agreement outside of the 1994 Plan, with a firm
performing consulting services to the Company. An option to purchase 0.6 million
shares of the Company's common stock was granted at an exercise price of $15.63
and expires in November 1999. This option vests over a 3 year period, commencing
in November 1994.

Warrants to Purchase Common Stock

In connection with the settlement of certain stockholder litigation the
Company has issued warrants to acquire approximately 0.5 million shares of the
Company's common stock at an exercise price ranging from $18 per warrant,
subject to adjustment. The Company has agreed, subject to court approval and
certain other contingencies, to issue additional warrants to acquire up to 2.5
million shares of the Company's common stock at an exercise price of $20.25 per
warrant, subject to adjustment (see Note 8).

In addition, stock purchase warrants outstanding at December 31, 1994,
which had been issued by the Merged Entities prior to the merger were converted
into warrants to acquire approximately 0.2 million shares of the Company's stock
at a price ranging from $12.58-$29.63 per warrant. Certain of these warrants do
not have an expiration date.

F-21
<PAGE> 173

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office, other operating space and equipment under
various operating and capital leases. The leases provide for monthly rental
payments including real estate taxes and other operating costs. Total rental
expense for 1994, 1993 and 1992 was approximately $14.8 million, $14.3 million
and $10.8 million, respectively. At December 31, 1994 the aggregate future
minimum lease commitments were as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year Ending December 31,
1995........................................................... $ 2,844 $ 7,845
1996........................................................... 1,376 5,560
1997........................................................... 617 3,876
1998........................................................... 484 1,795
1999 and thereafter............................................ -- 957
------- ---------
Total minimum lease payments................................... 5,321 20,033
Less amounts representing interest............................. 582 --
------- ---------
Net minimum lease payments..................................... $ 4,739 $20,033
====== =======
</TABLE>

Capital lease obligations are included in other obligations (see Note 4).
The cost and related accumulated depreciation of equipment under capital leases
were approximately $6.6 million and $3.2 million at December 31, 1994.

Employee Benefit Plans

The Merged Entities provide various defined contribution plans that are
available to their employees. Management of the Company intends to merge these
benefit plans during 1995. In general, each plan covers eligible employees, as
defined in the plan documents, and certain plans contain provisions whereby the
Company will contribute specified amounts. During the years ended December 31,
1994, 1993 and 1992, total contributions to these plans were approximately $1.4
million, $1.3 million and $0.9 million, respectively.

Litigation

The Company has entered into a Stipulation of Settlement (the
"Stipulation") dated as of January 27, 1995 which sets forth the principal terms
of a proposed settlement of class action shareholder litigation which was
initiated against T2 in 1992. The settlement provides for the Company to pay the
shareholder class $25 million in cash (of which approximately $7.8 million will
be contributed by the Company's insurance carriers), and to issue warrants to
acquire an aggregate of 2.52 million shares of the Company Common Stock at an
exercise price of $20.25, subject to adjustment. The Stipulation is subject to
the review and approval of the court on May 5, 1995 and certain other
contingencies, and there can be no assurance that the settlement will be
consummated.

During September 1994, the Company also settled a dispute with the former
principals of a company acquired by T2 in 1992 related to the valuation of that
acquisition transaction. The dispute was settled with the Company issuing to the
former principals, warrants to acquire 500,000 shares of the Company's common
stock at an exercise price of $18, subject to adjustment. The Company is
obligated to make a cash payment of up to $4 million to the warrantholders at
the end of the five-year term of the warrants; provided, however, that the
payment will be reduced, dollar-for-dollar, to the extent of the aggregate
positive spread in excess of $16.00 per share on any warrants exercised prior
to, or exercisable at the end of, the five year term of the

F-22
<PAGE> 174

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

warrants. The Company's obligation to make any cash payment terminates if the
Company's stock price exceeds $26.00 for any five consecutive business days
during the term of the warrants.

In September 1994, the Company announced that T2 had agreed to settle the
investigations conducted by Office of the Inspector General ("OIG") of the U.S.
Department of Health and Human Services regarding T2's financial arrangements
with physicians. T2, in expressly denying liability, agreed to a civil order
which enjoins it from violating federal anti-kickback and false claims laws
related to Medicare/Medicaid reimbursement. The order further requires T2 to
comply with certain standards when providing management or other services to
physicians. Under the terms of the settlement, T2 paid the federal government
$500,000 to reimburse the government for the costs of its investigation and
settle its claims. T2 will continue to participate in the Medicare/Medicaid
programs. On September 30, 1994, the U.S. District Court for the Northern
District of Georgia (Atlanta Division) approved the settlement.

The Company is involved in various legal proceedings incidental to the
normal course of business. While it is not possible to predict the outcome of
such proceedings with certainty, management is of the opinion that their
ultimate disposition will not have a material adverse effect on the Company's
consolidated financial position or results of operations.

Other Commitments

The Company's agreements with its lithotripsy physician partners
contemplate that the Company will acquire the remaining interest in each
partnership at a defined price in the event that legislation is passed or
regulations are adopted that would prevent the physician from owning an interest
in the partnership and using the partnership's lithotripsy equipment for the
treatment of his or her patients. While current interpretations of existing law
are subject to considerable uncertainty, the Company believes that its
partnership arrangements with physicians in its lithotripsy business are in
compliance with current law.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

Most of the Company's financial instruments are carried at their fair
value. The Company has estimated the fair value of its financial instruments
whose carrying value differed from fair value using available market information
and appropriate valuation methodologies. Considerable judgment is required in
developing the estimates of fair value presented herein and, therefore, the
values are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.

At December 31, 1994, the carrying amount and the estimated fair value of
such financial instruments consisted of the following:

<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
Investment securities........................................... $ 16,546 $ 16,546
Long-term debt, including current portion....................... $126,728 $ 127,116
</TABLE>

The estimated fair value of investment securities is based on quoted market
prices and dealer quotes. The estimated fair value of long-term debt was
determined based on interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities. See Note 2 and
Note 4 for additional disclosures relating to the Company's investment
securities and long-term debt, respectively. The Company has investments in
unconsolidated subsidiaries totaling approximately $3.2 million. Since these
subsidiaries are all closely held companies and there are no quoted market
prices, it is not practicable to estimate the fair value of such investments.

F-23
<PAGE> 175

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair value estimates presented herein are based on information
available to management as of December 31, 1994. Management is not aware of any
subsequent factors that would significantly affect the estimated fair value
amounts.

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

<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994
Net revenue..................................... $ 113,065 $ 113,647 $ 110,206 $ 113,578
Gross profit.................................... 36,050 36,356 31,432 33,476
Net income (loss)............................... $ 3,211 $ (9,000) $ (121,176) $ (1,107)
======== ========= ========= =========
Net income (loss) per common share:
Primary...................................... $ 0.08 $ (0.23) $ (3.14) $ (0.03)
======== ========= ========= =========
Year Ended December 31, 1993
Total revenue................................... $ 113,416 $ 117,885 $ 119,259 $ 111,744
Gross profit.................................... 47,590 48,173 47,881 33,637
Net income (loss)............................... $ 10,217 $ 12,680 $ 10,235 $ (4,471)
======== ========= ========= =========
Net income (loss) per common share:
Primary...................................... $ 0.27 $ 0.33 $ 0.27 $ (0.12)
======== ========= ========= =========
</TABLE>

In 1994, unusual or infrequently occurring charges included the Company's
provision for litigation settlements of $17.2 million in the second quarter and,
during the third quarter, a special provision for uncollectible accounts of
$17.3 million, a provision for litigation settlements of $6.0 million and the
development and implementation of the Coram Consolidation Plan which resulted in
charges of $28.5 million in estimated Merger Costs and $95.5 million in
estimated Restructuring Costs. In 1993 unusual or infrequently occurring charges
included a $6.4 million gain or sale of assets during the second quarter and
charges aggregating $11.3 million for additional provisions for uncollectible
accounts during the fourth quarter.

11. SUBSEQUENT EVENTS

Caremark

In January 1995, the Company announced that it had reached a definitive
agreement to acquire Caremark International Inc.'s alternate site infusion
business. Under the terms of the agreement, the Company will pay Caremark
approximately $310 million, subject to a net asset adjustment of up to $18
million. Consummation of the transaction is subject to the Company obtaining
certain debt financing, which is currently being undertaken, and other normal
closing conditions, including required government approvals. The acquisition
will be accounted for as a purchase and accordingly, Caremark's results of
operations, after consummation of the transaction, will be included in the
Company's operating results.

F-24
<PAGE> 176

CORAM HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unaudited pro forma financial position and results of operations of the
Company, as of and for the year ended December 31, 1994, assuming the purchase
had occurred at the beginning of the period, are as follows (in thousands):

<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
CORAM CAREMARK ADJUSTMENTS COMBINED
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets................................ $ 207,700 $184,900 $ (23,100) $ 369,500
========= ======== ========= =========
Total Assets.................................. $ 576,100 $418,700 $ (20,000) $ 974,800
========= ======== ========= =========
Liabilities and Stockholders' Equity
Total Current Liabilities..................... $ 124,300 $ 81,700 $ -- $ 206,000
Revolving Lines of Credit and Long Term
Debt....................................... 120,800 600 321,900 443,300
Other Liabilities............................. 8,800 35,300 44,100
Total Stockholders' Equity.................... 322,200 301,100 (341,900) 281,400
---------- -------- ----------- ---------
Total Liabilities and Stockholders' Equity.... $ 576,100 $418,700 $ (20,000) $ 974,800
========= ======== ========= =========
Net Revenue..................................... $ 450,500 $441,900 $ -- $ 892,400
Cost of Service................................. 313,200 338,200 -- 651,400
---------- -------- ----------- ---------
Gross profit.................................... 137,300 103,700 -- 241,000
Total operating expenses........................ 274,900 106,300 5,800 387,000
---------- -------- ----------- ---------
Operating loss.................................. $ (137,600) $ (2,600) $ (5,800) $(146,000)
========= ======== ========= =========
Interest expense, net........................... $ (4,900) $ (500) $ (35,000) $ (40,400)
---------- -------- ----------- ---------
Net loss........................................ $ (128,100) $ (2,400) $ (33,800) $(164,300)
========= ======== ========= =========
Net loss per common share (primary)............. $ (4.25)
=========
Weighted average common shares outstanding
(primary)..................................... 38,633
=========
</TABLE>

This pro forma presentation assumes that the Company will obtain
approximately $450 million of debt structured either as a combination of
subordinated debt and convertible notes or entirely subordinated debt. For
purposes of the calculation of interest expense, the Company has assumed an
average interest rate of approximately 10%. The structure of the proposed
financing is currently being negotiated. However, the Company anticipates the
financing will also to provide for the repayment of the outstanding revolving
line of credit totaling approximately $108 million at year end.

The pro forma adjustments to financial position primarily relate to the
increase in debt to be incurred by the Company to finance the acquisition of
Caremark. In addition, the Company expects goodwill associated with the
acquisition to be approximately $250 million, including $196 million of
purchased goodwill. The pro forma adjustments to operational expenses are due to
interest expense on the acquisition debt and adjustments to amortization of the
excess purchase price over the net assets and liabilities assumed and is subject
to change based upon finalizing the purchase agreement, asset valuation and
potential future restructuring costs. The pro forma adjustments do not give
affect to any benefits derived from the anticipated closures of a substantial
number of branches, reduction of corporate administrative expenses and other
savings. Additionally, interest expense could change significantly depending
upon the structure of the financing which has not yet been determined.

The pro forma financial information does not necessarily reflect the
operations that would have occurred had the companies been combined as a single
entity as of January 1, 1994 and the year ended December 31, 1994.

Kids Medical Club

On January 30, 1995, the Company reached an agreement in principle to sell
its pediatric home care business known as Kid's Medical Club to Pediatric
Services of America, Inc. ("PSAI"). The Company and PSAI simultaneously
announced the formation of a strategic alliance pursuant to which PSAI's
comprehensive pediatric home care services would be included in the Company's
alternate site care network, allowing joint national marketing and capitation
agreements with managed care organizations. The transaction is not material to
the Company's results of operations or financial position.

F-25
<PAGE> 177

CORAM HEALTHCARE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 21,580 $ 20,046
Accounts receivable, net........................................... 106,419 109,087
Investment in available-for-sale securities........................ 15,499 16,546
Inventories........................................................ 11,250 11,864
Prepaid taxes...................................................... 9,739 11,510
Deferred income taxes, net......................................... 32,538 31,893
Other current assets............................................... 20,784 7,251
--------- ------------
Total current assets....................................... 217,809 208,197
PROPERTY AND EQUIPMENT, NET.......................................... 23,744 25,902
JOINT VENTURES AND OTHER ASSETS...................................... 18,073 8,546
DEFERRED INCOME TAXES NON-CURRENT.................................... 556 556
GOODWILL, NET........................................................ 337,269 333,238
--------- ------------
TOTAL ASSETS......................................................... $ 597,451 $576,439
======== ==========

LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................... $ 32,553 $ 27,098
Current maturities of long-term debt............................... 5,562 5,911
Deferred income taxes.............................................. 5,818 5,788
Liabilities for securities sold under agreement to repurchase...... 7,365 7,430
Reserve for litigation............................................. 22,647 22,720
Accrued merger and restructuring................................... 35,958 43,594
Other accrued liabilities.......................................... 13,632 11,845
--------- ------------
Total current liabilities.................................. 123,535 124,386
REVOLVING LINES-OF-CREDIT............................................ 122,300 108,099
LONG-TERM DEBT....................................................... 10,801 11,627
MINORITY INTEREST IN CONSOLIDATED JOINT VENTURES..................... 4,729 6,599
OTHER LIABILITIES.................................................... 1,885 1,945
DEFERRED INCOME TAXES NON-CURRENT.................................... 1,522 1,522

STOCKHOLDERS' EQUITY:
Common stock par value $.001, authorized 75,000 shares, issued
39,454 in 1995 and 38,964 in 1994............................... 39 39
Additional paid-in capital......................................... 347,071 341,328
Unrealized loss on available-for-sale securities................... (193) (279)
Retained earnings (deficit)........................................ (14,238) (18,827)
--------- ------------
Total stockholders' equity................................. 332,679 322,261
--------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $ 597,451 $576,439
======== ==========
</TABLE>

See accompanying notes.

F-26
<PAGE> 178

CORAM HEALTHCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
NET REVENUE.......................................................... $104,778 $113,065
Drugs and supplies................................................. 37,227 34,650
Clinical services.................................................. 38,382 42,365
-------- --------
COST OF SERVICE...................................................... 75,609 77,015
-------- --------
Gross profit....................................................... 29,169 36,050
OPERATING EXPENSES:
Selling, general and administrative expenses....................... 17,885 19,584
Provision for estimated uncollectible accounts..................... 4,013 4,732
Amortization of goodwill........................................... 2,790 2,135
Restructuring costs (benefit)...................................... (4,131) --
-------- --------
Total operating expenses................................... 20,557 26,451
-------- --------
OPERATING INCOME..................................................... 8,612 9,599
OTHER INCOME (EXPENSE):
Interest income.................................................... 402 715
Interest expense................................................... (3,436) (1,168)
Minority interest in net income of consolidated joint ventures..... (2,432) (2,391)
Other income....................................................... 338 151
-------- --------
INCOME BEFORE INCOME TAXES........................................... 3,484 6,906
PROVISION (BENEFIT) FOR INCOME TAXES................................. (1,105) 3,695
-------- --------
NET INCOME........................................................... $ 4,589 $ 3,211
======== ========
NET INCOME PER COMMON SHARE:
Primary............................................................ $ 0.11 $ 0.08
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Primary............................................................ 40,939 38,616
======== ========
</TABLE>

See accompanying notes.

F-27
<PAGE> 179

CORAM HEALTHCARE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................... $ 4,589 $ 3,211
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Provision for estimated uncollectible accounts......................... 4,013 4,732
Depreciation and amortization.......................................... 5,571 5,311
Merger/restructuring benefit........................................... (4,131) --
Deferred income taxes, net............................................. (615) 500
Minority interest in net income of consolidated joint ventures, net.... (493) 469
Equity in net income of unconsolidated joint ventures, net............. (11) 21
Other, net............................................................. (29) 43
Change in assets and liabilities, net of acquisitions and dispositions:
Accounts receivable................................................. (6,414) (9,355)
Prepaid expenses, inventories and other assets...................... (6,910) (2,834)
Current and other liabilities and reserve for litigation............ 6,123 (8,435)
Accrued merger and restructuring.................................... (7,218) --
------- -------
Net cash provided (used) by operating activities.................. (5,525) (6,337)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale and maturities of available-for-sale securities..... 1,133 4,956
Proceeds from sales of property and equipment.......................... 62 393
Proceeds from sales of joint ventures.................................. 100 --
Purchases of property and equipment.................................... (1,251) (2,709)
Payments for acquisition of businesses, net of cash acquired........... (11,638) (2,682)
Proceeds from sales of businesses...................................... 729 --
Capital contributions to unconsolidated joint ventures................. (556) (929)
------- -------
Net cash used by investing activities............................. (11,421) (971)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock, net of repurchases and issuance costs........... -- 3,586
Borrowings (repayments) of lines of credit, net........................ 14,180 (14)
Securities sold under agreements to repurchase, net.................... (65) --
Debt borrowings........................................................ 24 8,908
Repayment of debt...................................................... (1,020) (457)
Cash dividends paid.................................................... -- (1,027)
Exercise of stock options.............................................. 5,361 68
------- -------
Net cash provided by financing activities......................... 18,480 11,064
------- -------
NET INCREASE IN CASH..................................................... 1,534 3,756
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................... 20,046 22,971
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................. $21,580 26,727
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest............................................................ $ 3,954 $ 1,066
======= =======
Income taxes........................................................ $(2,412) $11,648
======= =======
</TABLE>

See accompanying notes.

F-28
<PAGE> 180

CORAM HEALTHCARE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
regulations. The condensed consolidated financial statements reflect all
adjustments and disclosures which are, in the opinion of management, necessary
for a fair presentation. All such adjustments, other than those relating to the
merger, restructuring, special provision for uncollectible accounts and
litigation settlements, are of a normal recurring nature. The results of
operations for the interim periods are not necessarily indicative of the results
of the full fiscal year. Certain December 31, 1994 balance sheet amounts have
been reclassified to conform with the March 31, 1995 presentation.

Business Activity. The operations of the Company commenced on July 8,
1994, as a result of a merger of T2 Medical, Inc. ("T2"), Curaflex Health
Services, Inc. ("Curaflex"), HealthInfusion, Inc. ("HealthInfusion") and
Medisys, Inc. ("Medisys") (collectively, the "Merged Entities"). Each of those
companies became and are now wholly owned subsidiaries of the Company. Each
outstanding share of the Merged Entities was converted, at varying exchange
rates, into shares of the Company's common stock, resulting in the issuance of
38.6 million shares of Coram common stock. The transaction was accounted for as
a pooling of interests. Accordingly, the accompanying financial information was
restated to include the accounts of the Merged Entities for all periods
presented.

The results of operations previously reported by the Merged Entities and
the combined amounts presented in the accompanying consolidated financial
statements are summarized below (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1994
-------------------
<S> <C>
Net Revenue
T2..................................................... $ 58,209
Curaflex............................................... 24,974
Medisys................................................ 13,508
HealthInfusion......................................... 16,374
-------------------
Combined............................................ $ 113,065
===============
Net Income(loss)
T2..................................................... $ 3,562
Curaflex............................................... (1,590)
Medisys................................................ 277
HealthInfusion......................................... 962
Coram Holding.......................................... --
===============
Combined............................................ $ 3,211
===============
</TABLE>

HMSS Acquisition. On September 12, 1994, the Company acquired all of the
capital stock of H.M.S.S., Inc. ("HMSS"), an alternate site infusion therapy
provider. The acquisition was accounted for by the purchase method of
accounting, and accordingly, the results of operations of HMSS have been
included in the accompanying consolidated financial statements subsequent to the
date of acquisition. The acquisition was not material to the Company's financial
position or results of operations.

Other Acquisitions. During the three months ended March 31, 1995, the
Company completed six acquisitions totaling $12.2 million which were accounted
for as purchases. During 1994, T2 completed 55

F-29
<PAGE> 181

CORAM HEALTHCARE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

acquisitions totaling $22.8 million which were accounted for as purchases.
Individually, the acquisitions were not considered material to the Company's
financial position or results of operations.

Merger and Restructuring -- During September 1994, Coram initiated the
Coram Consolidation Plan to reduce future operating costs, improve productivity
and gain efficiencies through consolidation of redundant infusion centers and
corporate offices, reduce personnel, and eliminate or discontinue investments in
certain joint ventures and other non-infusion facilities. Additionally, upon the
completion of the HMSS acquisition, Coram extended the Coram Consolidation Plan
to include the consolidation of HMSS operations. Accordingly, Coram recorded
estimated restructuring costs of $3.2 million related to the HMSS transaction.
The estimated cost associated with each component of the Coram Consolidation
Plan, recorded in the third quarter of 1994, including the writedown of existing
assets to their estimated net realizable value, were as follows (in thousands):

<TABLE>
<CAPTION>
CASH NON-CASH
EXPENDITURES CHARGES TOTAL
------------ -------- -------
<S> <C> <C> <C>
Merger Costs......................................... $ 27,900 $ 600 $28,500
========= ======= =======
Personnel Reduction Costs............................ $ 26,200 $ 600 $26,800
Facility Reduction Costs............................. 15,600 16,300 31,900
Discontinuance Costs................................. 4,200 32,600 36,800
------------ -------- -------
Restructuring Costs.................................. $ 46,000 $49,500 $95,500
========= ======= =======
Change in Estimate, Sale of Kid's Medical............ $(2,700 ) $(2,700)
======= =======
</TABLE>

Management believes these costs to be non-recurring; however, actual costs
may vary from the recorded charges as the Coram Consolidation Plan continues.

Implementation of the Coram Consolidation Plan began in September 1994. The
Coram Consolidation Plan provided for the elimination of approximately 100 of
Coram's alternate site infusion branch facilities and the consolidation of
corporate administrative operations into one location, with a corresponding
significant reduction of branch and corporate personnel. Coram anticipates that
the branch and corporate consolidation portions of the Coram Consolidation Plan
will be substantially completed by the third quarter of 1995.

- ---------------
* The accompanying balance sheet reflects assets net of the $49,500 of
established accruals and reserves. Charges against those established reserves
pertaining to disposals completed through March 31, 1995 aggregate $22,500.

F-30
<PAGE> 182

CORAM HEALTHCARE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

Per Share Data. Per share data have been computed by dividing net income
or loss by the weighted average number of common and common equivalent shares
outstanding during the period. The weighted average calculation also includes
common shares issuable. Common stock equivalents include dilutive stock options
and warrants. Fully diluted per share amounts are not presented in the financial
statements because the assumed conversions of convertible debt and any
additional incremental shares would be either antidilutive or cause de minimus
dilution.

2. LINES OF CREDIT

On October 17, 1994, the Company entered into a revolving line of credit
agreement to replace its prior borrowing facility. This agreement, which had a
maturity date of June 30, 1996 was amended effective December 31, 1994. Under
this amendment the revolving line of credit was $150 million. The base rate
borrowings were zero to 1.25% over the greater of (i) prime rate or (ii) Federal
funds rate plus 0.5%, and the LIBOR borrowings at a rate of floating LIBOR plus
0.875% to 2.25%.

At March 31, 1995, borrowings on the revolving line of credit were $122.3
million of which $108.0 million was at weighted average LIBOR rate of 8.375%
with the remaining $14.3 million at base rate borrowing at 10.25%.

On April 6, 1995, the Company entered into a Senior Credit Facility. Under
the Senior Credit Facility, the Company has (i) a $200 million term loan
facility with a maturity date of April 6, 2000, and (ii) a $100 million
revolving credit facility, with a maturity date of April 6, 2000, of which up to
$20 million is available in the form of letters of credit. As of April 30, 1995,
the available borrowing base under the revolving credit facility was $100
million and the amount borrowed under the term loan facility was $200 million.
The loans under the Senior Credit Facility bear interest at a rate equal to, at
the Company's option, (i) the Alternate Base Rate (as defined hereafter) for the
respective interest period plus the Applicable Margin (as defined hereafter)
("ABR Loans") or (ii) the Eurodollar Rate (as defined hereafter) as determined
by Chemical Bank ("Chemical") for the respective interest period plus the
Applicable Margin ("Eurodollar Loans"). "Applicable Margin" means a percentage
per annum ranging (a) in the case of ABR Loans, from 1.50% to 0.50%, and (b) in
the case of Eurodollar Loans, from 2.50% to 1.50%, in each case based upon the
Company's ability to maintain certain financial ratios determined as provided in
the Credit Agreement. "Alternate Base Rate" means with respect to an interest
period, an interest rate per annum equal to the highest of (i) the rate of
interest publicly announced by Chemical as its prime rate in effect at its
principal office in New York City, (ii) the secondary market rate for three
month certificates of deposit (adjusted for reserves and assessments) plus 1%
and (iii) the federal funds rate in effect from time to time plus 0.5%.
"Eurodollar Rate" means, with respect to an interest period, an interest rate
per annum equal to the product of (a) the LIBOR rate in effect for such interest
period and (b) Statutory Reserves (as defined in the Credit Agreement). The
Senior Credit Facility is secured by the stock of all of the Company's
subsidiaries and contains standard financial covenants and conditions limiting
the Company's ability to engage in certain activities. The proceeds of the loans
under the Senior Credit Facility were used to repay amounts outstanding under
the Former Credit Facility, to fund a portion of the cash purchase price for the
Caremark Business and to pay certain expenses in connection therewith.

3. INCOME TAXES

The Company recorded an income tax benefit of $1.1 million for the three
months ended March 31, 1995. The resulting effective income tax benefit rate is
primarily due to the ability to carry back a portion of the Company's current
period tax deductible loss to the prior year tax returns of the predecessor
companies.

F-31
<PAGE> 183

CORAM HEALTHCARE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

4. LITIGATION

The Company has entered into a Stipulation of Settlement (the
"Stipulation") dated as of January 27, 1995 which sets forth the principal terms
of a proposed settlement of class action shareholder litigation which was
initiated against T2 in 1992. The settlement provides for the Company to pay the
shareholder class $25 million in cash (of which approximately $7.8 million will
be contributed by the Company insurance carrier), and to issue warrants to
acquire an aggregate of 2.52 million shares of the Company Common Stock at an
exercise price of $20.25, subject to adjustment. The stipulation was approved by
the court on May 5, 1995; however it is subject to certain other contingencies,
and there can be no assurance that the settlement will be consummated.

During September, 1994, the Company also settled a dispute with the former
principals of a company acquired by T2 in 1992 related to the valuation of that
acquisition transaction. The dispute was settled with the Company issuing to the
former principals warrants to acquire 500,000 shares of the Company's common
stock at an exercise price of $18, subject to adjustment. The Company is
obligated to make a cash payment of up to $4 million to the warrantholders at
the end of the five-year term of the warrants; provided, however, that the
payment will be reduced, dollar-for-dollar, to the extent of the aggregate
positive spread in excess of $16.00 per share on any warrant exercised prior to,
or exercisable at the end of, the five year term of the warrants. The Company's
obligation to make any cash payment terminates if the Company's stock price
exceeds $26.00 for any five consecutive business days during the term of the
warrants.

5. SUBSEQUENT EVENTS

Caremark Acquisition. In April 1995, the Company acquired substantially
all of the assets used in the alternate site infusion health care business, the
home care management and utilization system business and women's health care
business of Caremark Inc. ("Caremark"). The acquisition was accounted for by the
purchase method of accounting. It is estimated that the purchase price of $309
million will exceed the fair market value of the assets of Caremark by over $190
million and will be recorded as an increase to goodwill. The results of
operations of Caremark will be included with the results of the Company from
April 1, 1995.

Lincare Merger. On April 17, 1995, the Company and Lincare Holdings Inc.
("Lincare") entered into an Agreement Plan of Merger pursuant to which all of
Lincare's outstanding common stock would be acquired by the Company in a
business combination accounted for as a pooling of interests. Upon consummation
of the transaction, shareholders of Lincare will receive 1.5354 shares of the
Company's common stock. Historical financial information presented in reports
following the merger will be restated to include Lincare.

F-32
<PAGE> 184

CORAM HEALTHCARE CORPORATION

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

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ------------------------------------------- ---------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Three Months Ended March 31, 1995
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 22,297 $ 19,517 $ $(23,339)(1) $18,475
Year Ended December 31, 1994
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 25,076 $ 19,517 $3,901(2) $(46,383)(1) $22,297
17,300 2,886(3)
Year Ended December 31, 1993
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 17,530(2) $ 29,751 $2,834(2) $(24,788)(1) $25,076
(251)(3)
Year Ended December 31, 1992
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 18,953(2) $ 24,036 $1,948(2) $(27,407)(1) $17,530
</TABLE>

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

(1) Accounts written off, net of recoveries.

(2) Balance acquired in purchase acquisition(s).

(3) Other charges.

F-33
<PAGE> 185

REPORT OF INDEPENDENT ACCOUNTANTS

March 15, 1995

To the Board of Directors of
Caremark International Inc.

In our opinion, the accompanying combined balance sheets and the related
statements of operations, divisional equity and of cash flows present fairly, in
all material respects, the financial position of Caremark International Inc.'s
Home Infusion Business at December 31, 1994 and 1993, and the results of its
operations and its cash flow for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP

F-34
<PAGE> 186

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenue.................................................. $441,900 $420,500 $457,000
Cost of goods and services sold.............................. 338,200 300,600 321,200
Marketing and administrative expenses........................ 58,700 68,300 82,200
Provision for doubtful accounts.............................. 22,600 31,100 25,400
Restructuring and integration charges........................ 25,000 -- 26,700
Minority interests........................................... 3,500 9,900 10,700
-------- -------- --------
Income (loss) before sundry and income taxes................. (6,100) 10,600 (9,200)
Sundry income, net........................................... 2,000 500 5,400
-------- -------- --------
Income (loss) before income taxes............................ (4,100) 11,100 (3,800)
Income tax expense (benefit)................................. (1,700) 4,700 (1,000)
-------- -------- --------
Net income (loss)............................................ $ (2,400) $ 6,400 $ (2,800)
======== ======== ========
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-35
<PAGE> 187

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................................. $ 4,700 $ 1,600
Accounts receivable, net............................................. 143,500 118,600
Deferred tax assets.................................................. 23,500 14,100
Inventories.......................................................... 11,500 9,900
Prepaid expenses and other current assets............................ 1,700 1,200
-------- --------
Total current assets......................................... 184,900 145,400
-------- --------
Property and equipment, net............................................ 29,700 32,800
Goodwill, net.......................................................... 196,700 21,200
Other noncurrent assets................................................ 7,400 7,200
-------- --------
Total assets................................................. $418,700 $206,600
======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Current maturities of long-term debt and lease obligations........... $ 1,600 $ 400
Accounts payable..................................................... 26,700 34,600
Accrued liabilities.................................................. 53,400 30,000
-------- --------
Total current liabilities.................................... 81,700 65,000
-------- --------
Long-term debt and lease obligations................................... 600 300
Deferred tax liabilities............................................... 26,600 4,500
Other noncurrent liabilities........................................... 3,700 2,500
Commitments and contingent liabilities (Note 11).......................
Minority interests..................................................... 5,000 10,900
Divisional equity...................................................... 301,100 123,400
-------- --------
Total liabilities and divisional equity...................... $418,700 $206,600
======== ========
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-36
<PAGE> 188

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1994 1993 1992
--------- --------- --------
(BRACKETS DENOTE CASH OUTFLOWS)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss)...................................... $ (2,400) 6,400 (2,800)
Adjustments for non-cash items:
Provision for doubtful accounts..................... 22,600 31,100 25,400
Depreciation and amortization....................... 17,500 16,100 14,400
Deferred income taxes............................... 12,700 19,300 (8,900)
Restructuring and integration charges............... 25,000 -- 26,700
Other............................................... 1,500 2,900 1,800
Changes in balance sheet items:
Accounts receivable................................. 4,400 (6,300) (54,400)
Inventories......................................... 4,300 6,500 (1,500)
Accounts payable and accrued liabilities............ (10,000) (24,600) 31,300
Prepaid expenses and other current assets........... 700 1,400 (3,700)
Restructuring and integration payments.............. (65,800) (17,800) --
--------- --------- --------
Cash flows from operations............................... 10,500 35,000 28,300
--------- --------- --------
Cash flows from investing activities:
Capital expenditures................................... (7,100) (10,500) (21,200)
Acquisitions, net of cash received..................... (180,800) -- (7,600)
--------- --------- --------
Cash flows from investing activities..................... (187,900) (10,500) (28,800)
--------- --------- --------
Cash flows from financing activities:
Net issuance of debt and lease obligations.......... 400 700 --
Advances from (payments to) Caremark International
Inc............................................... 180,100 (36,200) (8,300)
--------- --------- --------
Cash flows from financing activities..................... 180,500 (35,500) (8,300)
--------- --------- --------
Increase (decrease) in cash and equivalents.............. 3,100 (11,000) (8,800)
Cash and equivalents, beginning of year.................. 1,600 12,600 21,400
--------- --------- --------
Cash and equivalents, end of year........................ $ 4,700 $ 1,600 $ 12,600
========= ========= ========
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-37
<PAGE> 189

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

COMBINED STATEMENTS OF DIVISIONAL EQUITY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year................................ $123,400 $153,200 $164,300
Net income (loss)......................................... (2,400) 6,400 (2,800)
Advances from (payments to) Caremark International Inc.... 180,100 (36,200) (8,300)
-------- -------- --------
Balance, end of year...................................... $301,100 $123,400 $153,200
======== ======== ========
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-38
<PAGE> 190

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1: BUSINESS

The accompanying combined financial statements comprise Caremark
International Inc.'s ("Caremark") Home Infusion Business ("Home Infusion" or the
"business") which consists of Caremark's Clinical Management Services Division
and its Home Care Management System Division. The Clinical Management Services
Division provides alternate site infusion therapies which include: total
parenteral nutrition therapy, enteral nutrition therapy, antibiotic, antiviral
and antifungal therapies, chemotherapy and pain management therapy. The Home
Care Management System Division provides or arranges for all of a patient's
homecare needs including respiratory therapy and durable medical equipment. In
January 1995, Caremark entered into a definitive agreement to sell the business
to Coram Healthcare Corporation (Note 13).

The accompanying combined financial statements reflect the "carve-out"
financial position, results of operations and cash flows of Home Infusion for
the periods presented. The combined financial statements have been prepared as
if Home Infusion had operated as a stand-alone entity for all periods presented,
and include those assets, liabilities, revenues and expenses directly
attributable to the Home Infusion operations. Certain corporate general and
administrative expenses of Caremark have been allocated to the business on
various bases which, in the opinion of management, are reasonable. However, such
expenses are not necessarily indicative of, and it is not practical for
management to estimate, the nature and level of expenses which might have been
incurred had the business been operating as a separate company. The financial
information included herein does not necessarily reflect what the financial
position and results of operations of Home Infusion would have been had it
operated as a stand-alone entity during the periods covered, and may not be
indicative of future operations or financial position.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the combined financial statements. These
policies are in conformity with generally accepted accounting principles and
have been applied consistently in all material respects.

Basis of combination

The combined financial statements include the accounts of the business and
majority-owned subsidiaries and partnerships in which it has more than 50%
ownership interest or exercises control. All material intercompany accounts and
transactions have been eliminated in consolidation.

Revenues

Revenues are recorded net of estimated contractual allowances under third
party reimbursement agreements.

Cash and equivalents

Cash and equivalents include cash, cash investments and marketable
securities with original maturities of three months or less. Home Infusion
participates in Caremark's centralized cash management program. Consequently,
cash on hand at the balance sheet date is not necessarily indicative of the cash
balance on a stand-alone basis (Note 12).

F-39
<PAGE> 191

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Inventories

Inventories primarily consist of pharmaceutical drugs, which require
compounding and other processing before delivery to customers, and related
supplies. Inventories are valued at the lower of cost (first-in, first-out
method) or market.

