Free Appendix - District Court of Delaware - Delaware

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 1 of 30

Common Stock from time to
of

shall

be

entitled

to

receive

dividends ratably

if in

shares

of

time by the Board of Common Stock held by

Directors each such

as may be declared to the number proportion

any

holder

After distribution in full of the preferential amount fixed by or pursuant of this Article Fourth if any to be the provisions of Paragraph holders of Preferred Stock in the event of voluntary or distributed to the distribution or sale of assets dissolution or winding involuntary liquidation the holders of the Common Stock shall be entitled to up of the Corporation
to

receive whatever
to

all

the

kind

the

number

remaining assets of the Corporation tangible and available to stockholders for distribution ratably of shares of Common Stock held by each

intangible
in

of

proportion

31

A31

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Page 2 of 30

EX-3.1

4th

Page

of
The or

ITOCIi
Preferred
The

Previous
Stock
of

INexti

Bottom

Just

4th

PREFERRED
in one or

STOCK

more
the

classes

series
the to fix

Board

shall have Corporation

resolution from time to time the of one classes or series of Preferred Stock and the voting or more designation powers full or limited or no voting powers and such designations preferences and relative participating optional or other special rights and limitations or restrictions thereof and to fix or alter the qualifications
by

Law

to authority of Delaware

fullest

extent

may be issued from time to time Directors of the Corporation permitted under the General

comprising any such class or series subject to the requirements General Corporation Law The authority of the Board of Directors without limitation of with respect to each such class or series shall include the the and fix foregoing right to determine number
of the of

shares

Delaware

The

number

of

distinctive of such designation shares to constitute such class or

class

or

series

and the

series

The rate and times at which if any on the shares of dividends such class declared and paid or set aside for payment or series shall be whether dividends at the rate so determined shall be cumulative or

accruing any

whether

the

shares

of

such

class

or

series shall be

entitled

to

or other dividends at the rate so determined and if so participating what terms and the extent of the preference on or relation if any of such dividends to the dividends payable on any other class or or classes

series of

the
The

same

or

other

classes

of

stock

shares

of

the

redeemable
The

if any of the obligation Corporation to redeem if particular class or series of Preferred Stock and the price terms and manner of such redemption

right or

and relative rights and preferences if any and the special amounts per share which the shares of such class or series of Stock shall be entitled to receive upon any voluntary or distribution or sale of involuntary liquidation merger consolidation assets dissolution or winding up of the Corporation amount or Preferred
The terms and conditions if any upon which shares of such class series shall be convertible into or exchangeable for shares of capital stock of any other class or series the price or prices or the including or

or

rate

rates

of

conversion

or

exchange

and

the

terms of

adjustment

if

any
The if any obligation purchase shares of such class or of similar nature or otherwise of the redeem or Corporation to retire series pursuant to fund or fund sinking and the terms and conditions of such

obligations
The voting rights if any including special voting rights with respect to the election of directors and matters adversely affecting any class or series of Preferred Stock and

8.

class

or

Stock

if any Limitations series or any shares and

on the
of any

issuance other

of

additional
or

shares

of

such

class

series of

Preferred

Such relative Corporation

rights

preferences powers qualifications special or and privileges thereof as the Board of Directors of the in.accordance with this Certificate of Incorporation acting

other

A32

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 3 of 30

may
this

and are not inconsistent deem advisable Certificate of Incorporation PROVISIONS relative in each

with

law and

the

provisions

of

OTHER

The Stock
in

shall

and rights of each powers preferences case be as fixed from time to time by

series of
the

Preferred
of

Board

in the resolution or resolutions adopted pursuant to authority granted of this Article Fourth and the consent by class or series vote Paragraph of the holders of the Preferred Stock or such of the series of the or otherwise for Preferred Stock as are from time to time outstanding shall not be required of any other series of Preferred Stock the issuance by the Boardof Directors

Directors

the and rights of such other series shall be fixed powers preferences as senior to or on parity with powers preferences by the Board of Directors that however and rights of such outstanding series or any of them provided the Board of Directors may provide in such resolution or resolutions adopted with respect to any series of Preferred Stock that the consent of the holders of

whether

majority

or such

greater

proportion

as

shall be

therein

32

A33

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 4 of 30

rEx-3.1
fixed
for of

5th

Page

of

TQcI1stI

Previous

I.NextI

Bottom

Just
be

5th

the

shares of such series voting thereon shall the outstanding issuance of any or all other series of Preferred Stock

required

shares to the provisions of Section of this Paragraph of Subject any series of Preferred Stock may be issued from time to time as the Board of and such terms and for such consideration Directors shall determine as shall on fixed by the Board of Directors be

Common shall by the
4.

determine Board of No

Stock may be and on such Directors
of

from time to time as the terms and for such consideration issued

Board
as

of

Directors fixed

shall be

shares of any class or series of shares or shares of any class or series of shares or of options warrants or other rights to purchase or acquire shares of any class or series of shares or of other securities of the Corporation shall have any shares of any subscribe for any unissued to purchase preemptive right acquire class or series or any additional shares of any class or series to be issued by securities convertible any of into
the

holder

such

reason of any increase of the authorized capital stock class or series or bonds certificate of indebtedness securities convertible into or exchangeable for shares or carrying any right to purchase or acquire shares of additional authorized shares any such unissued series of shares or securities convertible into carrying
any to

of

the Corporation of debenture or other

any

of

any

class

or

series

class or series but any issue of shares of any class or or exchangeable for shares or issued and disposed
of

pursuant corporations the Board of

right to purchase or acquire shares may be resolution of the Board of Directors to such
or

persons

firms
advisable by

associations Directors in the-

and upon exercise

such
of

terms
sole

its

may be deemed discretion
as

The Corporation reserves authorized or any capital stock and to amend alter change same

the right to increase or decrease its class or series thereof or to reclassify the or repeal any provision contaihed in this
in the manner now or any amendment thereto and limitations as subject to such conditions all rights conferred in this upon stockholders are granted subject to any amendment thereto in

Certificate hereafter
are

of

Incorporation

or

prescribed by law hereinbefore prescribed

but and
or

Certificate of Incorporation this reservation

FIFTH
The business of the NUMBER ELECTION AND TERMS OF DIRECTORS Board of Directors shall be managed The number of directors of Corporation by the to the Corporation shall be fixed from time to time by or pursuant By-Laws in or fixed by or pursuant of the to Corporation Except as otherwise provided of Article Fourth hereof relating to the rights of the holders of the provisions over the Common Stock as to having any class or series of stock preference

dividends
the

or upon liquidation to elect directors under specified circumstances directors shall be classified with respect to the time for which they into three classes as nearly severally hold office equal in number as in the in the By-Laws of the as shall be provided manner specified possible One class shall be originally elected for term expiring at the Corporation annual meeting of stockholders to be held in 1995 another class shall be

originally be held in

elected for term expiring at the annual meeting of stockholders term 1996 and another class shall be originally elected for

to

to be held in 1997 with each expiring at the annual meeting of stockholders member of each class to hold office until successor is elected and qualified At

each

annual

meeting

of

stockholders

of

the Corporation

and except

as

A34

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 5 of 30

in or fixed by or pursuant to the of Article provided provisions hereof relating to the rights of the holders of any class or series of the stock having over Common Stock as to dividends or upon preference under specified the of circumstances successors liquidation to elect directors

otherwise Fourth

the

class

of

directors
for

whose

term expires

at

that

meeting

shall be

elected

to

hold

office

term of

three

years
OF before
in the

STOCKHOLDER

BUSINESS
directors annual an By-Laws
of

NOMINATION OF DIRECTOR CIDIDATES ND INTRODUCTION for the Advance notice of stockholder nominations election of and advance notice of business to be brought by stockholders meeting
the of

stockholders

shall be

given

in

the

manner

provided

Corporation Except as otherwise required to the by or pursuant

DIRECTORSHIPS AND VACANCIES NEWLY CREATED in or fixed by law and except as otherwise provided of Article Fourth hereof provisions

