OPTION CARE INC/DE, DEF 14A, 1997-06-20

OPTION CARE INC/DE
DEF 14A, 1997-06-20
HOME HEALTH CARE SERVICES

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<PAGE>

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

OPTION CARE, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE>

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

NOTICE OF ANNUAL SHAREHOLDERS' MEETING

TO BE HELD MAY 9, 1997

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

TO THE SHAREHOLDERS OF OPTION CARE, INC.:

NOTICE IS HEREBY GIVEN that the Annual Shareholders' Meeting of Option
Care, Inc., a Delaware corporation (the "Company"), will be held at The Harris
Bank, 111 West Monroe, Chicago, Illinois 60690, on Friday, May 9, 1997, at 10:00
a.m. Central Daylight Time for the purpose of considering and acting upon:

(1) The election of two directors for terms expiring in 2000;

(2) The amendment and restatement of the Option Care, Inc. 1991 Stock
Incentive Plan; and

(3) Such other business as may properly come before the meeting or any
adjournments thereof.

Shareholders of record on March 28, 1997, are the only persons entitled to
notice of and to vote at the meeting.

Your attention is directed to the attached Proxy Statement. Even if you
expect to be present at the meeting, please sign, date and mail the enclosed
Proxy as promptly as possible in order to save the Company further solicitation
expense. You may revoke your proxy by attending the meeting and voting in
person. There is enclosed with the Proxy an addressed envelope for which no
postage is required if mailed in the United States.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ CATHY BELLEHUMEUR
CATHY BELLEHUMEUR
Senior Vice President, General Counsel and Secretary

April 18, 1997
<PAGE>

OPTION CARE, INC.
100 Corporate North, Suite 212
Bannockburn, Illinois 60015

----------------------
PROXY STATEMENT
----------------------

ANNUAL SHAREHOLDERS' MEETING
TO BE HELD MAY 9, 1997

The enclosed Proxy is solicited by the Board of Directors of Option Care,
Inc. (the "Company") in connection with the Annual Shareholders' Meeting of the
Company to be held on May 9, 1997, and at any and all adjournments thereof (the
"Annual Meeting"). The costs of solicitation, including the cost of preparing
and mailing the Notice of Annual Shareholders' Meeting and this Proxy Statement,
are being paid by the Company. In addition, the Company will, upon the request
of brokers, dealers, banks, voting trustees and their nominees who are holders
of record of shares of the Company's Common Stock on the record date specified
below, bear their reasonable expenses for mailing copies of this material to the
beneficial owners of such shares. Officers and other regular employees of the
Company who will receive no extra compensation for their services may solicit
Proxies in person or by telephone or facsimile. The Proxy Statement and
accompanying form of Proxy will be first mailed to shareholders on or about
April 18, 1997.

The Proxy may be revoked at any time prior to its exercise by giving
written notice of revocation to an officer of the Company, by executing a proxy
bearing a later date or by attending the meeting and voting in person. Unless so
revoked, properly executed Proxies will be voted in accordance with the
shareholders' specifications marked thereon. If no specifications are marked
thereon with respect to one or more proposals, proxies will be voted as to such
proposals in accordance with the recommendations of the Board of Directors set
forth in this Proxy Statement. Except for the election of directors, which shall
be by plurality vote, the affirmative vote of the holders of a majority of the
shares present or represented by proxy at the meeting and entitled to vote on
the matter is required for approval of any matter which may properly come before
the meeting, except as otherwise provided by law or the Company's Certificate of
Incorporation or By-laws. Abstentions and shares which are not voted by a broker
or other nominee on a particular matter (broker non-votes) have the same effect
as votes cast against a particular proposal.

Shareholders of record on March 28, 1997, are the only persons entitled to
vote at the Annual Meeting. As of that date, there were issued and outstanding
10,602,660 shares of Common Stock, the only voting securities of the Company.
Each shareholder is entitled to one vote for each share held.

1
<PAGE>

ELECTION OF DIRECTORS

The Company's By-laws authorize the Board of Directors to fix the number of
directors. Currently, the number is fixed at five. The members of the Board of
Directors are divided into three classes with the term of one class expiring
each year. There are two directors to be elected for terms expiring at the
Company's Annual Meeting of Shareholders in 2000 or until their successors have
been elected and qualified. It is intended that the names of John N. Kapoor and
Roger W. Stone, both of whom are currently directors, will be placed in
nomination and that those persons named in the Proxy will vote for their
election. The nominees have indicated their willingness to serve as members of
the Board of Directors if elected; however, in case the nominee(s) shall become
unavailable for election to the Board of Directors for any reason not presently
known or contemplated, the Proxy holders will have discretionary authority in
that instance to vote the Proxy for a substitute nominee designated by the Board
of Directors.
<TABLE>
<CAPTION>