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation.
Assets purchased in acquisitions are recorded at their respective fair values.
Expenditures that extend the useful life of property and equipment or increase
productivity are capitalized, whereas maintenance and repairs are charged to
expense in the year incurred.

Depreciation and amortization are provided for financial reporting purposes
principally on the straight-line method over the estimated useful lives of the
assets or, for leasehold improvements, over the terms of the related leases if
shorter. Both straight-line and accelerated methods of depreciation are used for
income tax purposes.

Goodwill and other intangible assets

Goodwill represents the excess of consideration paid for businesses
acquired in purchase transactions over the fair value of net assets acquired. It
is amortized on a straight-line basis over estimated useful lives not exceeding
40 years. The business recorded goodwill amortization of $4.5, $0.6 and $0.7
million in 1994, 1993 and 1992, respectively. Other intangible assets primarily
include noncompete agreements and other identified rights which are amortized on
a straight-line basis over the lesser of their legal or estimated useful lives.
The carrying values of intangible assets are reviewed for impairment on a
periodic basis.

Income taxes

Home Infusion's operations have been included in Caremark's consolidated
U.S. federal and state income tax returns. Prior to November 30, 1992,
operations of the business were included in Baxter International Inc.'s
consolidated income tax returns. The provision for income taxes shown in the
accompanying combined financial statements has been determined as if Home
Infusion had filed separate tax returns under its existing legal structure for
the periods presented. All U.S. income taxes, including deferred taxes, are
settled with Caremark on a current basis through the "Advances from and payments
to Caremark" account.

Income tax expense is based on pre-tax income for financial reporting
purposes, adjusted for the effects of permanent differences between such income
and that reported for tax return purposes. In 1992, the business prospectively
adopted Statement of Financial Accounting Standards No. 109 ("FAS 109"),
"Accounting for Income Taxes." FAS 109 requires an asset and liability approach,
whereby deferred tax assets and liabilities are recognized for expected future
tax consequences of temporary differences between the carrying amounts and tax
bases of the underlying assets and liabilities. The impact of adopting FAS 109
was not material to the financial statements of the business.

NOTE 3: ACQUISITIONS

Effective March 1, 1994, the business acquired the assets and assumed
certain liabilities of Critical Care America ("Critical Care") for approximately
$175 million in cash. This transaction was accounted for using the purchase
method of accounting. As such, operating results of Critical Care have been
included in the financial statements of the business from the date of
acquisition.

F-40
<PAGE> 192

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The following summary, prepared on a pro forma basis, depicts Home
Infusion's combined results of
operations as if Critical Care had been acquired as of the beginning of the
periods presented, after including the impact of certain adjustments, such as
amortization of intangibles and related income tax effects. Actual results of
the business for the year ended December 31, 1994 include a pre-tax charge of
$25.0 million for estimated costs to integrate the operations of Critical Care
(Note 4).

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Net revenues................................................... $473,000 $655,600
Income (loss) before income taxes.............................. $ (7,900) $ 15,800
Net income (loss).............................................. $ (4,500) $ 9,200
</TABLE>

These pro forma results do not anticipate any efficiencies from
consolidating the Critical Care operations, are not necessarily indicative of
what actually would have occurred if the Critical Care acquisition had been in
effect for the entire periods presented, and are not intended to project future
results.

NOTE 4: RESTRUCTURING AND INTEGRATION CHARGES

The business recorded a pre-tax charge of $25.0 million in the first
quarter of 1994 for estimated costs to integrate the operations of Critical
Care, acquired in March 1994 (Note 3). This charge consists primarily of
estimated exit costs to close redundant Home Infusion facilities and related
headcount reductions. Accrued costs include severance ($16.8 million), lease
commitments ($5.0 million), as well as fixed asset and other disposal costs
($3.2 million). The company also established a $54.4 million reserve via
purchase method accounting, with no charge to income, for costs associated with
the closing of redundant Critical Care facilities.

Integration-related cash outlays during 1994 of $58.6 million for the
activities cited above were funded through the "Advances from and payments to
Caremark" account. Actual spending coincided with management's estimates. There
were no unusual adjustments to these reserves during the year.

During 1992, a pre-tax charge of $26.7 million was recorded for a
restructuring program to reorganize sales and operations functions in the field,
standardize operations throughout the business and consolidate certain
facilities and administrative functions. Cumulative restructuring spending
approximated $25.0 million as of December 31, 1994, of which $7.2 million was
spent during 1994. Actual spending coincided with management's estimates.

NOTE 5: FINANCIAL INSTRUMENTS

Financial instruments of the business primarily consist of cash and
equivalents, receivables, payables, investments and debt obligations. The
carrying value of these financial instruments approximated fair value at
year-end.

NOTE 6: TRADE RECEIVABLES

The business provides credit in the normal course of business to
third-party payors (such as private insurers, Medicare and Medicaid), patients
and private enterprises. Amounts due from Medicare and Medicaid approximated 29%
and 30% of gross accounts receivable at December 31, 1994 and 1993,
respectively. Revenues from Medicare and Medicaid approximated 22% and 23% of
net revenues in 1994 and 1993, respectively. The company performs ongoing credit
evaluations of its customers and maintains an

F-41
<PAGE> 193

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

allowance for doubtful accounts based on the collectibility of trade
receivables. Credit losses have historically coincided with management's
expectations.

A summary of the activity in the allowance for doubtful accounts is
presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------
1994 1993
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Balance, beginning of year.................................... $ 12,800 $ 29,500
Provision for doubtful accounts............................... 22,600 31,100
Write-offs, net of recoveries................................. (27,000) (31,100)
Other(1)...................................................... (2,100) (16,700)
-------- --------
Balance, end of year.......................................... $ 6,300 $ 12,800
======== ========
</TABLE>

- ---------------
(1) Represents valuation accounts of acquired or divested companies and account
transfers.

NOTE 7: OTHER BALANCE SHEET DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Property and equipment, net:
Buildings and leasehold improvements................................. $ 3,700 $ 4,700
Machinery and other equipment........................................ 44,800 52,700
Equipment leased to customers........................................ 24,500 24,400
Software costs....................................................... 6,800 5,600
Construction in progress............................................. 3,700 600
-------- --------
Property and equipment, at cost........................................ 83,500 88,000
Accumulated depreciation and amortization.............................. (53,800) (55,200)
-------- --------
Totals....................................................... $ 29,700 $ 32,800
======== ========
Accrued liabilities:
Employee compensation and related taxes.............................. $ 21,000 $ 16,200
Restructuring and integration costs.................................. 22,500 8,900
Other................................................................ 9,900 4,900
-------- --------
Totals....................................................... $ 53,400 $ 30,000
======== ========
</TABLE>

F-42
<PAGE> 194

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8: DEBT AND LEASE OBLIGATIONS

The business leases certain facilities and equipment under operating and
capital leases expiring at various dates. Most of the operating leases contain
renewal options. Total rent expense under operating leases approximated $20.5,
$20.1 and $16.1 million in 1994, 1993 and 1992, respectively.

Future minimum lease payments under capital and noncancelable operating
leases and aggregate long-term debt maturities as of December 31, 1994 are
summarized as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL DEBT
LEASES LEASES MATURITIES
--------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1995.................................................. $10,800 $ 1,200 $400
1996.................................................. 7,700 200 100
1997.................................................. 4,500 -- 300
1998.................................................. 2,000 -- --
1999.................................................. 900 -- --
Thereafter............................................ 400 -- --
--------- ------- ----------
Total obligations and commitments........... $26,300 $ 1,400 $800
======= ====== ========
</TABLE>

The net book value of capitalized lease property approximated $0.7 million
at December 31, 1994.

Caremark maintains, on behalf of the business, a $20.0 million unsecured
line of credit, primarily for granting partnership loans that mature in three
years and bear interest at specified floating rates. At December 31, 1994 and
1993, there were no borrowings under this facility.

NOTE 9: RETIREMENT PROGRAMS

Home Infusion participates in Caremark-sponsored retirement plans for all
qualifying employees of the business. Liabilities and expenses related to these
retirement programs have been allocated to the business based on its eligible
payroll in relation to the eligible payroll of Caremark. Benefits are typically
based on years of service and the employee's compensation during five of the
last ten years of employment as defined by the plans. Caremark's funding policy
is to make contributions, which meet or exceed the minimum requirements of the
Employee Retirement Income Security Act of 1974, based on the projected unit
credit actuarial cost method, and to limit such contributions to amounts
currently deductible for tax reporting purposes. Pension expense allocated to
the business was $2.8, $2.5 and $2.2 million for the years 1994, 1993 and 1992,
respectively.

Most employees of the business are eligible to participate in a qualified
401(k) plan sponsored by Caremark. Participants may contribute up to 12% of
their annual compensation (limited in 1994 to $9,240 per individual) to the plan
and Caremark matches the participants' contributions up to 3% of compensation.

In 1992, the business adopted Statement of Financial Accounting Standards
No. 106 ("FAS 106"), "Employers' Accounting for Postretirement Benefits Other
Than Pensions", which requires the business to accrue costs for postretirement
benefits over the service years of employees. The adoption of FAS 106 and its
ongoing impact have not been material to the business' financial statements.

In 1994, the business adopted Statement of Financial Accounting Standards
No. 112 ("FAS 112"), "Employers' Accounting for Postemployment Benefits", which
requires employers to accrue costs for postemployment benefits (including salary
continuation, severance and disability benefits, job training and counseling and
continuation of benefits such as health care and life insurance coverage to
former or inactive employees). The adoption of FAS 112 was not material to the
business' financial statements.

F-43
<PAGE> 195

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10: INCOME TAXES

Income tax expense for the indicated years consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................... $(12,600) $(12,600) $ 6,800
State and Local................................... (1,800) (2,000) 1,100
-------- -------- -------
Current income tax expense (benefit)................ (14,400) (14,600) 7,900
-------- -------- -------
Deferred:
Federal........................................... 11,100 16,700 (7,700)
State and local................................... 1,600 2,600 (1,200)
-------- -------- -------
Deferred income tax expense (benefit)............... 12,700 19,300 (8,900)
-------- -------- -------
Income tax expense (benefit)........................ $ (1,700) $ 4,700 $(1,000)
======== ======== =======
</TABLE>

Deferred tax assets (liabilities) under FAS 109 are composed of the
following:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Bad debt and sales allowances.................................. $ 7,100 $ 3,600
Restructuring and integration costs............................ 10,800 4,400
Accrued compensation and employee benefits..................... 4,400 4,900
Other accrued expenses......................................... 1,200 1,200
------- -------
Deferred tax assets.............................................. $23,500 $14,100
------- -------
Deferred tax liabilities:
Accelerated depreciation and amortization...................... $25,300 $ 4,800
Other.......................................................... 1,300 (300)
------- -------
Deferred tax liabilities......................................... $26,600 $ 4,500
------- -------
Net deferred tax assets (liabilities)............................ $(3,100) $ 9,600
======= =======
</TABLE>

Income tax expense applicable to pre-tax income for financial reporting
purposes differs from income tax expense calculated by using the U.S. federal
income tax rate for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax (benefit) expense at statutory rate.... $(1,400) $ 3,900 $(1,300)
State and local taxes........................... (200) 600 (200)
Nondeductible goodwill.......................... 100 200 300
Non-deductible meals and entertainment.......... 200 100 100
Other........................................... (400) (100) 100
------- ------- -------
Income tax expense (benefit)............ $(1,700) $ 4,700 $(1,000)
======= ======= =======
</TABLE>

F-44
<PAGE> 196

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

All income taxes related to the business have been paid by Caremark.

NOTE 11: COMMITMENTS AND CONTINGENT LIABILITIES

Caremark was notified in August 1991 that the Office of the Inspector
General of the U.S. Department of Health and Human Services (the "OIG") and the
U.S. Department of Justice, with subsequent grand jury participation, were
investigating Caremark. The nature, scope, timing and outcome of the
investigation are not currently determinable. Caremark has provided and
continues to provide information and documents in connection with the
investigation.

Caremark is in discussions with the OIG and the U.S. Department of Justice
to settle the investigation. Because certain state agencies are conducting
related investigations of Caremark, representatives of various state health care
programs are participating in these discussions. Caremark is seeking to settle
all aspects of the investigation including any potential claims by the federal
government or any state agency, as applicable, under the federal laws
prohibiting payment of remuneration to induce the referral of Medicare and
Medicaid beneficiaries (the "Medicare Referral Payments Law"), the federal False
Claims Act (the "False Claims Act") or any other federal or state civil or
criminal statute. No assurances can be given with regard to the outcome of these
settlement discussions. Criminal penalties under the Medicare Referral Payments
Law could include fines of up to $25,000 per violation or up to five years
imprisonment or both. Criminal penalties under the Medicare Referral Payments
Law could be increased, under the alternative fines statute, to include fines of
up to $500,000 per violation. Fines could be increased to a maximum of two times
the amount of gross gain or loss in connection with the violation under the
alternative fines statute and could also be increased under the Federal
Organizational Sentencing Guidelines. Civil penalties under the Medicare
Referral Payments Law include exclusion from participation in the Medicare and
Medicaid programs: civil penalties under the False Claims Act could include
fines of up to $10,000 per claim and treble damages. If imposed, such penalties,
although not estimable at this time, could have a material adverse effect on the
company's business or on its income, cash flows or financial condition. In
conjunction with the sale of the business, Caremark will retain liability for
this investigation.

The business is party to various other commitments, claims and routine
litigation arising in the ordinary course of business. Based on the advice of
counsel, management does not believe that the result of such commitments, claims
and litigation, individually or in the aggregate, will have a material effect on
the business or its income, cash flows or financial condition.

NOTE 12: RELATED PARTY TRANSACTIONS

The business participated in a centralized cash management program
administered by Caremark. Advances from Caremark or excess cash sent to Caremark
have been treated as an adjustment to Divisional Equity. No interest has been
charged on this balance. Intercompany receivables and payables have historically
been settled in the normal course of business, usually within 90 days, and are
not interest bearing. The net intercompany balances have been included in the
combined balance sheets as "Divisional Equity".

Caremark has provided to Home Infusion certain legal, treasury, regulatory,
insurance, benefits, administrative services and facilities. Charges for these
services to Home Infusion have been based on allocation of Caremark's actual
direct and indirect costs using varying allocation methods designed to estimate
actual costs incurred by Caremark to render these services to the business. The
allocation methodology is consistent with the methods used by Caremark to
allocate the cost of similar services to its other business units. The allocated
costs of these services as reflected in the combined statements of operations
were $11.0, $5.1 and $4.0 million in 1994, 1993 and 1992, respectively. No
provision has been made for possible incremental costs that may have been
incurred had Home Infusion operated as a stand-alone entity for the periods
presented. The business has provided facilities, nursing and other services to
other operating units of

F-45
<PAGE> 197

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Caremark. Reimbursement for these services have been at arm's length pricing and
have not been material to the results of operations.

NOTE 13. SUBSEQUENT EVENT

In January 1995, Caremark entered into a definitive agreement to sell
specified assets and liabilities of the business to Coram Healthcare Corporation
for approximately $310 million in cash and securities, not to exceed $328
million, subject to net asset adjustments. Both companies' Boards of Directors
have approved the transaction. The sale is subject to government approval under
the Hart-Scott-Rodino Act and other conditions. Assets and liabilities excluded
from the sale include cash, specified receivables and fixed assets, income
taxes, legal, employee benefit and certain restructuring/integration obligations
and specified deferred purchase obligations.

F-46
<PAGE> 198

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1995 1994
------- --------
(IN THOUSANDS)
<S> <C> <C>
Net revenues............................................................. $96,100 $101,000
Cost of goods and services sold.......................................... 76,200 74,200
Marketing and administrative expenses.................................... 15,500 19,900
Provision for doubtful accounts.......................................... 4,300 6,300
Restructuring and integration charges.................................... -- 25,000
Minority interests....................................................... 500 800
------- --------
Income (loss) before sundry and income taxes............................. (400) (25,200)
Sundry income, net....................................................... (100) 100
------- --------
Income (loss) before income taxes........................................ (500) (25,100)
Income tax expense (benefit)............................................. -- --
------- --------
Net income (loss)........................................................ $ (500) $(25,100)
======= ========
</TABLE>

See accompanying Notes to Condensed Combined Financial Statements.

F-47
<PAGE> 199

CAREMARK INTERNATIONAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995* 1994
--------- ------------
<S> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents.......................................... $ -- $ 4,700
Accounts receivable, net of allowances............................. 138,800 143,500
Inventories........................................................ 10,900 11,500
Deferred tax asset................................................. -- 23,500
Other current assets............................................... -- 1,700
--------- ------------
Total current assets....................................... 149,700 184,900
Property and equipment, net.......................................... 26,700 29,700
Other assets......................................................... 4,700 7,400
Goodwill, net........................................................ 191,900 196,700
--------- ------------
Total assets......................................................... $ 373,000 $418,700
======== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable................................................... $ 23,800 $ 26,700
Current maturities of long-term debt............................... -- 1,600
Other accrued liabilities.......................................... 13,400 53,400
--------- ------------
Total current liabilities.................................. 37,200 81,700
Long-term debt....................................................... -- 600
Minority interest.................................................... 5,200 5,000
Other liabilities.................................................... 200 3,700
Deferred tax liabilities............................................. -- 26,600
Stockholders' equity:
Divisional equity.................................................. 330,400 301,100
--------- ------------
Total stockholders' equity................................. 330,400 301,100
--------- ------------
Total liabilities and stockholders' equity........................... $ 373,000 $418,700
======== ==========
</TABLE>

See accompanying notes.

F-48
<PAGE> 200

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

UANUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
------------------
(BRACKETS DENOTE
CASH OUTFLOWS)
(IN THOUSANDS)
<S> <C>
Cash flows from operations:
Net income (loss)......................................................... $ (500)
Adjustments for non-cash items:
Provision for doubtful accounts........................................ 4,300
Depreciation and amortization.......................................... 4,200
Changes in balance sheet items:
Accounts receivable.................................................... (2,800)
Inventories............................................................ 600
Accounts payable and accrued liabilities............................... (25,400)
Prepaid expenses and other current assets.............................. (800)
------------------
Cash flows from operations.................................................. (20,400)
------------------
Cash flows from investing activities:
Spin-off of net assets.................................................... 15,600
Cash received from disposal of equipment.................................. 100
------------------
Cash flows from investing activities........................................ 15,700
------------------
Cash flows from financing activities........................................ --
------------------
Increase (decrease) in cash and equivalents................................. (4,700)
Cash and equivalents, beginning of period................................... 4,700
------------------
Cash and equivalents, end of period......................................... $ --
==================
</TABLE>

See accompanying Notes to Combined Financial Statements.

F-49
<PAGE> 201

CAREMARK INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

The accompanying condensed consolidated balance sheet as of March 31, 1995,
condensed statements of operations for the three months ended March 31, 1995 and
1994 and cash flows for the three months ended March 31, 1995 are unaudited. In
the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the results of operations for the
interim periods presented have been reflected herein. The results of operations
for interim periods are not necessarily indicative of the results to be expected
for the entire year. The accompanying condensed consolidated balance sheet as of
March 31, 1995 include only those assets acquired and liabilities assumed by
Coram Healthcare Corporation as of that date.

F-50
<PAGE> 202

CAREMARK INTERNATIONAL INC.
HOME INFUSION BUSINESS

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

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ------------------------------------------- ---------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Three Months Ended March 31, 1995
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ $ 6,300 $ 4,300 $ -- $ (6,335) $ 4,265
Year Ended December 31, 1994
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ 12,800 22,600 -- (27,000)(1) 6,300
(2,100)(2)
Year Ended December 31, 1993
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ 29,500 31,100 -- (31,100)(1) 12,800
(16,700)(2)
Year Ended December 31, 1992(3)
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible
accounts............................ -- -- -- -- 29,500
</TABLE>

- ---------------
(1) Accounts written off, net of recoveries

(2) Other charges

(3) Certain historical financial data for the year end December 31, 1992 is not
available

F-51
<PAGE> 203

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Lincare Holdings Inc.:

We have audited the accompanying consolidated balance sheets of Lincare
Holdings Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1994. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedule. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lincare
Holdings Inc. and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

As discussed in notes 1 and 7 to the consolidated financial statements, the
Company changed its method of accounting for income taxes during the year ended
December 31, 1993 to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes."

/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP

St. Petersburg, Florida
January 20, 1995 (except for the
last paragraph of note 5 which is
as of February 10, 1995)

F-52
<PAGE> 204

LINCARE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
ASSETS (NOTE 5)
Current assets:
Cash and cash equivalents............................................ $ 16,023 $ 29,738
Accounts and notes receivable (note 2)............................... 23,629 21,314
Inventories.......................................................... 1,029 932
Prepaid expenses..................................................... 752 449
-------- --------
Total current assets......................................... 41,433 52,433
-------- --------
Property and equipment (notes 3 and 4)................................. 93,098 72,572
Less accumulated depreciation.......................................... 37,014 28,924
-------- --------
Net property and equipment................................... 56,084 43,648
-------- --------
Other assets:
Goodwill, less accumulated amortization of $3,878 in 1994 and $2,044
in 1993........................................................... 82,795 41,710
Intangible assets, less accumulated amortization of $21,249 in 1994
and
$17,370 in 1993................................................... 9,205 4,225
Covenants not to compete, less accumulated amortization of $3,238 in
1994
and $1,670 in 1993................................................ 6,055 4,869
Other................................................................ 206 199
-------- --------
Total other assets........................................... 98,261 51,003
-------- --------
$195,778 $147,084
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations (note 6)............... $ 6,972 $ 4,227
Accounts payable..................................................... 8,273 6,990
Accrued expenses:
Compensation and benefits......................................... 5,087 4,226
Other............................................................. 1,377 913
Income taxes payable (note 7)........................................ 1,207 435
-------- --------
Total current liabilities.................................... 22,916 16,791
Revolving credit loan (note 5)......................................... 2,000 --
Long-term obligations, excluding current installments (note 6)......... 4,717 7,512
Deferred income taxes (note 7)......................................... 3,255 5,483
Minority interest...................................................... 802 240
Stockholders' equity (notes 7, 8 and 9):
Common stock, $.01 par value. Authorized 100,000,000 shares; issued
and outstanding 27,124,130 shares in 1994 and 26,399,882 shares in
1993.............................................................. 271 264
Additional paid-in capital........................................... 77,799 70,729
Retained earnings.................................................... 84,018 46,065
-------- --------
Total stockholders' equity................................... 162,088 117,058
Commitments and contingencies (notes 4 and 14)
-------- --------
$195,778 $147,084
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-53
<PAGE> 205

LINCARE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net revenues (note 10)..................................... $201,142 $154,506 $117,403
-------- -------- --------
Costs and expenses:
Cost of goods and services............................... 29,058 21,115 16,215
Operating expenses....................................... 44,347 34,388 28,475
Selling, general and administrative expenses............. 43,249 34,623 28,354
Bad debt expense......................................... 1,546 1,832 1,591
Depreciation expense..................................... 13,403 11,764 10,143
Amortization expense..................................... 7,281 4,695 5,125
-------- -------- --------
138,884 108,417 89,903
-------- -------- --------
Operating income................................. 62,258 46,089 27,500
-------- -------- --------
Other income (expenses):
Interest income.......................................... 434 611 465
Interest expense (note 6)................................ (473) (387) (1,242)
Net gain on disposal of property and equipment........... 101 233 16
-------- -------- --------
62 457 (761)
-------- -------- --------
Income before income taxes and extraordinary
item........................................... 62,320 46,546 26,739
Income tax expense (note 7)................................ 24,367 18,294 10,600
-------- -------- --------
Income before extraordinary item................. 37,953 28,252 16,139
Extraordinary item -- loss on early extinguishment of debt,
net of income tax benefit of $647 (note 13).............. -- -- (1,000)
-------- -------- --------
Net income....................................... $ 37,953 $ 28,252 $ 15,139
======== ======== ========
Income (loss) per common share:
Income before extraordinary item......................... $ 1.34 $ 1.01 $ .64
Extraordinary item....................................... -- -- (.04)
-------- -------- --------
Net income....................................... $ 1.34 $ 1.01 $ .60
======== ======== ========
Weighted average number of common shares and common share
equivalents outstanding (in thousands)................... 28,307 27,911 25,334
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-54
<PAGE> 206

LINCARE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1991.................. $162 $ 3,886 $ 2,674 $ (1) $ 6,721
Issuance of common stock, net of offering
costs of $1,170.............................. 77 48,912 -- -- 48,989
Conversion of Series B preferred stock into
common stock................................. 4 1,496 -- -- 1,500
Issuance of common stock, net of offering
costs of $300................................ 5 6,470 -- -- 6,475
Exercise of stock options...................... 7 217 -- 1 225
Tax benefit related to exercise of employee
stock options (note 7)....................... -- 3,386 -- -- 3,386
Net income..................................... -- -- 15,139 -- 15,139
------ ---------- -------- --- -------------
Balances at December 31, 1992.................. 255 64,367 17,813 -- 82,435
Exercise of stock options (note 9)............. 9 412 -- -- 421
Adjustment of 1992 offering costs.............. -- 16 -- -- 16
Tax benefit related to exercise of employee
stock options (notes 7 and 9)................ -- 5,934 -- -- 5,934
Net income..................................... -- -- 28,252 -- 28,252
------ ---------- -------- --- -------------
Balances at December 31, 1993.................. 264 70,729 46,065 -- 117,058
Exercise of stock options (note 9)............. 7 454 -- -- 461
Tax benefit related to exercise of employee
stock options (notes 7 and 9)................ -- 6,616 -- -- 6,616
Net income..................................... -- -- 37,953 -- 37,953
------ ---------- -------- --- -------------
Balances at December 31, 1994.................. $271 $ 77,799 $ 84,018 $ -- $ 162,088
====== ======= ======= ====== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-55
<PAGE> 207

LINCARE HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 37,953 $ 28,252 $ 15,139
Adjustments to reconcile net income to net cash provided
by operating activities:
Decrease in provision for losses on accounts and notes
receivable.......................................... (491) (167) (12)
Depreciation expense.................................. 13,403 11,764 10,143
Gain on disposal of property and equipment............ (101) (233) (16)
Amortization expense.................................. 7,281 4,695 5,125
Amortization of imputed interest...................... 219 258 158
Extraordinary item.................................... -- -- 1,647
Deferred income tax benefit........................... (2,979) (738) (980)
Minority interest in net earnings of subsidiary....... 122 187 51
Change in operating assets and liabilities:
Decrease (increase) in accounts and notes
receivable....................................... 911 (2,995) (995)
Decrease in inventories............................. 177 140 153
(Increase) decrease in prepaid expenses............. (301) 185 (225)
Decrease in deferred offering costs................. -- -- 347
Increase in accounts payable........................ 1,282 474 1,117
Increase (decrease) in accrued expenses............. 1,154 1,294 (338)
Increase in income taxes payable.................... 7,388 8,276 862
-------- -------- --------
Net cash provided by operating activities........ 66,018 51,392 32,176
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment............. 900 737 532
Capital expenditures..................................... (22,614) (18,166) (12,910)
Increase in other assets................................. (7) (27) (26)
Business acquisitions, net of cash acquired (note 12).... (52,904) (10,362) (8,229)
-------- -------- --------
Net cash used in investing activities............ (74,625) (27,818) (20,633)
-------- -------- --------
Cash flows from financing activities:
Proceeds from revolving credit loan...................... 8,000 -- --
Payment of revolving credit loan......................... (6,000) (50) --
Payment of unsecured payable............................. -- -- (2,900)
Payment of long-term obligations......................... (8,009) (14,151) (43,223)
Prepayment premium....................................... -- -- (300)
Principal payments under capital lease obligations....... -- -- (1,948)
Increase (decrease) in minority interest................. 440 52 (144)
Retirement of redeemable preferred stock................. -- -- (10,576)
Proceeds from issuance of common stock................... 461 421 57,159
Adjustment (payment) of offering costs................... -- 16 (1,470)
-------- -------- --------
Net cash used by financing activities............ (5,108) (13,712) (3,402)
-------- -------- --------
Net (decrease) increase in cash.................. (13,715) 9,862 8,141
Cash and cash equivalents, beginning of year............... 29,738 19,876 11,735
-------- -------- --------
Cash and cash equivalents, end of year..................... $ 16,023 $ 29,738 $ 19,876
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-56
<PAGE> 208

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) DESCRIPTION OF BUSINESS

Lincare Holdings Inc. and subsidiaries (the "Company") provides oxygen and
respiratory therapy services to the home health care market and also supplies
home medical equipment, such as hospital beds, wheelchairs and other medical
supplies. The Company's customers are located in 35 states. The Company's
supplies are readily available and the Company is not dependent on a single
supplier or even a few suppliers.

(B) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Lincare
Holdings Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

The Company believes the book value of their financial instruments (cash
equivalents, accounts and notes receivable, income taxes receivable, revolving
credit loan, long-term obligations, accounts payable, accrued expenses and
income taxes payable) approximates their fair value due to their short-term
nature.

(D) INVENTORIES

Inventories, consisting of equipment, supplies and replacement parts, are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.

(E) PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized on the straight-line
method over the lesser of the lease term or estimated useful life of the asset.
Amortization is included with depreciation expense.

(F) OTHER ASSETS

Goodwill results from the excess of cost over net assets of acquired
businesses and is amortized on a straight-line basis over 40 years.

Intangible assets, consisting of customer base and assembled workforce, are
amortized on a straight-line basis over the estimated life of the asset, ten to
thirty-six months.

Covenants not to compete are amortized on a straight-line basis over the
life of the respective covenants.

(G) INCOME TAXES

Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, was issued by the Financial Accounting Standards Board in February 1992.
Under the asset and liability method of Statement 109, deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be recovered or settled. Under Statement
109, the effect on deferred taxes of a change in tax rate is recognized in
income in the period that includes the enactment date.

F-57
<PAGE> 209

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Statement 109 was adopted effective January 1, 1993. Upon adoption, the
provisions of the Statement were applied without restating prior years'
financial statements. The cumulative effect of the change in the method of
accounting for income taxes was not material.

Pursuant to the asset and liability method under Statement 96, which was
applied in 1992 and prior years, deferred income taxes are recognized for the
tax effects of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.

(H) PENSION PLAN

The Company has a defined contribution pension plan covering substantially
all employees. The Company makes monthly contributions to the plan equal to the
amount accrued for pension expense. Employer contributions (net of applied
forfeitures) were approximately $1,079,000 in 1994, $750,000 in 1993, and
$626,000 in 1992.

(I) STATEMENT OF CASH FLOWS

For purposes of the statements of cash flows, the Company considers all
short-term investments with a purchased maturity of three months or less to be
cash equivalents.

(2) ACCOUNTS AND NOTES RECEIVABLE

Accounts and notes receivable at December 31, 1994 and 1993 consist of:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Trade............................................................ $28,271 $25,848
Other............................................................ 81 >62
------- -------
28,352 25,910
Less allowance for uncollectible accounts........................ 4,723 4,596
------- -------
$23,629 $21,314
======= =======
</TABLE>

(3) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1994 and 1993 consists of:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements............................................ $ 87 $ 87
Building and improvements........................................ 1,412 1,312
Equipment and furniture.......................................... 91,599 71,173
------- -------
$93,098 $72,572
======= =======
</TABLE>

Rental equipment of approximately $71,324,000 in 1994 and $54,562,000 in
1993 is included with equipment and furniture.

F-58
<PAGE> 210

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) LEASES

The Company has several noncancelable operating leases, primarily for
buildings, computer equipment and vehicles, that expire over the next five years
and provide for purchase or renewal options. Operating lease expense was
approximately $6,971,000 in 1994, $5,469,000 in 1993 and $4,665,000 in 1992.

Future minimum lease payments under noncancelable operating leases, net of
sublease income, as of December 31, 1994 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995................................................... $ 5,775
1996................................................... 4,448
1997................................................... 2,499
1998................................................... 679
1999................................................... 83
--------------
Total minimum lease payments........................... $ 13,484
===========
</TABLE>

(5) REVOLVING CREDIT LOAN

Under the revolving line of credit, the Company may borrow amounts up to
$25,000,000. The maturity date is sixty months from the date of the note, and
amounts borrowed under the revolving line of credit are payable in full on the
maturity date. The revolving line of credit bears interest at prime less
one-quarter of one percent (8.25% at December 31, 1994) and is payable monthly.
The Loan Agreement contains several financial and other covenants and is secured
by, effectively, all of the assets of the Company. At December 31, 1994,
$2,000,000 was outstanding under the revolving line of credit. At December 31,
1993, there were no outstanding balances under the revolving line of credit.

Amortization of loan origination fees amounted to approximately $4,000 in
1994, $1,000 in 1993 and $41,000 in 1992.

On February 10, 1995, the Company increased the amount it may borrow under
the revolving line of credit from $25,000,000 to $50,000,000. The revolving line
of credit now bears interest at LIBOR plus 58 basis points. Substantially all
other terms of the Loan Agreement are essentially unchanged.

(6) LONG-TERM OBLIGATIONS

Long-term obligations generally consist of unsecured, non-interest bearing
deferred acquisition obligations payable in varying installments through 1998.
Unamortized imputed interest at 5.75% to 8.25% was $47,000 in 1994 and $62,000
in 1993.

Interest expense was $473,000 in 1994, $387,000 in 1993 and $1,242,000 in
1992 (approximately $399,000 to related parties).

F-59
<PAGE> 211

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate maturities of long-term obligations for each of the five
years subsequent to December 31, 1994 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995................................................... $ 6,972
1996................................................... 2,748
1997................................................... 1,133
1998................................................... 836
1999................................................... --
--------------
$ 11,689
===========
</TABLE>

(7) INCOME TAXES

The tax effects of temporary differences that account for significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1994 and 1993 are presented below:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
uncollectible accounts...................................... $(1,878) $(1,680)
Accrued expenses, principally due to deferral for income tax
reporting purposes.......................................... (1,140) (738)
Intangible assets and covenants not to compete, principally due
to differences in amortization.............................. (2,777) --
Other.......................................................... (41) (8)
------- -------
Total gross deferred tax assets........................ (5,836) (2,426)
------- -------
Deferred tax liabilities:
Property and equipment, principally due to differences in
depreciation................................................ 7,182 4,880
Goodwill, principally due to differences in amortization....... 922 --
Excess of tax over book for certain loan origination and other
fees........................................................ -- 2,237
Other.......................................................... 987 792
------- -------
Total gross deferred tax liabilities................... 9,091 7,909
------- -------
Net deferred tax liability............................. $ 3,255 $ 5,483
======= =======
</TABLE>

There was no valuation allowance for deferred tax assets as of January 1,
1994 or December 31, 1994.

F-60
<PAGE> 212

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income tax expense attributable to continuing operations consists of:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $23,224 $15,549 $ 9,502
State............................................... 4,147 3,483 2,078
------- ------- -------
Total current............................... 27,371 19,032 11,580
Deferred:
Federal............................................. (2,606) (605) (805)
State............................................... (398) (133) (175)
------- ------- -------
Total deferred.............................. (3,004) (738) (980)
------- ------- -------
$24,367 $18,294 $10,600
======= ======= =======
Total income tax expense was allocated:
Income from continuing operations................... $24,367 $18,294 $10,600
Stockholders' equity for compensation expense for
tax
purposes in excess of financial reporting
purposes......................................... (6,616) (5,934) (3,386)
------- ------- -------
$17,751 $12,360 $ 7,214
======= ======= =======
</TABLE>

Total income tax expense differs from the amounts computed by applying U.S.
federal income tax rates (35% in 1994 and 1993 and 34% in 1992) to income before
income taxes and extraordinary item as a result of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense....................... $21,812 $16,291 $ 9,091
State income taxes, net of federal income tax
benefit............................................. 2,437 2,178 1,256
Other................................................. 118 (175) 253
------- ------- -------
Total income tax expense.................... $24,367 $18,294 $10,600
======= ======= =======
</TABLE>

(8) STOCKHOLDERS' EQUITY

The Company has 4,879,238 authorized and unissued shares of preferred
stock. The Board of Directors has the authority to issue up to such number of
shares of preferred stock in one or more series and to fix the rights,
preferences, privileges, qualifications, limitations and restrictions thereof
without any further vote or action by the stockholders.