33

A35

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 6 of 30

EX-3.
relating
to

6th
the

Page

of

Previous

Next

Bottom

Just

6th

preference directors

or series of stock rights of the holders of any class having the Common Stock as to dividends or upon liquidation to elect circumstances specified directorships newly created from any increase in the number of directors and any vacancies on the resulting from death removal Board of Directors resulting resignation disqualification be filled by the affirmative vote of or other cause shall majority of the

over under

even though less than remaining directors then in office quorum of the Board of Directors ii any director elected in accordance with the preceding clause shall hold office for the remainder of the full term of the class of occurred and directors in which the new directorship was created or the vacancy shall have been elected and qualified and iii until such directors successor
no

decrease
the

in

the

number

of

directors

shorten

term ofarly

incumbent

contituting director

the

Board

of

Directors

shall

in or fixed by or pursuant to the REMOVAL Except as otherwise provided of Article Fourth hereof relating to the rights of the holders of any provisions class or series of stock over the Common Stock as to having preference dividends or upon liquidation to elect directors under specified circumstances from office only for cause and director my be removed only by the any

affirmative outstanding

vote

of

the of

shares

together as single hereof or in Article Seventh hereof the phrase the then outstanding shares of stock entitled to vote generally is used such phrase shall the Corporations mean each then outstanding share of any class or series of the Corporations in the election of the Corporations stock that is entitled to vote generally directors OR REPEAL Notwithstanding other provisions of this AMENDMENT any Fifth or of any other Article hereof or of the ByLaws of the the fact that Corporation and notwithstanding lesserpercentage may be from time to time by law this Article Fifth any other Article specified Article
of this Article Fifth hereof or the ByLaws of the Corporation the provisions in any respect amended or repealed nor may any provision may not be altered unless such therewith be adopted alteration amendment repeal or inconsistent is approved vote of at least 80% of the combined by the affirmative adoption shares of the Corporations stock entitled voting power of the then outstanding to

of 80% of the combined voting power of the then stock entitled to vote generally voting Corporations class Whenever in this Article Fifth or in Article Sixth

holders

the

vote

generally

voting

together

as

single SIXTH

class

Both

stockholders
to

and

directors

shall have
one

power
or

if

the

ByLaws
within

so or

provide
without

hold

the

their meetings State of Delaware

and to have

more

offices

to of

Except as otherwise fixed by resolution of the Board of Directors pursuant of Article Fourth hereof relating to the rights of the holders provisions Preferred Stock any action required or permitted to be taken by the
the

of the Corporation must be effected at duly called annual or meeting of such holders Except as otherwise required by law and subject to the rights of the holders of Preferred Stock special meetings of stockholders may be called only by the Chairman on his or her own initiative Officer the Chief Executive if different from the Chairman on his or her own

stockholders special

initiative
of

or

the

Board of
of

majority this Certificate holders
of at

the

entire

resolution approved Directors to by pursuant of Directors in Notwithstanding anything contained to the contrary the affirmative vote of the Incorporation Board
of 80%

least

thevoting

power

of

all

shares

of

the

Corporation

A36

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 7 of 30

in the to vote election of directors generally voting together single class shall be required to alter amend adopt any provision inconsistent with or repeal this Article Sixth

entitled

as

SEVENTH The Board of Directors shall have power to adopt amend and repeal the from time to time by of the By-Laws Corporation to the maximum extent permitted Delaware that any By-Laws adopted by the Board of law provided however Directors under the powers conferred hereby may be amended or repealed by the Board of Directors or by the holders of at least majority of the combined shares of the Corporations stock entitled voting power of the then outstanding to vote generally voting together as single class except that and of this Article Seventh notwithstanding any other provisions or any other Article hereof or of the By

34

A37

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 8 of 30

EX-3.1
Laws

7th

Page

of

IQcIi

Prevjp

INext

Bottom

Just

7th

lesser percentage of the the fact that Corporation and notwithstanding from time to time by law this Article Seventh any other may be specified the of Article II Article hereof or the ByLaws of the Corporation provisions those of Article III Sections and of Sections or 11 of the ByLaws the ByLaws and the rights of the directors and officers of the Corporation with under Article IX of the By-Laws may not be altered inconsistent therewith nor may any provision in any respect repealed is approved unless such alteration be adopted amendment repeal or adoption by 80% of the combined the affirmative vote of the holders of at .east voting power shares of the Corporations stock entitled to vote of the then outstanding as that rights of directors or voting together single class except generally under Article IX may with respect to indemnification officers of the Corporation respect amended
to or be

indemnification

by such enlarged such indemnification other provisions of

the By-Laws of the from time to time by law this Article Seventh percentage may be specified any the of this other Article hereof or the By-Laws of the Corporation provisions in any nor may amended or repealed Article Seventh respect may not be altered unless such alteration inconsistent therewith be adopted any provision is approved vote of the holders or adoption by the affirmative amendment -repeal of the at

be required if enlargement of applicable law Notwithstanding rights permitted by any this Article Seventhor of any other Article hereof or of that lesser the fact Corporation and notwithstanding lesser vote
is as

may

otherwise

least

80%

of

the stock

combined entitled

Corporations

voting power or the to vote generally

then

outstanding together

shares

of

voting

asa

single

class
EIGHTH shall not be personally liable to this this Corporation stockholders for monetary damages for breach of fiduciary of the directors for liability for any breach except ii for acts or duty of loyalty-to this Corporation or its stockholders misconduct omissions not in good faith or which involve intentional or knowing director
of

Corporation or its director duty as

violatin

of

law
for

iii- under
any

Section

174

of

the the

Delaware director

General derived

Corporation
any

improper General Corporation Law is amended to personal benefit If the Delaware authori2e corporate action further eliminating or limiting the personal then the liability of director of this Corporation liability of directors shall be eliminated or limited to the fullest extent permitted by the Delaware

Law

or

iv

transaction

from which

General Any

Corporation

Law

as

so

amended

of the foregoing paragraph by the stockholders repeal or modification of Corporation shall not adversely affect any right or protection director of this Corporation repeal or existing at the time of such of this

modification NINTH RIGHT which
it is or

OF

INDEMNIFICATION
to do so

The by

Delaware

empowered any other any

effect

indemnity

person

applicable who

Corporation may to the fullest extent to General Corporation Law of the State of laws as they may from time to time be in made was or is threatened to be party to any
the she the

whether civil pending or completed action suit or proceeding administrative that he or or investigative by reason of the fact director of the or is or was is or was or officer Corporation serving at as director or officer of another corporation request of the Corporation threatened criminal partnership including joint

venture

trust or

other

attorneys

fees

judgments

fines

enterprise against all and amounts incurred

expenses by him or

her

A38

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 9 of 30

in

connection

with

such

action

suit

or

proceeding

TENTH Corporation reserves the right to amend alter change or repeal any in this Certificate contained of Incorporation in the manner now or provision and all hereafter prescribed by statute or this Certificate of Incorporation herein are granted subject to this rights conferred upon stockholders
The

reservation

35

A39

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 10 of 30

EX-3.i

Last

Page

of

TOClisti

Previous

INext

Bottom

Just

8th

ELEVENTH Election
of

directors

need

not

be

by written

ballot

TWELFTH
The

name

and mailing

address

of

the

incorporator

is

Gatlin Stephen Gardner Carton Douglas 321 North Clark Suite 3400 Chicago Illinois

606104795

hereinbefore THE UNDERSIGNED being the incorporator named for the General Corporation Law of corporation to the purpose of forming pursuant do make this certificate and certifying that this Delaware hereby declaring and deed and the facts herein stated are true and accordingly have my act hereunto.set 1993 my hand this 30th day of November
/s/

is

STEPREN Stephen

GATLIN Gatlin

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2006 Fran Finnegan

Company All Rights Reserved GMT- Help at SECInfo -Tue 25 Apr 2006 172947.1

A40

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 11 of 30

MINUTES

OF

TELEPHONIC

MEETING OF

OF THE BOARD OF DIRECTORS

CORAM IIEALTHCARE
AprIl

CORPORATION

22 1999

telephonic

meeting
at

of

the

Board

of

Directors

of

Corain on

Healthcare April

Corporation

the

Company
tonotke
duly

was convened given

approximately in the

1240 p.m MST
meeting were

Thursday

22

1999

pursuant

Participating Executive

the following Stephen
in

Directors

Donald
Richard Richard Financial

Am

rat

Chairman and Chief
Stephen President
axid

Officer

\Villian

Casey

Feinberg were

Fink Smith
Officer

Pagliuca

and

Peter

SmIth

Also

participating

the meeting and Blair

and

Secretary

Wendy
Senior

Simpson
President

Executive

Vice

President

Chief

Scott

Larson Robinson

Vice

and
also

General participated

Counsel
in

Lockwood
at

of Oflen
of the

Johnson Chairman

Neff
acted

Ragonetti
as

P.C

the

meeting
Larson

the

invitation

Mr

Amaral

Chairman

of

the

meeting

and

Mr

kept

the

Minutes

REVIEW
The
the

AND APPROVAL
first

OF MINUTES
was review
held
to

OF PRIOR MEETINGS
and of
the
draft

item the

of

business

consideration

Board and

minutes April

from 1999
duly

meetings draft

of

Board of been

Directors distributed

on

January Directors

14 1999
prior
to

March
the

1999

The

minutes had

the

meeting

Upon

motion

made and seconded

the

minutes

were

adopted

as presented

FIRST

QUARTER FINANCIAL REPORT Mr
Amaral
during results invited
its first

Ms
quarter
in

Simpson of 1999

to

provide

an

overview

of

the

Companys
of the

financial

performance
financial

Ms

Simpson

reviewed
to

the highlights

Companys
Simpson
reserves

as outlined

the

materials

presented

the
as

Board

of

Directors

Ms
litigation

summarized
and other

the various

points as

of

non.operating
that

income
the

such

recoveries
financial

from

matters

such

bonuses

impacted
with the

Companys
contracts

statements has with

She Aetna on
its

also

reviewed

the financial

resujts

associated

various

the

Company had by
been Aetna

U.S
base

Ilenithoare business
that to

Inc

Aetna
the

USHC

She

explained of cash

that the to the

Company Company
to

working

collect USI-IC

various

amounts

owed

USIC
that

She

stated

Aetna

had been slow
various

in remitting for receiving

cash

payments
and

the

Company

but

the

Company
for

was
its

negotiating

methods

advances

ultimately

achieving

full

payment

services

Turning
and with cost

to

the

Resource

Network
with
that

division the the

Ms

Simpson

highlighted the Resource

the outstanding

revenue has

EXHIBIT

ofgoods

matters

associated explained the

Master Agreement

Network
issues

division with

Aetna

USI-IC

She

Company

bad

certain ceitajn

unresolved revenues

Aetna
the

USIIC

which

prevented

Company

from

recording

even

though

COR-EQTy

0014530

A41

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 12 of 30

Ivlrnute5

of

the

Board

of

Directors

April

22

1999

Page She added
the

corresponding matters

costs

were

incurred
after

and

recorded with

that

the

Con1pans

treatment

of

these

had been

established

consulting

Companys
sheet

auditors

E-.rnst

Young

LLP

Ms
and
inventory office
certain

Simpson She

outlined explained

the

Companys

balance

noting
capital

increases

ir accowts
for

receivable for

that the other

Company had made
required Jersey
in

expenditur..es with
the

pumps and
the

equipment
office

and
in

matters

connection

outfzning

of

Resource

Net-work location

division
in

Whippany

New

and

the

Coram

Prescriplin

Services

CPS
during
to that

Orlando

Florida

Ms
first

Simpson and
an
that

noted
fls in

that

the

Company
increased and

had bonowed $26

approximately during other the

$2.5
quarter

million
in

the

quarter

debt

had

million

order

fund
the for
its

operations

increase
to

receivables

inventory spread

and on
its

certain cash

matters
that

She
the
it

noted

Compan
collection

continued

experience cash

negative remained

flo gten
dats

time

required to

of

the

Compan
in

abave

set

em 70
during

%%hile riotec3
first

tended
the

pa

ernploces day
sale

and endors
outstanding

to
had
attempt

and

four

eeks
three
that

respectively

She
the on

that

Cornpan% but
that

DSO

increased to reverse

3.days
trend

uarter
cash

the

Company was workingto

by

focusing

col1ecing

Mr
primary inventory that the
this

Fink

inquired

about

obtaining

more
Rick

favorable

terms
that

from the

vendors

such

as the

Companys
working
its

wholesale

supplier

Cardinal
its

Smith
by

stated

Company
the

had
tI-ste

been

down
progress

and

had

decreased

inventory
partially facility

$600000 by

since and

end

of

year of

He

explained during

however of
its

had

been

offset

CPS

us

build-uJz

inventory the

establishnjeni

Orlando
arid

Florida

Mr
had of

Smith

also

explained
to

that

Companys
and the
its

inventories

of

blood
to

products

hemophilia

factor

increased
to

due

procLuct
ass

shortages
to

Companys
sales

desire

have

inventories also

of these types explained
that

products
liad

provide

urarices
to

support

opportunities directly

Mr
from

Smith

CPS

begun

attempting
in

source
to

many

of

its
--

products favorable

the

manufacturers and rather than

or through through

consignment the

programs
traditional

.rder

achieve

more

payment

terms

Compans

.vholesale

source

FtRST

OUATRjIjEE
Mr
Amaral
directed
uriviied

TIONAL
Rick Smith

REPORT

to

review

the

Mr

Smith

the

Board

to the

materials reeiving

distributed These

Companys He

operations reviewed revealed had

dtjring

the

first in

quarter types

th
highr

changes
decrease coSts

of

therapies therapies
as

the such

Companys
as antibiotics

patients

er

trends
that

in certain goods

and

an

increase and

in certain therapies hemophilia
to steer its

of

such

intravenous

irncnunoglobulin

1VIG
was was

blood
sales

factor

products toward

Mr it

Smith
cost

explained therapies been taken

that

Company management
noted
that

attempting generally

efforts

lower
profit

He

patient census
sales

up

but

thai

much

of

the

potential

had

away
to

throughthe

of

less

profitable therapies

therapies
to

Accordingly
cost

he

was

also

workmg
offered

on programs by

turtj-tcr

transition

higher

cost

lower

models

such

as those

CPS

htIcl\icolttminuIes99boaid42l.doc

COR-EQTY

0014531

A42

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 13 of 30

Miuts
April Page

of

the

Board of

Directors

22

1999

Mr
could
for

Smith
to

also

reviewed