F-61
<PAGE> 213

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) STOCK OPTIONS

The Company has reserved a total of 2,973,768 shares of common stock for
issuance under its Non-Qualified Stock Option Plan (the Plan). Information
related to the Plan is as follows:

<TABLE>
<CAPTION>
NUMBER OF OPTION
OPTIONS PRICES
--------- ------------
<S> <C> <C>
Outstanding at December 31, 1992............................ 2,322,536 $.25 - $3.63
Exercised in 1993........................................... 943,226 $.25 - $3.63
---------
Outstanding at December 31, 1993............................ 1,379,310 $.25 - $3.63
Exercised in 1994........................................... 700,248 $.25 - $3.63
---------
Outstanding at December 31, 1994............................ 679,062 $.25 - $3.63
========
</TABLE>

Of the options outstanding under the Plan at December 31, 1994, 333,459 are
exercisable as of January 1, 1995. Options for 161,631 shares are exercisable on
November 30, 1995 and options for 183,972 shares are exercisable on January 1,
1996.

In connection with the exercise of stock options in 1994, 1993 and 1992,
the Company receives a tax deduction for the difference between the fair value
of the common stock at the date of exercise and the exercise price. The related
income tax benefit of approximately $6,616,000 in 1994, $5,934,000 in 1993 and
$3,386,000 in 1992 has been recorded as a reduction of income taxes payable and
an addition to additional paid-in capital.

On December 17, 1991, the Board of Directors and the stockholders approved
the Lincare Holdings Inc. 1991 Stock Plan (the 1991 Plan). The Company is
authorized to issue an aggregate 1,600,000 shares of common stock under the 1991
Plan. The 1991 Plan provides for the granting of non-qualified and incentive
stock options to acquire common stock and/or granting of rights to purchase
common stock on a restricted stock basis. Options granted (96,000 at $7.00 per
share, 54,000 at $9.07 per share, 650,000 at $12.125 and 700,000 at $19 per
share) vest between December 31, 1992 and December 31, 1997. Options for 48,000
shares at $7.00 per share, 100,000 shares at $12.125 per share and 200,000
shares at $19 per share are exercisable as of December 31, 1994. At December 31,
1994, there were 100,000 shares available for issuance under the 1991 Plan.

On April 14, 1994, the Board of Directors and the stockholders approved the
Lincare Holdings Inc. 1994 Stock Plan (the 1994 Plan). The Company is authorized
to issue an aggregate 500,000 shares of common stock under the 1994 Plan. The
1994 Plan provides for the granting of nonqualified and incentive stock options
to acquire common stock and/or granting of rights to purchase common stock on a
restricted stock basis. There have been no options or shares granted under the
1994 Plan.

(10) NET REVENUES

Included in the Company's net revenues is reimbursement from the federal
government under the Medicare and under Medicaid programs which aggregated
approximately 58% in 1994, 57% in 1993 and 56% in 1992.

F-62
<PAGE> 214

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11) SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid for:
Interest.................................................... $ 254 $ 183 $ 1,089
======= ======= =======
Income taxes................................................ $19,983 $11,609 $10,718
======= ======= =======
</TABLE>

(12) BUSINESS COMBINATIONS

During 1994, the Company acquired the outstanding stock or certain assets
of 26 businesses in 20 separate transactions. During 1993, the Company acquired
the outstanding stock or certain assets of 15 businesses in 11 separate
transactions. Consideration for the acquisitions generally included cash,
unsecured non-interest bearing obligations and the assumption of certain
liabilities.

None of the businesses acquired were related to the Company prior to
acquisition. Each acquisition during 1994 and 1993 was accounted for as a
purchase. The results of operations of the acquired companies are included in
the accompanying consolidated statement of operations since the respective date
of acquisition. Each of the acquired companies conducted operations similar to
that of the Company.

The aggregate cost of the above acquisitions was as follows:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash............................................................. $52,904 $10,362
Deferred acquisition obligations................................. 7,701 14,032
Assumption of liabilities........................................ 947 1,610
------- -------
$61,552 $26,004
======= =======
</TABLE>

The aggregate purchase price was allocated as follows:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current assets................................................... $ 2,915 $ 1,704
Property and equipment........................................... 4,024 2,828
Intangible assets................................................ 11,613 7,277
Goodwill......................................................... 43,000 14,195
------- -------
$61,552 $26,004
======= =======
</TABLE>

The unaudited pro forma supplemental information on the results of
operations for the years ended December 31, 1994 and 1993 include the
acquisitions as if they had been combined at the beginning of the respective
years.

<TABLE>
<CAPTION>
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net revenues................................................... $213,237 $162,544
======== ========
Net income..................................................... $ 40,106 $ 29,673
======== ========
</TABLE>

The unaudited pro forma financial information is not necessarily indicative
of either the results of operations that would have occurred had the
transactions been effected at the beginning of the respective preceding years or
of future results of operations of the combined companies.

F-63
<PAGE> 215

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(13) EXTRAORDINARY ITEM

The Company recorded an extraordinary expense, net of an income tax
benefit, of $1,000,000 ($0.04 per share) in the quarter ended March 31, 1992.
The extraordinary expense is associated with the early extinguishment of the
Company's senior and subordinated debt from the net proceeds of the Company's
initial public stock offering in March 1992. The extraordinary expense was
comprised of unamortized loan origination fees, a prepayment premium for the
early prepayment of bank loans and the unamortized original issue discount
attributable to the Company's subordinated debt.

(14) CONTINGENCIES

In January 1994, the Company was advised by the United States Attorney for
the Middle District of Florida that a grand jury has been investigating certain
services provided by the Company to a pharmacy that supplied medications to home
respiratory patients. Under its contracts with the pharmacy, the Company was
responsible for providing various marketing, field administration and patient
services to the pharmacy. The contracts were in effect from February 1989 to
April 1992, and accounted for less than one percent of the Company's revenues
during such period. The Company is also involved in certain other claims and
legal actions arising in the ordinary cause of business. In the opinion of
management, the ultimate disposition of all matters will not have a material
adverse impact on the Company's financial position or results of operations.

F-64
<PAGE> 216

LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15) QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of quarterly financial results for the years
ended December 31, 1994 and 1993:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994:
Net revenues.................................... $44,009 $49,267 $52,812 $55,054
======= ======= ======= =======
Operating income................................ $13,255 $14,922 $16,555 $17,526
======= ======= ======= =======
Net income...................................... $ 8,129 $ 9,022 $10,102 $10,700
======= ======= ======= =======
Income per common share(1)...................... $ 0.29 $ 0.32 $ 0.36 $ 0.38
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1993:
Net revenues.................................... $34,177 $37,535 $40,643 $42,151
======= ======= ======= =======
Operating income................................ $ 9,229 $10,917 $12,679 $13,264
======= ======= ======= =======
Net income...................................... $ 5,699 $ 6,711 $ 7,698 $ 8,144
======= ======= ======= =======
Income per common share(1)...................... $ 0.21 $ 0.24 $ 0.28 $ 0.29
======= ======= ======= =======
</TABLE>

- ---------------
(1) Based on the weighted average number of common shares and common share
equivalents outstanding for each quarter. The total of the four quarters do
not equal the annual amount as a result of the treasury stock method of
calculating weighted average number of common shares and common share
equivalents outstanding.

F-65
<PAGE> 217

LINCARE HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- --------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents....................................... $ 7,266 $ 16,023
Accounts and notes receivable................................... 29,504 23,629
Inventories..................................................... 1,176 1,029
Prepaid expenses................................................ 640 752
----------- --------------
Total current assets.................................... 38,586 41,433
----------- --------------
Property and Equipment............................................ 99,522 93,098
Less accumulated depreciation..................................... 38,512 37,014
----------- --------------
Net Property, plant and equipment....................... 61,010 56,084
----------- --------------
Other Assets:
Goodwill........................................................ 104,833 82,795
Intangible assets............................................... 11,523 9,205
Covenants not to compete........................................ 6,493 6,055
Other........................................................... 180 206
----------- --------------
Total other assets...................................... 123,029 98,261
----------- --------------
Total assets............................................ $ 222,625 $195,778
========= ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current installments of long-term obligations................... $ 5,857 $ 6,972
Accounts payable................................................ 9,609 8,273
Accrued expenses:
Compensation and benefits.................................... 3,928 5,087
Other........................................................ 1,515 1,377
Income taxes payable............................................ 4,664 1,207
----------- --------------
Total current liabilities............................... 25,573 22,916
Revolving credit loan............................................. 10,000 2,000
Long-term obligations, excluding current installments............. 4,026 4,717
Deferred income taxes............................................. 3,664 3,255
Minority interest................................................. 738 802
Stockholders' equity:
Common stock.................................................... 275 271
Additional paid-in capital...................................... 82,469 77,799
Retained earnings............................................... 95,880 84,018
----------- --------------
Total stockholders' equity.............................. 178,624 162,088
----------- --------------
Total liabilities and stockholders' equity.............. $ 222,625 $195,778
========= ===========
</TABLE>

See accompanying notes to condensed financial statements.

F-66
<PAGE> 218

LINCARE HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
1995 1994
---------- ----------
<S> <C> <C>
Net revenues....................................................... $ 61,223 $ 44,009
---------- ----------
Costs of goods and services...................................... 9,112 6,027
Operating expenses............................................... 13,207 9,803
Selling, general and administrative expenses..................... 12,664 9,818
Bad debt expense................................................. 489 433
Depreciation expense............................................. 3,945 3,340
Amortization expense............................................. 2,391 1,333
---------- ----------
41,808 30,754
---------- ----------
Operating income......................................... 19,415 13,255
---------- ----------
Other income (expense):
Interest income.................................................. 134 138
Interest expense................................................. (110) (63)
Net gain on disposal of property and equipment................... 7 79
---------- ----------
31 154
---------- ----------
Income before income taxes............................... 19,446 13,409
Income taxes....................................................... 7,584 5,280
---------- ----------
Net income............................................... $ 11,862 $ 8,129
========= =========
Net income per common share........................................ $ 0.42 $ 0.29
========= =========
Weighted average number of common shares and common share
equivalents outstanding.......................................... 28,525,960 28,303,054
========= =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-67
<PAGE> 219

LINCARE HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
------------------------
MARCH 31, MARCH 31,
1995 1994
--------- ---------
<S> <C> <C>
Cash from operations.................................................. $ 20,088 $ 12,000
Investing activities:
Proceeds from sale of property and equipment........................ 292 240
Capital expenditures................................................ (7,336) (5,503)
Decrease in other assets............................................ 26 5
Business acquisitions, net of cash acquired......................... (27,033) (29,056)
--------- ---------
(34,051) (34,314)
--------- ---------
Financing activities:
Proceeds from revolving line of credit.............................. 8,000 5,000
Payment of long-term obligations.................................... (4,075) (1,530)
Decrease in minority interest....................................... (116) (11)
Proceeds from issuance of common stock.............................. 1,397 5
--------- ---------
5,206 3,464
--------- ---------
Decrease in cash and cash equivalents................................. (8,757) (18,850)
Cash and cash equivalents, beginning of period........................ 16,023 29,738
--------- ---------
Cash and cash equivalents, end of period.............................. $ 7,266 $ 10,888
======== ========
</TABLE>

See accompanying notes to condensed consolidated financial statements

F-68
<PAGE> 220

LINCARE HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

The accompanying condensed consolidated balance sheet as of March 31, 1995
and condensed statements of operations and cash flows for the three months ended
March 31, 1995 and 1994 are unaudited. In the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of operations for the interim periods presented have
been reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the entire year. The
accompanying condensed consolidated balance sheet as of December 31, 1994 is
derived from the Lincare Holdings Inc.'s (the "Company") audited balance sheet
as of that date.

NOTE 2 -- BUSINESS COMBINATIONS

During the three months ended March 31, 1995 the Company acquired, in
unrelated acquisitions, the stock of five companies and certain assets of five
companies. Each acquisition was accounted for as a purchase. The results of the
acquired companies are included in the accompanying consolidated statements of
operations since the respective date of acquisition.

The aggregate cost of these acquisitions (including cash acquired of
$275,000) was as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash........................................................... $ 27,308
Deferred acquisition obligations............................... 2,359
Assumption of liabilities...................................... 1,278
--------------
$ 30,945
===========
</TABLE>

The aggregate purchase price was allocated as follows:

<TABLE>
<S> <C>
Current assets................................................. $ 2,085
Property and equipment......................................... 1,820
Intangible assets.............................................. 4,548
Goodwill....................................................... 22,492
--------------
$ 30,945
===========
</TABLE>

Unaudited pro forma supplemental information on the results of operations
for the three months ended March 31, 1995 and March 31, 1994 are provided below
and reflect the acquisitions as if they had been combined at the beginning of
each respective period.

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS
ENDED MARCH 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Net revenues............................................. $64,013 $48,251
======= =======
Net income............................................... $12,224 $ 8,938
======= =======
Net income per common share.............................. $ 0.43 $ 0.32
======= =======
</TABLE>

The unaudited pro forma financial information is not necessarily indicative
of either the results of operations that would have occurred had the
transactions been effected at the beginning of the respective preceding periods
or of future results of operations of the combined companies.

F-69
<PAGE> 221

SCHEDULE II

LINCARE HOLDINGS INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ---------------------------------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Deducted from asset accounts:
Allowance for uncollectible
accounts................... $4,596 $1,546 $617(1) $2,036(2) $ 4,723
======== ======== ======== ======== =========
YEAR ENDED DECEMBER 31, 1993
Deducted from asset accounts:
Allowance for uncollectible
accounts................... $3,860 $1,832 $903(1) $1,999(2) $ 4,596
======== ======== ======== ======== =========
YEAR ENDED DECEMBER 31, 1992
Deducted from asset accounts:
Allowance for uncollectible
accounts................... $3,129 $1,591 $743(1) $1,603(2) $ 3,860
======== ======== ======== ======== =========
</TABLE>

- ---------------
(1) To record allowance on business combinations.

(2) To record write-offs.

F-70
<PAGE> 222

APPENDIX A

AGREEMENT AND PLAN OF MERGER

AMONG

CORAM HEALTHCARE CORPORATION

CHC ACQUISITION CORP.

AND

LINCARE HOLDINGS INC.

DATED AS OF APRIL 17, 1995
<PAGE> 223

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE MERGER................................................................ A-1
1.1 The Merger................................................................ A-1
1.2 Closing................................................................... A-1
1.3 Effective Time............................................................ A-1
1.4 Effect of Merger.......................................................... A-1
1.5 Certificate of Incorporation and Bylaws................................... A-2
1.6 Directors and Officers.................................................... A-2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES....................... A-2
2.1 Share Consideration; Conversion or Cancellation of Shares in the Merger... A-2
2.2 Payment for Shares in the Merger.......................................... A-3
2.3 Exchange Agent............................................................ A-4
2.4 Fractional Shares......................................................... A-4
2.5 Transfer of Shares After the Effective Time............................... A-5
2.6 Further Assurances........................................................ A-5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CORAM AND
MERGER SUB......................................................... A-5
3.1 Corporate Organization.................................................... A-5
3.2 Capital Stock............................................................. A-5
3.3 Options or Other Rights................................................... A-5
3.4 Authority Relative to this Agreement...................................... A-6
3.5 Coram Common Stock........................................................ A-6
3.6 No Violation.............................................................. A-6
3.7 Compliance with Laws...................................................... A-6
3.8 Litigation................................................................ A-7
3.9 Financial Statements and Reports.......................................... A-7
3.10 Absence of Certain Changes or Events...................................... A-7
3.11 Employee Benefit Plans and Employment Matters............................. A-8
3.12 Labor Matters............................................................. A-9
3.13 Insurance................................................................. A-9
3.14 Environmental Matters..................................................... A-9
3.15 Tax Matters............................................................... A-9
3.16 Intellectual Property..................................................... A-10
3.17 Related Party Transactions................................................ A-10
3.18 No Undisclosed Material Liabilities....................................... A-10
3.19 No Default................................................................ A-10
3.20 Title to Properties; Encumbrances......................................... A-10
3.21 Pooling of Interests...................................................... A-11
3.22 Representations Complete.................................................. A-11
3.23 Brokers................................................................... A-11
3.24 Certain Cost Savings Estimates............................................ A-11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF LINCARE................................ A-11
4.1 Corporate Organization.................................................... A-11
4.2 Capital Stock............................................................. A-11
4.3 Options or Other Rights................................................... A-12
4.4 Authority Relative to Agreement........................................... A-12
4.5 No Violation.............................................................. A-12
4.6 Compliance with Laws...................................................... A-12
4.7 Litigation................................................................ A-13
4.8 Financial Statements and Reports.......................................... A-13
</TABLE>

i
<PAGE> 224

<TABLE>
<S> <C>
4.9 Absence of Certain Changes or Events...................................... A-13
4.10 Employee Benefit Plans and Employment Matters............................. A-14
4.11 Labor Matters............................................................. A-15
4.12 Insurance................................................................. A-15
4.13 Environmental Matters..................................................... A-15
4.14 Tax Matters............................................................... A-15
4.15 Intellectual Property..................................................... A-16
4.16 Related Party Transactions................................................ A-16
4.17 No Undisclosed Material Liabilities....................................... A-16
4.18 No Default................................................................ A-16
4.19 Title to Properties; Encumbrances......................................... A-16
4.20 Pooling of Interests...................................................... A-17
4.21 Representations Complete.................................................. A-17
4.22 Brokers................................................................... A-17
ARTICLE V COVENANTS AND AGREEMENTS.................................................. A-17
5.1 Joint Proxy Statement/Prospectus; Registration Statement; Stockholders'
Meeting........................................................................ A-17
5.2 Conduct of the Business of Lincare Prior to the Effective Time............ A-18
5.3 Conduct of the Business of Coram Prior to the Effective Time.............. A-20
5.4 Access to Properties and Records.......................................... A-21
5.5 No Solicitation, Etc...................................................... A-21
5.6 Employee Benefit Plans.................................................... A-22
5.7 Treatment of Options...................................................... A-22
5.8 Existing Agreements....................................................... A-22
5.9 Confidentiality........................................................... A-23
5.10 Reasonable Best Efforts................................................... A-23
5.11 Certification of Stockholder Vote......................................... A-23
5.12 Employment/Non-Compete Agreements......................................... A-24
5.13 Affiliate Letters......................................................... A-24
5.14 Listing Application....................................................... A-24
5.15 Supplemental Disclosure Schedules......................................... A-24
5.16 No Action................................................................. A-24
5.17 Conduct of Business of Merger Sub......................................... A-24
5.18 Directors of Coram........................................................ A-24
5.19 Notification of Certain Matters; Delivery of Financial Information........ A-24
ARTICLE VI CONDITIONS PRECEDENT..................................................... A-25
6.1 Conditions to Each Party's Obligation to Effect the Merger................ A-25
6.2 Conditions to the Obligation of Lincare to Effect the Merger.............. A-25
6.3 Conditions to the Obligations of Coram and Merger Sub to Effect the
Merger......................................................................... A-26
ARTICLE VII TERMINATION............................................................. A-27
7.1 Termination by Mutual Consent............................................. A-27
7.2 Termination by Either Coram or Lincare.................................... A-27
7.3 Termination by Lincare.................................................... A-28
7.4 Termination by Coram...................................................... A-28
7.5 Effect of Termination and Abandonment..................................... A-28
7.6 Extension; Waiver......................................................... A-29
ARTICLE VIII MISCELLANEOUS.......................................................... A-29
8.1 Amendment................................................................. A-29
8.2 Waiver.................................................................... A-29
8.3 Survival.................................................................. A-29
8.4 Expenses and Fees......................................................... A-30
8.5 Notices................................................................... A-30
8.6 Headings.................................................................. A-30
</TABLE>

ii
<PAGE> 225

<TABLE>
<S> <C>
8.7 Publicity................................................................. A-30
8.8 Entire Agreement.......................................................... A-30
8.9 Assignment................................................................ A-30
8.10 Counterparts.............................................................. A-31
8.11 Invalidity; Severability.................................................. A-31
8.12 Governing Law............................................................. A-31
</TABLE>

EXHIBITS

<TABLE>
<S> <C>
Exhibit A Form of Affiliate Letters
Exhibit B Opinion of Brobeck, Phleger & Harrison
Exhibit C Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol
</TABLE>

iii
<PAGE> 226

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of April 17, 1995 among
Coram Healthcare Corporation, a Delaware corporation ("Coram"), CHC Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Coram ("Merger
Sub"), and Lincare Holdings Inc., a Delaware corporation ("Lincare").

WHEREAS, the Boards of Directors of Coram, Merger Sub and Lincare deem
advisable and in the best interests of their respective stockholders the merger
of Merger Sub with and into Lincare (the "Merger") upon the terms and conditions
set forth herein and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL") (Lincare, following the effectiveness of the Merger,
being hereinafter sometimes referred to as the "Surviving Corporation");

WHEREAS, the Boards of Directors of Coram, Merger Sub and Lincare have
approved the Merger pursuant to this Agreement, upon the terms and subject to
the conditions set forth herein;

WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");

WHEREAS, Coram and Lincare have each received a fairness opinion relating
to the transactions contemplated hereby as more fully described herein; and

WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.

NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and in order to set forth
the terms and conditions of the Merger and the method of carrying the same into
effect, the parties hereby agree as follows:

ARTICLE I

THE MERGER

1.1 The Merger. Upon the terms and conditions hereinafter set forth and in
accordance with the DGCL, at the Effective Time (as defined in Section 1.3),
Merger Sub shall be merged with and into Lincare and thereupon the separate
existence of Merger Sub shall cease, and Lincare, as the Surviving Corporation,
shall continue to exist under and be governed by the DGCL.

1.2 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at the offices of
Brobeck, Phleger & Harrison, 4675 MacArthur Court, Suite 1000, Newport Beach,
California 92660 as promptly as practicable after satisfaction or waiver of the
conditions set forth in Article VI, or at such other location, time or date as
may be agreed to in writing by the parties hereto. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date."

1.3 Effective Time. If all the conditions to the Merger set forth in
Article VI shall have been satisfied or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article VII, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such other time which the parties
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").

1.4 Effect of Merger. After the Effective Time, pursuant to the DGCL, the
separate existence of Merger Sub will cease and the Surviving Corporation shall
succeed, without other transfer, to all the rights and property of Merger Sub
and shall be subject to all the debts and liabilities of Merger Sub in the same
manner as if the Surviving Corporation had itself incurred them.

A-1
<PAGE> 227

1.5 Certificate of Incorporation and Bylaws. At the Effective Time, the
Certificate of Incorporation of Lincare shall be the Certificate of
Incorporation of the Surviving Corporation and the Bylaws of Lincare as in
effect on the date hereof shall be the Bylaws of the Surviving Corporation.

1.6 Directors and Officers. The persons who are directors of Merger Sub
immediately prior to the Effective Time shall, after the Effective Time, serve
as the directors of the Surviving Corporation, to serve until their successors
have been duly elected and qualified in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The persons who are
officers of Merger Sub immediately prior to the Effective Time shall, after the
Effective Time, serve as the officers of the Surviving Corporation at the
pleasure of the Board of Directors of the Surviving Corporation.

ARTICLE II

CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

2.1 Share Consideration; Conversion or Cancellation of Shares in the
Merger. Subject to the provisions of this Article II, at the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:

(a) Each issued and outstanding share of the common stock, $.01 par value,
of Lincare (the "Lincare Common Stock"), other than (i) shares of Lincare Common
Stock owned of record by Coram, or a wholly owned Subsidiary (as hereinafter
defined) of Coram, and (ii) shares of Lincare Common Stock that are owned by
Lincare as treasury stock (the "Treasury Shares"), shall be automatically
converted into the right to receive 1.5354 shares (the "Exchange Ratio") of the
common stock, $.001 par value, of Coram (the "Coram Common Stock"). If prior to
the Effective Time, Coram or Lincare should split or combine its Common Stock,
or pay a stock dividend or other stock distribution in its Common Stock, or
otherwise change its Common Stock into any other securities, or make any other
dividend or distribution on its Common Stock, then the Exchange Ratio will be
appropriately adjusted to reflect such split, combination, dividend or other
distribution or change. The Exchange Ratio shall, in each case, be rounded to
the nearest ten-thousandth of a share.

(b) All of the shares of the Lincare Common Stock to be converted into
Coram Common Stock pursuant to Section 2.1(a) (the "Lincare Shares") shall cease
to be outstanding, shall be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall thereafter cease
to have any rights with respect to such shares, except the right to receive for
each of the shares, upon the surrender of such certificate in accordance with
Section 2.2(b), the number of shares of Coram Common Stock specified in Section
2.01(a) above (the "Share Consideration") and cash in lieu of fractional Coram
Common Stock as contemplated by Section 2.4.

(c) The issued and outstanding shares of the common stock, $1.00 par value,
of Merger Sub (the "Merger Sub Common Stock") shall be converted into one
hundred (100) shares of fully paid and nonassessable shares of common stock,
$.01 par value, of the Surviving Corporation ("Surviving Corporation Common
Stock").

(d) All shares of Lincare Common Stock which are owned of record by Coram
or any wholly owned Subsidiary of Coram and all of the Treasury Shares shall be
cancelled and retired and cease to exist, without any conversion thereof or
payment with respect thereto.

(e) Each outstanding option to purchase Lincare Common Stock (each an,
"Lincare Stock Option") shall be assumed by Coram as provided in Section 5.7.

As used in this Agreement, the term "Subsidiary" shall mean any corporation
of which at least a majority of the securities having by their terms ordinary
voting power to elect a majority of the Board of Directors is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries; provided,
however, that as used in Sections 3.1, 3.3, 3.6, 3.7, 3.8, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 3.17, 3.19, 3.20, 3.21, 4.1, 4.5, 4.6, 4.7, 4.9, 4.10, 4.11,
4.12, 4.13, 4.14, 4.16, 4.17, 4.18, 4.19, 4.20, 5.2(c)-(f), 5.3 and 5.16 of this
Agreement, the term "Subsidiary" shall also include any

A-2
<PAGE> 228

unincorporated organization, including partnerships and joint ventures, of which
such party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or at least a majority of the voting interests in such
organization are directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries (such unincorporated organizations being collectively referred to
herein as the "Joint Ventures");

2.2 Payment for Shares in the Merger.

(a) At the Effective Time, Coram shall make available to an exchange agent
selected by Coram and reasonably acceptable to Lincare (the "Exchange Agent"),
for the benefit of those persons who immediately prior to the Effective Time
were the holders of Lincare Shares, a sufficient number of certificates
representing shares of Coram Common Stock required to effect the delivery of the
aggregate Share Consideration required to be issued pursuant to Section 2.1 (the
certificates representing Coram Common Stock comprising such aggregate Share
Consideration being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the shares
of Coram Common Stock contemplated to be issued pursuant to Section 2.1 and
effect the sales provided for in Section 2.4 out of the Exchange Fund. The
Exchange Fund shall not be used for any other purpose.

(b) As soon as practicable after the Effective Time, the Exchange Agent
shall send a notice and transmittal form to each holder of record of the Lincare
Shares immediately prior to the Effective Time advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent (who may appoint forwarding agents with the approval of Coram) the
certificate or certificates to be exchanged pursuant to the Merger (the
"Certificates"). Upon the surrender for exchange of Certificates, together with
such letter of transmittal duly completed and properly executed in accordance
with instructions thereto and such other documents as may be required pursuant
to such instructions, the holder shall be paid promptly, without interest
thereon and subject to any required withholding of taxes, the Share
Consideration to which such holder is entitled hereunder, and such Certificates
shall forthwith be cancelled. Until so surrendered and exchanged, the
Certificates shall represent solely the right to receive the Share Consideration
pursuant to Section 2.1 and cash in lieu of fractional shares as contemplated by
Section 2.4, subject to any required withholding of taxes. If any payment for
the Lincare Shares is to be made to a person other than the person in whose name
the Certificates for such shares surrendered are registered, it shall be a
condition of the exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
delivery of such payment to a person other than the registered owner of the
Certificates surrendered or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. To the extent permitted
by law, former stockholders of record of Lincare shall be entitled to vote,
after the Effective Time, at any meeting of Coram stockholders, the number of
whole shares of Coram Common Stock into which their respective Lincare Shares
are converted, regardless of whether such holders have exchanged their
Certificates in accordance with this Section 2.2.

(c) No dividends or other distributions with respect to Coram Common Stock
with a record date after the Effective Time shall be paid to the holders of any
unsurrendered Certificates with respect to the shares of Coram Common Stock
represented thereby and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.4 until the surrender of such
Certificates in accordance with this Section 2.2. Subject to the effect of
applicable laws, following surrender of any such Certificates, there shall be
paid to the holder of the Certificates representing whole shares of Coram Common
Stock issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of Coram
Common Stock to which such holder is entitled pursuant to Section 2.4 and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Coram
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Coram Common Stock.

A-3
<PAGE> 229

(d) In the event any Certificates shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Coram, the
posting by such person of a bond in such amount, form and with such surety as
Coram may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the number of shares of the Coram Common
Stock and cash in lieu of fractional shares deliverable (and unpaid dividends
and distributions) in respect thereof pursuant to this Agreement.

(e) Coram, as the sole stockholder of Merger Sub, shall, upon surrender to
the Surviving Corporation of Certificates representing the Merger Sub Common
Stock, receive a Certificate representing the number of shares of the Surviving
Corporation Common Stock into which such Merger Sub Common Stock shall have been
converted pursuant to Section 2.1.

(f) Certificates surrendered for exchange by any person constituting a Rule
145 Affiliate of Lincare (as defined in Section 5.13) shall not be exchanged for
Certificates representing Coram Common Stock until Coram has received a written
agreement from such person as provided in Section 5.13.

2.3 Exchange Agent. Subject to the agreement of the Exchange Agent, among
other things, (i) the Exchange Agent shall maintain the Exchange Fund as a
separate fund to be held for the benefit of the holders of the Lincare Shares,
which shall be promptly applied by the Exchange Agent to making the payments
provided for in Section 2.2, (ii) any portion of the Exchange Fund that has not
been paid to holders of the Lincare Shares pursuant to Section 2.2 prior to that
date which is six months from the Effective Time shall be paid to Coram, and any
holders of Lincare Shares who shall not have theretofore complied with Section
2.2 shall thereafter look only to Coram for payment of the number of shares of
Coram Common Stock to which they are entitled under this Agreement, (iii) the
Exchange Fund shall not be used for any purpose that is not provided for herein;
and (iv) all expenses of the Exchange Agent shall be paid directly by Coram.
Promptly following the date which is six months from the Effective Time, the
Exchange Agent shall return to Coram all cash, securities and any other
instruments in its possession relating to the transactions described in this
Agreement, and the Exchange Agent's duties shall terminate. Thereafter, each
holder of Certificates formerly representing Lincare Shares may surrender such
Certificates to Coram and (subject to applicable abandoned property, escheat and
similar laws) receive in exchange therefor the Share Consideration and cash in
lieu of fractional shares payable with respect thereto pursuant to Sections 2.1
and 2.4 hereof, without interest, but shall have no greater rights against Coram
than may be accorded to general creditors of Coram under the DGCL. The Exchange
Agent shall not be entitled to vote or exercise any rights of ownership with
respect to the Coram Common Stock held by it from time to time hereunder.

2.4 Fractional Shares. No fractional shares of Coram Common Stock shall be
issued in the Merger. In lieu of any such fractional securities, each holder of
Lincare Shares who would otherwise have been entitled to a fractional share of
Coram Common Stock upon surrender of Certificates for exchange pursuant to this
Article II will be paid an amount in cash (without interest) equal to such
holder's proportionate interest in the net proceeds from the sale or sales in
the open market by the Exchange Agent, on behalf of all such holders, of the
aggregate fractional shares of the Coram Common Stock issued pursuant to this
Article II. As soon as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (i) the number of full shares of the Coram
Common Stock delivered to the Exchange Agent by Coram over (ii) the aggregate
number of full shares of the Coram Common Stock to be distributed to holders of
Lincare Shares (such excess being herein called the "Excess Shares"), and the
Exchange Agent, as agent for the former holders of Lincare Shares, shall sell
the Excess Shares at the prevailing prices on the NYSE. The sale of the Excess
Shares by the Exchange Agent shall be executed on the NYSE through one or more
member firms of the NYSE and shall be executed in round lots to the extent
practicable. Coram shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Shares. Until
the net proceeds of such sale have been distributed to the former stockholders
of Lincare, the Exchange Agent will hold such proceeds in trust for such former
stockholders (the "Fractional Securities Fund"). As soon as practicable after
the determination of the amount of cash to be paid to former stockholders of
Lincare in lieu of any fractional interests, the

A-4
<PAGE> 230

Exchange Agent shall make available in accordance with this Agreement such
amounts to such former stockholders.

2.5 Transfer of Shares After the Effective Time. No transfers of Lincare
Shares shall be made on the stock transfer books of Lincare after the close of
business on the day prior to the date of the Effective Time.

2.6 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary, desirable or
proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, the title to any property or right of Lincare or Merger Sub
acquired or to be acquired by reason of, or as a result of, the Merger, or (b)
otherwise to carry out the purposes of this Agreement, Lincare and Merger Sub
agree that the Surviving Corporation and its proper officers and directors shall
and will execute and deliver all such deeds, assignments and assurances in law
and do all acts necessary, desirable or proper to vest, perfect or confirm title
to such property or right in the Surviving Corporation and otherwise to carry
out the purposes of this Agreement, and that the proper officers and directors
of Lincare and Merger Sub and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of Lincare and Merger Sub or
otherwise to take any and all such action.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF CORAM AND MERGER SUB

Coram and Merger Sub, jointly and severally, represent and warrant to
Lincare that, except as set forth in the Disclosure Schedule delivered herewith
(the "Coram Disclosure Schedule"):

3.1 Corporate Organization. Each of Coram and its Subsidiaries (the "Coram
Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted, and is qualified or
licensed to do business and is in good standing in each jurisdiction in which
the failure to be so qualified or licensed, individually or in the aggregate,
would have a material adverse effect on the financial condition, results of
operations, business or properties of Coram and the Coram Subsidiaries taken as
a whole (a "Material Adverse Effect on Coram"). The Coram Disclosure Schedule
contains a complete and accurate list of all of the Coram Subsidiaries. Neither
Coram nor any Coram Subsidiary is in violation of any provision of its
Certificate of Incorporation or Bylaws which could have a Material Adverse
Effect on Coram. Merger Sub has not engaged in any business nor has it incurred
any liabilities or obligations since it was incorporated other than relating to
this Agreement and the transactions contemplated hereby.

3.2 Capital Stock. The authorized capital stock of Coram consists in its
entirety of (i) 75,000,000 shares of Coram Common Stock, $.001 par value, and
(ii) 10,000,000 shares of Preferred Stock, $.001 par value. As of March 31,
1995, 39,454,218 shares of Coram Common Stock were issued and outstanding, (ii)
options to acquire 7,286,181 shares of Coram Common Stock were outstanding under
all stock option plans of Coram, (iii) 9,600,000 shares were reserved for
issuance pursuant to all employee benefit plans of Coram and (iv) warrants to
purchase 766,076 shares of Coram Common Stock were outstanding. As of the date
hereof, the authorized capital stock of Merger Sub consists in its entirety of
1,000 shares of common stock, $1.00 par value, of which 100 shares are issued
and outstanding. All of the outstanding shares of capital stock of each of the
Coram Subsidiaries are owned beneficially and of record by Coram or a Coram
Subsidiary free and clear of all liens, charges and encumbrances of any nature.
All of the outstanding shares of capital stock of Coram, Merger Sub and each of
the Coram Subsidiaries have been validly issued and are fully paid and
nonassessable.

3.3 Options or Other Rights. Except as disclosed in Section 3.2, there is
no outstanding right, subscription, warrant, call, unsatisfied preemptive right,
option or other agreement or arrangement of any kind to purchase or otherwise to
receive from Coram or any Coram Subsidiary any of the outstanding authorized but
unissued, unauthorized or treasury shares of the capital stock or any other
security of Coram or any Coram Subsidiary, and there is no outstanding security
of any kind convertible into or exchangeable for such capital stock. No options
or rights to acquire equity securities granted by Coram have provisions which
accelerate the

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<PAGE> 231

vesting or right to exercise such options or rights or terminate any repurchase
rights of Coram upon the consummation of the Merger.