opporturuties included

that

he had

highlighted

for

his

Branch Managers

that

lead

cost savings costs

These of

tighter

management
related

of

inventory

pump

rentals

overtime

staff nursing

cost

deliveries

and

other

items

Mr
division observed

Smith
as

then

summarized
claims large Orlando

certain

opportunities and

available for

for the

Resource

Network
I-Ic

such
that

outsourcing had
to its

processing cash

opportunities during the
that

CPS
of

in

E-Commerce Companys
to

CPS

been

consumer
but

transition

the

main on

mail-order track

facility

new

facility

added

he

expected

CPS

move back

Mr
lnfomatics
the

Smith

also

highlighted

the

opportunities
this

available

for

the

Clinical

Research

and

Medical
sell

division

He

explained

that

division

would

continue

to

attempt as

to cross tool
for

with only

Resource
payor

Network
but

division also for

using
its

the

Companys Corameters
research

program

not

its

customers

clinical

customers

Ms
quarter

Smith

explained

that

so

fr he was
asked

comfortable several

that

the

Company
of

would

reach and

its

second Smith

budgetestimates
the
first

Mr

Feinerg
and

questions

Ms
role

Simpson
quarter
the

Mr

regarding expressed items such

quaner
over

results

the

expected
in the

results

for the
the

secnd

Mr
resuks with

Eeinberg

concern as

the limited of the

growth

base had
to

business on the

non-operating

income and
the the

the reverse collection

1itiguion

reserves
as

Companys

financial associatd questions

Companys
reorganization contribution

cash

results

He

inquired

when

the cost savings also
in

field

would
of
the

be

felt

by

the

Company
and base

Mr
the

Feinberg performance infusion believed

asked
the

regarding base

the

Aetna IJSHC
that

agreement

Companys
on
its

business short

Mr
its

Amaral
during

explained
the

the

Companys
bum
that

home

business
that
it

own
its

was

of

plan

second

quarter

management

would meet

second

quarter

plan

COMPENSATION

COMMITTEE
and RickSmith

REPORT

Ms
Mr
Partners 1999
turn in

Simpson

departed

from

the

meeting

Amaral

opened

the

discussion and had

stating

that

he

had

met

with

Goldman

Sachs

Credit April

L.P Goldman

Sachs
that

Cerberus

Financial
his

Partners
to

L.P
his

Cerberus
role at

on

21
and

New

York
as

and

he

explained

proposal Rick

reduce

the

Company

his duties effective

Chief
the

Executive

Officer over

Smith

and He

the

members
that the

of his

management Sachs
terms

team

at

close

of

business
his

Friday

April

23 1999
Ajitaral

stated

Goldman proposed
forth
in

and of an
to

Ccrberu amendment
these

were
to

comfortable
his

with

role

changes Those

Mr

reviewed terms are

Employment
the

Aeieemenl

proposed

se

on
the

Exhibit capacity

minutes

Under

amended

agreement Mr.Amaral

would

serve

only

as

h\tt3JOflJuinoc.99.bOMd422dOC

COR-EQTY

0014532

A43

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 14 of 30

Minutes

of the

Board of

Directors

April22 Page

1999

Chaan
to expire per nsonth

with
OrL

salary

of$1

00000
Under

per the

year

through

the

term

of

the

agreement devote

which up days
to

is

scheduled days by
the

May 15 2000
the

arrangement

Mr
per

Arnaral for

would any

two

to

Company

and would

charge

S2500

day

additional

required

Company

Mr
propasal explained benefits agreements
benefits for

Amaral

then

explainedhat

the

Compensation
to

Committee members
providing
j\Ir

had reviewed

ananagements

providing

employment
of these

agreements
already

certain
letters

of

Company
them with
slated
in

management
various the

He

that

many some

executives chanree

had

severance

and

in

cases
the

of control

payments
these

Amaral
and

that

employment
standardized requested benefits but that

would
and
restrictive

help

Company
for

in retaining

individuals

providing the

covenants differences Arnaral

these
in

individuals benefIts
that

Mr
afforded

Fink
under

in

reviewing the

memo
and
the the

an

explanation
in

of Ihe

the

proposal largely

currently change

1ace

Mr

explained

the

severance

benefits Scott

were
Larson

same

of control

payments were

added

for

Wendy

Simpson

and Vito Ponzio

Mr
Companys
change

Amaral
Chief

reviewed

in

greater

detail

The

proposed
included

terms an

for

employing
in his

Rick

Smith

as

the

Executive

Officer cash bonus

The

terms

increase benefits

annual

compensation
to these

of

control

payment

opportunity

and

other

set

forth

on

Exhibit

minutes

Peter must
differ

Smith

inquired

about
it

the in

Companys
1995 given combining
control

compensation that she

strategY

He
in

noted

that

the

strategy

today
in the

from what

was
to

Company was
entity

more

of an

operations that he

mode

than

mode

ofsellirig

or
in

with

another very

Mr

Fink added
the he but

was

concerned incentives
to

that

Mr

Amarals
to

change members
criteria

bonus

was

different

than

change be

in control agreeable

provided
the

other fee of

of
set

management
forth in his fee

Mr

Amaral

statedthat

would no

changing as
to

success

employment

agreement
it

agreement

ws
and
fee

--

reached the
at

the terms

subsequent

success take

However
of

was

agreed
in

that

Mr

Asnaral success

CornpensationCommittee
later

would

up

the discussion

change

Mr

Amarats

date

Upon emplpyment management employment
for

motion

duly

made
and an

and

seconded
as

the

Board on

approved

the

proposed

terms

of

Mr
enter

Arnaral into with

Mr
Smith

Smith

outlined

Exhibit

and
with

authorized

Company
and
an

to

employment
as

agreement

amendment by
the

Mr

Ainaral

agreement

Mr
that

recommended

CornpensationCommittee

Mr
recommending
with forms
forth

Arnaral
that

added
the

the

Compensation

Committee
to

had

also

adopted

resolutions

Board

authorize officers

Company mananement
and key members
principal terms of the and
nairies

enter

into

employment management

agreements

certain other of the
in

executive

Companys
of duly

team
were

The
set

employment agreements
presented
to

the proposed

recipients

the materials

the

Board

Upon.a

motion

made and seconded

the

Board

COR-EQTy

0014533

A44

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 15 of 30

Minutes April22 PageS

of

the

Board of

Directors

1999

approved
to

the into

Compensation employment

Committees

reconthtendation in the

and

authorized presented

Cornp
to

any management
with the

enter

agreements

substantially

forms

ihe Board

individuals

designated

The
Stock

discussion

turned Issuance

then

to

the

options

proposed

for

issuance
that

under been held

the

Companys
the

1994 by
the

Option/Stock

Plan the

Stock Option Plan
about the the prior options
list

had

reccmrnertded by
persons of option explained for

Compensation
to

Committee
grants

Mr
the

Fink

inquired

currently the
if five

slated grant
that

receive

option

Mr

Arnaral

then reviewed

noting

categoties

recipients the option and

and

swnniarizing

amounts
as

of

their

holdings
for

any

Mr
to

Ama_rat and

grants

were
Peter

intended

combination
that

of rewards

past

perfomiance

new

hires

promotions
through

Smith

stated

the

management amounts Without
motion duly

team
and

needs

have ccompetitive
the stock
that

equity options those

oinership granted were
the

options

and he had

reviewed

compared

them witli
he

by

other

companies-to with other

their executives

extensive

re\ie

elieved

consistent

companies
in the addition that
alt

Upon

made

and

seconded
for

1Ie Board approved
incziividuals to
listed

numbers
to

of options these

included In

Compensation Committee
the

report an

the

on

Exhibit Option

minutes
to reflect

Board

agreed

to

effect

amendmeizt
be

Mr

Arnarals
to

Agreement
of
his

of Mi- Amarals
as

options

would

vested

prior

the

temuination

Employment

Agreement

amended

Mr
duty

Fink recommended
and

that Rick effective Chief

Smith

be

added

to

the

Board of on

Directos 23
of

Upon

motion

made
to

seconded
as
the

and

upon

the close

of business and as

April

l99 Mr
the

Smjth was Board

elected

serve
to

Companys
in

Executive
until

Officer

member
elected

Companys

of Directors

serve

each

capacity

his successors

are duly

and-qualified

DEBT RESTRUCTIJRINC Mr
status

AND STOCK
the discussion

LISTING

STATUS
been

Amaral opened
the

by

stating

that

the

Company
over and
the

had past

iscussing

its

listing

with

New
has

York

Stock Exchange
its

the

Exchange

year
its

During

that

lime
to

the

Company

been

reporting

financial far the

performance representatives

describing of the

brusiness

strategy provided

representatives

of the

Exchange
that

Thus
the in

Exchange
and
that

have

the

Company
receive

with

assurances from
stated

Company
the

would
that

not

be

detisted
to

the Company
procedures but

would The
not

notice

the

Exchange
it

event the

decided

commence
on

detistirig

Exchange make
the

had
tong

that

would

reiew

Companys
then

status

quarterly
to

baSi5

would

any

term

commitments of
its

Mr
other

Arriara
listing

invited

Mr

Larson

provide

discussion

of

Companys

investigation

alternatives

Mr
Johnson
stock
for

Larson

stated

that

the

Company
to

had the

been

working of

with
listing the

Mr Lckwood
the

at

Onen

Robinson
trading
EJeaters

Neff
the

Ragoneni

review

possibility

CmpanYs
had

common
of

on

American

Stock

Exchange System

AMEX
NASDAQ

or

Natio.-nal

Association

Securities

Automated

Quotation

The

Company

revtewcd

COR-EQTY

0014534

A45

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 16 of 30

Minutes April22 Page

of

the

Board

of

Directors

1999

whether
prevented

it

met
the

the

relevant

listing

criteria

and
the

found

that

the

Companys

current

stock

price

Company

from moving
the

to either pursuit

MvIEX
reverse

or

NASDAQ
split to

Accordingly management

had

considered

recommending
increase in the

of

stock

sth
the

the

expectation

of

corresponding

Companys

stock

price

in

order

meet

requirements

Mr
as
to

Feinberg had

stated

that

his

strong
in

preference
listing

was

to

remain on
Arnaral

the

Exchange
that

He

inquired

what

changed

recently

the

status exploring

Mr
the

responded

nothing had

changed

but

that

management

wasintent upon

Companys

alternatives

Mr
to further help the

Amaral

added

that

Rick

Smith had suggeted
believed as necessary thking
this

face-to-face step the
as

meeting precautionary
for its

with

the

Exchange would
of

inquire

about

status

He

measure

Company
and

make
for

decisions the

regarding

agenda
the

annual meeting Accordingly

stockholders Smith

whether
the

Company
would

should be

remain

on

Exchange
with

Rkk
of the

explained as
its

that

Company
to obtain

pursuing assurances

meeting

representatives
to

Exchange
to

soon

as possible out

whatever

were

possible

permit

the

Company

earn

way

of

its

listing

problem

Mr
reconsider concerns price

Amaral whether

explained reverse stock

that

if

nO

assurances

could

be

given
Fink

thc-Board
stated

would he-had

need

to

stock split

split

was

appropriate

Mr
those

that

serious stock

about continue

reverse
to

Mr

Feinberg stock

echoed
split

concerns

explaining

that the

may

decline

following

Afier the

discussion

the

Board At

agreed
that

to delay the

consideration

of

reverse

stock

split

until

after

Exchange and

meeting
consider

occurs what
other
listing

time

Board would reconvene
be necessary
at

discuss

the

results

of the

meeting
to

actions status

would

the annual

meeting

of

stockholders

address

the

Companys

The Board
of information business

discussed

the

iossible

upcoming
resignation expressed
that

earnings

release
in

on

May

1999
as

and of

the the

release close

concerning April

Mr

Amarats

and
concern the

change
that

roles effective

of
--

on
as

23

1999

Mr
26
any

Fink

Mr

Amarals
to

resignation the

may be
be

viewed
released April

negative

Mr
April delay

Ainaral

explained

release

as ditribuied with

Board wotdd
on

on

Monday
but to

1999

The on

Board

agreed

to proceed split

the

release

Monday

26

1999

decision

reverse

slack

ANNUAL Mr
resolutions discussion split the

MEETING Mr
had Board matters of consider
other the

Amaral
regarding about the

explained the annual

that

Larson of

requested and

that

the

meeting stock

stockholders status

certain other

Following
reverse

Companys
resolutions

listing

and

possible

consideration of

stock not

proposed

regarding

the

1999

Annual

Meeting

Stockholders

were

h\ItaSCOflrnifllCj.99tbo1d4fl.doc

COR-EQTy

0014535

A46

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 17 of 30

MjnutoftheBoardofDirectors
April

22 1999

Page

considered resohitions

However
included

Mr

Larson
of

led

discussion

of

the

other

resolutions previously
that

presented

These by
the

ratification and

certain stock by the

options

thatwere
Larson but
that

approved
records did the

Compensation
that the

Comrnittee
considered

issued approved

Company
option

Mr

explained

indicated

Board
their

and

these

grants

the minutes
reflect

not adequately designation

reflect

approval
slated the for

Furihermore
the

the prior minutes

did not

adequately

of
of

the

persons

Compensation Committee
the proposed

Committee Messrs

Accordingly
Pagliuca and

the

prior

appointment was

methbers

of

Compensation
introduced the

Feinberg

Peter

Smith
signatory

ratified

Mr

Larson

also

resolutions

outlining

the granting
leases

of

authority estate

to certain

members of

Company management

for-the

Companys

and

related real

documents

Upon
minutes

motion

duly

made

and

seconded

the resolutions

set

forth

on

Exhibit

these

were

adopted and approved

OTHER

BUS1N1E
Smith
inquired

Peter

of

Mr

Amaral
Officer

and

Rick

Smith

about

conversations Christopher Inc
that

he

had

with

the

Companys
that

former Chief had been
that

Operating

of the Western with from

Area

York

He

explained

Mr

York

considering

position
the

Gateway

Homecare
zequesting

Mr
the they

.kmaral

and

vlr

Smith
the

replied

they to

had

received and about had