3.4 Authority Relative to this Agreement. Each of Coram and Merger Sub has
full corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on its part hereby. The execution and
delivery of this Agreement by each of Coram and Merger Sub and the consummation
of the transactions contemplated on its part hereby have been duly authorized by
their respective Board of Directors, and, other than the approval of Coram's
stockholders as provided in Section 5.1 hereof, no other corporate proceedings
on the part of Coram or Merger Sub are necessary to the consummation of the
transactions contemplated on its part hereby. This Agreement has been duly
executed and delivered by each of Coram and Merger Sub, and constitutes a legal,
valid and binding obligation of each of Coram and Merger Sub, enforceable
against each of them in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equity principles.

3.5 Coram Common Stock. The shares of Coram Common Stock to be issued in
connection with the Merger have been duly authorized and, when issued as
contemplated hereby at the Effective Time, will be validly issued, fully paid
and nonassessable, and not subject to any preemptive rights.

3.6 No Violation. The execution, delivery and performance of this
Agreement by each of Coram and Merger Sub and the consummation by each of them
of the transactions contemplated hereby will not (i) violate or conflict with
any provision of any law applicable to Coram or any Coram Subsidiary or by which
any of their property or assets are bound, (ii) require the consent, waiver,
approval, license or authorization of or any filing by Coram or any Coram
Subsidiary with any public authority (other than (a) the filing of a pre-merger
notification report under The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (the "HSR
Act") and the expiration of the applicable waiting period, (b) in connection
with or in compliance with the provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Securities Act of 1933, as amended
(the "Securities Act"), the DGCL, the Bylaws of the NYSE or the "takeover" or
"blue sky" laws of various states and (c) any other filings and approvals
expressly contemplated by this Agreement) or (iii) violate, conflict with,
result in a breach of or the acceleration of any obligation under, or constitute
a default (or an event which with notice or the lapse of time or both would
become a default) under, or give to others any right of, or result in any,
termination, amendment, acceleration or cancellation of, or loss of any benefit
or creation of a right of first refusal or result in the creation of a lien or
other encumbrance on any property or asset of Coram or any Coram Subsidiary
pursuant to or under any provision of any charter or bylaw, indenture, mortgage,
lien, lease, license, agreement, contract, instrument, order, judgment,
ordinance, Coram Permit (as defined below), law, regulation or decree to which
Coram or any Coram Subsidiary is subject or by which Coram or any Coram
Subsidiary or any of their property or assets are bound, except where the
failure to give such notice, make such filings, or obtain such authorizations,
consents, waivers, licenses or approvals, or where such violations, conflicts,
breaches, defaults, terminations, amendments, accelerations, cancellations, loss
of rights, liens or encumbrances, individually or in the aggregate, would not
have a Material Adverse Effect on Coram or on Coram's or Merger Sub's ability to
consummate the transactions contemplated hereby.

3.7 Compliance with Laws.

(a) Coram and each Coram Subsidiary hold all material licenses, permits and
other authorizations necessary to conduct its business (collectively, "Coram
Permits"), are certified as providers under all applicable Medicare and Medicaid
programs to the extent required to be so certified, and are in compliance with
all Coram Permits and all federal, state and other laws, rules, regulations,
ordinances and orders governing its business, including, without limitation, the
requirements, guidelines, rules and regulations of Medicare, Medicaid and other
third-party reimbursement programs, except where the failure to hold such Coram
Permits and other authorizations or to so comply would not be material to the
financial condition, results of operations, business or properties of Coram and
the Coram Subsidiaries taken as a whole. The Coram Permits are in full force and
effect.

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(b) All health care personnel employed by Coram or any Coram Subsidiary are
properly licensed to the extent required to perform the duties of their
employment in each jurisdiction where such duties are performed, except where
the failure to be so licensed, would not be material to the financial condition,
results of operations, business or properties of Coram and the Coram
Subsidiaries taken as a whole.

(c) No action or proceeding is pending or, to Coram's knowledge, threatened
that may result in the suspension, revocation or termination of any Coram
Permit, the issuance of any cease-and-desist order, or the imposition of any
administrative or judicial sanction, and neither Coram nor any Coram Subsidiary
has received any notice from any governmental authority in respect of the
suspension, revocation or termination of any Coram Permit, or any notice of any
intention to conduct any investigation or institute any proceeding, in any such
case where such suspension, revocation, termination, order, sanction,
investigation or proceeding would be material to the financial condition,
results of operations, business or properties of Coram and the Coram
Subsidiaries taken as a whole.

(d) Neither Coram nor any Coram Subsidiary has received notice that
Medicare, Medicaid or any other third-party reimbursement program has any claims
for disallowance of costs against any of them which could result in material
offsets against future reimbursement or recovery of prior payments, which
offsets or recoveries have not been reserved for in Coram's financial
statements.

3.8 Litigation. Except as may be disclosed in the Coram SEC Filings (as
defined below) made prior to the date hereof, there are no suits, arbitrations,
mediations, actions, proceedings, unfair labor practice complaints or grievances
pending or, to Coram's knowledge, threatened, or, to Coram's knowledge,
investigations pending or threatened, against Coram or any Coram Subsidiary or
with respect to any property or asset of any of them before any court,
arbitrator, administrator or governmental or regulatory authority or body which,
individually or in the aggregate, would have a Material Adverse Effect on Coram.
Neither Coram nor any Coram Subsidiary nor any property or asset of any of them
is subject to any order, judgment, injunction or decree which, individually or
in the aggregate, would have a Material Adverse Effect on Coram.

3.9 Financial Statements and Reports. Coram has made available to Lincare
true and complete copies of (i) its Annual Report on Form 10-K as filed with the
Securities and Exchange Commission (the "Commission"), for the year ended
December 31, 1994 (the "Coram Form 10-K"), (ii) all registration statements
filed by Coram and declared effective under the Securities Act (other than
registration statements on Form S-8), and (c) all other reports, statements and
registration statements (including Current Reports on Form 8-K) filed by it with
the Commission subsequent to the filing of the Coram Form 10-K, if any. The
reports, statements and registration statements referred to in the immediately
preceding sentence (including, without limitation, any financial statements or
schedules or other information, included or incorporated by reference therein)
are referred to in this Agreement as the "Coram SEC Filings." As of the
respective times such documents were filed or, as applicable, became effective,
the Coram SEC Filings complied as to form and content, in all material respects,
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations promulgated thereunder, and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of Coram included in the Coram SEC Filings were prepared in
accordance with generally accepted accounting principles (as in effect from time
to time) applied on a consistent basis and (except as may be indicated therein
or in the notes thereto) present fairly the consolidated financial position,
consolidated results of operations and consolidated cash flows of Coram and the
Coram Subsidiaries as of the dates and for the periods indicated subject, in the
case of unaudited interim consolidated financial statements, to normal recurring
year-end adjustments and any other adjustments described therein.

3.10 Absence of Certain Changes or Events. Since December 31, 1994 and
except as disclosed in the Coram SEC Filings made through the date hereof, the
business of Coram and of each of the Coram Subsidiaries has been conducted in
the ordinary course, and there has not been (i) any material adverse change in
the financial condition, results of operations, business or properties of Coram
and the Coram Subsidiaries, taken as a whole; (ii) any indebtedness incurred by
Coram or any Coram Subsidiary for money borrowed; (iii) any material transaction
or commitment, except in the ordinary course of business or as

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contemplated by this Agreement, entered into by Coram or any of the Coram
Subsidiaries; (iv) any damage, destruction or loss, whether covered by insurance
or not, which, individually or in the aggregate, would have a Material Adverse
Effect on Coram; (v) any declaration, setting aside or payment of any dividend
(whether in cash, securities or property) with respect to the Coram Common
Stock; (vi) any material agreement to acquire any assets or stock or other
interests of any third-party; (vii) any increase in the compensation payable or
to become payable by Coram or any Coram Subsidiary to any employees, officers,
directors, or consultants or in any bonus, insurance, welfare, pension or other
employee benefit plan, payment or arrangement made to, for or with any such
employee, officer, director or consultant (other than as provided in employment
agreements, consulting agreements and welfare and benefit plans in existence as
of the date hereof, and except for increases consistent with past practice);
(viii) any material revaluation by Coram or any Coram Subsidiary of any asset
(including, without limitation, any writing down of the value of inventory or
writing off of notes or accounts receivable); (ix) any material change by Coram
in accounting principles or methods except insofar as may be required by a
change in generally accepted accounting principles; (x) any mortgage or pledge
of any of the assets or properties of Coram or any Coram Subsidiary or the
subjection of any of the assets or properties of Coram or any Coram Subsidiary
to any material liens, charges, encumbrances, imperfections of title, security
interest, options or rights or claims of other with respect thereto; or (xi) any
assumption or guarantee by Coram or an Coram Subsidiary of the indebtedness of
any person or entity.

3.11 Employee Benefit Plans and Employment Matters.

(a) The Coram Disclosure Schedule lists all employee benefit plans,
collective bargaining agreements, labor contracts, and employment agreements not
otherwise disclosed in the Coram SEC Filings which provide for the annual
payment of more than $100,000 in which Coram participates, or by which it is
bound, including, without limitation, (i) any profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, welfare, and
incentive plan or agreement; (ii) any plan providing for "fringe benefits" to
its employees, including, but not limited to, vacation, sick leave, medical,
hospitalization and life insurance; (iii) any written employment agreement and
any other employment agreement not terminable at will; and (iv) any other
"employee benefit plan" (within the meaning of Section 3(3) of the Employment
Retirement Income Security Act of 1974 ("ERISA")) that is not exempted from the
coverage of ERISA by reason of the Department of Labor regulations. Coram is in
compliance in all material respects with the requirements prescribed by all laws
currently in effect applicable to employee benefit plans and to any employment
agreements, including, but not limited to, ERISA and the Code. Coram has
performed all of its obligations under all such employee benefit plans and
employment agreements in all material respects. There is no pending or, to the
knowledge of Coram, threatened legal action, proceeding or investigation against
or involving any Coram employee benefit plan which could result in a material
amount of liability to such employee benefit plan or to Coram.

(b) Coram does not sponsor or participate in, and has not sponsored or
participated in, any employee benefit pension plan to which Section 4021 of
ERISA applies that would create a material amount of liability to Coram under
Title IV of ERISA.

(c) Coram does not sponsor or participate in, and has not sponsored or
participated in, any employee benefit pension plan that is a "multiemployer
plan" (within the meaning of Section 3(37) of ERISA) that would subject Coram to
any material amount of liability with respect to any such plan.

(d) All group health plans of Coram have been operated in compliance with
the group health plan continuation coverage requirements of Section 4980B of the
Code in all material respects, to the extent such requirements are applicable.

(e) There have been no acts or omissions by Coram that have given rise to
or may give rise to a material amount of fines, penalties, taxes, or related
charges under Sections 502(c) or 4071 of ERISA or under Chapter 43 of the Code.

(f) No "reportable event," as defined in ERISA Section 4043, other than
those events with respect to which the Pension Benefit Guaranty Corporation has
waived the notice requirement, has occurred with respect to any of the employee
benefit plans of Coram.

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(g) The Coram Disclosure Schedule sets forth the name of each director,
officer or employee of Coram entitled to receive any material amount of benefit
or payment under any existing employment agreement, severance plan or other
benefit plan solely as a result of the consummation of any transaction
contemplated by this Agreement, and with respect to each such person, the nature
of such benefit or the amount of such payment, the event triggering the benefit
or payment, and the date of, and parties to, such employment agreement,
severance plan or other benefit plan.

(h) Coram has made available to Lincare true and correct copies of all plan
documents and employment agreements referred to on the Coram Disclosure
Schedule, including all amendments thereto, and all related summary plan
descriptions to the extent that one is required by law.

(i) For purposes of this Section 3.11, any reference to "Coram" shall be
deemed to include a reference to any entity that is aggregated with Coram under
the provisions of Section 414 of the Code, to the extent that those aggregation
rules apply.

3.12 Labor Matters. Neither Coram nor any Coram Subsidiary is a party to
any collective bargaining agreement with respect to any of their employees. None
of the employees of Coram or any Coram Subsidiary is represented by any labor
union. To the knowledge of Coram, there is no activity involving any employees
of Coram or the Coram Subsidiaries seeking to certify a collective bargaining
unit or engaging in any other organizational activity.

3.13 Insurance. Coram and the Coram Subsidiaries maintain insurance
against such risks and in such amount as Coram reasonably believes are necessary
to conduct its business. Coram and the Coram Subsidiaries are not in default
with respect to any provisions or requirements of any such policy, nor have any
of them failed to give notice or present any claim thereunder in a due and
timely fashion, except for defaults or failures which, individually or in the
aggregate, would not have a Material Adverse Effect on Coram. Neither Coram nor
any Coram Subsidiary has received any notice of cancellation or termination in
respect of any of its insurance policies.

3.14 Environmental Matters. Coram and the Coram Subsidiaries are in
compliance with all environmental laws, and have obtained all necessary licenses
and permits required to be issued pursuant to any environmental law, except
where the failure to so comply or to obtain such licenses or permits,
individually or in the aggregate, would not have a Material Adverse Effect on
Coram. Neither Coram nor any Coram Subsidiary has received any notice or
communication from any governmental agency with, respect to (i) any hazardous
substance relative to its operations, property or assets or (ii) any
investigation, demand or request pursuant to enforcing any environmental law
relating to it or its operations, and no such investigation is pending or, to
the knowledge of Coram threatened, in any case, which would lead to a Material
Adverse Effect on Coram.

3.15 Tax Matters. Coram has paid, or made adequate provision for on its
balance sheet at December 31, 1994, all federal, state, local, foreign or other
governmental income, payroll, F.I.C.A., unemployment, withholding, real
property, personal property, sales, payroll, disability and, to its knowledge,
franchise and all other taxes imposed on Coram or any Coram Subsidiary or with
respect to any of their respective properties, or otherwise payable by them,
including interest and penalties, if any, in respect thereof (collectively,
"Coram Taxes"), for the Coram taxable period ended September 30, 1994 and all
fiscal periods of Coram prior thereto, except such nonpayment, or failure to
make adequate provision, that would not be material to the financial condition,
results of operations, business or properties of Coram and the Coram
Subsidiaries taken as a whole. Coram Taxes paid and/or incurred from September
30, 1994 include only Coram Taxes incurred in the ordinary course of business
determined in the same manner as in the taxable period ended September 30, 1994
and Coram has properly accrued for all such Taxes for such periods. Coram and
each of the Coram Subsidiaries have timely filed all income tax, excise tax,
sales tax, use tax, gross receipts tax, franchise tax, employment and payroll
related tax, property tax, and all other tax returns which Coram and/or such
Coram Subsidiary (as the case may be) are required to file ("Coram Tax
Returns"), and have paid or provided for all the amounts shown to be due
thereon, except where such failure to make such timely filings or the nonpayment
of such amounts would not be material to the financial condition, results of
operations, business or properties of Coram and the Coram Subsidiaries taken as
a whole. Neither Coram nor any Coram

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Subsidiary (i) has filed or entered into, or is otherwise bound by, any
election, consent or extension agreement that extends any applicable statute of
limitations with respect to taxable periods of Coram, (ii) is a party to any
contractual obligation requiring the indemnification or reimbursement of any
person with respect to the payment of any Coram Taxes, other than among Coram
and the Coram Subsidiaries, or (iii) has received any claim by an authority in a
jurisdiction where neither Coram nor any Coram Subsidiary files Coram Tax
Returns that they are or may be subject to Coram Taxes by that jurisdiction,
except for any such claims as would not be material to the financial condition,
results of operations, business or properties of Coram and the Coram
Subsidiaries taken as a whole. No action or proceeding is pending or, to Coram's
knowledge, threatened by any governmental authority for any audit, examination,
deficiency, assessment or collection from Coram or any Coram Subsidiary of any
Coram Taxes, no unresolved claim for any deficiency, assessment or collection of
any Coram Taxes has been asserted against Coram or any Coram Subsidiary, and all
resolved assessments of Coram Taxes have been paid or are reflected on the Coram
balance sheet at December 31, 1994, except for any of the foregoing which would
not be material to the financial condition, results of operations, business or
properties of Coram and the Coram Subsidiaries taken as a whole.

3.16 Intellectual Property. Coram and the Coram Subsidiaries own, possess
or have the right to use all franchises, patents, trademarks, service marks,
tradenames, licenses and authorizations (collectively, "Coram Intellectual
Property Rights") which are necessary, to the conduct of their respective
businesses. To the knowledge of Coram, neither Coram nor any Coram Subsidiary is
infringing or otherwise violating intellectual property rights of any person
which infringement or violation would subject Coram or any Coram Subsidiary to
liabilities which, individually or in the aggregate, would have a Material
Adverse Effect on Coram or which would prevent Coram or any Coram Subsidiary
from conducting their respective businesses substantially in the manner in which
they are now being conducted. No claim has been made or, to Coram's knowledge,
threatened against Coram or any Coram Subsidiary alleging any such violation.

3.17 Related Party Transactions. Except as disclosed in the Coram SEC
Filings made through the date hereof, there have been no material transactions
between Coram or any Coram Subsidiary on the one hand, and any (i) officer or
director of Coram or any Coram Subsidiary, (ii) record or beneficial owner of
five percent or more of the voting securities of Coram, or (iii) affiliate (as
such term is defined in Regulation 12b-2 promulgated under the Exchange Act) of
any such officer, director or beneficial owner, on the other hand, other than
payment of compensation for services rendered to Coram or the Coram Subsidiaries
by any officers of Coram or Coram Subsidiaries.

3.18 No Undisclosed Material Liabilities. Except as disclosed in the Coram
SEC Filings made through the date hereof, neither Coram, any of the Coram
Subsidiaries or, to the knowledge of Coram, any of the Joint Ventures has
incurred any liabilities of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, that, individually or in the
aggregate, would have a Material Adverse Effect on Coram other than liabilities
under or contemplated by this Agreement.

3.19 No Default. Neither Coram nor any of the Coram Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (a) its charter or By-Laws, (b) any note, bond, mortgage,
indenture, license, agreement, contract, lease, commitment or other obligation
to which Coram or any of the Coram Subsidiaries is a party or by which they or
any of their properties or assets may be bound, or (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to Coram or any of
the Coram Subsidiaries, except in the case of clauses (b) and (c) above for
defaults or violations which would not have a Material Adverse Effect on Coram.

3.20 Title to Properties; Encumbrances. Except as described in the
following sentence, each of Coram and the Coram Subsidiaries has good, valid and
marketable title to, or a valid leasehold interest in, all of its properties and
assets (real, personal and mixed, tangible and intangible), including, without
limitation, all the properties and assets reflected in the consolidated balance
sheet of Coram and the Coram Subsidiaries at December 31, 1994 (except for
properties and assets disposed of in the ordinary course of business and
consistent with past practices since December 31, 1994). None of such properties
or assets are subject to any liability, obligation, claim, lien, mortgage,
pledge, security interest, conditional sale agreement, charge or

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encumbrance of any kind (whether absolute, accrued, contingent or otherwise),
except for liens for taxes not yet due and payable and minor imperfections of
title and encumbrance, if any, which are not substantial in amount, do not
materially detract from the value of the property or assets subject thereto and
do not impair the operations of Coram and the Coram Subsidiaries.

3.21 Pooling of Interests. Neither Coram, any of the Coram Subsidiaries
nor, to the knowledge of Coram, any of their respective directors, officers or
stockholders has taken any action which would interfere with the parties'
ability to account for the Merger as a pooling of interests.

3.22 Representations Complete. None of the representations or warranties
made by Coram or Merger Sub herein or in any Schedule hereto, including the
Coram Disclosure Schedule, or certificate furnished by Coram or Merger Sub
pursuant to this Agreement, or the Coram SEC Filings, when all such documents
are read together in their entirety, contains or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.

3.23 Brokers. Neither Coram nor Merger Sub has paid or is obligated to pay
any fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement, except Donaldson, Lufkin &
Jenrette Securities Corporation.

3.24 Certain Cost Savings Estimates. The information regarding estimated
annualized cost savings of Coram as of December 31, 1994, derived from the
implementation of Coram's consolidation plan as of such date, which information
has been delivered to Alex. Brown & Sons Incorporated on behalf of Lincare has
been prepared in good faith and, to the knowledge of Coram, is reasonable based
on the estimates and assumptions underlying such information and Coram is not,
as of the date hereof, aware that such information is false or misleading in any
material respect; it being understood that such cost savings are projections and
as such are inherently uncertain.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF LINCARE

Lincare represents and warrants to Coram and Merger Sub that, except as set
forth in the Disclosure Schedule delivered herewith (the "Lincare Disclosure
Schedule"):

4.1 Corporate Organization. Each of Lincare and its Subsidiaries (the
"Lincare Subsidiaries") is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, with all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted, and is qualified or
licensed to do business and is in good standing in each jurisdiction in which
the failure to be so qualified or licensed, individually or in the aggregate,
would have a material adverse effect on the financial condition, results of
operations, business or properties of Lincare and the Lincare Subsidiaries taken
as a whole (a "Material Adverse Effect on Lincare"). The Lincare Disclosure
Schedule contains a complete and accurate list of all of the Lincare
Subsidiaries. Neither Lincare nor any Lincare Subsidiary is in violation of any
provision of its charter or Bylaws which could have a Material Adverse Effect on
Lincare.

4.2 Capital Stock. As of the date hereof, the authorized capital stock of
Lincare consists in its entirety of (i) 100,000,000 shares of common stock, $.01
par value, and (ii) 4,879,238 shares of Preferred Stock, $1.00 par value, none
of which shares of Preferred Stock are issued and outstanding. As of March 31,
1995, 27,472,262 shares of Lincare Common Stock were issued and outstanding,
(ii) options to acquire 2,268,750 shares of Lincare Common Stock were
outstanding under the Lincare Option Plans (as hereinafter defined) and (iii)
68,000 shares of Lincare Common Stock were reserved for issuance under all of
the Lincare Option Plans. All of the outstanding shares of capital stock of each
of the Lincare Subsidiaries are owned beneficially and of record by Lincare or a
Lincare Subsidiary free and clear of all liens, charges, encumbrances, options,
rights of first refusal or limitations or agreements regarding voting rights of
any nature. All of the outstanding

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shares of capital stock of Lincare and each of the Lincare Subsidiaries have
been validly issued and are fully paid and nonassessable.

4.3 Options or Other Rights. Except as disclosed in Section 4.2, there is
no outstanding right, subscription, warrant, call, unsatisfied preemptive right,
option or other agreement or arrangement of any kind to purchase or otherwise to
receive from Lincare or any Lincare Subsidiary any of the outstanding,
authorized but unissued, unauthorized or treasury shares of the capital stock or
any other security of Lincare or any Lincare Subsidiary and there is no
outstanding security of any kind convertible into or exchangeable for such
capital stock. No options or rights to acquire equity securities granted by
Lincare have provisions which accelerate the vesting or right to exercise such
options or rights or terminate any rights upon the consummation of the Merger.

4.4 Authority Relative to Agreement. Lincare has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated on its part hereby. The execution and delivery of this
Agreement by Lincare and the consummation of the transactions contemplated on
its part hereby have been duly authorized by its Board of Directors, and, other
than the approval of Lincare's stockholders as provided in Section 5.1 hereof,
no other corporate proceedings on the part of Lincare are necessary to authorize
the execution and delivery of this Agreement by Lincare or the consummation of
the transactions contemplated on its part hereby. This Agreement has been duly
executed and delivered by Lincare, and constitutes legal, valid and binding
obligations of Lincare, enforceable against Lincare in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equity principles.

4.5 No Violation. The execution, delivery and performance of this
Agreement by Lincare and the consummation by it of the transactions contemplated
hereby will not (i) violate or conflict with any provision of any law applicable
to Lincare or any Lincare Subsidiary or by which any of its property or assets
are bound, (ii) require the consent, waiver, approval, license or authorization
of or any filing by Lincare or any Lincare Subsidiary with any public authority
(other than as described in clause (ii) of the first sentence of Section 3.6)
or, (iii) violate, conflict with or result in a breach of or the acceleration of
any obligation under, or constitute a default (or an event which with notice or
the lapse of time or both would become a default) under, or give to others any
right of, or result in any, termination, amendment, acceleration or cancellation
of, or loss of any benefit or creation of a right of first refusal or result in
the creation of a lien or other encumbrance on any property or asset of Lincare
or any Lincare Subsidiary pursuant to or under any provision of any charter or
bylaw, indenture, mortgage, lien, lease, license, agreement, contract,
instrument, order, judgment, ordinance, Lincare Permit (as defined below), law,
regulation or decree to which Lincare or Lincare Subsidiary is subject or by
which Lincare or any Lincare Subsidiary or any of their property or assets are
bound, except where the failure to give such notice, make such filings, or
obtain such authorizations, consents, waivers, licenses or approvals, or where
such violations, conflicts, breaches, defaults, terminations, amendments,
accelerations, cancellations, loss of rights, liens or encumbrances,
individually or in the aggregate, would not have a Material Adverse Effect on
Lincare or on Lincare's ability to consummate the transactions contemplated
hereby.

4.6 Compliance with Laws.

(a) Lincare and each Lincare Subsidiary hold all licenses, permits and
other authorizations necessary to conduct its business (collectively, "Lincare
Permits"), are certified as providers under all applicable Medicare and Medicaid
programs to the extent required to be so certified, and are in compliance with
all Lincare Permits and all federal, state and other laws, rules, regulations,
ordinances and orders governing its business, including, without limitation, the
requirements, guidelines, rules and regulations of Medicare, Medicaid and other
third-party reimbursement programs, except where the failure to hold such
licenses, permits and other authorizations or to so comply would not be material
to the financial condition, results of operations, business or properties of
Lincare and the Lincare Subsidiaries taken as a whole. The Lincare Permits are
in full force and effect.

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(b) All health care personnel employed by Lincare or any Lincare Subsidiary
are properly licensed to the extent required to perform the duties of their
employment in each jurisdiction where such duties are performed, except where
the failure to be so licensed would not be material to the financial condition,
results of operations, business or properties of Lincare and the Lincare
Subsidiaries taken as a whole.

(c) No action or proceeding is pending or, to Lincare's knowledge,
threatened that may result in suspension, revocation or termination of any
Lincare Permit, the issuance of any cease-and-desist order, or the imposition of
any administrative or judicial sanction, and neither Lincare nor any Lincare
Subsidiary has received any notice from any governmental authority in respect of
the suspension, revocation or termination of any Lincare Permit, or any notice
of any intention to conduct any investigation or institute any proceeding, in
any such case where such suspension, revocation, termination, order, sanction,
investigation, or proceeding would be material to the financial condition,
results of operations, business or properties of Lincare and the Lincare
Subsidiaries taken as a whole.

(d) Neither Lincare nor any Lincare Subsidiary has received notice that
Medicare, Medicaid or any other third-party reimbursement program has any claims
for disallowance of costs against any of them which could result in material
offsets against future reimbursement or recovery of prior payments, which
offsets or recoveries have not been reserved for in Lincare's financial
statements.

4.7 Litigation. Except as may be disclosed in the Lincare SEC Filings (as
defined below) made as of the date hereof, there are no suits, arbitrations,
mediations, actions, proceedings, unfair labor practice complaints or grievances
pending or, to Lincare's knowledge, threatened or, to Lincare's knowledge,
investigations pending or threatened, against Lincare or any Lincare Subsidiary
or with respect to any property or asset of any of them before any court,
arbitrator, administrator or governmental or regulatory authority or body which,
individually or in the aggregate, would have a Material Adverse Effect on
Lincare. Neither Lincare nor any Lincare Subsidiary nor any property or asset of
any of them is subject to any order, judgment, injunction or decree which,
individually or in the aggregate, would have a Material Adverse Effect on
Lincare.

4.8 Financial Statements and Reports. Lincare has made available to Coram
true and complete copies of (i) its Annual Report on Form 10-K for the year
ended December 31, 1994 (the "Lincare 10-K"), as filed with the Commission, (ii)
its proxy statement relating to the annual meetings of its stockholders held on
May 16, 1994, (iii) all registration statements filed by Lincare and declared
effective under the Securities Act since January 1, 1993 (other than
registration statements on Form S-8) and (iv) all other reports, statements and
registration statements (including Current Reports on Form 8-K) filed by it with
the Commission subsequent to the filing of the Lincare 10-K, if any. The
reports, statements and registration statements referred to in the immediately
preceding sentence (including, without limitation, any financial statements or
schedules or other information included or incorporated by reference therein)
are referred to in this Agreement as the "Lincare SEC Filings." As of the
respective times such documents were filed or, as applicable, became effective,
the Lincare SEC Filings complied as to form and content, in all material
respects, with the requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations promulgated thereunder, and did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Lincare included in the Lincare SEC
Filings were prepared in accordance with generally accepted accounting
principles (as in effect from time to time) applied on a consistent basis and
(except as may be indicated therein or in the notes thereto) present fairly the
consolidated financial position, consolidated results of operations and
consolidated cash flows of Lincare and the Lincare Subsidiaries as of the dates
and for the periods indicated subject, in the case of unaudited interim
consolidated financial statements, to normal recurring year-end adjustment and
any other adjustment described therein.

4.9 Absence of Certain Changes or Events. Since December 31, 1994, except
as disclosed in the Lincare SEC Filings made through the date hereof, the
business of Lincare and of each of the Lincare Subsidiaries has been conducted
in the ordinary course, and there has not been (i) any material adverse change
in the financial condition, results of operations, properties or business of
Lincare and the Lincare Subsidiaries, taken as a whole; (ii) any indebtedness
incurred by Lincare or any Lincare Subsidiary for money borrowed; (iii) any

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material transaction or commitment, except in the ordinary course of business or
as contemplated by this Agreement, entered into by Lincare or any of the Lincare
Subsidiaries; (iv) any damage, destruction or loss, whether covered by insurance
or not, which, individually or in the aggregate, would have a Material Adverse
Effect on Lincare; (v) any declaration, setting aside or payment of any dividend
(whether in cash, securities or property) with respect to the Lincare Common
Stock; (vi) any material agreement to acquire any assets or stock or other
interests of any third-party; (vii) any increase in the compensation payable or
to become payable by Lincare or any Lincare Subsidiary to any employees,
officers, directors, or consultants or in any bonus, insurance, welfare, pension
or other employee benefit plan, payment or arrangement made to, for or with any
such employee, officer, director or consultant (other than as provided in
employment agreements, consulting agreements and welfare and benefit plans set
forth on the Lincare Disclosure Schedule, and except for increases consistent
with past practice); (viii) any material revaluation by Lincare or any Lincare
Subsidiary of any asset (including, without limitation, any writing down of the
value of inventory or writing off of notes or accounts receivable); (ix) any
material change by Lincare in accounting principles or methods except insofar as
may be required by a change in generally accepted accounting principles; (x) any
mortgage or pledge of any of the assets or properties of Lincare or any Lincare
Subsidiary or the subjection of any of the assets or properties of Lincare or
any Lincare Subsidiary to any material liens, charges, encumbrances,
imperfections of title, security interest, options or rights or claims of others
with respect thereto; or (xi) any assumption or guarantee by Lincare or a
Lincare Subsidiary of the indebtedness of any person or entity.

4.10 Employee Benefit Plans and Employment Matters.

(a) The Lincare Disclosure Schedule lists all employee benefit plans,
collective bargaining agreements, labor contracts, and employment agreements not
otherwise disclosed in the Lincare SEC Filings, which provide for the annual
payment of more than $100,000 in which Lincare participates, or by which it is
bound, including, without limitation, (i) any profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, welfare, and
incentive plan or agreement; (ii) any plan providing for "fringe benefits" to
its employees, including, but not limited to, vacation, sick leave, medical,
hospitalization and life insurance; (iii) any written employment agreement and
any other employment agreement not terminable at will; and (iv) any other
"employee benefit plan" (within the meaning of Section 3(3) of ERISA) that is
not exempted from the coverage of ERISA by reason of the Department of Labor
regulations. Lincare is in compliance in all material respects with the
requirement prescribed by all laws currently in effect applicable to employee
benefit plans and to any employment agreement, including, but not limited to,
ERISA and the Code. Lincare has performed all of its obligations under all such
employee benefit plans and employment agreements in all material respects. There
is no pending or, to the knowledge of Lincare, threatened legal action,
proceeding or investigation against or involving any Lincare employee benefit
plan which could result in a material amount of liability to such employee
benefit plan or to Lincare.

(b) Lincare does not sponsor or participate in, and has not sponsored or
participated in, any employee benefit pension plan to which Section 4021 of
ERISA applies that would create a material amount of liability to Lincare under
Title IV of ERISA.

(c) Lincare does not sponsor or participate in, and has not sponsored or
participated in, any employee benefit pension plan that is a "multiemployer
plan" (within the meaning of Section 3(37) of ERISA) that would subject Lincare
to any material amount of liability with respect to any such plan.

(d) All group health plans of Lincare have been operated in compliance with
the group health plan continuation coverage requirements of Section 4980B of the
Code in all material respects, to the extent such requirements are applicable.

(e) There have been no acts or omissions by Lincare that have given rise to
or may give rise to a material amount of fines, penalties, taxes, or related
charges under Sections 502(c) or 4071 of ERISA or under Chapter 43 of the Code.

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(g) The Lincare Disclosure Schedule sets forth the name of each director,
officer or employee of Lincare entitled to receive any material amount of
benefit or payment under any existing employment agreement, severance plan or
other benefit plan solely as a result of the consummation of any transaction
contemplated by this Agreement, and with respect to each such person, the nature
of such benefit or the amount of such payment, the event triggering the benefit
or payment, and the date of, and parties to, such employment agreement,
severance plan or other benefit plan.

(h) Lincare has made available to Coram true and correct copies of all plan
documents and employment agreements referred to on the Lincare Disclosure
Schedule, including all amendments thereto, and all related summary plan
descriptions to the extent that one is required by law.

(i) For purposes of this Section 4.10, any reference to "Lincare" shall be
deemed to include a reference to any entity that is aggregated with Lincare
under the provisions of Section 414 of the Code, to the extent that those
aggregation rules apply.

4.11 Labor Matters. Neither Lincare nor any Lincare Subsidiary is a party
to any collective bargaining agreement with respect to any of their employees.
None of the employees of Lincare or any Lincare Subsidiary is represented by any
labor union. To the knowledge of Lincare, there is no activity involving any
employees of Lincare or the Lincare Subsidiaries seeking to certify a collective
bargaining unit or engaging in any other organizational activity.

4.12 Insurance. Lincare and the Lincare Subsidiaries maintain insurance
against such risks and in such amounts as Lincare reasonably believes are
necessary to conduct its business. Lincare and the Lincare Subsidiaries are not
in default with respect to any provisions or requirements of any such policy nor
have any of them failed to give notice or present any claim thereunder in a due
and timely fashion, except for defaults or failures which, individually or in
the aggregate, would not have a Material Adverse Effect on Lincare. Neither
Lincare nor any Lincare Subsidiary has received any notice of cancellation or
termination in respect of any of its insurance policies.

4.13 Environmental Matters. Lincare and the Lincare Subsidiaries are in
compliance with all environmental laws, and have obtained all necessary licenses
and permits required to be issued pursuant to any environmental law, except
where the failure to so comply or to obtain such licenses or permits,
individually or in the aggregate, would not have a Material Adverse Effect on
Lincare. Neither Lincare nor any Lincare Subsidiary has received any notice or
communication from any governmental agency with respect to (i) any hazardous
substance relative to its operations, property or assets or (ii) any
investigation, demand or request pursuant to enforcing any environmental law
relating to it or its operations, and no such investigation is pending or, to
the knowledge of Lincare threatened, in any case, which would lead to a Material
Adverse Effect on Lincare.

4.14 Tax Matters. Lincare has paid, or made adequate provision for on its
December 31, 1994 balance sheet, all federal, state, local, foreign or other
governmental income, franchise, payroll, F.I.C.A., unemployment, withholding,
real property, personal property, sales, payroll, disability and all other taxes
imposed on Lincare or any Lincare Subsidiary or with respect to any of their
respective properties, or otherwise payable by them, including interest and
penalties, if any, in respect thereof (collectively, "Lincare Taxes"), for the
Lincare taxable period ended December 31, 1994 and all fiscal periods of Lincare
prior thereto, except such nonpayment, or failure to make adequate provision,
which would not be material to the financial condition, results of operations,
business or properties of Lincare and Lincare Subsidiaries taken as a whole.
Lincare Taxes paid and/or incurred from December 31, 1994 include only Lincare
Taxes incurred in the ordinary course of business determined in the same manner
as in the taxable period ending on December 31, 1994 and Lincare has properly
accrued for all such Taxes for such periods. Lincare and each of the Lincare
Subsidiaries have timely filed all income tax, excise tax, sales tax, use tax,
gross receipts tax, franchise tax, employment and payroll related tax, property
tax, and all other tax returns which Lincare and/or such Lincare Subsidiary (as
the case may be) are required to file ("Lincare Tax Returns"), and have paid or
provided for all the amounts shown to be due thereon, except where such failure
to make such timely filings would not be material to the financial condition,
results of operations, business or properties of Lincare and Lincare
Subsidiaries taken as a whole, and except for the nonpayment of such amounts
which would not be material to the financial condition,

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results of operations, business or properties of Lincare and the Lincare
Subsidiaries taken as a whole. Neither Lincare nor any Lincare Subsidiary (i)
has filed or entered into, or is otherwise bound by, any election, consent or
extension agreement that extends any applicable statute of limitations with
respect to taxable periods of Lincare, (ii) is a party to any contractual
obligation requiring the indemnification or reimbursement of any person with
respect to the payment of any Lincare Taxes other than among Lincare and the
Lincare Subsidiaries, (iii) has elected to be treated as a consenting
corporation under Section 341(f) of the Code, or (iv) has received any claim by
an authority in a jurisdiction where neither Lincare nor any Lincare Subsidiary
files Lincare Tax Returns that they are or may be subject to Lincare Taxes by
that jurisdiction, except for any such claims as would not be material to the
financial condition, results of operations, business or properties of Lincare
and the Lincare Subsidiaries taken as a whole. No action or proceeding is
pending or, to Lincare's knowledge, threatened by any governmental authority for
any audit, examination, deficiency, assessment or collection from Lincare or any
Lincare Subsidiary of any Lincare Taxes, no unresolved claim for any deficiency,
assessment or collection of any Lincare Taxes has been asserted against Lincare
or any Lincare Subsidiary, and all resolved assessments of Lincare Taxes have
been paid or are reflected on the Lincare balance sheet at December 31, 1994
included in its Annual Report on Form 10-K for the period ended on such date,
except for any of the foregoing which would not be material to the financial
condition, results of operations, business or properties of Lincare and the
Lincare Subsidiaries taken as a whole.

4.15 Intellectual Property. Lincare and the Lincare Subsidiaries own,
possess or have the right to use all franchises, patents, trademarks, service
marks, tradenames, licenses and authorizations (collectively, "Lincare
Intellectual Property Rights") which are necessary to the conduct of their
respective businesses. To the knowledge of Lincare, neither Lincare nor any
Lincare Subsidiary is infringing or otherwise violating the intellectual
property rights of any person which infringement or violation would subject
Lincare or any Lincare Subsidiary to liabilities which, individually or in the
aggregate, would have a Material Adverse Effect on Lincare or which would
prevent Lincare or any Lincare Subsidiary from conducting their respective
businesses substantially in the manner in which they are now being conducted. No
claim has been made or, to Lincare's knowledge, threatened against Lincare or
any Lincare Subsidiary alleging any such violation.

4.16 Related Party Transactions. Except as disclosed in the Lincare SEC
Filings, there have been no material transactions between Lincare or any Lincare
Subsidiary on the one hand, and any (i) officer or director of Lincare or any
Lincare Subsidiary, (ii) record or beneficial owner of five percent or more of
the voting securities of Lincare or (iii) affiliate (as such term is defined in
Regulation 12b-2 promulgated under the Exchange Act) of any such officer,
director or beneficial owner, on the other hand, other than payment of
compensation for services rendered to Lincare or the Lincare Subsidiaries by any
officer of Lincare or Lincare Subsidiaries.

4.17 No Undisclosed Material Liabilities. Except as disclosed in the
Lincare SEC Filings, neither Lincare nor any of the Lincare Subsidiaries has
incurred any liabilities of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, that, individually or in the
aggregate, would have a Material Adverse Effect on Lincare other than
liabilities under or contemplated by this Agreement.

4.18 No Default. Neither Lincare nor any of the Lincare Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (a) its charter or By-Laws, (b) any note, bond, mortgage,
indenture, license, agreement, contract, lease, commitment or other obligation
to which Lincare or any of the Lincare Subsidiaries is a party or by which they
or any of their properties or assets may be bound, or (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to Lincare or any of
the Lincare Subsidiaries, except in the case of clauses (b) and (c) above for
defaults or violations which would not have a Material Adverse Effect on
Lincare.

4.19 Title to Properties; Encumbrances. Except as described in the
following sentence, each of Lincare and the Lincare Subsidiaries has good, valid
and marketable title to, or a valid leasehold interest in, all of its properties
and assets (real, personal and mixed, tangible and intangible), including,
without limitation, all the properties and assets reflected in the consolidated
balance sheet of Lincare and the Lincare Subsidiaries at

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December 31, 1994 (except for properties and assets disposed of in the ordinary
course of business and consistent with past practices since December 31, 1994).
None of such properties or assets are subject to any liability, obligation,
claim, lien, mortgage, pledge, security interest, conditional sale agreement,
charge or encumbrance of any kind (whether absolute, accrued, contingent or
otherwise), except minor imperfections of title and encumbrance, if any, which
are not substantial in amount, do not materially detract from the value of the
property or assets subject thereto and do not impair the operations of Lincare
and the Lincare Subsidiaries.

4.20 Pooling of Interests. Neither Lincare nor any of the Lincare
Subsidiaries nor, to the knowledge of Lincare, any of their respective
directors, officers or stockholders has taken any action which would interfere
with the parties' ability to account for the Merger as a pooling of interests.

4.21 Representations Complete. None of the representations or warranties
made by Lincare herein or in any Schedule hereto, including the Lincare
Disclosure Schedule, or certificate furnished by Lincare pursuant to this
Agreement, or the Lincare SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.

4.22 Brokers. Neither Lincare nor any Lincare Subsidiary has paid or is
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with this Agreement, except that Lincare has
retained Alex, Brown & Sons Incorporated ("Alex. Brown") as its financial
advisor for the transactions contemplated hereby.

ARTICLE V

COVENANTS AND AGREEMENTS

5.1 Joint Proxy Statement/Prospectus; Registration Statement;
Stockholders' Meeting.

(a) Coram and Lincare agree that this Agreement shall be submitted to their
respective stockholders for approval at a meeting (the "Meeting") duly called
and held pursuant to applicable state law. As soon as practicable after the date
of this Agreement, each of Lincare and Coram shall take all action, to the
extent necessary in accordance with applicable law and their respective
Certificates of Incorporation and Bylaws, to convene each Meeting promptly to
consider and vote upon the approval of the Merger and such other matters as may
be necessary or desirable to consummate the Merger and the transactions
contemplated hereby. As soon as practicable after the date of this Agreement,
Lincare and Coram shall jointly prepare and file with (i) the Commission,
subject to the prior approval of the other party, which approval shall not be
unreasonably withheld, preliminary proxy materials relating to each Meeting as
required by the Exchange Act, and a registration statement on Form S-4 (as
amended or supplemented, the "Registration Statement") relating to the
registration under the Securities Act of the shares of Coram Common Stock
issuable to the holders of the Lincare Shares, and (ii) state securities
administrators, such registration statements or other documents as may be
required under applicable blue sky laws to qualify or register the shares of
Coram Common Stock issuable to the holders of the Lincare Shares (the "Blue Sky
Filings"). Lincare, Merger Sub and Coram will use their reasonable best efforts
to cause the Registration Statement to become effective as soon as practicable.
Promptly after the Registration Statement has become effective and all
applicable blue sky laws have been complied with, Lincare and Coram shall mail
the proxy statement to their respective stockholders. Such joint proxy statement
at the time it initially is mailed to the stockholders of Lincare and the
stockholders of Coram and all duly filed amendments or revisions made thereto,
if any, similarly mailed are hereinafter referred to as the "Proxy Statement."
Notice of the Lincare Meeting shall be mailed to the stockholders of Lincare and
notice of the Coram Meeting shall be mailed to the stockholders of Coram along
with the Proxy Statement.

(b) Each party represents and warrants that the information supplied or to
be supplied by it for and included or incorporated by reference in the
Registration Statement, the Blue Sky Filings, the Proxy Statement and any other
documents to be filed with the Commission or any regulatory agency in connection
with the transactions contemplated hereby will, at the respective times such
documents are filed or, as

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applicable, declared effective and, as of the Effective Time, and, with respect
to the Proxy Statement, when first published, sent or given to the stockholders
of Lincare and the stockholders of Coram and at the time of the Meetings, not be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading.

(c) Each party covenants and agrees that (i) if, at any time prior to the
Effective Time, any event relating to it or any of its affiliates, officers or
directors is discovered that should be set forth in an amendment to the
Registration Statement or Blue Sky Filings or a supplement to the Proxy
Statement, such party will promptly inform the other parties, and such amendment
or supplement will be promptly filed with the Commission and appropriate state
securities administrators and disseminated to the stockholders of Lincare and
Coram, to the extent required by applicable federal and state securities laws,
and (ii) documents which either party files or is responsible for filing with
the Commission and any regulatory agency in connection with the Merger
(including, without limitation, the Proxy Statement) will comply as to form and
content in all material respects with the provisions of applicable law.
Notwithstanding the foregoing, no party makes any representations or warranties
with respect to any information that has been supplied by the other party or by
its auditors, attorneys, financial advisors, other consultants or advisors
specifically for use in the Registration Statement, Blue Sky Filing, the Proxy
Statement, or any other documents to be filed with the Commission or any
regulatory agency in connection with the transactions contemplated hereby.

(d) Lincare hereby represents that its Board of Directors has (i)
determined that the Merger is fair to and in the best interests of Lincare's
stockholders, (ii) approved the Merger and (iii) resolved to and will recommend
in the Proxy Statement adoption of this Agreement and authorization of the
Merger by the stockholders of Lincare; provided, however, that such
determination, approval or recommendation may be amended, modified or withdrawn
to the extent required by the fiduciary obligations of Lincare's Board of
Directors under applicable law, as advised in writing by outside counsel. Coram
hereby represents that its Board of Directors has (i) determined that the Merger
is fair to and in the best interests of Coram's stockholders, (ii) approved the
Merger and (iii) resolved to and will recommend in the Proxy Statement adoption
of this Agreement and authorization of the Merger by the stockholders of Coram,
provided, however, that such determination, approval or recommendation may be
amended, modified or withdrawn to the extent required by the fiduciary
obligations of Coram's Board of Directors under applicable law, as advised in
writing by outside counsel.

(e) Lincare shall use all reasonable efforts to cause to be delivered to
Coram (i) a letter of KPMG Peat Marwick, Lincare's independent accountants,
dated a date within two (2) business days before the date on which the
Registration Statement shall become effective and addressed to Coram, of the
kind contemplated by the Statement of Auditing Standards with respect to Letters
to Underwriters promulgated by the American Institute of Certified Public
Accountants (the "AICPA Statement"), in form and substance reasonably
satisfactory to Coram and customary in scope and substance for letters delivered
by independent public accountants in connection with registration statements
similar to the Registration Statement and (ii) the letter referred to in Section
6.1(f) within two (2) weeks of the date of this Agreement. Coram shall use all
reasonable efforts to cause to be delivered to Lincare (i) a letter of Ernst &
Young, Coram's independent accountants, dated a date within two (2) business
days before the date on which the Registration Statement shall become effective
and addressed to Lincare, of the kind contemplated by the AICPA Statement, in
form and substance reasonably satisfactory to Lincare and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement and (ii) the
letter referred to in Section 6.1(f) within two (2) weeks of the date of this
Agreement. Lincare shall, and shall cause KPMG Peat Marwick and its other
representatives to fully cooperate with Coram, Ernst & Young and its other
representatives in seeking to obtain confirmation from the Commission that the
Merger should be accounted for as a "pooling of interests."

5.2 Conduct of the Business of Lincare Prior to the Effective Time. Prior
to the Effective Time, except as otherwise consented to or approved in writing
by Coram, which consent shall not be unreasonably withheld, or expressly
permitted by, or required to consummate the transactions contemplated by, this
Agreement:

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(a) Lincare and the Lincare Subsidiaries shall conduct their respective
businesses in the ordinary course and consistent in all material respects with
past practice and shall use all reasonable efforts to preserve substantially
intact their respective business organizations, to keep available the services
of their present officers, employees and consultants and to preserve their
present relationships with customers, suppliers, payors and other persons with
whom they have a significant business relationship; provided, however, that the
loss of any officer, employee, consultant, customer, payor or supplier prior to
the Effective Time shall not constitute a breach of this covenant;

(b) Neither Lincare nor any Lincare Subsidiary shall (i) amend its charter
or Bylaws, (ii) declare, set aside or pay any dividend or other distribution or
payment in cash, securities or property in respect of shares of the Lincare
Common Stock, (iii) make any direct or indirect redemption, retirement, purchase
or other acquisition of any of its capital stock (except for repurchases of
Lincare Common Stock from employees pursuant to existing stock subscription
agreements between Lincare and certain of its employees) or (iv) split, combine
or reclassify its outstanding shares of capital stock;

(c) Neither Lincare nor any Lincare Subsidiary shall, directly or
indirectly, (i) issue, grant, sell or pledge or agree or propose to issue,
grant, sell or pledge any shares of, or rights or securities of any kind to
acquire any shares of, the capital stock of Lincare or such Lincare Subsidiary
except that Lincare may issue shares of Lincare Common Stock upon the exercise
of stock options outstanding on the date hereof pursuant to the terms thereof
existing as of the date hereof, (ii) other than in the ordinary course of
business and consistent with past practice, incur any material indebtedness for
borrowed money, except under credit facilities existing as of the date hereof
and as they may be amended from time to time or pursuant to a substitute credit
facility on terms comparable to such existing credit facilities, (iii) waive,
release, grant or transfer any rights of material value, except in the ordinary
course of business, (iv) except as provided in clause (v) below, merge or
consolidate with any person or adopt a plan of liquidation or dissolution, (v)
acquire (or enter into an agreement to acquire) any assets, stock or other
interests of a third-party except for (A) cash acquisitions utilizing existing
cash resources and amounts available under Lincare's existing credit facilities
and (B) transactions pending as of the date hereof, and in each case which are
of a nature so as not to require a merger or consolidation with Lincare or to
cause the filing or the effectiveness of the Registration Statement or the Proxy
Statement to be delayed or be amended by Coram to include separate or pro forma
financial statements for the acquired entity, (vi) transfer, lease, license,
sell or dispose of a material portion of assets or any material assets, (vii)
permit any material revaluation of any asset (including, without limitation, any
writing down of the value of inventory or writing off of notes or accounts
receivable), (viii) change any accounting principles or methods except insofar
as may be required by changes in generally accepted accounting principles or
(ix) mortgage or pledge any of their assets or properties or subject any of
their assets or properties to any material liens, charges, encumbrances,
imperfections of title, security interests, options or rights or claims of
others with respect thereto;

(d) Neither Lincare nor any Lincare Subsidiary will, directly or
indirectly, (i) increase the cash compensation payable or to become payable by
it to any of its employees, officers, consultants or directors (except in
accordance with employment or consulting agreements, and welfare and benefit
plans set forth on the Lincare Disclosure Schedule, and except for increases
consistent with past practice and which are otherwise reasonably necessary for
the operation of the business of Lincare and the Lincare Subsidiaries), (ii)
enter into, adopt or amend any stock option, stock purchase, profit sharing,
pension, retirement, deferred compensation, restricted stock or severance plan,
agreement or arrangement for the benefit of employees, officers, directors or
consultants of Lincare or any Lincare Subsidiary, (iii) enter into or amend any
employment or consulting agreement, except in the ordinary course of business,
or (iv) make any loan or advance to, or enter into any written contract, lease
or commitment with, any officer, employee, consultant or director of Lincare or
any Lincare Subsidiary, except in the ordinary course of business;

(e) Neither Lincare nor any Lincare Subsidiary shall, directly or
indirectly, assume, guarantee, endorse or otherwise become responsible for the
obligations of any other individual, corporation or other entity, or make any
loans or advances to any individual, corporation or other entity except in the
ordinary course of business and consistent with past practices; and

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(f) Neither Lincare nor any Lincare Subsidiary shall take any action which
would interfere with the abilities of the parties hereto to account for the
Merger as a pooling of interests.

(g) Neither Lincare nor any Lincare Subsidiary shall authorize or enter
into any agreement to do any of the things described in clauses (a) through (f)
of this Section 5.2.

5.3 Conduct of the Business of Coram Prior to the Effective Time. Prior to
the Effective Time, except as otherwise consented to or approved in writing by
Lincare, which consent shall not be unreasonably withheld, or expressly
permitted by, or required to consummate the transactions contemplated by this
Agreement:

(a) Coram and the Coram Subsidiaries shall conduct their respective
businesses in the ordinary course and consistent in all material respects with
past practice and shall use all reasonable efforts to preserve substantially
intact their respective business organizations, to keep available the services
of their present officers, employees and consultants and to preserve their
present relationships with customers, suppliers and other persons with whom they
have a significant business relationship; provided, however, that the loss of
any officer, employee, consultant, customer or supplier prior to the Effective
Time shall not constitute a breach of this covenant;

(b) Neither Coram nor any Coram Subsidiary shall (i) amend its charter or
Bylaws, (ii) declare, set aside or pay any dividend or other distribution or
payment in cash, securities or property in respect of shares of the Coram Common
Stock, (iii) make any direct or indirect redemption, retirement, purchase or
other acquisition of any of its capital stock, except if required by a written
agreement existing as of the date hereof, or (iv) split, combine or reclassify
its outstanding shares of capital stock;

(c) Neither Coram nor any Coram Subsidiary shall, directly or indirectly,
(i) issue, grant, sell or pledge or agree or propose to issue, grant, sell or
pledge any shares of, or rights or securities of any kind to acquire any shares
of, the capital stock of Coram or such Coram Subsidiary, except that Coram may
(A) grant stock options to employees and consultants under the Coram Option
Plans consistent with past practices, (B) issue shares of Coram Common Stock
upon the exercise of stock options outstanding on the date hereof pursuant to
the terms thereof existing as of the date hereof, (C) issue shares of Coram
Common Stock pursuant to the terms of other agreements or instruments
outstanding as of the date hereof and (D) issue up to 500,000 additional shares
of Coram Common Stock for any other general corporate purpose, (ii) other than
in the ordinary course of business and consistent with past practice, incur any
material indebtedness for borrowed money, except under credit facilities
existing as of the date hereof and as they may be amended from time to time
(other than to increase the availability of credit thereunder) or pursuant to a
substitute credit facility on terms comparable to such existing credit
facilities, (iii) waive, release, grant or transfer any rights of material
value, except in the ordinary course of business, (iv) except as provided in
clause (v) below, merge or consolidate with any person or adopt a plan of
liquidation or dissolution, (v) acquire, propose to acquire or enter into an
agreement to acquire any assets, stock or other interests of a third-party
except for cash transactions permitted under Coram's credit facilities which are
of a nature so as not to require a merger or consolidation with Lincare or to
cause the filing or the effectiveness of the Registration Statement or the Proxy
Statement to be delayed or to be amended by Coram to include separate or pro
forma financial statements for the acquired entity, (vi) transfer, lease,
license, sell or dispose of a material portion of assets or any material assets
except as permitted under Coram's credit facilities, (vii) permit any material
revaluation of any asset (including, without limitation, any writing down of the
value of inventory or writing off of notes or accounts receivable), (viii)
change any accounting principles or methods except insofar as may be required by
changes in generally accepted accounting principles or (ix) mortgage or pledge
any of their assets or properties or subject any of their assets or properties
to any material liens, charges, encumbrances, imperfections of title, security
interests, options or rights or claims of others with respect thereto.

(d) Neither Coram nor any Coram Subsidiary will, directly or indirectly,
(i) increase the cash compensation payable or to become payable by it to any of
its employees, officers, consultants or directors (except in accordance with
employment or consulting agreements, and welfare and benefit plans set forth on
the Coram Disclosure Schedule, and except for increases consistent with past
practice and which are otherwise reasonably necessary for the operation of the
business of Coram and the Coram Subsidiaries), (ii) enter into, adopt or amend
any stock option, stock purchase, profit sharing, pension, retirement, deferred

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compensation, restricted stock or severance plan, agreement or arrangement for
the benefit of employees, officers, directors or consultants of Coram or any
Coram Subsidiary (other than to increase the number of authorized shares), (iii)
enter into or amend any employment or consulting agreement, except in the
ordinary course of business, or (iv) make any loan or advance to, or enter into
any written contract, lease or commitment with, any officer, employee,
consultant or director of Coram or any Coram Subsidiary, except in the ordinary
course of business;

(e) Neither Coram nor any Coram Subsidiary shall, directly or indirectly,
assume, guarantee, endorse or otherwise become responsible for the obligations
of any other individual, corporation or other entity, or make any loans or
advances to any individual, corporation or other entity except in the ordinary
course of business and consistent with past practices;

(f) Neither Coram nor any Coram Subsidiary shall take any action which
would interfere with the abilities of the parties hereto to account for the
Merger as a pooling of interests.

(g) Neither Coram nor any Coram Subsidiary shall enter into an agreement to
do any of the things described in clauses (a) through (f) of this Section 5.3.

5.4 Access to Properties and Records. Each party shall afford to the other
and their respective accountants, counsel and representatives ("Respective
Representatives"), reasonable access during normal business hours throughout the
period prior to the Effective Time to all of their respective properties
(including, without limitation, books, contracts, commitments and written
records) and shall make reasonably available their respective officers and
employees to answer fully and promptly questions put to them thereby; provided,
however, that no investigation pursuant to this Section 5.4 shall alter any
representation or warranty of any party hereto or the conditions to the
obligations of the parties hereto.

5.5 No Solicitation, Etc.

(a) Prior to the Effective Time, each of Coram and Lincare agrees that it
shall not, and shall cause each of its officers, directors, employees, agents,
legal and financial advisors and affiliates not to, directly or indirectly,
make, solicit, encourage, initiate or enter into any agreement or agreement in
principle, or announce any intention to do any of the foregoing, with respect to
any offer or proposal to acquire all or a substantial part of such party's
business and properties or a substantial amount of such party's equity
securities or debt securities whether by purchase, merger, purchase of assets,
tender offer, exchange offer, business combination or otherwise (any such
proposal or offer being hereinafter referred to as a "Third Party Transaction").

(b) Prior to the Effective Time, each of Coram, Lincare and their
respective Subsidiaries shall not, and shall cause each of their officers,
directors, legal and financial advisors, agents and affiliates not to, directly
or indirectly, participate in any negotiations or discussions regarding, or
furnish any information with respect to, or otherwise cooperate in any way in
connection with, or assist or participate in, facilitate or encourage, any
effort or attempt to effect or seek to effect, a Third Party Transaction with or
involving any other person unless such party shall have received an unsolicited
written offer from a person other than Coram or Lincare to effect a Third Party
Transaction and the Board of Directors of such party determines in good faith
with the advice of outside legal counsel that, in the exercise of the fiduciary
obligations of the Board of Directors under applicable law, such information is
required to be provided to or such discussions or negotiations are required to
be undertaken with the person submitting such Third Party Transaction. Each of
Coram and Lincare represents it is not currently involved in any existing
discussions or negotiations with any person with respect to any Third Party
Transaction.

(c) Prior to the Effective Time, each of Coram and Lincare will promptly
communicate to the other party the terms of any Third Party Transaction which it
may receive and will keep such other party informed as to the status of any
actions, including negotiations or discussions, taken pursuant to clause (b) of
this Section 5.5. As soon as practicable following the Effective Time, each of
Coram and Lincare shall promptly request each person who has executed a
confidentiality agreement in connection with its consideration of a Third Party
Transaction to return all confidential information that has been furnished to
such person by or on behalf of Lincare or Coram, as the case may be.

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5.6 Employee Benefit Plans. Except as otherwise provided in this
Agreement, the Lincare employee benefit plans listed on the Lincare Disclosure
Schedule which are in effect at the date of this Agreement shall remain in
effect immediately following the Effective Time. Coram and Lincare shall
cooperate in coordinating their respective benefit plans, and any Lincare
employee benefit plan may be terminated after the Effective Time, to the extent
reasonably comparable benefits (including credit for past service), considered
in the aggregate, are made available to employees of Lincare under one or more
employee benefits plans of Coram or any Coram Subsidiary.

5.7 Treatment of Options.

(a) Each Lincare Stock Option issued pursuant to Lincare's stock option
plans (collectively, the "Lincare Option Plans") set forth in the Lincare
Disclosure Schedule, whether or not vested or exercisable, shall be assumed by
Coram and shall constitute an option to acquire, on the same terms and
conditions as were applicable under such assumed Lincare Stock Option (including
the vesting provisions thereof), a number of shares of Coram Common Stock equal
to the product of the Exchange Ratio and the number of shares of Lincare Common
Stock subject to such Lincare Stock Option, at a price per share equal to the
aggregate exercise price for the shares of Lincare Common Stock subject to such
Lincare Stock Option divided by the number of full shares of Coram Common Stock
deemed to be purchasable pursuant to such Lincare Stock Option; provided,
however, that (i) subject to the provisions of clause (ii) below, the shares of
Coram Common Stock that may be purchased upon exercise of such Lincare Stock
Option shall not include any fractional shares and, upon the last such exercise
of such Lincare Stock Option, a cash payment shall be made for any fractional
shares based upon the per share average of the highest and lowest sale price of
the Coram Common Stock as reported on the NYSE on the date of such exercise, and
(ii) in the case of any Lincare Stock Option to which Section 421 of the Code
applies by reason of its qualification under Section 422 or Section 423 of the
Code ("Qualified Stock Options"), the option price, the number of shares
purchasable pursuant to such Lincare Stock Option and the terms and conditions
of exercise of such Lincare Stock Option shall be determined in order to comply
with Section 424 of the Code. As soon as practicable after the Effective Time,
Coram shall deliver to holders of Lincare Stock Options appropriate option
agreements representing the right to acquire shares of Coram Common Stock on the
same terms and conditions as contained in the outstanding Lincare Stock Options
(subject to any adjustments required by the preceding sentence), upon surrender
of the outstanding Lincare Stock Options. Coram shall comply with the terms of
the Lincare Option Plans as they apply to the Lincare Stock Options assumed as
set forth above.

(b) Coram shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Coram Common Stock for delivery upon exercise
of the Lincare Stock Options assumed in accordance with this Section 5.7. Coram
shall file a registration statement on Form S-8 (or any successor form) or
another appropriate form, effective as of the Effective Time, with respect to
shares of Coram Common Stock subject to such Lincare Stock Options and shall use
all reasonable efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Lincare Stock
Options remain outstanding. With respect to those individuals who subsequent to
the Merger will be subject to the reporting requirements under Section 16(a) of
the Exchange Act, Coram shall administer the Lincare Option Plans assumed
pursuant to this Section 5.7 in a manner that complies with rule 16b-3
promulgated under the Exchange Act to the extent the applicable Lincare Option
Plan complied with such rule prior to the Merger.

5.8 Existing Agreements. Coram and the Surviving Corporation shall insure
and guaranty that the provisions with respect to indemnification by Lincare and
the Lincare Subsidiaries now existing in favor of any present or former
director, officer, employee or agent (and their respective heirs and assigns) of
Lincare or any Lincare Subsidiary, respectively (the "Indemnified Parties"), as
set forth in their respective charters or Bylaws or pursuant to other agreements
(including any insurance policies), shall survive the Merger, shall not be
amended, repealed or modified in any manner as to adversely affect the rights of
such Indemnified Parties and shall continue in full force and effect for a
period of at least six years from the Effective Time; provided, however, that
Coram and the Surviving Corporation shall be required to maintain or obtain such
insurance coverage only (i) if it is available for an annual premium not in
excess of two times the last annual premium paid by Lincare or the Lincare
Subsidiaries prior to the date of this Agreement (but in such case shall

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purchase as much coverage as possible for an amount which shall not exceed two
times the last annual premium paid by Lincare or the Lincare Subsidiaries prior
to the date of the Agreement), and (ii) for six years after the Effective Time.
This Section 5.8 shall survive the closing of all of the transactions
contemplated hereby, is intended to benefit the officers and employees of
Lincare and of the Lincare Subsidiaries at the Effective Time and each of the
Indemnified Parties (each of which shall be entitled to enforce this Section 5.8
against Coram and the Surviving Corporation, as the case may be, as a
third-party beneficiary of this Agreement), and shall be binding on all
successors and assigns of the Surviving Corporation.

5.9 Confidentiality. The Confidentiality Agreement, dated March 8, 1995
(the "Confidentiality Agreement") between Lincare and Coram, and the Standstill
Agreement dated March 31, 1995 (the "Standstill Agreement") between Lincare and
Coram are each hereby affirmed by Coram and Lincare and the terms thereof are
herewith incorporated herein by reference and shall continue in full force and
effect until the Effective Time shall have occurred, and if this Agreement is
terminated or if the Effective Time shall not have occurred for any reason
whatsoever, each of the Confidentiality Agreement and the Standstill Agreement
shall thereafter remain in full force and effect in accordance with its terms;
provided, however, to the extent there are any provisions in the Confidentiality
Agreement or the Standstill Agreement inconsistent with the terms of this
Agreement, the terms of this Agreement shall control. Each of Coram and Lincare
agrees that it will not, and will cause its Respective Representatives not to,
use any information obtained pursuant to Section 5.4 for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of law, each party hereto will keep confidential, and will
cause its Respective Representatives to keep confidential, all information and
documents obtained pursuant to Section 5.4 except as otherwise consented to by
the other party; provided, however, that neither Coram nor Lincare shall be
precluded from making any disclosure which it deems required by law in
connection with the Merger. In the event that any party is required to disclose
any information or documents pursuant to the immediately preceding sentence,
such party shall promptly give written notice of such disclosure that is
proposed to be made to the other party so that the parties can work together to
limit the disclosure to the greatest extent possible and, in the event that
either party is legally compelled to disclose any information, to seek a
protective order or other appropriate remedy or both. Upon any termination of
this Agreement, each of Coram and Lincare will collect and deliver to the other
party all documents obtained pursuant to Section 5.4 or otherwise from such
party or its Respective Representatives by it or any of its Respective
Representatives then in their possession and any copies thereof.

5.10 Reasonable Best Efforts. Subject to the terms and conditions herein
provided, the parties hereto shall: (i) promptly make their respective filings
and thereafter make any other required submissions under the HSR Act with
respect to the Merger; (ii) use all reasonable efforts to cooperate with one
another in (A) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
("Third Party Consents") are required to be obtained prior to the Effective Time
from, governmental or regulatory authorities of the United States and the
several states in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (B) timely
making all such filings and timely seeking all such Third Party Consents; and
(iii) use all reasonable efforts to take, or cause to be taken, all other action
and do, or cause to be done, all other things necessary, proper or appropriate
to consummate and make effective the transactions contemplated by this
Agreement. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purpose of this Agreement, the proper
officers and directors of the parties hereto shall take all such necessary
action. No party hereto shall (i) take any action for the purpose of delaying,
impairing or impeding the receipt of any Third Party Consent, or the making of
any required filing or registration or the mailing of the Proxy Statement or
(ii) take any action that could reasonably have the effect of preventing Coram
from accounting for the Merger as a pooling of interests.

5.11 Certification of Stockholder Vote. At or prior to the closing of the
transactions contemplated by this Agreement, Lincare and Coram shall deliver to
each other a certificate of their respective Secretary setting forth the number
of shares of Lincare Common Stock or Coram Common Stock, as the case may be,
voted in favor of adoption of this Agreement and consummation of the Merger and
the number of shares of

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Lincare Common Stock or Coram Common Stock voted against adoption of this
Agreement and consummation of the Merger.

5.12 Employment/Non-Compete Agreements. Each of the executive officers of
Lincare listed on the schedule provided by Coram to Lincare shall have, as of
the date of this Agreement, executed and delivered Employment/Non-Compete
Agreements in substantially the form provided to Lincare (the "Employment
Agreements").

5.13 Affiliate Letters. At least 30 days prior to the Closing Date, Coram
and Lincare shall each deliver to the other a list of names and addresses of
those persons who were, in the reasonable judgment of Coram or Lincare, as the
case may be, at the record date for their respective stockholders' meeting to
approve the Merger, "affiliates" (each such person a "Rule 145 Affiliate") of
such party within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act. Each party shall provide to the other such
information and documents as the other may reasonably request for purposes of
reviewing such list. Each party shall use all reasonable efforts to deliver or
cause to be delivered to the other, prior to the Closing Date, from each of its
Rule 145 Affiliates identified in the foregoing list, an Affiliate Letter. Rule
145 Affiliates of Coram shall deliver Affiliate letters in the form attached
hereto as Exhibit A-1 and Affiliates of Coram shall deliver Affiliate Letters in
the form attached hereto as Exhibit A-2. Coram shall be entitled to place
legends as specified in such Affiliate Letters on the certificates evidencing
any Coram Common Stock to be received by Rule 145 Affiliates pursuant to the
terms of this Agreement, and to issue appropriate stop transfer instructions to
the transfer agent for such Coram Common Stock, consistent with the terms of
such Affiliate Letters.

5.14 Listing Application. Coram will use its reasonable best efforts to
cause the Coram Common Stock to be issued pursuant to this Agreement in the
Merger, to be listed for trading on the NYSE.

5.15 Supplemental Disclosure Schedules. Each of Coram and Lincare shall
supplement their respective Disclosure Schedules delivered in connection with
this Agreement as of the Effective Time to the extent necessary to reflect
matters permitted by, or consented to by, the other party under this Agreement.
In addition, from time to time prior to the Effective Time, each of Coram and
Lincare will promptly deliver to the other party such amended or supplemental
Disclosure Schedules as may be necessary to make the Schedules accurate and
complete in all material respects as of the Effective Time; provided, however,
that no such disclosure shall have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article VI of this Agreement.

5.16 No Action. Except as contemplated by this Agreement, no party hereto
will, nor will either such party permit any of its Subsidiaries to, take or
agree or commit to take any action that is reasonably likely to make any of its
representations or warranties hereunder inaccurate in any material respect at
the date made (to the extent so limited), or as of the Effective Time.

5.17 Conduct of Business of Merger Sub. Merger Sub shall not conduct any
business from the date of this Agreement, other than to consummate the Merger
and the transactions contemplated by this Agreement.

5.18 Directors of Coram. Coram agrees that promptly after the Effective
Time, Coram shall take such action as may be necessary to cause James T. Kelly
and Frank T. Cary to be appointed to the Board of Directors of Coram. Mr. Kelly
shall also serve as Vice-Chairman of Coram's Board of Directors.

5.19 Notification of Certain Matters; Delivery of Financial Information.

(a) Coram and Merger Sub agree that they shall give prompt notice to
Lincare, and Lincare agrees that it shall give prompt notice to Coram and Merger
Sub, of (i) any known breach of any representations or warranties contained in
this Agreement at any time from the date hereof to the Effective Time and (ii)
any material failure of Coram, Merger Sub or Lincare, as the case may be, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that failure to give such notice shall not
constitute a waiver of any defense that may be validly asserted.

(b) Each of Coram and Lincare shall furnish the other with all financial,
operating and other information and data as Coram or Lincare, as the case may
be, through its officers, employees or agents, may

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reasonably request and shall promptly furnish to the other party a copy of (i)
each report, schedule and other document filed or received by it during such
period pursuant to the requirements of the federal securities laws and (ii)
monthly operating and financial reports as such party shall reasonably request
from time to time, when such reports become available.