request

Mr

York

Company
stared that

waive they
to

covenant incomplete

not

compete

been

considering competitive

this

mailer

However
that

had

information
until

Gateways
information

status

and

they

were

not prepared

make
taken

decision regarding

additional

was

obtained

about

Gateway.-

No

further actioI

was

this

matter

There

being

no

further

business

the meeting

was

adjourned

at

approximately

320

p.m

MST

Respectfully

submirted

Scott Secretary

Larson of
the

Meeting

COR-EQTYool436

A47

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 18 of 30

EXHIBIT

Compensation
April

CommiUee

22 1999
and Changes

ExeeutiveAppointrnenls

Donald

Amaral

Title

ChairmanofthcBoard
Through

Term
Benefits Salary

May 15 2000

Original

1erm
15 2000

ContinuedpaymentbyCompanythroughMay S100000annually
I6houis S2500 per

S3846JSperbiwcek1ypaycheck month

Hour Commitment
Consulting

month
plus expenses

Rate

per

day

if

greater

than

16 houis per

Bonus
Options
Success

EligibI Accekrate

for 4/12
to

pro-rated

payout declined
at

by

Mr

Arnaral

Full Vesting if

end of term

May
on

15 2000
or before

Fee

As

per

contract

Change

of Control

occurs

May 15

2000

Richard

Smith

Title Effective

President

and 1999

Chief Executive

Officer

ApIl

22

Salary CarAllowaace Travel
Initial

S25000

annually

S600permonth Ooioa
for First

Class through

Travel April

at

Mr

Smiths

discretion

Term

Three

years years

30

2002

Severance Bonus Compensation

Two

--

1fe
below
of
his

Company
the

hits

the

percentage be
effect entitled

of

its

EBflDA
receive as

target bonu.s fiscal

act that

forth percentagein

Executive
Salasy

will in

to

Base

as

on

the

last

day

of

the

year

question

.setfor.hbclosv

Percentage

of EBIIDA 100.0%

Target

Percentage

olD

asc

Salaiy

1015%
103.0%

60% 65% 70% 75% 80% 85% 90% 93%
100%

l0.5%
106.0%

1075%
109.0%
.-

1105% 112%

COR-EQTY

0014537

A48

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 19 of 30

EXIHBITB

BOARD OF DIRECTORS
A1PIUL

MEET1G

22

19
Grants

StockOption Pagel

1999

TEL1REORGAN1ZAnON
500000
OJfIcer Presideut Operations

Rick Smith
Joseph Smith Bernoechi

PresIdent Chief Senior

Operating
Vice

R-et

350000 100000 100000 50000

Perry

President

Markflauley
Vito roniio

SeniorVlcePrelsdentSales
Senior Vice Vice

President

BR
East

John

Ellis

Area

President

Operations

50000 50000

RayMcCaslin Bruce Harper John Earringtou
Iriye

AxeaVicePre.sidentSalesSoutb Area Area Area Area Area Area
Vice Vice Vice Vice Vice Vice

President President President President President President

Operations Operations Operations Sales Sales Sales

Central

50000 50000 50000 50000 45000 40000

Sonth
%Yest

Richard Richard Deborah
Michael

Weakland Meyer Saracco

West
Central East

99S

FOURTH QUARTER STOCI OPTrON WThNERS

Frank
Paula Paul

Vivona
Gaida

10000 500O 2500

Astpban

I999SALESCOMMISS1ONPLAN
Sales

Managers

XarenBryant
Aiitony Clarke

5000 5000 5000 5000 5000 5000 5000 5000

Leslie

eecher

5000 5000 5000 5000 5000 5000 5000

DebbieDemils Paula Gaiaa

Dawn

Fleming
Gleeson

Christopher BeneJacobs

Cherlelsnirel Llsbethjarm Eileen

Marianne Rose JimTurner
Chris Tice

Thomas

CraigVoliner

COR-EQTYOOI453ll

A49

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 20 of 30

BOMW OF D11CTOBS MEE1NG
APRIL 22 1999
Grants

Stoek

Option Page2

1999

SALES

COSSIONP1M
Care
Consultants

Managed
Jan Bounds
Frosty Corner 750 250

WiUiamBrenoan Deborah Dannas
Janet

750 750 750 750 750 750 750 750 750
750

Joanne
ICIm

DouneUy

750 730
750 750 750 750 750 750 750 750 750

Dunn-ueble

Eplee

Lynn Cathy

Uanmea
Heinsbn

Megan Rasenberg
JanetteHarden Lisajohnson TeriKolar Kymber Murphy

Jamieflo1au

EthabethMon
BarbaraMusared
Cathy Barb James

Ovefln
Reyn-.1ds

Roy Pornon David
Retherlord Saragnii

Platten

750
750 750 750

Sandra Doug Frank David

JIm Sepeda Angele Maggie

Scblinder

TrimWle

Vivona
Ze1as1owski

750
750

Vonras

NEW

ffIRES

AND

PROMOTOS
VIce-President Reimbursement
th
lieu

Rodney

Wright

7500 2500 40000 40000

PromotIon Equity
VIce Vice

Wendy Barry
Eric

Stak

of Increased

salary

1astaxgo
Douglass

Presidnt Pharmacy Presidut Nursing

Services

Kate

COREQTY

0014539

A50

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 21 of 30

EXflEOITC

RESOL1YflONS

ADOPTED B1TffE

BOAIU OF DIRECTORS
CORPORATION

CO1AM1TEALTHC4JE
April 2.1999

RESOLVED
Operating hereby Offer authorized
for

that

the Chief Vice and

Executive
President directed

Officer
olf the tcj

President

Chief an

Financial

Officer

C2hjef
is

or any

Senior

Company
into

each

Authorized
to the

OffIceic Employxnen
the

empowered
Amaral

enter terms

an

arneodmerti on Exhibit approval

Agreement
the

Donald

substantially

oia the
Dire

outlined to the

to

xnirruts

for

April22

1999

meeting

of

this

Board

of

ctors

subject

of

the

Compenstion

Committee

RESOLVED
effect

that to

any

Authorized Aenarals vested

Ofiicer

is

hereby authorized agreements
to

empowered
that
all

and direcLed of
the

to

an

amendment
thereunder

Mr
be

stock to

option thie

reflect

options
as

granted

would

prior

termination

of

his

employment

agreemcrit

amended

RESOLVED
enter into

that

any

Authorized on
to

Ofilcr

is

hereby authorized

empowered

and

directed

to

an employment outlined
to

agreement on Exhibit

behalf the

oE

the

Company
the

vith Richard

Smith substantially of
this

on

the

terms

minuLes
Compcnsation

for

April

22

1999

meeting

Boa.rd

of

Directors

subject

the

approval

of

the

Committee

RESOLVED
enter

that

any

Authorized behalf

OThcr

is

hereby authorized agreements Ito
these

empowered
in the

and directed forms

to

into

on
the

the

Companys
persons

employinnt

substantially

attched

hereto with

other

designated on

Schedule

resolutions

RESOLVED
Executive
until the his close Officer

that

Richard

Smith of
elected the

hereby

elected

to

serve

as
to

the

Companys
such

hief
upon

and
is

as

eimber
duly
April

Comp
and

anys

Board

of

Directors

serve-in

capancities

successor

hereby day

qL..ali

These

electioji.s

were

made

effective

of business

on

23

1999

RESOLVED
shall

that

the

members
Stephen

of the

Compensation
and of

Committee

of

the

Board

of

Dirctors

be Stephen
since

Feinberg the June

PagLiuca

Peter

Smith and
is

their

service

on

such

committee

24

1998 meeting

of tE3is Board

Directors

hereby

ratified

authcriZed

arrdapproved

LaLuCOTOrmJ42WrD

COREQTYO014O

A51

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 22 of 30

SCIIEDtJLE1

PERSONS

FOR DESI GNATED

EMPLOYMENT

AGREEMES

JosephSrfl1th

Wendy
Scott

SimpsOn

Larson 1onjio

Vito

Paul Quiner Joan Adler BernocCbi

Perry

David Evans

arkHaeY McCoCk

Dd

DomMeffe
Robert Roose

COREQT1

001454i

A52

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 23 of 30

UNITED

STATES

SECURITIES
Washington

AND EXCHANGE
D.C
20549

COMMISSION

Form 1O-Q
Mark One
ll

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly
Period

Ended

June 30 1999

OR

TRANSITION

REPORT PURSUANT TO SECTION 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition

period

from

to

Commission

File

Number

1-11343

Coram Healthcare
Exact name
of Registrant
as

Corporation
specified in
its

charter

Delaware State
or other
or jurisdiction

33-0615337
of

I.R.S Employer
Identification

incorporation

organization

No

1125 Seventeenth
Suite

Street

2100 80202
offices

DenverC0
Address
of
principal

executive

Zip Code

Registrants

telephone

number

including

area

code

303

292-4973

Indicate or
that

by check

mark whether Exchange
to

the Registrant

has

filed

all

reports

required

to

be
for

filed

by Section
shorter

13

15d
past

of the Securities

Act of 1934
file

during the preceding has been

12

months or
to

such

period
for

the Registrant 90

was required Yes
12J

such

reports and

subject

such

filing

requirements

the

days

No
of

The 1999

number of shares outstanding

the Registrants

Common Stock

$.001

par value

as

of

August

10

was 49549366

CROWLEYKVN

016900

A53

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 24 of 30

PART
FINANCIAL

INFORMATION

ITEM

Financial

Stateneizts

CORAM HEALTHCARE

CORPORATION BALANCE SHEETS

CONDENSED CONSOLIDATED
In Thousands

ASSETS
June

30

December
1998

31

1999

Unaudited Current Cash Cash

assets

and

cash
as

equivalents to

limited

use
net

Accounts
Inventories

receivable income

of allowance

of

$16254

and

$18128

8001 1776 120106 23026
280

53

1557
113697

27203
705

Deferred Other

taxes net

current Total

assets current assets net net

5584 158773 27000 2392 17950 3732
amortization
of

4963
148178

Property and Deferred Other Other

equipment
taxes

income

assets deferred net Total costs of

26563 4365 17574 5243 235696 437619

Goodwill

accumulated

$72693

and

$67247

230648 440495

assets

LIABILITIES
Current
liabilities

AND STOCKHOLDERS

EQUITY
72356 7898 5460 52930 11205 4671
260 300

Accounts Accrued
Interest

payable compensation payable
maturities taxes

Current

of long-term

debt

399 495 319

Income
Deferred Reserve Accrued Other

payable
taxes

income

1060 2987 3935
6271

for litigation

merger
current Total

and

restructuring

liabilities

1365 3233 7556 99081

current

liabilities

Long-term Minority Other Deferred

debt
interest in

consolidated

joint

ventures

liabilities

income

taxes

268574 2353 13493 2352

83619 242162 2024 12947 4010

--

Commitments
Total Stockholders
Preferred

and

contingencies

liabilities

385853 10000 shares none issued 100000 shares issued and 49201 at December 31 1998

344762

equity stock stock

Common

authorized par value $.001 par value $001 authorized at June outstanding 49549 30 1999 and
paid-in capital

50

49

Additional Accumulated
Total Total

427296

427133

deficit

372704
equity

334325
92857 437619

stockholders
liabilities

54642
equity

and

stockholders

440495

See accompanying

notes

to

unaudited

condensed

consolidated

financial

statements

CROWLEYKVN

016901

A54

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 25 of 30

CORAM HEALThCARE CONDENSED CONSOLIDATED
In Thousands

CORPORATION OF OPERATIONS

STATEMENTS

Unaudited Except per Common

Share Data
Months
June

Three

Ended

Six

Months
June

Ended 30
1998

30
3998 1999

1999

Net
Cost

revenue of
service

$152797 146846 5951

$117173 87882 29291

$313751 269661 44090

$224862 168382 56480

Gross

profit

Operating

expenses and administrative
uncollectible

Selling general Provision
for

expenses accounts

28680 4452 2716

21625 3577 2778

52509 8613 5448
950

42698 7243 5543

estimated of goodwill
costs

Amortization Restructuring Total Operating Other

operating

expenses

35848

27980 1311

67520

55484
996

income

loss

29897

23430 14083
391

income

expenses

Interest

expense

7524
net taxes and minority
interests

6083
946

20258
1723

Other Loss

income

182

before
tax

income
expense

37239
175
joint

3826
400

37122
250

17539
1400

Income
Minority

interests

in

net

income

of

consolidated

ventures

579

302

1006

713

Net
Loss Loss

loss

$37993
common common
share share assuming
dilution

4528
0.09 0.09

$38378
0.78 0.78

$19652
0.40 0.40

per per

0.77 0.77

See

accompanying

notes

to

unaudited

condensed

consolidated

financial

statements

016902

A55

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 26 of 30

CORAM HEALTHCARE

CORPORATION OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENTS
Unaudited In Thousands

Six

Months 30

Ended 1999 1998

June 1999

Net Cash

cash
flows

used

in

operating
investing

activities activities

$8888

22087

from

Purchases Other

bfproperty

and

equipment

5074 525 5599
28500

39U
620 4531

Net Cash

cash

used

in

investing

activities

flows from on

financing
line

activities

Borrowings

of

credit

Repayment
Sales

of debt including by exercise of stock options
activities

6065
used

80226
10

of stock

Net cash Net

provided

in
in

financing and

22435 7948

80216 $106834

increase

decrease

cash

cash

equivalents

See accompanying

notes

to

unaudited

condensed

consolidated financial

statements

CROWLETh169O3

A56

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 27 of 30

CORAM HEALTHCARE
NOTES TO UNAUDITED
FINANCIAL

CORPORATION

CONDENSED CONSOLIDATED
STATEMENTS

June 30 1999

Basis

of Presentation

Business engaged services
in

Activity
principal

Coram
lines

Healthcare of business

Corporation
alternate

and
site

its

subsidiaries

Coram

or the

Company
and

are

four

outside

the hospital

infusion and
for

therapy
specialty

related

ancillary services

network

management

services

pharmacy

benefit

management
support

mail-order
trials

pharmacy
and

and centralized
services medical

management
Other
services

administrative
offered respiratory

and

clinical

clinical

research

medical such

informatics
as

by

Coram
therapy

include services

non-intravenous

home

health

products

durable

equipment and
site

and

Coram
located infective in

delivers

its

alternate

infusion Infusion

therapy therapy

services

through

approximately

90

branch

offices

44

states

and

Ontario

Canada

involves

the intravenous pain

administration

of

anti-

therapy

intravenous

immunoglobulin

IVIG
management
health

chemotherapy

management

nutrition

and

other therapies

The

Company
which

provides

ancillary

network of

services

through on

its

Resource of

Network
health

division

R-Net
organizations

HMOs
organizations

manages

networks preferred

home

care

provider
serves
its

organizations customers

PPOs
and

providers

behalf

maintenance and other

at-risk

physician centers

groups and

managed
offices

care

R-Net

through

two primary

call

three

satellite

The Coram
order

Company

delivers

pharmacy
division in

Prescription

Services

CPS
review

benefit

management The division

specialty

pharmacy
through

services

through

its

provides

services

centralized in

mail

pharmacy and

service center

Orlando Florida four regional mail order pharmacies

Plainview
in

New

York Omaha Nebraska
Maryland management The
and

Las Vegas
benefit

Nevada

Hayward
service services

California provides through

and

one

retail

pharmacy

Baltimore formulary

pharmacy
certain

management

on-line

claims

administration of
retail patient

drug

utilization

nationwide adherence

network

pharmacies
education

CPSs
and

specialty

pharmacy
to

services

provide high and

centralized

distribution
risk

programs

clinical

support
its

patients

with

cost

high

conditions

Through management
services as

Clinical

Research
for clinical

Medical

Informatics This

division
also

the

Company
data

provides and

centralized integration

and
well as

support

research

trials

division

offers

collection

pharmaceconomic The

outcomes

and

utilization

analyses consolidated
of financial

Basis been

of Presentation by
the

accompanying
pursuant and
to

unaudited the
rules

condensed and

statements and

have

prepared

Company

regulations

the

Securities

Exchange
prepared
to
--

Commission
in

Certain with

information

footnote accounting

disclosures principles financial for fair

normally have

included

in financial or
all

statements pursuant and
are

accordance

generally

accepted

been

condensed
reflect All

omitted

such

regulations
that

The unaudited
the opinion of

condensed

consolidated necessary
for

statements presentation

adjustments adjustments

disclosures

are

in

management

such

of

normal

recurring indicative financial for

nature of the

The

results

of operations the
full

the interim period

ended

June
refer

30 1999
to

are

not

necessarily

results

of

fiscal

year

For
in the

further

information

the

audited

consolidated
as

statements

and notes thereto December Estimated
is

included and

Companys Annual
filings

Report

on

Form 10-K
8-K
net
in

amended

the year

ended

31

1998

subsequent

on

Forms

l0-Q and
the

1999 amount
uncollectible

Provision accounts accounts
provisions

for

Uncollectible stated

Accounts
that

Management
has

believes

carrying
for

of

receivable based
for

fairly

and

the

Company

made

adequate can be

provision as to

on

all

information accounts

available
or

However
they
will

no assurance compare
to

given

the
in

level

of future

uncollectible

how

the

levels

experienced

the past

Earnings Statement

Loss
128

per Share
Earnings

In per

1997
Share

the Financial

Accounting

Standards accordance

Board
with

the

FASB
128

issued basic

No

Statement

128

In

Statement

CROWLEYKVN

016904

A57

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 28 of 30

CORAM HEALTHCARE
NOTES TO UNAUDITED
FINANCIAL

CORPORATION

CONDENSED CONSOLIDATED STATEMENTS Continued
of options warrants per and share convertible
for securities