ARTICLE VI

CONDITIONS PRECEDENT

6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:

(a) The Registration Statement shall have been declared effective, and no
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the Commission or shall be continuing to be in effect, and no
proceedings for that purpose shall have been initiated or threatened by the
Commission. Coram shall have received all state securities laws or "blue sky"
permits and authorizations necessary to issue the Share Consideration pursuant
to the Merger and the transactions contemplated hereby.

(b) This Agreement and the Merger contemplated hereby and any other action
necessary to consummate the transactions contemplated hereby shall have been
approved and adopted by the requisite vote of (i) the holders of the outstanding
shares of the Lincare Common Stock entitled to vote thereon at the Lincare
Meeting and (ii) the holders of the outstanding shares of Coram Common Stock
entitled to vote thereon at the Coram Meeting.

(c) No governmental authority or other agency, commission or court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
transactions contemplated by this Agreement; provided, however, that, prior to
invoking this condition, each party hereto shall use all reasonable efforts to
have such statute, rule, regulation, injunction or order vacated.

(d) Any waiting period applicable to the Merger under the HSR Act shall
have expired or been terminated without action by the Justice Department or the
Federal Trade Commission to prevent consummation of the Merger.

(e) The shares of Coram Common Stock issuable to Lincare's stockholders and
option holders in the Merger or thereafter shall have been authorized for
listing on the NYSE, upon official notice of issuance.

(f) Coram and Lincare shall have each received from Ernst & Young and KPMG
Peat Marwick, respectively, a letter to the effect that the Merger qualifies for
"pooling of interests" treatment for financial reporting purposes and that such
treatment is in accordance with generally accepted accounting practices.

6.2 Conditions to the Obligation of Lincare to Effect the Merger. The
obligation of Lincare to effect the Merger shall be subject to the fulfillment
or waiver by Lincare at or prior to the Effective Time of the following
additional conditions:

(a) Each of Coram and Merger Sub shall have performed in all material
respects its obligations under this Agreement required to be performed by it on
or prior to the Effective Time pursuant to the terms hereof.

(b) All representations or warranties of Coram and Merger Sub in this
Agreement which are qualified with respect to a Material Adverse Effect on Coram
or materiality shall be true and correct, and all such representations or
warranties that are not so qualified shall be true and correct in all material
respects, in each case as if such representation or warranty was made as of the
Effective Time, except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty shall
have been true and correct as of such specified date and, with respect to
Section 3.3, to the extent it is permitted to change by the provisions of this
Agreement.

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(c) All material federal, state, local and foreign governmental consents,
approvals and filings required to permit the Merger and the consummation of the
transactions contemplated by this Agreement shall have been received or made and
any applicable waiting period shall have expired or been terminated without the
imposition of conditions that are or would become applicable to Lincare or the
Lincare Subsidiaries or Coram or the Coram Subsidiaries and which would have a
Material Adverse Effect on Lincare or a Material Adverse Effect on Coram.

(d) Coram and Merger Sub shall have obtained all Third Party Consents
(applicable to Coram, any Coram Subsidiary or Merger Sub) contemplated by
subsection (ii) of Section 5.10, except for such Third Party Consents which, if
not obtained, would not, individually or in aggregate, have a Material Adverse
Effect on Coram.

(e) From the date hereof through the Effective Time, there shall have been
no material adverse change in the financial condition, results of operations,
properties or business of Coram and the Coram Subsidiaries taken as a whole.

(f) Each of Coram and Merger Sub shall have delivered a certificate of its
President or Vice President and its Chief Financial Officer to the effect set
forth in clauses (a), (b), (c) and (e) of this Section 6.2.

(g) Lincare shall have received from Brobeck, Phleger & Harrison, counsel
to Coram, opinion or opinions dated as of the Effective Time covering the
matters set forth in Exhibit B hereto.

(i) Lincare shall have received the opinion of Reboul, MacMurray, Hewitt,
Maynard & Kristol, counsel to Lincare, in form and in substance reasonably
satisfactory to Lincare and dated as of the Effective Time, substantially to the
effect that (i) the Merger will constitute a reorganization for United States
Federal income tax purposes within the meaning of Section 368(a) of the Code,
(ii) Coram, Merger Sub and Lincare will each be a party to the reorganization
within the meaning of Section 368(b) of the Code, (iii) no gain or loss will be
recognized by Coram, Merger Sub or Lincare pursuant to the Merger and (iv) no
gain or loss will be recognized by stockholders of Lincare to the extent their
shares of the capital stock of Lincare are converted into and exchanged solely
for Coram Common Stock (except to the extent that cash is received in lieu of a
fractional share interest and except with respect to the conversion and exchange
of any shares of the capital stock of Lincare that were acquired by the holder
thereof pursuant to any employee stock option, employee stock purchase plan or
otherwise as compensation). In rendering such opinion, Reboul, MacMurray,
Hewitt, Maynard & Kristol may require and rely upon representations contained in
certificates of officers of Coram, Merger Sub, Lincare and others.

6.3 Conditions to the Obligations of Coram and Merger Sub to Effect the
Merger. The obligations of Coram and Merger Sub to effect the Merger shall be
subject to the fulfillment or waiver by Coram at or prior to the Effective Time
of the following additional conditions:

(a) Lincare shall have performed in all material respects each of its
obligations under this Agreement required to be performed by it on or prior to
the Effective Time pursuant to the terms hereof.

(b) All representations or warranties of Lincare in this Agreement which
are qualified with respect to a Material Adverse Effect or materiality shall be
true and correct, and all such representations or warranties that are not so
qualified shall be true and correct in all material respects, in each case as if
such representation or warranty were made as of the Effective Time except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
as of such specified date and with respect to Section 4.3, to the extent
permitted to change by the provisions of this Agreement.

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(d) Lincare shall have obtained all Third Party Consents (applicable to
Lincare or any Lincare Subsidiary) contemplated by subsection (ii) of Section
5.10, except for such Third Party Consents which, if not obtained, would not,
individually or in aggregate, have a Material Adverse Effect on Lincare.

(f) Lincare shall have delivered a certificate of its President or Vice
President and its Chief Financial Officer to the effect set forth in paragraphs
(a), (b), (c) and (e) to this Section 6.3.

(g) Coram shall have received from Reboul, MacMurray, Hewitt, Maynard &
Kristol, counsel to Lincare, an opinion or opinions dated as of the Effective
Time covering the matters set forth in Exhibit C hereto.

(h) Coram shall have received the opinion of Brobeck, Phleger & Harrison,
counsel to Coram, in form and in substance reasonably satisfactory to Coram and
dated as of the Effective Time, substantially to the effect that (i) the Merger
will constitute a reorganization for United States Federal income tax purposes
within the meaning of Section 368(a) of the Code, (ii) Coram, Merger Sub and
Lincare will each be a party to the reorganization within the meaning of Section
368(b) of the Code, (iii) no gain or loss will be recognized by Coram, Merger
Sub or Lincare pursuant to the Merger and (iv) no gain or loss will be
recognized by stockholders of Lincare to the extent their shares of the capital
stock of Lincare are converted into and exchanged solely for Coram Common Stock
(except to the extent that cash is received in lieu of a fractional share
interest and except with respect to the conversion and exchange of any shares of
the capital stock of Lincare that were acquired by the holder thereof pursuant
to any employee stock option, employee stock purchase plan or otherwise as
compensation). In rendering such opinion, Brobeck, Phleger & Harrison may
require and rely upon representations contained in certificates of officers of
Coram, Merger Sub, Lincare and others.

(i) Merger Sub shall have received letters of resignation addressed to
Lincare from the members of Lincare's board of directors, which resignations
shall be effective as of the Effective Time.

(j) Each of Coram and Lincare shall have received the Affiliate Letters
from each of the Rule 145 Affiliates, as provided in Section 5.13.

ARTICLE VII

TERMINATION

7.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of Lincare or Coram, by
the mutual consent of Coram and Lincare.

7.2 Termination by Either Coram or Lincare. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Coram or Lincare if:

(a) The Merger shall not have been consummated by October 31, 1995;

(b) The approval of the stockholders of each of Lincare and Coram required
by Section 6.1(b) shall not have been obtained at a meeting duly convened
therefor or at any adjournment thereof; or

(c) A United States federal or state court of competent jurisdiction or
United States federal or state governmental regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (d) shall have
used all reasonable efforts to remove such injunction, order or decree;
provided, in the case of a termination pursuant to clauses (a) or (b) above, the
terminating party shall not have breached in any material respect its

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obligations under this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Merger by September 30, 1995 and;
provided further, that if any condition to this Agreement shall fail to be
satisfied by reason of the existence of an injunction or order of any court or
governmental or regulatory body resulting from an action or proceeding commenced
by any party which is not a government or governmental authority, then at the
request of either party the deadline date referred to above shall be extended
for a reasonable period of time, not in excess of 120 days, to permit the
parties to have such injunction vacated or order reversed.

7.3 Termination by Lincare. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the stockholders of Lincare referred to in Section
6.1(b), by action of the Board of Directors of Lincare, if:

(a) The Board of Directors of Lincare determines in good faith with the
advice of outside legal counsel that, in the exercise of the fiduciary
obligations of the Board of Directors under applicable law, such termination is
required by reason of a Third Party Transaction;

(b) The Board of Directors of Coram shall have withdrawn or modified in a
manner adverse to Lincare (other than a modification indicating that the Board
of Directors of Coram, in accordance with Section 5.5, is considering a Third
Party Transaction) its approval or recommendation of this Agreement or the
Merger due to the existence of a Third Party Transaction, or shall have
recommended a Third Party Transaction to Coram stockholders;

(c) There has been a breach by Coram or Merger Sub of any representation or
warranty contained in this Agreement the effect of which is a Coram Material
Adverse Effect; or

(d) There has been a breach in any material respect of any of the covenants
or agreements set forth in this Agreement on the part of Coram, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Lincare to Coram.

7.4 Termination by Coram. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, by action of the Board
of Directors of Coram, if:

(a) The Board of Directors of Lincare shall have withdrawn or modified in a
manner adverse to Coram (other than a modification indicating that the Board of
Directors of Lincare, in accordance with Section 5.5, is considering a Third
Party Transaction) its approval or recommendation of this Agreement or the
Merger due to the existence of a Third Party Transaction, or shall have
recommended a Third Party Transaction to Lincare stockholders;

(b) The Board of Directors of Coram determines in good faith with the
advice of outside legal counsel that, in the exercise of the fiduciary
obligations of the Board of Directors under applicable law, such termination is
required by reason of a Third Party Transaction;

(c) There has been a breach by Lincare of any representation or warranty
contained in this Agreement the effect of which is a Lincare Material Adverse
Effect; or

(d) There has been a breach in any material respect of any of the covenants
or agreements set forth in this Agreement on the part of Lincare, which breach
is not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by Coram to Lincare.

7.5 Effect of Termination and Abandonment.

(a) In the event that this Agreement is terminated by Lincare pursuant to
Section 7.3(a) or by Coram pursuant to Section 7.4(a), then Lincare shall
promptly, but in no event later than ten days after the date of such request,
pay Coram a fee of $15,000,000 plus reasonable out-of-pocket fees and expenses
up to $3,000,000, which amount shall be payable by wire transfer of same day
funds. If, within nine months of the date this Agreement is terminated by
Lincare pursuant to Section 7.3(a) or by Coram pursuant to Section 7.4(a), a
Third Party Transaction is consummated by Lincare, then Lincare shall promptly,
and in no event later than ten days following the closing date of such Third
Party Transaction, pay to Coram an additional $15,000,000 by wire transfer of
same day funds. Lincare acknowledges that the agreements

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contained in this Section 7.5(a) are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, Coram and
Merger Sub would not enter into this Agreement.

(b) In the event that this Agreement is terminated by Lincare pursuant to
Section 7.3(b) or by Coram pursuant to Section 7.4(b), then Coram shall
promptly, but in no event later than ten days after the date of such request,
pay Lincare a fee of $15,000,000 plus reasonable out-of-pocket fees and expenses
up to $3,000,000, which amount shall be payable by wire transfer of same day
funds. If, within nine months of the date this Agreement is terminated by Coram
pursuant to Section 7.4(b) or by Lincare pursuant to Section 7.3(b), a Third
Party Transaction is consummated by Coram, then Coram shall promptly, and in no
event later than ten days following the closing date of such Third Party
Transaction, pay to Lincare an additional $15,000,000 by wire transfer of same
day funds. Coram acknowledges that the agreements contained in this Section
7.5(b) are an integral part of the transactions contemplated in this Agreement,
and that, without these agreements, Lincare would not enter into this Agreement.

(c) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
7.5 and except as provided in Section 8.3. Moreover, in the event of termination
of this Agreement pursuant to Section 7.3 or 7.4, nothing herein shall prejudice
the ability of the non-breaching party from seeking damages from any other party
for any breach of this Agreement, including without limitation, attorneys' fees
and the right to pursue any remedy at law or in equity.

7.6 Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent allowed by
law, (i) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.

ARTICLE VIII

MISCELLANEOUS

8.1 Amendment. Subject to the applicable provisions of state law, this
Agreement may be amended by the parties hereto solely by action taken by their
respective Boards of Directors. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.

8.2 Waiver. At any time prior to the Effective Time, the parties hereto,
by action taken by their respective Boards of Directors, may (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any documents delivered pursuant hereto, and
(iii) waive compliance by the other party with any of the agreements or
conditions herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. No waiver by either party of any default with
respect to any provision, condition or requirement hereof shall be deemed to be
a waiver of any other provision, condition or requirement hereof; nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereunder.

8.3 Survival. All representations, warranties and agreements contained in
this Agreement or in any instrument delivered pursuant to this Agreement shall
terminate and be extinguished at the Effective Time or the earlier date of
termination of this Agreement pursuant to Section 7, as the case may be, except
that the agreements set forth in Article I, Article II and in Sections 5.5, 5.8,
5.9, 8.4 and 8.7 will survive the Effective Time indefinitely and those set
forth in Sections 7.5 and 8.7 will survive the termination of this Agreement
indefinitely, and other than any covenant the breach of which has resulted in
the termination of this Agreement.

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8.4 Expenses and Fees. Whether or not the Merger is consummated, all costs
and expenses incurred by the parties hereto in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses except as expressly provided herein and except that (i) the filing
fee in connection with the HSR Act filing, (ii) the filing fee in connection
with the filing of the Registration Statement or Proxy Statement with the
Commission and (iii) the expenses incurred in connection with printing and
mailing the Registration Statement and the Proxy Statement, shall be shared
equally by Coram and Lincare.

8.5 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been given or made if in
writing and delivered personally or sent by registered or certified mail
(postage prepaid, return receipt requested) or by telecopier to the parties at
the following addresses:

<TABLE>
<S> <C>
If to Merger Sub or Coram: Coram Healthcare Corporation
1125 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Chief Executive Officer
Telecopier: (303) 298-0043
With copies to: Brobeck, Phleger & Harrison
4675 MacArthur Court, Suite 1000
Newport Beach, California 92660
Attention: Richard A. Fink, Esq.
Telecopier: (714) 752-7522
If to Lincare: Lincare Holdings Inc.
19337 U.S. 19 North
Clearwater, Florida 34624
Attention: Chief Executive Officer
Telecopier: (813) 532-9692
With copies to: Reboul, MacMurray, Hewitt, Maynard
& Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Robert A. Schwed, Esq.
Telecopier: (212) 841-5725
</TABLE>

or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date so delivered or mailed.

8.6 Headings. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.

8.7 Publicity. The parties hereto shall not, and shall cause their
affiliates not to, issue or cause the publication of any press release or other
announcement with respect to the Merger or this Agreement without consulting
with all other parties and their respective counsel; provided, however, that to
the extent either party believes on the advice of counsel that it is obligated
under federal or state law to issue or cause the publication of any press
release or other announcement, such party shall only be obligated to so consult
if it is possible to do so without violating any such legal obligation.

8.8 Entire Agreement. This Agreement and the other agreements referred to
herein constitute the entire agreement among the parties and supersede all other
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof.

8.9 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefits of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations shall be assigned by any of the parties
hereto without the prior

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<PAGE> 256

written consent of the other parties. This Agreement is not intended to confer
upon any other person any rights or remedies hereunder.

8.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.

8.11 Invalidity; Severability. In the event that any provision of this
Agreement shall be deemed contrary to law or invalid or unenforceable in any
respect by a court of competent jurisdiction, the remaining provisions shall
remain in full force and effect to the extent that such provisions can still
reasonably be given effect in accordance with the intentions of the parties, and
the invalid and unenforceable provisions shall be deemed, without further action
on the part of the parties, modified, amended and limited solely to the extent
necessary to render the same valid and enforceable.

8.12 Governing Law. The validity and interpretation of this Agreement
shall be governed by the laws of the State of Delaware, without reference to the
conflict of laws principles thereof.

IN WITNESS WHEREOF, Coram, Merger Sub and Lincare have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.

<TABLE>
<S> <C>
LINCARE HOLDINGS INC. CORAM HEALTHCARE
CORPORATION
By: /s/ JAMES T. KELLY By: /s/ JAMES M. SWEENEY
------------------------------------ -----------------------------------
James T. Kelly, James M. Sweeney,
Chairman and Chief Executive Officer Chairman and Chief Executive Officer

CHC ACQUISITION CORP.

By: /s/ JAMES M. SWEENEY
-----------------------------------
James M. Sweeney,
Chairman and Chief Executive Officer
</TABLE>

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<PAGE> 257

APPENDIX B

[DLJ LETTERHEAD]

April 17, 1995

Board of Directors
Coram Healthcare Corporation
1125 Seventeenth Street, 15th Floor
Denver, Colorado 80202

Dear Sirs:

You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Coram Healthcare Corporation (the "Company") of the
consideration to be paid by the Company pursuant to the terms of the Agreement
and Plan of Merger dated as of April 17, 1995 (the "Agreement") between the
Company, Everest Acquisition Corp., a wholly-owned subsidiary of the Company
("Merger Sub"), and Lincare Holdings Inc. ("Lincare").

Pursuant to the Agreement, the Company is proposing to issue 1.5354 shares
of its common stock for each share of Lincare common stock.

In arriving at our opinion, we have reviewed the Agreement and have
reviewed financial and other information that was publicly available or
furnished to us by the Company and Lincare, including information provided
during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain financial projections of Lincare prepared by the management of Lincare,
certain financial projections of the Company prepared by the management of the
Company and certain financial projections of the Company and Lincare on a
combined basis prepared by the Company. In addition, we have compared certain
financial and securities data of the Company and Lincare with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the common stock of Lincare and the Company,
reviewed prices and premiums paid in other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.

In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to by the Company and
Lincare or their respective representatives and financial advisors, or that was
otherwise reviewed by us. In particular, we have relied upon the estimates of
the management of the Company of the operating synergies achievable as a result
of the Merger and upon our discussion of such synergies with the management of
Lincare. With respect to the financial projections supplied to us, we have
assumed that they have been reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management of the Company and
Lincare as to the future operating and financial performances of the Company and
Lincare. We have not assumed any responsibility for making any independent
evaluation of Lincare's assets or liabilities or for making any independent
verification of any of the information reviewed by us. We have relied as to all
legal matters on advice of counsel to the Company.

B-1
<PAGE> 258

Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion as to the prices
at which the Company's common stock or Lincare's common stock will actually
trade at any time. Our opinion does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the proposed transaction.

Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company in the past and has been
compensated for such services. On April 6, 1995, an affiliate of DLJ made a
bridge loan to the Company in the amount of $150 million, the proceeds of which
were to be used in connection with the acquisition of Caremark Internation,
Inc.'s home infusion therapy business (the "Caremark Acquisition"). In addition,
DLJ acted as an underwriter in connection with two 1992 public offerings of
common stock by Lincare and was compensated for such services.

Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be paid by the Company pursuant to the
Agreement is fair to the shareholders of the Company from a financial point of
view.

Very truly yours,

/s/ DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

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APPENDIX C

[ALEX. BROWN & SONS LETTERHEAD]

April 17, 1995

Board of Directors
Lincare Holdings Inc.
19337 U.S. 19 North
Clearwater, FL 34624

Dear Sirs:

Lincare Holdings Inc. ("Lincare"), Coram Healthcare Corporation ("Coram")
and CHC Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Coram ("Merger Sub") have entered into an Agreement and Plan of Merger dated as
of April 17, 1995 (the "Agreement"). Pursuant to the Agreement, Merger Sub will
merge with and into Lincare (the "Merger") and each share, par value $.01 per
share, of Lincare common stock ("Lincare Common Stock"), other than Lincare
Common Stock held directly or indirectly by Coram, Merger Sub or the Company,
will be converted into the right to receive 1.5354 shares (the "Exchange Ratio")
of the common stock, par value $.001 per share, of Coram ("Coram Common Stock")
in a tax-free exchange. You have requested our opinion regarding the fairness,
from a financial point of view, of the Exchange Ratio to the stockholders of
Lincare.

Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, private
placements and valuations for estate, corporate and other purposes. We have
served as financial advisor to the Board of Directors of Lincare in connection
with the Merger and will receive a fee for our services, a substantial portion
of which is contingent upon the consummation of the Merger. We maintain a market
in Lincare Common Stock and regularly publish research reports regarding the
health care industry and the businesses and securities of publicly owned
companies in that industry, including Lincare.

In connection with our opinion, we have reviewed the Agreement and certain
publicly available financial information concerning Lincare and Coram. We have
reviewed certain internal financial analyses and other information regarding
Lincare and Coram made available to us by their respective managements and have
held discussions with members of the senior management of Lincare and Coram
regarding the business and prospects of their respective companies and the joint
prospects of a combined company. We have also held discussions with consultants
to Coram regarding the business and prospects of Coram and the home infusion
business which it recently acquired from Caremark International Inc. In
addition, we have (i) reviewed the reported price and trading activity for
Lincare Common Stock and Coram Common Stock, (ii) compared certain financial and
stock market information for Lincare and Coram with similar information for
certain other companies whose securities are publicly traded, (iii) reviewed the
financial terms of certain recent business combinations which we deemed
comparable in whole or in part and (iv) performed such other studies and
analyses and considered such other factors as we deemed appropriate.

We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information furnished to or otherwise reviewed
by or discussed with us for purposes of this opinion. With respect to the
financial projections used in our analyses, we have assumed that they have been
reasonably

C-1
<PAGE> 260

prepared on bases reflecting the best currently available estimates and
judgments of the senior management of Lincare and Coram as to the likely future
financial performance of their respective companies. We have assumed, with your
consent, that the Merger will be treated as a pooling-of-interests in accordance
with generally accepted accounting principles and as a tax-free reorganization
for federal income tax purposes. We have not made an independent evaluation or
appraisal of the assets of Lincare or Coram, nor have we been furnished with any
such evaluation or appraisal. Our opinion is based on market, economic and other
conditions as they exist and can be evaluated as of the date of this letter. Our
opinion does not imply any conclusion as to the likely trading range of the
Coram Common Stock following consummation of the Merger nor does it constitute a
recommendation by us to any stockholder of Lincare as to how such stockholder
should vote with respect to the Merger.

It is understood that this letter is for the information of the Board of
Directors of Lincare only and may not be used for any other purpose without our
prior written consent. We hereby consent, however, to the inclusion of this
opinion as an exhibit to any proxy or registration statement distributed in
connection with the Merger.

Based upon and subject to the foregoing, it is our opinion that as of the
date of this letter, the Exchange Ratio pursuant to the Agreement is fair, from
a financial point of view, to the stockholders of Lincare.

Very truly yours,

/s/ ALEX. BROWN & SONS INCORPORATED
ALEX. BROWN & SONS INCORPORATED

C-2
<PAGE> 261

APPENDIX D

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CORAM HEALTHCARE CORPORATION

Coram Healthcare Corporation, a corporation duly organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:

FIRST: The name of the corporation is Coram Healthcare Corporation.

SECOND: The date on which the Certificate of Incorporation was filed
with the Secretary of State of Delaware is November 30, 1993.

THIRD: The Board of Directors of the corporation, acting in accordance
with the provisions of Section 141(f) and 242 of the General Corporation
Law of the State of Delaware, adopted resolutions to amend Article Fourth
in its entirety to read as follows:

"FOURTH. A. AUTHORIZED CAPITAL STOCK. The total number of shares
that the Corporation shall have authority to issue shall be 210,000,000
shares, of which 200,000,000 shares shall be designated Common Stock,
$.001 par value, and 10,000,000 shares shall be designated Preferred
Stock, $.001 par value."

FOURTH: Thereafter, pursuant to a resolution of the Board of Directors
and in accordance with the provisions of Sections 222 and 242 of the
General Corporation Law of the State of Delaware, this Certificate of
Amendment was submitted to the stockholders of the corporation and was
adopted by a majority of the outstanding shares of each class entitled to
vote thereon.

IN WITNESS WHEREOF, Coram Healthcare Corporation, a Delaware corporation,
has caused this Certificate of Amendment to be signed by its President and
attested to by its Secretary this day of , 1995.

CORAM HEALTHCARE CORPORATION

Patrick J. Fortune, President

ATTEST:

Sam R. Leno, Secretary

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<PAGE> 262

APPENDIX E

CORAM HEALTHCARE CORPORATION
1994 STOCK OPTION/STOCK ISSUANCE PLAN

AS AMENDED THROUGH MAY , 1995

ARTICLE ONE

GENERAL

I. PURPOSE OF THE PLAN

This 1994 Stock Option/Stock Issuance Plan (the "Plan") is intended to
promote the interests of Coram Healthcare Corporation, a Delaware corporation
(the "Corporation"), by providing (i) key employees (including officers) of the
Corporation (or its parent or subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations), (ii) the non-employee members of the Corporation's
Board of Directors or the board of directors of any parent or subsidiary
corporation and (iii) those consultants and other independent contractors who
provide valuable services to the Corporation (or its parent or subsidiary
corporations) with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation (or its parent or
subsidiary corporations).

II. DEFINITIONS

A. For purposes of the Plan, the following definitions shall be in effect:

BOARD: the Corporation's Board of Directors.

CHANGE IN CONTROL: a change in ownership or control of the Corporation
effected through either of the following transactions:

- the direct or indirect acquisition by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, or

- a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members (rounded up
to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either
(a) have been Board members continuously since the beginning of such period
or (b) have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in clause
(a) who were still in office at the time such election or nomination was
approved by the Board.

CODE: the Internal Revenue Code of 1986, as amended.

COMMON STOCK: shares of the Corporation's common stock, par value $0.001
per share.

CONSTITUENT CORPORATIONS: Curaflex Health Services, Inc., a Delaware
corporation; HealthInfusion, Inc., a Florida corporation; Medisys, Inc., a
Delaware corporation, and T2 Medical, Inc., a Delaware corporation. Each of the
Constituent Corporations became a separate wholly-owned operating subsidiary of
the Corporation on July 8, 1994 pursuant to the Agreement and Plan of Merger
dated February 6, 1994 and amended May 25, 1994 which was subsequently approved
by the stockholders of each Constituent Corporation on July 8, 1994.

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CORPORATE TRANSACTION: any of the following stockholder-approved
transactions effected after the Effective Date to which the Corporation is a
party:

- a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Corporation is incorporated,

- the sale, transfer or other disposition of all or substantially all
of the assets of the Corporation (including the capital stock of the
Corporation's subsidiary corporations) in complete liquidation or
dissolution of the Corporation, or

- any reverse merger in which the Corporation is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such merger.

EFFECTIVE DATE: July 8, 1994, the date on which the merger of each of the
Constituent Corporations into a wholly-owned subsidiary of the Corporation was
consummated.

EMPLOYEE: an individual who performs services while in the employ of the
Corporation or one or more parent or subsidiary corporations, subject to the
control and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.

EXERCISE DATE: the date on which the Corporation shall have received
written notice of the option exercise.

FAIR MARKET VALUE: the fair market value per share of Common Stock
determined in accordance with the following provisions:

- The Fair Market Value per share of Common Stock on any relevant date
under the Plan other than the Effective Date shall be the closing selling
price per share on the date in question on the New York Stock Exchange, as
such price is reported on the composite tape of transactions on such
exchange. If there is no reported closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.

- The Fair Market Value per share of Common Stock subject to any stock
option grants made under the Plan on the Effective Date shall be deemed to
be equal to the average closing selling price per share of the Common Stock
on the New York Stock Exchange for the five (5) consecutive trading day
period commencing with the Effective Date.

HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through the following transaction:

- more than fifty percent (50%) of the acquired securities are
accepted from holders other than the officers and directors of the
Corporation subject to the short-swing profit restrictions of Section 16 of
the 1934 Act.

INCENTIVE OPTION: a stock option which satisfies the requirements of Code
Section 422.

INVOLUNTARY TERMINATION: the termination of the Service of any Optionee or
Participant which occurs by reason of:

- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

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- such individual's voluntary resignation following (i) a change in
his or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any
non-discretionary and objective-standard incentive payment or bonus award)
by more than five percent (5%) or (C) a relocation of such individual's
place of employment by more than fifty (50) miles, provided and only if
such change, reduction or relocation is effected by the Corporation without
the individual's consent.

MISCONDUCT: the commission of any act of fraud, embezzlement or dishonesty
by the Optionee or Participant, any unauthorized use or disclosure by such
individual of confidential information or trade secrets of the Corporation or
its parent or subsidiary corporations, or any other intentional misconduct by
such individual adversely affecting the business or affairs of the Corporation
in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Corporation or any parent or
subsidiary may consider as grounds for the dismissal or discharge of any
Optionee, Participant or other individual in the Service of the Corporation.

NEWLY ISSUED SHARES: shares of Common Stock drawn from the Corporation's
authorized but unissued shares of Common Stock.

1934 ACT: the Securities and Exchange Act of 1934, as amended.

NON-STATUTORY OPTION: a stock option not intended to meet the requirements
of Code Section 422.

OPTIONEE: any person to whom an option is granted under the Discretionary
Option Grant or Automatic Option Grant Program in effect under the Plan.

PARTICIPANT: any person who receives a direct issuance of Common Stock
under the Stock Issuance Program in effect under the Plan.

PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the Optionee
or Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.

PLAN ADMINISTRATOR: the particular entity, whether the Primary Committee,
any secondary committee or the Board, which is authorized (either pursuant to
the express provisions of the Plan or by resolution of the Board) to exercise
administrative discretion under the Discretionary Option Grant and Stock
Issuance Programs with respect to one or more classes of eligible individuals,
to the extent such entity is acting within the scope of its administrative
authority under such programs with respect to those individuals over which it
has jurisdiction.

PRIMARY COMMITTEE: a committee of two (2) or more non-employee Board
members appointed by the Board.

SERVICE: the provision of services on a periodic basis to the Corporation
(or any parent or subsidiary corporation) in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant or
advisor, except to the extent otherwise specifically provided in the applicable
stock option or stock issuance agreement.

TAKE-OVER PRICE: the greater of (i) the Fair Market Value per share of
Common Stock on the date the option is surrendered to the Corporation in
connection with a Hostile Take-Over or (ii) the highest reported price per share
of Common Stock paid by the tender offeror in effecting such Hostile Take-Over.
However, if the surrendered option is an Incentive Option, the Take-Over Price
shall not exceed the clause (i) price per share.

TREASURY SHARES: shares of Common Stock reacquired by the Corporation and
held as treasury shares.

B. The following provisions shall be applicable in determining the parent
and subsidiary corporations of the Corporation:

Any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation shall be considered to be a PARENT
of the Corporation, provided each such corporation in the

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unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in any other corporation in
such chain.

Each corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation shall be considered to be a
SUBSIDIARY of the Corporation, provided each such corporation (other than
the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in any other corporation in
such chain.

III. STRUCTURE OF THE PLAN

A. Stock Programs. The Plan shall be divided into four separate components:

- The Discretionary Option Grant Program, under which eligible
individuals may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock in accordance with the
provisions of Article Two.

- The Automatic Option Grant Program, under which non-employee Board
members shall automatically receive option grants at periodic intervals to
purchase shares of Common Stock in accordance with the provisions of
Article Three.

- The Stock Issuance Program, under which eligible individuals may be
issued shares of Common Stock directly, either through the immediate
purchase of such shares at a price not less than eighty-five percent (85%)
of their Fair Market Value at the time of issuance or as a bonus tied to
the performance of services or the Corporation's attainment of financial
objectives.

B. General Provisions. Unless the context clearly indicates otherwise, the
provisions of Articles One and Five shall apply to the Discretionary Option
Grant, Automatic Option Grant and Stock Issuance Programs and shall accordingly
govern the interests of all individuals under the Plan.

IV. ADMINISTRATION OF THE PLAN

A. The Plan shall be administered in accordance with the following
provisions:

- The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to those individuals subject to the short-swing profit restrictions
of the Federal securities laws. No Board member shall be eligible to serve
on the Primary Committee if such individual has, within the twelve
(12)-month period immediately preceding the date such individual is to be
appointed to the Primary Committee, received an option grant or stock
issuance under this Plan or any other stock option, stock appreciation,
stock bonus or other stock plan of the Corporation (or any parent or
subsidiary corporation), other than pursuant to the Automatic Option Grant
Program specified in Article Three or any similar automatic option grant
programs in effect for the non-employee directors of the Constituent
Corporations prior to the Effective Date.

- Administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other individuals eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a secondary committee of two (2) or more Board members
appointed by the Board, or the Board may retain the power to administer
those programs with respect to all individuals who are not subject to the
short-swing profit restrictions of the Federal securities laws. The
membership of any secondary committee may include Board members who are
Employees eligible to receive option grants or stock issuances under this
Plan or any other stock option, stock appreciation, stock bonus or other
stock plan of the Corporation (or any parent or subsidiary corporation).

- Members of the Primary Committee or any secondary committee shall
serve for such period as the Board may determine and shall be subject to
removal by the Board at any time. The Board may also

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at any time reassume all administrative powers and authority delegated
under the Plan to any secondary committee appointed by the Board.

B. The Plan Administrator shall, within the scope of its administrative
authority under the Plan, have full power and discretion (subject to the express
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for the proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of each such program and any outstanding
option grants or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative authority under the Plan, shall be final and binding on all
parties who have an interest in the Discretionary Option Grant or Stock Issuance
Program or any outstanding option or stock issuance thereunder.

C. Service on the Primary Committee or the secondary committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of either committee shall
be liable for any act or omission made in good faith with respect to the Plan or
any option granted or shares issued under the Plan.

D. Administration of the Automatic Option Grant shall be self-executing in
accordance with the express terms and conditions of Article Three, respectively,
and no Plan Administrator shall exercise any discretionary functions with
respect to the option grants made pursuant to such programs.

V. OPTION GRANTS AND STOCK ISSUANCES

A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two and the Stock Issuance Program under Article Four are
as follows:

- officers and other key employees of the Corporation (or its parent
or subsidiary corporations) who render services which contribute to the
management, growth and financial success of the Corporation (or its parent
or subsidiary corporations);

- non-employee members of the board of directors of any parent or
subsidiary corporations, provided such individuals do not concurrently
serve as members of the Board; and

- those consultants or other independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary
corporations).

B. Non-employee Board members shall not be eligible to participate in the
Discretionary Option Grant or Stock Issuance Program or in any other stock
option, stock purchase, stock bonus or other stock plan of the Corporation (or
its parent or subsidiary corporations). Such non-employee Board members shall be
eligible to receive automatic option grants under Article Three.

C. The Plan Administrator shall have full authority to determine, (i) with
respect to the option grants made under the Discretionary Option Grant Program,
which eligible individuals are to receive option grants, the number of shares to
be covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding and (ii), with respect to stock issuances under
the Stock Issuance Program, which eligible individuals are to be selected for
participation, the number of shares to be issued to each selected individual,
the vesting schedule (if any) to be applicable to the issued shares and the
consideration to be paid for such shares.

VI. STOCK SUBJECT TO THE PLAN

A. Shares of Common Stock shall be available for issuance under the Plan
and shall be drawn from either the Corporation's authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market. The maximum number

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of shares of Common Stock which may be issued over the term of the Plan shall
not exceed 12,000,000 shares1, subject to adjustment from time to time in
accordance with the provisions of this Section VI.

B. In no event may the aggregate number of shares of Common Stock for which
any one individual participating in the Plan may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
exceed 5,000,000 shares over the term of the Plan.

C. Should one or more outstanding options under the Plan expire or
terminate for any reason prior to exercise in full (including any option
cancelled in accordance with the cancellation-regrant provisions of Section IV
of Article Two), then the shares subject to the portion of each option not so
exercised shall be available for subsequent issuance under the Plan. Shares
subject to any option or portion thereof surrendered in accordance with the
stock appreciation right provisions of the Plan and all share issuances under
the Plan, whether or not the shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an outstanding option under the Plan or the vesting of a share
issuance under the Plan, then the number of shares of Common Stock available for
issuance under the Plan shall be reduced by the gross number of shares for which
the option is exercised or which vest under the share issuance, and not by the
net number of shares of Common Stock actually issued to the holder of such
option or share issuance.

D. Should any change be made to the Common Stock issuable under the Plan by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances in the aggregate over the term of the Plan, (iii) the number and/or
class of securities for which automatic option grants are to be subsequently
made per newly elected or continuing non-employee Board member under the
Automatic Option Grant Program and (iv) the number and/or class of securities
and price per share in effect under each option outstanding under the Plan. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.

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

1 Includes the 4,400,000-share increase approved by the Board on May , 1995,
subject to stockholder approval at the 1995 Annual Meeting.

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ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I. TERMS AND CONDITIONS OF OPTIONS

Options granted pursuant to the Discretionary Option Grant Program shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees may only be granted Non-Statutory
Options. Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with the terms and conditions specified below. Each
instrument evidencing an Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this Article Two.

A. Exercise Price.

1. The exercise price per share under this Article Two shall be fixed by
the Plan Administrator in accordance with the following provisions:

The exercise price per share of Common Stock subject to an Incentive
Option shall in no event be less than one hundred percent (100%) of the
Fair Market Value of such Common Stock on the grant date.

The exercise price per share of Common Stock subject to a
Non-Statutory Option shall in no event be less than eighty-five percent
(85%) of the Fair Market Value of such Common Stock on the grant date.

2. The exercise price shall become immediately due upon exercise of the
option and, subject to the provisions of Section I of Article Five and the
instrument evidencing the grant, shall be payable in one of the alternative
forms specified below:

(i) full payment in cash or check made payable to the Corporation's
order,

(ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date,

(iii) full payment in a combination of shares of Common Stock held for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value
on the Exercise Date and cash or check made payable to the Corporation's
order, or

(iv) to the extent the option is exercised for vested shares, full
payment through a broker-dealer sale and remittance procedure pursuant to
which the Optionee shall provide concurrent irrevocable written
instructions (I) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares plus
all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation in connection with such purchase
and (II) to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.

B. Term and Exercise of Options. Each option granted under this Article Two
shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the instrument evidencing such option. No granted option shall, however, have
a maximum term in excess of ten (10) years. During the lifetime of the Optionee,
the option, together with any stock appreciation rights pertaining to such
option, shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by transfer of the option effected by will or by the
laws of descent and distribution following the Optionee's death.

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C. Termination of Service.

1. Should an Optionee cease Service for any reason (including death or
Permanent Disability) while holding one or more outstanding options under this
Article Two, then none of those options shall (except to the extent otherwise
provided pursuant to subparagraph 7 below) remain exercisable for more than a
thirty-six (36)-month period (or such shorter period determined by the Plan
Administrator and set forth in the instrument evidencing the grant) measured
from the date of such cessation of Service.

2. Any option held by the Optionee under this Article Two and exercisable
in whole or in part on the date of his or her death may be subsequently
exercised by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution. However, the
right to exercise such option shall lapse upon the earlier of (i) the third
anniversary of the date of the Optionee's death (or such shorter period
determined by the Plan Administrator and set forth in the instrument evidencing
the grant) or (ii) the specified expiration date of the option term.
Accordingly, upon the occurrence of the earlier event, the option shall
terminate and cease to remain outstanding.

3. Under no circumstances shall any such option be exercisable after the
specified expiration date of the option term.

4. During the applicable post-Service exercise period, the option may not
be exercised in the aggregate for more than the number of shares (if any) in
which the Optionee is vested at the time of his or her cessation of Service.
Upon the expiration of the limited post-Service exercise period or (if earlier)
upon the specified expiration date of the option term, each such option shall
terminate and cease to remain outstanding with respect to any vested shares for
which the option has not otherwise been exercised. However, each outstanding
option shall immediately terminate and cease to remain outstanding, at the time
of the Optionee's cessation of Service, with respect to any shares for which the
option is not otherwise at that time exercisable or in which the Optionee is not
otherwise vested.

5. Should the Optionee's Service be terminated for Misconduct, all
outstanding options held by the Optionee under this Article Two shall terminate
immediately and cease to remain outstanding.

6. The Plan Administrator shall have complete discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to permit one or more options held by the Optionee under this
Article Two to be exercised, during the limited post-Service exercise period
applicable under this Section I.C, not only with respect to the number of vested
shares of Common Stock for which each such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
subsequent installments of vested shares for which the option would otherwise
have become exercisable had such cessation of Service not occurred.

7. The Plan Administrator shall have full power and authority, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service or death from the
limited period in effect under subparagraphs 1 and 2 above to such greater
period of time as the Plan Administrator shall deem appropriate. In no event,
however, shall such option be exercisable after the specified expiration date of
the option term.

D. Stockholder Rights. An Optionee shall have none of the rights of a
stockholder with respect to any option shares until such individual shall have
exercised the option and paid the exercise price for the purchased shares.

E. Repurchase Rights. The shares of Common Stock acquired under this
Article Two may be subject to repurchase by the Corporation in accordance with
the following provisions:

1. The Plan Administrator shall have the discretion to grant options for
unvested shares of Common Stock under this Article Two. Should the Optionee
cease Service while holding any unvested shares purchased under such options,
then the Corporation shall have the right to repurchase any or all of those
unvested shares at the exercise price paid per share. The terms and conditions
upon which such repurchase right shall be

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exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the instrument evidencing such repurchase right.

2. All of the Corporation's outstanding repurchase rights under this
Article Two shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (i) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued. However, to the extent any of the Corporation's
repurchase rights with respect to the unvested shares held by an Optionee are
assigned in the Corporate Transaction pursuant to clause (i) above, those
repurchase rights shall subsequently terminate, and all the shares subject to
the terminated rights shall immediately vest in full, upon the Involuntary
Termination of the Optionee's Service (other than for Misconduct) within
eighteen (18) months after the effective date of the Corporate Transaction.

3. The Plan Administrator shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of Service, to
cancel the Corporation's outstanding repurchase rights with respect to one or
more shares purchased or purchasable by the Optionee under this Article Two and
thereby accelerate the vesting of such shares in whole or in part at any time.

II. INCENTIVE OPTIONS

The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall not be
subject to such terms and conditions.

A. Dollar Limitation. The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of the Common Stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its parent or subsidiary corporations) may for the first time
become exercisable as incentive stock options under the Federal tax laws during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted. Should the number of shares of Common Stock for which
any Incentive Option first becomes exercisable in any calendar year exceed the
applicable One Hundred Thousand Dollar ($100,000) limitation, then the option
may nevertheless be exercised in that calendar year for the excess number of
shares as a non-statutory option under the Federal tax laws.

B. 10% Stockholder. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any one of its parent or subsidiary
corporations, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the grant date and the option term shall not exceed five (5) years measured from
the grant date.

Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Five shall apply to all Incentive Options
granted hereunder.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each option which is at the
time outstanding under this Article Two shall automatically accelerate so that
each such option shall, immediately prior to the specified effective date for
such Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares. However, an outstanding option
under this Article Two shall not so accelerate if and to the extent:

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(i) such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof, (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option or
(iii) the acceleration of such option is subject to other limitations imposed by
the Plan Administrator at the time of the option grant. However, upon an
Optionee's cessation of Service by reason of an Involuntary Termination (other
than for Misconduct) within eighteen (18) months after a Corporate Transaction
in which his or her outstanding options are assumed or replaced pursuant to
clause (i) above, each such option shall automatically accelerate and become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for all or any portion of
such shares. The option as so accelerated shall remain exercisable until the
earlier of (i) the expiration of the option term or (ii) the expiration of the
one (1)-year period measured from the date of such Involuntary Termination. The
determination of option comparability under clause (i) above shall be made by
the Plan Administrator, and its determination shall be final, binding and
conclusive.

B. Immediately following the consummation of the Corporate Transaction, all
outstanding options under this Article Two shall terminate and cease to remain
outstanding, except to the extent assumed by the successor corporation or its
parent company.

C. Each outstanding option under this Article Two that is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share, provided the aggregate exercise price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan on both an aggregate and
participant basis following the consummation of the Corporate Transaction shall
be appropriately adjusted.

D. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually anticipated Change in Control or
at the time of an actual Change in Control, to provide for the automatic
acceleration of one or more outstanding options under this Article Two (and the
termination of one or more of the Corporation's outstanding repurchase rights
under this Article Two) upon the occurrence of the Change in Control. The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the Optionee's Service within a specified
period following the Change in Control.

E. Any options accelerated in connection with the Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term or the surrender of such option in accordance with Section V of this
Article Two.

F. The grant of options under this Article Two shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

G. The portion of any Incentive Option accelerated under this Section III
in connection with a Corporate Transaction or Change in Control shall remain
exercisable as an incentive stock option under the Federal tax laws only to the
extent the dollar limitation of Section II of this Article Two is not exceeded.
To the extent such dollar limitation is exceeded, the accelerated portion of
such option shall be exercisable as a non-statutory option under the Federal tax
laws.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Primary Committee shall have the sole and exclusive authority to
effect, at any time and from time to time, with the consent of the affected
Optionees, the cancellation of any or all outstanding options under

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this Article Two and to grant in substitution new options under the Plan
covering the same or different numbers of shares of Common Stock but with an
exercise price per share based upon the Fair Market Value of the Common Stock on
the new grant date.

V. STOCK APPRECIATION RIGHTS

A. One or more Optionees may be granted the right, exercisable upon such
terms and conditions as the Plan Administrator may establish, to surrender all
or part of an unexercised option under this Article Two in exchange for a
distribution from the Corporation in an amount equal to the excess of (i) the
Fair Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (ii) the aggregate exercise price payable for
such vested shares.

B. No such option surrender shall be effective unless it is approved by the
Plan Administrator. If the surrender is so approved, then the distribution to
which the Optionee shall accordingly become entitled under this Section V may be
made in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.

C. If the surrender of an option is rejected by the Plan Administrator,
then the Optionee shall retain whatever rights the Optionee had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time prior to the later of (i) five (5)
business days after the receipt of the rejection notice or (ii) the last day on
which the option is otherwise exercisable in accordance with the terms of the
instrument evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the date of the option grant.

D. One or more officers of the Corporation subject to the short-swing
profit restrictions of the Federal securities laws may, in the Primary
Committee's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over, each such officer holding one or more options
with such a limited stock appreciation right in effect for at least six (6)
months shall have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for fully
vested shares of Common Stock. The officer shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the vested shares of Common Stock at the time subject to each
surrendered option (or surrendered portion of such option) over (ii) the
aggregate exercise price payable for such vested shares. Such cash distribution
shall be made within five (5) days following the option surrender date. Neither
the approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. Any
unsurrendered portion of the option shall continue to remain outstanding and
become exercisable in accordance with the terms of the instrument evidencing
such grant.

E. The shares of Common Stock subject to any option surrendered for an
appreciation distribution pursuant to this Section V shall not be available for
subsequent issuance under the Plan.

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ARTICLE THREE

AUTOMATIC OPTION GRANT PROGRAM

I. ELIGIBILITY

A. Eligible Optionees. The individuals eligible to receive automatic option
grants pursuant to the provisions of this Article Three shall be limited to (i)
those individuals who are serving as non-employee Board members on July 28, 1994
(other than Tommy H. Carter), (ii) those individuals who are first elected or
appointed as non-employee Board members after July 28, 1994, whether through
appointment by the Board or election by the Corporation's stockholders, and
(iii) those individuals who continue to serve as non-employee Board members at
one or more Annual Stockholder Meetings beginning with the 1995 Annual Meeting.
Any non-employee Board member eligible to participate in the Automatic Option
Grant Program pursuant to the foregoing criteria shall be designated an Eligible
Director for purposes of this Article Three.

B. Limitation. Except for the option grants to be made pursuant to the
provisions of this Automatic Option Grant Program and the special option grant
made to Mr. Carter on July 28, 1994, non-employee Board members shall not be
eligible to receive any additional option grants or stock issuances under this
Plan or any other stock plan of the Corporation (or its parent or subsidiaries).

II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

A. Grant Dates. Option grants shall be made under this Article Three on the
dates specified below:

1. Each individual serving as an Eligible Director on July 28, 1994 (other
than Tommy H. Carter) shall automatically be granted on such date a
Non-Statutory Option to purchase 75,000 shares of Common Stock upon the terms
and conditions of this Article Three.

2. Each individual who first becomes an Eligible Director after July 28,
1994, whether through election by the Corporation's stockholders or appointment
by the Board, shall automatically be granted, at the time of such initial
election or appointment, a Non-Statutory Option to purchase 75,000 shares of
Common Stock upon the terms and conditions of this Article Three.

3. On the date of each Annual Stockholders Meeting held after the Effective
Date, beginning with the 1995 Annual Meeting, each individual who is thereafter
to continue to serve as an Eligible Director, whether or not such individual is
standing for re-election as a Board member at that particular meeting, shall
automatically be granted a Non-Statutory Option to purchase an additional 2,500
shares of Common Stock upon the terms and conditions of this Article Three,
provided such individual has served as a Board member for at least six (6)
months.

B. No Limitation. There shall be no limit on the number of such 2,500-share
annual option grants any one Eligible Director may receive over his or her
period of Board service. The number of shares for which the automatic option
grants are to be made to newly elected or continuing Eligible Directors shall be
subject to periodic adjustment pursuant to the applicable provisions of Section
VI.E. of Article One.

C. Exercise Price. The exercise price per share of Common Stock of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
automatic grant date.

D. Payment. The exercise price shall be payable in one of the alternative
forms specified in Section I.A.2 of Article Two. To the extent the option is
exercised for any unvested shares, the Optionee must execute and deliver to the
Corporation a stock purchase agreement for those unvested shares which provides
the Corporation with the right to repurchase, at the exercise price paid per
share, any unvested shares held by the Optionee at the time of cessation of
Board service and which precludes the sale, transfer or other disposition of any
shares purchased under the option, to the extent those shares are subject to the
Corporation's repurchase right.

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E. Option Term. Each automatic grant under this Article Three shall have a
maximum term of ten (10) years measured from the automatic grant date.

F. Exercisability/Vesting. Each automatic grant shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares in accordance with the applicable schedule
below:

- Each initial 75,000-share automatic grant shall vest, and the
Corporation's repurchase right shall lapse, with respect to (i) twenty-five
percent (25%) of the option shares upon the Optionee's completion of one
(1) year of Board service measured from the automatic grant date (or from
July 8, 1994 for the initial grants made under this Article Three on July
28, 1994) and (ii) the balance of the option shares in equal successive
monthly installments over the next thirty-six (36) months of continued
Board service thereafter.

- Each additional 2,500-share automatic grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of twelve (12)
equal and successive monthly installments over the Optionee's period of
continued service as a Board member, with the first such installment to
vest upon the Optionee's completion of one (1) month of Board service
measured from the automatic grant date.

Vesting of the option shares shall be subject to acceleration as provided
in Section II.H.3 and Section III of this Article Three. In no event shall any
additional option shares vest after the Optionee's cessation of Board service,
except as otherwise provided pursuant to Section II.H.3 of this Article Three.

G. Non-Transferability. During the lifetime of the Optionee, the automatic
option grant, together with the limited stock appreciation right pertaining to
such option, shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by transfer of the option effected by will
or by the laws of descent and distribution following the Optionee's death.

H. Termination of Board Service.

1. Should the Optionee cease to serve as a Board member for any reason
(other than death or Permanent Disability) while holding one or more automatic
option grants under this Article Three, then such individual shall have a six
(6)-month period following the date of such cessation of Board service in which
to exercise each such option for any or all of the option shares in which the
Optionee is vested at the time of such cessation of Board service. However, each
such option shall immediately terminate and cease to remain outstanding, at the
time of such cessation of Board service, with respect to any option shares in
which the Optionee is not otherwise at that time vested under such option.

2. Should the Optionee die within six (6) months after cessation of Board
service, then any automatic option grant held by the Optionee at the time of
death may subsequently be exercised, for any or all of the option shares in
which the Optionee is vested at the time of his or her cessation of Board
service (less any option shares subsequently purchased by the Optionee prior to
death), by the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution. The right to exercise
each such option shall lapse upon the expiration of the twelve (12)-month period
measured from the date of the Optionee's death.

3. Should the Optionee die or become Permanently Disabled while serving as
a Board member, then the shares of Common Stock at the time subject to each
automatic option grant held by the Optionee shall immediately vest in full (and
the Corporation's repurchase right with respect to such shares shall terminate),
and the Optionee (or the representative of the Optionee's estate or the person
or persons to whom the option is transferred upon the Optionee's death) shall
have a twelve (12)-month period following the date of the Optionee's cessation
of Board service in which to exercise such option for any or all of those vested
shares of Common Stock.

4. In no event shall any automatic grant under this Article Three remain
exercisable after the expiration date of the ten (10)-year option term. Upon the
expiration of the applicable post-service exercise period under subparagraphs 1
through 3 above or (if earlier) upon the expiration of the ten (10)-year option
term, the

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automatic grant shall terminate and cease to be outstanding for any option
shares in which the Optionee was vested at the time of his or her cessation of
Board service but for which such option was not otherwise exercised.

I. Stockholder Rights. The holder of an automatic option grant under this
Article Three shall have none of the rights of a stockholder with respect to any
shares subject to that option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.

J. Remaining Terms. The remaining terms and conditions of each automatic
option grant shall be as set forth in the form Automatic Stock Option Agreement
attached as Exhibit A to the Plan.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, the shares of Common Stock at
the time subject to each outstanding option under this Article Three but not
otherwise vested shall automatically vest in full and the Corporation's
repurchase right with respect to those shares shall terminate, so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation and remain
fully exercisable until the expiration or sooner termination of the option term,
whether or not the Optionee continues in Board service.

B. In connection with any Change in Control of the Corporation, the shares
of Common Stock at the time subject to each outstanding option under this
Article Three but not otherwise vested shall automatically vest in full and the
Corporation's repurchase right with respect to those shares shall terminate, so
that each such option shall, immediately prior to the specified effective date
for the Change in Control, become fully exercisable for all of the shares of
Common Stock at the time subject to that option and may be exercised for all or
any portion of such shares as fully vested shares of Common Stock. Each option
shall remain so exercisable until the expiration or sooner termination of the
option term, whether or not the Optionee continues in Board service.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each option held
by him or her under this Article Three for a period of at least six (6) months.
The Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock at the time subject to the surrendered option (whether or
not the Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. Neither the approval of the Plan Administrator nor the consent of
the Board shall be required in connection with such option surrender and cash
distribution. The shares of Common Stock subject to each option surrendered in
connection with the Hostile Take-Over shall not be available for subsequent
issuance under the Plan.

D. The automatic option grants outstanding under this Article Three shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS

The provisions of this Automatic Option Grant Program, together with the
automatic option grants outstanding under this Article Three, may not be amended
at intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.

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ARTICLE FOUR

STOCK ISSUANCE PROGRAM

I. TERMS AND CONDITIONS OF STOCK ISSUANCES

Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Four.

A. Consideration

1. Newly Issued Shares shall be issued under the Stock Issuance Program for
one or more of the following items of consideration that the Plan Administrator
may deem appropriate in each individual instance:

(i) full payment in cash or check made payable to the Corporation's
order,

(ii) a promissory note payable to the Corporation's order in one or
more installments, which may be subject to cancellation in whole or in part
upon terms and conditions established by the Plan Administrator, or

(iii) past services rendered to the Corporation or any parent or
subsidiary corporation.

2. Newly Issued Shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one hundred
percent (100%) of the Fair Market Value of such shares at the time of issuance,
but in no event less than eighty-five percent (85%) of such Fair Market Value.

3. Treasury Shares may be issued under the Stock Issuance Program for such
consideration (including one or more of the items of consideration specified in
subparagraph 1 above) as the Plan Administrator may deem appropriate, whether
such consideration is in an amount less than, equal to or greater than the Fair
Market Value of the Treasury Shares at the time of issuance. Treasury Shares
may, in lieu of any cash consideration, be issued subject to such vesting
requirements tied to the Participant's period of future Service or the
Corporation's attainment of specified performance objectives as the Plan
Administrator may establish at the time of issuance.

B. Vesting Provisions

1. The shares of Common Stock issued under the Stock Issuance Program
(other than shares issued in lieu of salary) may, in the absolute discretion of
the Plan Administrator, be fully and immediately vested upon issuance or may
vest in installments over the Participant's period of Service. The elements of
the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program, namely:

(i) the Service period to be completed by the Participant or the
performance objectives to be achieved by the Corporation,

(ii) the number of installments in which the shares are to vest,

(iii) the interval or intervals (if any) which are to lapse between
installments, and

(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule,

shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.

2. The Participant shall have full stockholder rights with respect to any
shares of Common Stock issued to him or her under the Stock Issuance Program,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends

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paid on such shares. Any new, additional or different shares of stock or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued, subject to (i) the same vesting requirements
applicable to the Participant's unvested shares and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.

3. Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock under the Stock Issuance Program, then
those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money promissory note), the Corporation
shall repay to the Participant the cash consideration paid for the surrendered
shares and shall cancel the unpaid principal balance of any outstanding
purchase-money note of the Participant attributable to such surrendered shares.
The surrendered shares may, at the Plan Administrator's discretion, be retained
by the Corporation as Treasury Shares or may be retired to authorized but
unissued share status.

4. The Plan Administrator may in its discretion elect to waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. Upon the occurrence of any Corporate Transaction, all unvested shares of
Common Stock at the time outstanding under this Stock Issuance Program shall
immediately vest in full and the Corporation's repurchase rights shall
terminate, except to the extent: (i) any such repurchase right is expressly
assigned to the successor corporation (or parent thereof) in connection with the
Corporate Transaction or (ii) such termination is precluded by other limitations
imposed in the Issuance Agreement. However, to the extent any of the
Corporation's repurchase rights with respect to the unvested shares held by a
Participant are assigned in the Corporate Transaction pursuant to clause (i)
above, those repurchase rights shall subsequently terminate, and all the shares
subject to the terminated rights shall immediately vest in full, upon the
Involuntary Termination of the Participant's Service (other than for Misconduct)
within eighteen (18) months after the effective date of the Corporate
Transaction.

B. The Plan Administrator shall have the discretionary authority,
exercisable either in advance of any actually anticipated Change in Control or
at the time of an actual Change in Control, to provide for the immediate and
automatic vesting of one or more unvested shares outstanding under the Stock
Issuance Program, and the termination of the Corporation's repurchase rights
with respect to those shares, at the time of such Change in Control. The Plan
Administrator shall also have full power and authority to condition any such
accelerated vesting upon the subsequent termination of the Participant's Service
within a specified period following the Change in Control.

III. TRANSFER RESTRICTIONS/SHARE ESCROW

A. Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing such unvested shares. To the extent an escrow
arrangement is utilized, the unvested shares and any securities or other assets
issued with respect to such shares (other than regular cash dividends) shall be
delivered in escrow to the Corporation to be held until the Participant's
interest in such shares (or other securities or assets) vests. Alternatively, if
the unvested shares are issued directly to the Participant, the restrictive
legend on the certificates for such shares shall read substantially as follows:

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"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II) CANCELLATION OR
REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN
INTEREST) CEASES TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER
RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION OR
REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST)
DATED , 199 , A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE CORPORATION."

B. The Participant shall have no right to transfer any unvested shares of
Common Stock issued to him or her under the Stock Issuance Program. For purposes
of this restriction, the term "transfer" shall include (without limitation) any
sale, pledge, assignment, encumbrance, gift, or other disposition of such
shares, whether voluntary or involuntary. Upon any such attempted transfer, the
unvested shares shall immediately be cancelled in accordance with substantially
the same procedures in effect under Section I.B.3 of this Article Four, and
neither the Participant nor the proposed transferee shall have any rights with
respect to such cancelled shares. However, the Participant shall have the right
to make a gift of unvested shares acquired under the Stock Issuance Program to
the Participant's spouse or issue, including adopted children, or to a trust
established for such spouse or issue, provided the donee of such shares delivers
to the Corporation a written agreement to be bound by all the provisions of the
Stock Issuance Program and the Issuance Agreement.

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ARTICLE FIVE

MISCELLANEOUS

I. LOANS OR INSTALLMENT PAYMENTS

A. The Plan Administrator may, in its discretion, assist any Optionee or
Participant, to the extent such Optionee or Participant is an Employee
(including an Optionee or Participant who is an officer of the Corporation), in
the exercise of one or more options granted to such Optionee under the
Discretionary Option Grant Program or the purchase of one or more shares issued
to such Participant under the Stock Issuance Program, including the satisfaction
of any Federal, state and local income and employment tax obligations arising
therefrom, by (i) authorizing the extension of a loan from the Corporation to
such Optionee or Participant or (ii) permitting the Optionee or Participant to
pay the exercise price or purchase price for the purchased shares in
installments over a period of years. The terms of any loan or installment method
of payment (including the interest rate and terms of repayment) shall be upon
such terms as the Plan Administrator specifies in the applicable option or
issuance agreement or otherwise deems appropriate under the circumstances. Loans
or installment payments may be authorized with or without security or
collateral. However, the maximum credit available to the Optionee or Participant
may not exceed the exercise or purchase price of the acquired shares (less the
par value of such shares) plus any Federal, state and local income and
employment tax liability incurred by the Optionee or Participant in connection
with the acquisition of such shares.

B. The Plan Administrator may, in its absolute discretion, determine that
one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.

II. AMENDMENT OF THE PLAN AND AWARDS

A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to stock options or unvested stock issuances at the
time outstanding under the Plan, unless the Optionee or Participant consents to
such amendment, and (ii) any amendment made to the Automatic Option Grant
Program (or any options outstanding thereunder) shall be in compliance with the
applicable limitations of Section IV of Article Three. In addition, the Board
may not, without the approval of the Corporation's stockholders, amend the Plan
to (i) materially increase the maximum number of shares issuable under the Plan,
the number of shares for which options may be granted to newly elected or
continuing non-employee Board members under Article Three or the maximum number
of shares for which any one individual participating in the Plan may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances in the aggregate over the term of the Plan, except for permissible
adjustments under Section VI.E. of Article One, (ii) materially modify the
eligibility requirements for plan participation or (iii) materially increase the
benefits accruing to Optionees or Participants.

B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program, which are in excess of the number of shares
then available for issuance under the Plan, provided any excess shares actually
issued under the Discretionary Option Grant or Stock Issuance Program are held
in escrow until stockholder approval is obtained for a sufficient increase in
the number of shares available for issuance under the Plan. If such stockholder
approval is not obtained within twelve (12) months after the date the first such
excess option grants or excess share issuances are made, then (i) any
unexercised excess options shall terminate and cease to be exercisable and (ii)
the Corporation shall promptly refund the purchase price paid for any excess
shares actually issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow.

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III. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of stock options or the direct issuance or vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable Federal, state
and local income tax and employment tax withholding requirements.

B. The Plan Administrator may, in its discretion and in accordance with the
provisions of this Section III and such supplemental rules as the Plan
Administrator may from time to time adopt (including the applicable safe-harbor
provisions of Securities and Exchange Commission Rule 16b-3), provide any or all
holders of Non-Statutory Options (other than the options granted pursuant to
Article Three) or unvested shares under the Plan with the right to use shares of
Common Stock in satisfaction of all or part of the Federal, state and local
income and employment tax liabilities (the "Taxes") incurred by such holders in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the following
formats:

- Stock Withholding: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (up to one hundred percent (100%)) specified by
such holder.

- Stock Delivery: The holder of the Non-Statutory Option or the
unvested shares may be provided with the election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock already held by such
individual (other than in connection with the option exercise or share
vesting triggering the Taxes) with an aggregate Fair Market Value equal to
the percentage of the Taxes (up to one hundred percent (100%)) specified by
such holder.

IV. EFFECTIVE DATE AND TERM OF PLAN

A. The Plan became effective on July 8, 1994 upon consummation of the
merger pursuant to which each of the Constituent Corporations merged with a
wholly-owned subsidiary of the Corporation and thereby became a separate
operating subsidiary of the Corporation, and all of the outstanding shares of
the common stock of each such Constituent Corporation were converted into shares
of the Corporation's common stock.

B. On May , 1995, the Board amended the Plan to increase the number of
shares of Common Stock issuable thereunder by 4,400,000 shares, subject to
stockholder approval at the 1995 Annual Stockholders Meeting. Any options
granted on the basis of the 4,400,000 share increase shall not become
exercisable in whole or in part unless such share increase is approved by the
Corporation's stockholders. If such stockholder approval is not obtained at the
1995 Annual Stockholders Meeting, then all options granted on the basis of such
4,400,000-share increase shall terminate without ever becoming exercisable for
the option shares, and no further option grants shall be made on the basis of
such share increase. Subject to the foregoing limitations, options may be
granted on the basis of the 4,400,000-share increase at any time from and after
the May , 1995 effective date of such increase and before the date fixed
herein for termination of the Plan.

C. The Plan shall terminate upon the earlier of (i) December 31, 2003 or
(ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant to the exercise of options or stock
appreciation rights granted under the Plan or the issuance of shares (whether
vested or unvested) under the Stock Issuance Program. If the date of termination
is determined under clause (i) above, then all option grants and unvested stock
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
grants or issuances.

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or stock issuances under the Plan shall be used for
general corporate purposes.

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VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan, the issuance of any shares under the Stock
Issuance Program, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.

VII. NO EMPLOYMENT/SERVICE RIGHTS

Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
Service of the Corporation (or any parent or subsidiary corporation) for any
period of specific duration, and the Corporation (or any parent or subsidiary
corporation retaining the services of such individual) may terminate such
individual's Service at any time and for any reason, with or without cause.

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EXHIBIT A

AUTOMATIC STOCK OPTION AGREEMENT

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CORAM HEALTHCARE CORPORATION
AUTOMATIC STOCK OPTION AGREEMENT

RECITALS

A. The Corporation has approved an automatic option grant program under the
1994 Stock Option/Stock Issuance Plan (the "Plan"), pursuant to which special
option grants are to be made to eligible members of the Corporation's Board of
Directors (the "Board") at periodic intervals over their period of Board service
in order to encourage such individuals to remain in the Corporation's service.

B. Optionee is an eligible Board member and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the automatic grant of a stock option to purchase shares of the
Corporation's common stock ("Common Stock").

C. The granted option is intended to be a non-statutory option which does
not meet the requirements of Section 422 of the Internal Revenue Code and is
designed to provide Optionee with a meaningful incentive to continue to serve as
a member of the Board.

NOW, THEREFORE, it is hereby agreed as follows:

1. Grant of Option. Subject to and upon the terms and conditions set forth
in this Agreement, the Corporation hereby grants to Optionee, as of the date of
grant (the "Grant Date") specified in the accompanying Notice of Grant of
Non-Employee Director Automatic Stock Option (the "Grant Notice"), a stock
option to purchase up to that number of shares of Common Stock (the "Option
Shares") as is specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term at the price per share (the
"Exercise Price") specified in the Grant Notice.

2. Option Term. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall expire at the close of business on the
Expiration Date specified in the Grant Notice, unless sooner terminated under
Paragraph 5 or 8.

3. Limited Transferability. This option, together with the special stock
appreciation right provided under Paragraph 8.b, shall be neither transferable
nor assignable by Optionee, other than a transfer of this option effected by
will or by the laws of descent and distribution following Optionee's death, and
may be exercised, during Optionee's lifetime, only by Optionee.

4. Exercisability. This option shall be immediately exercisable for any or
all of the Option Shares, whether or not the Option Shares are vested in
accordance with the Vesting Schedule set forth in the Grant Notice, and shall
remain so exercisable until the expiration or sooner termination of the option
term. In no event, however, shall any additional Option Shares vest following
Optionee's cessation of service as a Board member.

5. Cessation of Board Service. Should Optionee's service as a Board member
cease while this option remains outstanding, then the option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date in accordance with the following provisions:

a. Upon Optionee's cessation of Board service for any reason other
than death or permanent disability, this option shall immediately terminate
and cease to be outstanding with respect to any and all Option Shares in
which Optionee is not otherwise at that time vested in accordance with the
normal Vesting Schedule set forth in the Grant Notice or the special
vesting acceleration provisions of Paragraph 7 or 8.

b. Should Optionee cease to serve as a Board member for any reason
(other than death or permanent disability) while holding this option, then
the period for exercising this option shall be reduced to a six (6)-month
period commencing with the date of such cessation of Board service, but in
no event shall this option be exercisable at any time after the Expiration
Date. During such limited period of exercisability, this option may not be
exercised for more than the number of Option Shares (if any) in which
Optionee is vested on the date Optionee ceases service as a Board member.
Upon the earlier of

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(i) the expiration of such six (6)-month period or (ii) the specified
Expiration Date, the option shall terminate and cease to be exercisable
with respect to any vested Option Shares for which the option has not been
exercised.

c. Should Optionee die during the six (6)-month period following his
or her cessation of Board service, then the personal representative of
Optionee's estate or the person or persons to whom the option is
transferred pursuant to Optionee's will or in accordance with the laws of
descent and distribution shall have the right to exercise this option for
any or all of the Option Shares in which Optionee is vested at the time of
Optionee's cessation of Board service (less any Option Shares purchased by
Optionee after such cessation of Board service but prior to death). Such
right of exercise shall terminate, and this option shall accordingly cease
to be exercisable for such vested Option Shares, upon the earlier of (i)
the expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the specified Expiration Date.

d. Should Optionee die or become permanently disabled while serving as
a Board member, then all the Option Shares subject to this option at the
time of such cessation of Board service shall immediately vest, and
Optionee (or the personal representative of Optionee's estate or the person
or persons to whom the option is transferred pursuant to Optionee's will or
in accordance with the laws of descent and distribution) shall have the
right to exercise this option for any or all of those vested Option Shares.
Such right of exercise shall terminate, and this option shall accordingly
cease to be outstanding with respect to the Option Shares, upon the earlier
of (i) the expiration of the twelve (12)-month period measured from the
date on which Optionee dies or becomes permanently disabled or (ii) the
specified Expiration Date.

e. Optionee shall be deemed to be PERMANENTLY DISABLED if Optionee is
unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.

f. In the event of a Corporate Transaction (as defined in Paragraph 7)
or Change in Control (as defined in Paragraph 8), the provisions of
Paragraph 7 and 8.a shall govern the period for which this option shall
remain exercisable following Optionee's cessation of Board service and
shall supersede any provisions to the contrary in this Paragraph 5.

6. Adjustment in Option Shares.

a. Should any change be made to the Common Stock issuable under the Plan by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the Common Stock as a class
without the Corporation's receipt of consideration, then the number and class of
securities purchasable under this option and the Exercise Price payable per
share shall be appropriately adjusted to prevent the dilution or enlargement of
Optionee's rights hereunder; provided, however, the aggregate Exercise Price
shall remain the same.

b. Upon the assumption of this option in connection with any Corporate
Transaction under Paragraph 7, this option shall be appropriately adjusted to
apply and pertain to the number and class of securities which would have been
issued to Optionee in the consummation of such Corporate Transaction had the
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Exercise Price payable per
share, provided the aggregate Exercise Price payable hereunder shall remain the
same.

7. Corporate Transaction. In the event of any of the following
stockholder-approved transactions effected after July 8, 1994 to which the
Corporation is a party (a "Corporate Transaction"):

(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Corporation is incorporated,

(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation (including the capital stock of the
Corporation's subsidiary corporations) in complete liquidation or
dissolution of the Corporation, or

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<PAGE> 285

(iii) any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to a person or persons different from the persons holding
those securities immediately prior to such merger,

all Option Shares at the time subject to this option but not otherwise
vested shall automatically vest and the Corporation's repurchase right shall
terminate so that this option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable for all
of the Option Shares at the time subject to this option and may be exercised for
all or any portion of such shares as fully vested shares of Common Stock. The
option as so accelerated shall be assumed by the successor corporation in the
Corporate Transaction and shall remain exercisable for such fully vested Option
Shares, whether or not Optionee continues in Board service, until the earlier of
(i) the specified Expiration Date or (ii) the surrender of this option under
Paragraph 8.b.