earnings per share
table sets forth

exclude

any

dilutive

effects

The

following

the computation and

of

basic

and

diluted earnings

the three

and

six

months ended

June

30

1999

1998
Three June

Months

Ended
June

Six 1998 June

Months

Ended
June

301999

30

301999

301998

Numerator
per share

for

basic

and

diluted

loss

$37993
shares--denominator per share securities

$4528
48818

$38378

$19652

Weighted
for Effect

average

basic earnings of other options

49495

49448

48651

dilutive

Stock

Warrants

Denominator
share shares Loss Loss per per

for

diluted

earnings

per

adjusted and

weighted

average

assumed

conversion

49495

48818

49448

48651

common common

share share--assuming

0.77

0.09

0.78

0.40

dilution

0.77

0.09

0.78

0.40

Diluted

earnings
as

loss
effect

per share

computations have been

do

not give

effect

to

stock

options

or warrants

to

purchase

common

stock

their

would

anti-dilutive

Derivatives Standards
requires effective

and 133

Hedging
Accounting

Activities for

In

June

1998

the

FASB
and

issued Statement
Activities at in fair

of Financial

Accounting

No
for

Derivative
as

Instruments
assets

Hedging

Statement
June 1999
and

133

which

recording
fiscal

all

derivative

instruments
after

or

liabilities

measured
issued

value Statement

133

was
of

years beginning Standards

June

15

1999

The
for

FASB

the Statement
Activities

Financial Deferral Statement

Accounting of the 137
Effective will

No
of
fiscal

137

Accounting Statement
all

Derivative

Instruments

Hedging

Date
to
all

FASB

133
fiscal

Statement
and

137
after

which

amends

Statement

133

apply

quarters of
into

years beginning hedging have an

June 15 2000
and
as

As of June
the

30

1999
does

the

Company had
believe that

not entered of the

any

derivative

transactions
effect

such

Company
financial
--

not

adoption results

new

requirement

will

on

the

Companys

future

position

or operating Costs
that as

Start-up

In the

1998
costs

the of

AICPA
of an did

issued

SOP
be

98-5

Reporting
as

on

the Costs
Initial

of Start-Up of

Activities 98-5

which

requires for

start-up

activities

expensed

incurred

adoption the

SOP
98-5 or

was

accounted January position

cumulative

effect

accounting

change
significant

The

Company
on the

adopted
results

SOP

effective financial

1999

and

such

adoption

not have

effect

of operations

CROWLEYKVN

016905

A58

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 29 of 30

CORAM HEALTHCARE
NOTES
FINANCIAL
and

CORPORATION

TO UNAUDITED CONDENSED CONSOUDATED STATEMENTS Continued

Acquisitions

Restructuring Certain businesses

Acquisitions
for additional
is

agreements

related to

to

previously

acquired

or

interests

therein

provide
if

contingent based be on

consideration the
financial

be paid

by the Company
levels

The

amount

of

additional

consideration

any

generally

performance

of the acquired $2.0

companies

As of June
to

30

1999.the

Company
certain

may
on

required

to

pay
or
its

minimum
subsidiaries

of approximately exceeding
certain

million subject or

increase and

based

in
iii

cases

the of

Company
the

revenue

income

targets

changes recorded

the

market

value goodwill
of

Companys
to certain

stock

These

minimum

contingent or the

obligations sellers

have

been

as

additional $1.1

Subject

elections

by the
to

Company
increase

maximum
cash the

of approximately
to

million in

these

contingent of
the

obligations

subject
If

may

be

paid

in

with the remaining

be

paid

common
they
will

stock be the

Company
as additional

these goodwill

contingent
in

payments
in

exceed the

minimum
becomes
and

contingent probable million

amounts Payments

recorded three

the period and

which
totaled

payment
million

during

months

ended

June

30

1999

1998

$0.2

$0.1

respectively

Merger and Restructuring
of the
assets

As

result

of the formation of

of

Coram

and the

acquisition of

of

substantially

all

of the

alternate

site infusion

business

Caremark
the

Inc
million

subsidiary
initiated to

Caremark
restructuring as

International plan

Inc

the

Caremark
Business

Business
Consolidation
costs price to

during

May
and

1995
charged

Company
$11.4
in

the
cost
for as

Caremark
Certain

Plan
totaling

$25.8

operations

restructuring

additional to

restructuring the purchase
costs

approximately

million were

incurred

and

accounted the

adjustments evaluated recognized

of

the

Caremark
the

Business

1995

In

December
Plan

1998
and

Company
and

the estimated
restructure

complete
benefit

Caremark
million

Business

Consolidation

other accruals

reversal

of $0.7

Under
reversals as

the

Caremark

Business

Consolidation

plan the Company has made

total

payments

disposals

and

follows

in thousands
aIance Through
Cash Expenditures June
at

30

1999 Restructure Future

June

30

1999 Total Charges

Non-Cash
Charges Total

Cash

Reiersal

Expenditures

Caremark

Business

Consolidation Personnel Facility

Plan Reduction

Costs

$11300
9496

$11300

$11300 714

Reduction
Total

Costs

3900

13396

2590

16700

Restructuring

Costs

$20796

$3900

$24696

$714

$2590

$28000

During of

January

1999

the
in

Company
the

adopted

restructuring in

1999

The plan resulted
costs

an
in

organizational

restructure

severance
future

The balance

Accrued
the other

Merger

and

plan which was initiated in the first quarter which $0.9 million of expense was recognized for at June 30 1999 consists of Restructuring liability
Consolidation Plan of $2.6 million the 1999

cash

expenditures plan of $0.3

related

to

Caremark
accruals

Business of $0.3

restructure

million and

million

The

Company
Plan

estimates and the 1999

that

the

future

cash
will

expenditures

related

to

the

Caremark 35% through
and

Business

Consolidation

restructure

plan

be

made

in

the following

periods

June 30
thereafter

2000

16% through

June 30 2001

17% through

June

30 2002

and

32%

through

June 30 2003

CROWLEYKVN

016906

A59

Case 1:04-cv-01565-SLR

Document 124-2

Filed 04/17/2007

Page 30 of 30

CORAM HEALTHCARE CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED HNANCIAL STATEMENTS Continued

Long-Term
Long-term

Debt
debt
is

as

follows

in thousands
June

30

December
1998

31

1999

Series
Series

Senior Subordinated Senior Subordinated

Unsecured
Convertible

Notes Notes

$157631 87922 22500

$153785 87922

New
Other

Senior

Credit

Facility

obligations
to

including

capital

leases

at

interest

rates

ranging

from
920 715

6%

16%

collateralized

by

certain

property

and

equipment

268973
I.ess

242422

current

scheduled

maturities

399
$26