8. Change in Control/Hostile Takeover.

a. All Option Shares subject to this option at the time of a Change in
Control (as defined below) but not otherwise vested shall automatically vest and
the Corporation's repurchase right shall terminate so that this option shall,
immediately prior to the effective date of such Change in Control, become fully
exercisable for all of the Option Shares at the time subject to this option and
may be exercised for all or any portion of such shares as fully vested shares of
Common Stock. This option shall remain exercisable for such fully vested Option
Shares, whether or not Optionee continues in Board service, until the earlier of
(i) the specified Expiration Date or (ii) the surrender of this option under
Paragraph 8.b.

b. Provided this option has been outstanding for at least six (6) months
prior to the occurrence of a Hostile Take-Over (as defined below), Optionee
shall have an unconditional right (exercisable during the thirty (30)-day period
immediately following the consummation of such Hostile Take-Over) to surrender
this option to the Corporation in exchange for a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price (as
defined below) of the Option Shares at the time subject to the surrendered
option (whether or not those Option Shares are at the time vested) over (ii) the
aggregate Exercise Price payable for such shares.

To exercise this limited stock appreciation right, Optionee must, during
the applicable thirty (30)-day exercise period, provide the Corporation with
written notice of the option surrender in which there is specified the number of
Option Shares as to which the Option is being surrendered. Such notice must be
accompanied by the return of Optionee's copy of this Agreement, together with
any written amendments to such Agreement. The cash distribution shall be paid to
Optionee within five (5) days following such delivery date, and neither the
approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. Upon
receipt of such cash distribution, this option shall be cancelled with respect
to the Option Shares for which the option has been surrendered, and Optionee
shall cease to have any further right to acquire those Option Shares under this
Agreement. The option shall, however, remain outstanding and exercisable for the
balance of the Option Shares (if any) in accordance with the terms and
provisions of this Agreement, and the Corporation shall accordingly issue a new
stock option agreement (substantially in the same form of this Agreement) for
those remaining Option Shares.

This limited stock appreciation right shall in all events terminate upon
the expiration or sooner termination of the option term and may not be assigned
or transferred by Optionee.

c. Definitions: For purposes of this Agreement, the following definitions
shall be in effect:

A CHANGE IN CONTROL shall be deemed to occur in the event of a change
in ownership or control of the Corporation effected through either of the
following transactions:

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Securities Exchange Act of 1934 (the "1934 Act")) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or

(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals
who either (A) have been Board members continuously since the beginning
of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board
members described in clause (A) who were still in office at the time
such election or nomination was approved by the Board.

A HOSTILE TAKE-OVER shall be deemed to occur in the event of a change
in ownership of the Corporation effected through the following transaction:

(i) the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept, and

(ii) more than fifty percent (50%) of the acquired securities are
accepted from holders other than the officers and directors of the
Corporation subject to the shortswing profit restrictions of Section 16
of the 1934 Act.

The TAKE-OVER PRICE per share shall be deemed to be equal to the
greater of (i) the Fair Market Value per share of Common Stock on the date
the option is surrendered to the Corporation in connection with a Hostile
Take-Over, as determined in accordance with the valuation provisions of
Paragraph 9.b, or (ii) the highest reported price per share of Common Stock
paid by the tender offeror in effecting the Hostile Take-Over.

9. Manner of Exercising Option.

a. In order to exercise this option for all or any part of the Option
Shares for which the option is at the time exercisable, Optionee (or in the case
of exercise after Optionee's death, Optionee's executor, administrator, heir or
legatee, as the case may be) must take the following actions:

(i) To the extent the option is exercised for vested Option Shares,
the Secretary of the Corporation shall be provided with written notice of
the option exercise (the "Exercise Notice"), in substantially the form of
Exhibit I attached hereto, in which there is specified the number of vested
Option Shares which are to be purchased under the exercised option. To the
extent the option is exercised for one or more unvested Option Shares,
Optionee (or other person exercising the option) shall deliver to the
Secretary of the Corporation a stock issuance agreement (in form and
substance satisfactory to the Corporation) which grants the Corporation the
right to repurchase, at the Exercise Price, any and all unvested Option
Shares held by Optionee at the time of his or her cessation of Board
service and which precludes the sale, transfer or other disposition of any
purchased Option Shares while subject to such repurchase right (the
"Issuance Agreement").

(ii) The aggregate Exercise Price for the purchased shares shall be
paid in one of the following alternative forms:

(A) full payment in cash or check made payable to the Corporation's
order;

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(B) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date (as such terms are defined below);

(C) full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date and cash or check made payable to
the Corporation's order; or

(D) to the extent the option is exercised for vested Option Shares,
full payment effected through a broker-dealer sale and remittance
procedure pursuant to which Optionee shall provide concurrent
irrevocable written instructions to (1) a Corporation-designated
brokerage firm to effect the immediate sale of the vested shares
purchased under the option and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for those shares and (2) the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.

(iii) Appropriate documentation evidencing the right to exercise this
option shall be furnished the Corporation if the person or persons
exercising the option is other than Optionee.

b. For purposes of Paragraph 9.a and for all other valuation purposes under
this Agreement, the Fair Market Value per share of Common Stock on any relevant
date shall be the closing selling price per share on the date in question on the
New York Stock Exchange, as such price is reported on the composite tape of
transactions on such exchange. If there is no reported closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such quotation
exists.

c. The Exercise Date shall be the date on which the Exercise Notice is
delivered to the Secretary of the Corporation, together with the appropriate
Issuance Agreement for any unvested shares acquired under the option. Except to
the extent the sale and remittance procedure specified above is utilized in
connection with the exercise of the option for vested shares, payment of the
Exercise Price for the purchased shares must accompany such notice.

d. As soon as practical after the Exercise Date, the Corporation shall
issue to or on behalf of Optionee (or other person or persons exercising this
option) a certificate or certificates representing the purchased Option Shares.
To the extent any such Option Shares are unvested, the certificates for those
Option Shares shall be endorsed with an appropriate legend evidencing the
Corporation's repurchase rights and may be held in escrow with the Corporation
until such shares vest.

e. In no event may this option be exercised for any fractional shares.

10. Stockholder Rights. The holder of this option shall not have any of the
rights of a stockholder with respect to the Option Shares until such individual
shall have exercised this option and paid the Exercise Price for the purchased
shares.

11. No Impairment of Rights. This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise make
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets. Nor
shall this Agreement in any way be construed or interpreted so as to affect
adversely or otherwise impair the right of the Corporation or the stockholders
to remove Optionee from the Board at any time in accordance with the provisions
of applicable law.

12. Compliance with Laws and Regulations. The exercise of this option and
the issuance of the Option Shares upon such exercise shall be subject to
compliance by the Corporation and Optionee with all applicable requirements of
law relating thereto and with all applicable regulations of any stock exchange
on which shares of the Common Stock may be listed at the time of such exercise
and issuance.

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13. Successors and Assigns. Except to the extent otherwise provided in
Paragraph 3, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, administrators, heirs, legal representatives
and assigns of Optionee and the Corporation's successors and assigns.

14. Discharge of Liability. The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. However, the Corporation shall use its best efforts to
obtain all such applicable approvals.

15. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at the Corporate Offices
at 1125 17th Street, Suite 1500, Denver, Colorado 80202. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed to have been given or delivered upon personal
delivery or upon deposit in the U.S. mail, by registered or certified mail,
postage prepaid and properly addressed to the party to be notified.

16. Construction/Governing Law. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the express terms and provisions of the Plan, including the
automatic option grant provisions of Article Three of the Plan. The
interpretation, performance and enforcement of this Agreement shall be governed
by the laws of the State of California, as such laws are applied to contracts
entered into and performed in such State, without resort to that State's
conflict-of-laws rules.

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EXHIBIT I

NOTICE OF EXERCISE
OF
AUTOMATIC STOCK OPTION

I hereby notify Coram Healthcare Corporation (the "Corporation") that I
elect to purchase shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 1994 Stock Option/Stock Issuance Plan on ,
1994 to purchase up to shares of the Corporation's Common Stock.

Concurrently with the delivery of this Exercise Notice to the Secretary of
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with the
Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker/dealer sale and remittance
procedure specified in my agreement to effect payment of the Exercise Price for
any Purchased Shares in which I am vested at the time of exercise.
, 199
Date

<TABLE>
<S> <C>
---------------------------------------------
Optionee
Address:

---------------------------------------------
Print name in exact manner it is to appear
on the stock certificate:
Address to which certificate is to be sent,
if different from address above: ---------------------------------------------

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

Social Security Number: ---------------------------------------------
</TABLE>

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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Statutory Provisions

Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") enables
a corporation in its certificate of incorporation to eliminate or limit the
personal liability of members of its board of directors to the corporation or
its stockholders for monetary damages for violations of a director's fiduciary
duty of care. Such a provision would have no effect on the availability of
equitable remedies, such as an injunction or rescission, for breach of fiduciary
duty. In addition, no such provision may eliminate or limit the liability of a
director for breaching his duty of loyalty, failing to act in good faith,
engaging in intentional misconduct or knowingly violating a law, paying an
unlawful dividend or approving an illegal stock repurchase, or obtaining an
improper personal benefit.

Section 145 of the DGCL empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. No indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper. Additionally, a corporation is required to
indemnify its directors and officers against expenses to the extent that such
directors or officers have been successful on the merits or otherwise in any
action, suit or proceeding or in defense of any claim, issue or matter therein.

Indemnification can be made by the corporation only upon a determination
that indemnification is proper in the circumstances because the party seeking
indemnification has met the applicable standard of conduct as set forth in the
DGCL. The indemnification provided by the DGCL shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. A corporation also has the power to purchase and maintain insurance
on behalf of any person, whether or not the corporation would have the power to
indemnify him against such liability. The indemnification provided by the DGCL
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.

The Coram Certificate of Incorporation and Coram Bylaws

The Coram Certificate of Incorporation limits the directors' liability for
monetary damages to Coram and its stockholders for breaches of fiduciary duty
except under the circumstances outlined in Section 102(b)(7) of the DGCL as
described above under "-- Statutory Provisions."

The Coram Bylaws extend indemnification rights to the fullest extent
authorized by the DGCL to directors and officers involved in any action, suit or
proceeding where the basis of such involvement is such persons' alleged action
in an official capacity or in another capacity while serving as a director or
officer of Coram. The Coram Bylaws also provide for the right of a person
submitting a written claim for indemnification to bring suit against Coram if
such claim is not paid in full by Coram within thirty days of its receipt. In
addition, the Coram Bylaws permit Coram to maintain insurance to protect itself
and any of its directors, officers, employees or agents against any expense,
liability or loss incurred as a result of any action, suit or proceeding whether
or not Coram would have the power to indemnify such person under the DGCL.

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Contractual and Other Provisions

Directors and officers of Coram are covered by directors and officers
liability insurance of 100% of the amount of loss up to a maximum of $25,000,000
per occurrence. This coverage is for claims made against them solely by reason
of their being directors or officers of Coram. Among the principal exclusions
from the coverage are claims for libel or slander, those based on illegal
personal profits, those for return of remuneration illegally paid, those made
under Section 16(b) of the Exchange Act for accounting of profits made from a
transaction in Coram's securities, those which a final adjudication establishes
are acts of dishonesty, those based upon fines or penalties and those which
shall be indemnified by Coram.

ITEM 21. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ------------------------------------------------------------------------------------
<S> <C>
2.1 -- Agreement and Plan of Merger dated as of February 6, 1994, by and among the
Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition Company, CHS
Acquisition Company, HII Acquisition Company and MI Acquisition Company
(Incorporated by reference to Exhibit 2.1 of Registration No. 33-53957 on Form
S-4).
2.2 -- First Amendment to Agreement and Plan of Merger dated as of May 25, 1994, by and
among the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition
Company, CHS Acquisition Company, HII Acquisition Company and MI Acquisition
Company (Incorporated by reference to Exhibit 2.2 of Registration No. 33-53957 on
Form S-4).
2.3 -- Second Amendment to Agreement and Plan of Merger dated as of July 8, 1994 by and
between the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition
Company, CHS Acquisition Company, HII Acquisition Company and MI Acquisition
Company (Incorporated by reference to Exhibit 2.3 of the Registrant's Current
Report on Form 8-K dated as of July 15, 1994).
2.4 -- Agreement and Plan of Merger, dated as of April 17, 1995, between Coram
Healthcare Corporation and Lincare Holdings Inc. (Incorporated by reference from
Registrant's Current Report on Form 8-K filed on May 2, 1995).
3.1 -- Certificate of Incorporation of Registrant, as amended through May 11, 1994
(Incorporated by reference to Exhibit 2.1 of Registration No. 33-53957 on Form
S-4).
3.2 -- Bylaws of Registrant (Incorporated by reference to Exhibit 3.2 of Registration
No. 33-53957 on Form S-4).
4.1 -- Form of Common Stock Certificate for the Registrant's common stock, $.001 par
value per share (Incorporated by reference to Exhibit 4.1 from Registrant's
Annual Report on Form 10-K filed March 31, 1995).
4.2 -- $75 million 7% Convertible Subordinated PIK Note and $25 million 12%
Non-Convertible Subordinated PIK Note (Incorporated by reference to Exhibit F
from Registrant's Current Report on Form 8-K dated April 6, 1995).
*5 -- Opinion of Brobeck, Phleger & Harrison.
*8.1 -- Opinion of Brobeck, Phleger & Harrison regarding certain tax matters.
*8.2 -- Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol regarding tax matters.
+10.1 -- Amended and Restated Credit Agreement dated as of February 10, 1995, by and among
Curaflex, T2, HealthInfusion, Medisys, and HMSS as Co-Borrowers, Toronto Dominion
(Texas), Inc., as Agent (the "Amended Credit Agreement") (Incorporated by
reference to Exhibit 10.1 from Registrant's Annual Report on Form 10-K filed
March 31, 1995).
10.2 -- Form of Employment Agreement between the Registrant and Charles A. Laverty
(Incorporated by reference to Exhibit 10.1 of Registration No. 33-53957 on Form
S-4).
</TABLE>

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<PAGE> 292

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ------------------------------------------------------------------------------------
<S> <C>
10.3 -- Form of Severance/Non-Compete Agreement between the Registrant and Miles E.
Gilman (Incorporated by reference to Exhibit 10.2 of Registration No. 33-53957 on
Form S-4).
10.4 -- Form of Severance/Non-Compete Agreement between the Registrant and William J.
Brummond (Incorporated by reference to Exhibit 10.3 of Registration No. 33-53957
on Form S-4).
10.5 -- Form of Severance/Non-Compete Agreement between the Registrant and Tommy H.
Carter (Incorporated by reference to Exhibit 10.4 of Registration No. 33-53957 on
Form S-4).
*10.6 -- Form of Indemnification Agreement between the Registrant and each of the
Registrant's directors and certain executive officers.
10.7 -- Registrant's 1994 Stock Option/Stock Issuance Plan and related forms of
agreements (Incorporated by reference to Exhibit 10.15 of Registration No.
33-53957 on Form S-4).
10.8 -- Registrant's Employee Stock Purchase Plan (Incorporated by reference to Exhibit
10.16 of Registration No. 33-53957 on Form S-4).
10.9 -- 401(k) Plan of T2 dated December 8, 1989 (Incorporated herein by reference to
Exhibit 10(s) of T2's Annual Report on Form 10-K for the fiscal year ended
September 30, 1989, filed with the Commission on or about December 29, 1988.
10.10 -- 1988 Stock Option Plan of T2, as amended and restated as of July 31, 1990 and as
further amended as of (i) August 20, 1991; (ii) November 12, 1991; and (iii) July
6, 1992 (Incorporated by reference to Exhibit 10.18 of Registration No. 33-53957
on Form S-4).
10.11 -- Curaflex 1989 Stock Option Plan (Incorporated by reference to Exhibit 10.53 of
Registration No. 33-53957 on Form S-4).
10.12 -- Curaflex Amended 1990 Stock Option Plan (Incorporated by reference to Exhibit
10.54 of Registration No. 33-53957 on Form S-4).
10.13 -- Curaflex Directors' Nonqualified Stock Option Plan (Incorporated by reference to
Exhibit 10.59 of Registration No. 33-53957 on Form S-4).
10.14 -- Clinical Homecare Ltd. 1990 Incentive Stock Option Plan, as amended (Incorporated
by reference to Exhibit 10.61 of Registration No. 33-53957 on Form S-4).
10.15 -- Clinical Homecare Ltd. 1990 Stock Option Plan, as amended (Incorporated by
reference to Exhibit 10.62 of Registration No. 33-53957 on Form S-4).
10.16 -- 1989 Stock Option Plan of Medisys (Incorporated by reference to Exhibit 10.85 of
Registration No. 33-53957 on Form S-4).
10.17 -- Form of Non-Plan Option Agreement of Medisys (Incorporated by reference to
Exhibit 10.86 of Registration No. 33-53957 on Form S-4).
10.18 -- Asset Sale and Note Purchase Agreement dated as of January 29, 1995, among Coram
Healthcare Corporation, Caremark International Inc. and Caremark Inc., as amended
April 1, 1995 (Incorporated by reference to Exhibit G from Registrant's Current
Report on Form 8-K dated as of April 6, 1995).
+10.19 -- Credit Agreement dated as of April 6, 1995 among Coram Healthcare Corporation,
Coram, Inc., the lenders named therein and Chemical Bank as Administrative Agent,
as Collateral Agent and as Fronting Bank (Incorporated by reference to Exhibit C
from Registrant's Current Report on Form 8-K dated as of April 6, 1995).
10.20 -- Securities Purchase Agreement, and Form of Subordinated Bridge Note, dated as of
April 6, 1995 among Coram, Inc., as Issuer, Coram Funding, Inc., as initial
Purchaser and Coram Healthcare Corporation (Incorporated by reference to Exhibit
E from Registrant's Current Report on Form 8-K dated as of April 6, 1995).
*11 -- Statement regarding Computation of Per Share Earnings.
</TABLE>

II-3
<PAGE> 293

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ------------------------------------------------------------------------------------
<S> <C>
**23.1 -- Consent of Ernst & Young LLP.
**23.2 -- Consent of KPMG Peat Marwick LLP (St. Petersburg).
**23.3 -- Consent of Deloitte & Touche LLP.
**23.4 -- Consent of KPMG Peat Marwick LLP (Ontario).
**23.5 -- Consent of Arthur Andersen LLP.
**23.6 -- Consent of Coopers & Lybrand LLP.
**23.7 -- Price Waterhouse LLP.
*24.1 -- Consent of Brobeck, Phleger & Harrison (included in the opinion filed as Exhibit
5 to this Registration Statement).
*24.2 -- Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included in the opinion
filed as Exhibit 8.2 to this Registration Statement).
**99.1 -- Form of Coram Healthcare Corporation Proxy Card.
**99.2 -- Form of Lincare Holdings Inc. Proxy Card.
</TABLE>

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

* To be filed by amendment.
** Filed herewith.

+ The exhibits and schedules to this report are omitted from this Exhibit. The
Registrant agrees to furnish supplementally any omitted exhibit or schedule to
the Securities and Exchange Commission upon request.

ITEM 22. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) to file during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) to reflect in the prospectus any facts or event arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and

(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information statement.

(2) that, for the propose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement related to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.

(3) to remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 294

(c)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or any
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.

(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.

(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.

(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-5
<PAGE> 295

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, State of Colorado
on the 15th day of May, 1995.

CORAM HEALTHCARE CORPORATION

By: /s/ JAMES M. SWEENEY
-----------------------------
James M. Sweeney
Chairman and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated, each of whom also constitutes and
appoints James M. Sweeney, Patrick J. Fortune and Sam R. Leno, acting singly or
together, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him in any and all capacities, to sign any
and all amendments and post-effective amendments to this Registration Statement,
and to file the same, with exhibits thereto and any other documents in
connection therewith with the Securities and Exchange Commission, granting unto
each attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary in connection with such matters,
and hereby ratifying and confirming all that each attorney-in-fact and agent or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------ --------------
<S> <C> <C>
/s/ JAMES M. SWEENEY Chairman and Chief Executive May 15, 1995
- ----------------------------------- Officer (Principal Executive
James M. Sweeney Officer)

/s/ PATRICK J. FORTUNE President, Chief Operating May 15, 1995
- ----------------------------------- Officer and Director
Patrick J. Fortune

/s/ SAM R. LENO Vice President, Secretary and May 15, 1995
- ----------------------------------- Chief Financial Officer
Sam R. Leno (Principal Financial Officer
and Principal Accounting
Officer)

/s/ TOMMY H. CARTER Vice Chairman of the Board of May 15, 1995
- ----------------------------------- Directors
Tommy H. Carter

/s/ RICHARD A. FINK Director May 15, 1995
- -----------------------------------
Richard A. Fink

/s/ STEPHEN G. PAGLIUCA Director May 15, 1995
- -----------------------------------
Stephen G. Pagliuca

/s/ L. PETER SMITH Director May 15, 1995
- -----------------------------------
L. Peter Smith

/s/ GAIL R. WILENSKY Director May 15, 1995
- -----------------------------------
Dr. Gail R. Wilensky
</TABLE>

II-6
<PAGE> 296

<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger dated as of February 6, 1994, by and among
the Registrant, T2, Curaflex, HealthInfusion, Medisys, T2 Acquisition
Company, CHS Acquisition Company, HII Acquisition Company and MI
Acquisition Company (Incorporated by reference to Exhibit 2.1 of
Registration No. 33-53957 on Form S-4).
2.2 -- First Amendment to Agreement and Plan of Merger dated as of May 25,
1994, by and among the Registrant, T2, Curaflex, HealthInfusion,
Medisys, T2 Acquisition Company, CHS Acquisition Company, HII
Acquisition Company and MI Acquisition Company (Incorporated by
reference to Exhibit 2.2 of Registration No. 33-53957 on Form S-4).
2.3 -- Second Amendment to Agreement and Plan of Merger dated as of July 8,
1994 by and between the Registrant, T2, Curaflex, HealthInfusion,
Medisys, T2 Acquisition Company, CHS Acquisition Company, HII
Acquisition Company and MI Acquisition Company (Incorporated by
reference to Exhibit 2.3 of the Registrant's Current Report on Form 8-K
dated as of July 15, 1994).
2.4 -- Agreement and Plan of Merger, dated as of April 17, 1995, between Coram
Healthcare Corporation and Lincare Holdings Inc. (Incorporated by
reference from Registrant's Current Report on Form 8-K filed on May 2,
1995).
3.1 -- Certificate of Incorporation of Registrant, as amended through May 11,
1994 (Incorporated by reference to Exhibit 2.1 of Registration No.
33-53957 on Form S-4).
3.2 -- Bylaws of Registrant (Incorporated by reference to Exhibit 3.2 of
Registration No. 33-53957 on Form S-4).
4.1 -- Form of Common Stock Certificate for the Registrant's common stock,
$.001 par value per share (Incorporated by reference to Exhibit 4.1
from Registrant's Annual Report on Form 10-K filed March 31, 1995).
4.2 -- $75 million 7% Convertible Subordinated PIK Note and $25 million 12%
Non-Convertible Subordinated PIK Note (Incorporated by reference to
Exhibit F from Registrant's Current Report on Form 8-K dated April 6,
1995).
*5 -- Opinion of Brobeck, Phleger & Harrison.
*8.1 -- Opinion of Brobeck, Phleger & Harrison regarding certain tax matters.
*8.2 -- Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol regarding tax
matters.
+10.1 -- Amended and Restated Credit Agreement dated as of February 10, 1995, by
and among Curaflex, T2, HealthInfusion, Medisys, and HMSS as
Co-Borrowers, Toronto Dominion (Texas), Inc., as Agent (the "Amended
Credit Agreement") (Incorporated by reference to Exhibit 10.1 from
Registrant's Annual Report on Form 10-K filed March 31, 1995).
10.2 -- Form of Employment Agreement between the Registrant and Charles A.
Laverty (Incorporated by reference to Exhibit 10.1 of Registration No.
33-53957 on Form S-4).
10.3 -- Form of Severance/Non-Compete Agreement between the Registrant and
Miles E. Gilman (Incorporated by reference to Exhibit 10.2 of
Registration No. 33-53957 on Form S-4).
</TABLE>
<PAGE> 297

<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
10.4 -- Form of Severance/Non-Compete Agreement between the Registrant and Wil-
liam J. Brummond (Incorporated by reference to Exhibit 10.3 of
Registration No. 33-53957 on Form S-4).
10.5 -- Form of Severance/Non-Compete Agreement between the Registrant and
Tommy H. Carter (Incorporated by reference to Exhibit 10.4 of
Registration No. 33-53957 on Form S-4).
*10.6 -- Form of Indemnification Agreement between the Registrant and each of
the Registrant's directors and certain executive officers.
10.7 -- Registrant's 1994 Stock Option/Stock Issuance Plan and related forms of
agreements (Incorporated by reference to Exhibit 10.15 of Registration
No. 33-53957 on Form S-4).
10.8 -- Registrant's Employee Stock Purchase Plan (Incorporated by reference to
Exhibit 10.16 of Registration No. 33-53957 on Form S-4).
10.9 -- 401(k) Plan of T2 dated December 8, 1989 (Incorporated herein by
reference to Exhibit 10(s) of T2's Annual Report on Form 10-K for the
fiscal year ended September 30, 1989, filed with the Commission on or
about December 29, 1988.
10.10 -- 1988 Stock Option Plan of T2, as amended and restated as of July 31,
1990 and as further amended as of (i) August 20, 1991; (ii) November
12, 1991; and (iii) July 6, 1992 (Incorporated by reference to Exhibit
10.18 of Registration No. 33-53957 on Form S-4).
10.11 -- Curaflex 1989 Stock Option Plan (Incorporated by reference to Exhibit
10.53 of Registration No. 33-53957 on Form S-4).
10.12 -- Curaflex Amended 1990 Stock Option Plan (Incorporated by reference to
Exhibit 10.54 of Registration No. 33-53957 on Form S-4).
10.13 -- Curaflex Directors' Nonqualified Stock Option Plan (Incorporated by
reference to Exhibit 10.59 of Registration No. 33-53957 on Form S-4).
10.14 -- Clinical Homecare Ltd. 1990 Incentive Stock Option Plan, as amended
(Incorporated by reference to Exhibit 10.61 of Registration No.
33-53957 on Form S-4).
10.15 -- Clinical Homecare Ltd. 1990 Stock Option Plan, as amended (Incorporated
by reference to Exhibit 10.62 of Registration No. 33-53957 on Form
S-4).
10.16 -- 1989 Stock Option Plan of Medisys (Incorporated by reference to Exhibit
10.85 of Registration No. 33-53957 on Form S-4).
10.17 -- Form of Non-Plan Option Agreement of Medisys (Incorporated by reference
to Exhibit 10.86 of Registration No. 33-53957 on Form S-4).
10.18 -- Asset Sale and Note Purchase Agreement dated as of January 29, 1995,
among Coram Healthcare Corporation, Caremark International Inc. and
Caremark Inc., as amended April 1, 1995 (Incorporated by reference to
Exhibit G from Registrant's Current Report on Form 8-K dated as of
April 6, 1995).
+10.19 -- Credit Agreement dated as of April 6, 1995 among Coram Healthcare
Corporation, Coram, Inc., the lenders named therein and Chemical Bank
as Administrative Agent, as Collateral Agent and as Fronting Bank
(Incorporated by reference to Exhibit C from Registrant's Current
Report on Form 8-K dated as of April 6, 1995).
</TABLE>
<PAGE> 298

<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
10.20 -- Securities Purchase Agreement, and Form of Subordinated Bridge Note,
dated as of April 6, 1995 among Coram, Inc., as Issuer, Coram Funding,
Inc., as initial Purchaser and Coram Healthcare Corporation
(Incorporated by reference to Exhibit E from Registrant's Current
Report on Form 8-K dated as of April 6, 1995).
*11 -- Statement regarding Computation of Per Share Earnings.
**23.1 -- Consent of Ernst & Young LLP.
**23.2 -- Consent of KPMG Peat Marwick LLP (St. Petersburg).
**23.3 -- Consent of Deloitte & Touche LLP.
**23.4 -- Consent of KPMG Peat Marwick LLP (Ontario).
**23.5 -- Consent of Arthur Andersen LLP.
**23.6 -- Consent of Coopers & Lybrand LLP.
**23.7 -- Price Waterhouse LLP.
*24.1 -- Consent of Brobeck, Phleger & Harrison (included in the opinion filed
as Exhibit 5 to this Registration Statement).
*24.2 -- Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included in
the opinion filed as Exhibit 8.2 to this Registration Statement).
**99.1 -- Form of Coram Healthcare Corporation Proxy Card.
**99.2 -- Form of Lincare Holdings Inc. Proxy Card.
</TABLE>

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

* To be filed by amendment.
** Filed herewith.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 17, 1995, included in the Proxy Statement
of Coram Healthcare Corporation which is made a part of the Registration
Statement (Form S-4 No. 33-00000) and Prospectus of Coram Healthcare Corporation
for the registration of 45,665,000 shares of its common stock.

/s/ ERNST & YOUNG LLP
--------------------------------------
ERNST & YOUNG LLP

Orange County, California
May 11, 1995

<PAGE> 1

EXHIBIT 23.2

CONSENT OF KPMG PEAT MARWICK LLP INDEPENDENT AUDITORS

The Board of Directors
Lincare Holdings Inc.:

We consent to the use of our report included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data of Lincare"
and "Experts" in the Joint Proxy Statement/Prospectus.

Our report refers to a change in the method of accounting for income taxes.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

St. Petersburg, Florida
May 11, 1995

<PAGE> 1

EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Shareholders of
T2 Medical, Inc.
Alpharetta, Georgia

We consent to the use in this Registration Statement of Coram Healthcare
Corporation on Form S-4 of our report dated November 17, 1993 (December 23, 1993
as to Note 17) (which expresses an unqualified opinion and includes an
explanatory paragraph relating to material uncertainties concerning certain
pending claims against T2 Medical, Inc.) (relating to the financial statements
of T2 Medical, Inc. not presented separately herein) appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Atlanta, Georgia
May 10, 1995

<PAGE> 1

EXHIBIT 23.4

CONSENT OF KPMG PEAT MARWICK LLP INDEPENDENT AUDITORS

The Board of Directors
Curaflex Health Services, Inc.:

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the Joint Proxy Statement/Prospectus.

Our report refers to a change in the method of accounting for income taxes.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Ontario, California
May 11, 1995

<PAGE> 1

EXHIBIT 23.5

[ARTHUR ANDERSEN LLP LETTERHEAD]

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the use
of our report dated March 18, 1994 covering the consolidated financial
statements of HealthInfusion, Inc. and Subsidiaries for the years ended December
31, 1993 and 1992 and to all references to our Firm included in this Form S-4
registration statement of Coram Healthcare Corporation.

/s/ Arthur Andersen LLP

Arthur Andersen LLP

Miami, Florida,
May 10, 1995

<PAGE> 1

EXHIBIT 23.6

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-4 of
our report dated February 11, 1994, on our audits of the consolidated financial
statements of Medisys, Inc. and Subsidiaries as of December 31, 1993 and for
each of the years in the two-year period then ended. We also consent to the
reference to our Firm under the caption "Experts".

/s/ COOPERS & LYBRAND L.L.P.
--------------------------------------
COOPERS & LYBRAND L.L.P.

Minneapolis, Minnesota
May 11, 1995

<PAGE> 1

EXHIBIT 23.7

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Coram Healthcare Corporation of our report
dated March 15, 1995 relating to the financial statements of Caremark
International Inc. Home Infusion Business, which appears in such Prospectus. We
also consent to the references to us under the heading "Experts" and "Summary
Historical Consolidated Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such "Summary
Historical Consolidated Financial Data."

/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP

Chicago, Illinois
May 11, 1995

<PAGE> 1

EXHIBIT 99.1

CORAM HEALTHCARE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY , 1995

The undersigned hereby appoints James M. Sweeney, Patrick J. Fortune, and
Sam R. Leno, and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes either of them to act and to vote at the
annual meeting of stockholders of Coram Healthcare Corporation ("Coram") to be
held on July , 1995, and at any adjournments thereof, as indicated upon all
matters referred to on this proxy card and described in the Joint Proxy
Statement/Prospectus for the meeting, and, in their discretion, upon any other
matters which may properly come before the meeting.

1. Adoption and approval of the Agreement and Plan of Merger dated as of
April 17, 1995, as amended, between Lincare Holdings Inc., a Delaware
corporation ("Lincare"), CHC Acquisition Corp., a Delaware corporation ("Merger
Sub"), and Coram, providing for the merger of Merger Sub with and into Lincare,
with Lincare becoming a wholly-owned subsidiary of Coram, and the transactions
contemplated thereby.
/ / FOR / / AGAINST / / ABSTAIN

2. Elect members of the Coram Board of Directors.

<TABLE>
<S> <C>
/ / FOR ALL nominees listed below / / WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary). nominees listed below.
</TABLE>

James M. Sweeney, Patrick J. Fortune, Tommy H. Carter,
Richard A. Fink, Stephen G. Pagliuca, L. Peter Smith,
Dr. Gail R. Wilensky

(INSTRUCTION: To WITHHOLD AUTHORITY to vote for any
individual nominees, draw a line through (or otherwise
strike out) the nominee's name in the list above.

(Continued and to be signed on reverse side)
<PAGE> 2

3. To approve an amendment to Coram's 1994 Stock Option/Stock Issuance Plan
which will increase the number of shares of Common Stock authorized for issuance
thereunder from 7,600,000 shares to 12,000,000 shares.

/ / FOR / / AGAINST / / ABSTAIN

Shares represented by all properly executed proxies will be voted in
accordance with instructions appearing on this proxy card and in the discretion
of the proxy holders as to any other matter that may properly come before the
meeting. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR
ITEMS 1, 2 AND 3.

Dated: ________________, 1995 (SEAL)
------------------------------------
(Signature)

(SEAL)
------------------------------------
(Signature)

PLEASE SIGN AS NAME(S) APPEAR ON
THIS PROXY CARD, AND DATE THIS PROXY
CARD. IF A JOINT ACCOUNT, EACH JOINT
OWNER MUST SIGN. IF SIGNING FOR A
CORPORATION OR PARTNERSHIP AS AGENT,
ATTORNEY OR FIDUCIARY, INDICATE THE
CAPACITY IN WHICH YOU ARE SIGNING.

<PAGE> 1
EXHIBIT 99.2

PROXY PROXY

LINCARE HOLDINGS, INC.

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY ____, 1995

The undersigned hereby appoints James T. Kelly, Howard R. Deutsch and James
M. Emanuel, and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes any of them to act and to vote at the special
meeting of stockholders of Lincare Holdings, Inc. ("Lincare") to be held on
July____,1995, and at any adjournments thereof, as indicated upon all matters
referred to on this proxy card and described in the Joint Proxy
Statement/Prospectus for the meeting, and, in their discretion, upon any other
matters which may properly come before the meeting.

(Continued and to be signed on reverse side.)

LINCARE HOLDINGS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /

1. Adoption and approval of the Agreement and Plan of Merger dated as of
April 17, 1995, as amended, between Lincare, Coram Healthcare Corporation, a
Delaware corporation ("Coram"), and CHC Acquisition Corporation, a Delaware
corporation ("Merger Sub"), providing for the merger of Merger Sub with and
into Lincare, with Lincare becoming a wholly owned subsidiary of Coram, and
the transactions contemplated thereby.

For Against Abstain
/ / / / / /

Dated: ___________________________, 1995

__________________________________(SEAL)
(Signature)

Please sign as name(s) appear on this
proxy card, and date this proxy card. If
a joint account, each joint owner must
sign. If signing for a corporation or
partnership an agent, attorney or
fiduciary, indicate the capacity in which
you are signing.