The nominees are as follows:

Name Age Position
---- --- --------
<S> <C> <C>
John N. Kapoor 53 Chairman of the Board
and Director

Roger W. Stone (1) (2) (3) (4) 62 Director

The present directors of the Company whose terms will expire after 1997 are
as follows:

Term Expiring in 1998

Jerome F. Sheldon (1) (2) (3) (4) 61 Director

Term Expiring in 1999

James G. Andress (1) (2) (3) (4) 58 Director

Erick E. Hanson 50 President, Chief Executive
Officer and Director
</TABLE>
- -----------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Stock Incentive Plan Committee.
(4) Member of the Corporate Compliance Committee.

Dr. John N. Kapoor is currently Chairman of the Board. He has been Chairman
of the Board of Directors since October 1990 and served as CEO from August 1993
to April 1996. He previously served as President from August 1993 through
October 1993 and from January, 1995 through February, 1996. Dr. Kapoor also
served as Chief Executive Officer and President from March 1991 to May 1991. In
addition, Dr. Kapoor is President of E. J. Financial Enterprises, Inc., located
in Lake Forest, Illinois, a position he has held since April 1990. From June
1982 to April 1990, Dr. Kapoor held several positions with Lyphomed, Inc., in
Rosemont, Illinois, including Chairman, Chief Executive Officer and President.
Dr. Kapoor is also a director of

2
<PAGE>

Lunar Corporation, a medical equipment pharmaceutical development company, and
director and Chief Executive Officer of Akorn, Inc., an ophthalmic
pharmaceutical company, and is Chairman and Chief Executive Officer of UniMed,
Inc., a pharmaceutical company. Dr. Kapoor holds a doctorate in medicinal
chemistry.

Roger W. Stone has been a member of the Board of Directors since November
1991. Mr. Stone has been Chairman of the Board of Directors, President and Chief
Executive Officer of Stone Container Corporation, a paper products company,
since 1983. Mr. Stone is also a director of Morton International, Inc.,
McDonald's Corporation and Stone-Consolidated Corporation.

Jerome F. Sheldon has been a member of the Board of Directors since
November 1991. Mr. Sheldon is Chairman and CEO of Lamar Snowboards, Inc.,
located in San Diego, California. Previously, Mr. Sheldon was President and
Chief Executive Officer of Medicine Shoppe International, Inc., a franchisor of
retail pharmacies, from March 1989 to June 1990, a director of such company from
March 1980 to February 1991 and a consultant to such company from July 1990 to
June 1991. Mr. Sheldon was a director of the International Franchise Association
and a trustee of the St. Louis College of Pharmacy for approximately 10 years.

James G. Andress has been a member of the Board of Directors since November
1991. Mr. Andress has been President and Chief Executive Officer of Warner-
Chilcott PLC, a pharmaceutical company, since November 1996. From 1989 until
November 1995, Mr. Andress served as President, Chief Executive Officer and
Chief Operating Officer of Information Resources, Inc., a software and
information services company. He currently serves as a Director of the following
companies: Information Resources, Inc.; Allstate Corporation; Genelabs
Technologies, Inc.; Genetics Institute, Inc.; The Liposome Company, Inc.;
Sepracor, Inc.; Walsh International, Inc.; Xoma Corporation; Neorx Corporation,
and Favorite Brands International.

Erick E. Hanson is currently President, Chief Executive Officer and
Director. He has been President and Director since March 1996, and Chief
Executive Officer since April 1996. Mr. Hanson joined the Company as Senior Vice
President in April 1995 and was appointed Executive Vice President and Chief
Operating Officer in August 1995. From November 1991 to April 1995, Mr. Hanson
held executive positions, including that of Vice President Corporate Sales and
Marketing, at Caremark, Inc. in Northbrook, Illinois. From April 1989 to
November 1991 Mr. Hanson served as President and Chief Operating Officer of
Clinical Partners, Inc. in Boston, Massachusetts.

Board Meetings

The Company's Board of Directors met four times during 1996. Each director
attended all Board and Committee meetings during 1996.

Committees of the Board of Directors

The Company has standing Audit, Compensation, Stock Option and Corporate
Compliance Committees of the Board of Directors. The members of these Committees
have been identified above. The Company does not have a nominating committee.

3
<PAGE>

The Audit Committee recommends the selection of independent public
accountants to the Board of Directors, reviews the scope of the audits performed
by the independent public accountants, together with their audit reports and any
recommendations made by them, and the results of the audit for the prior fiscal
year, with the independent public accountants. The Audit Committee also reviews
the Company's financial disclosure documents, material litigation and regulatory
proceedings and other issues relating to potentially significant corporate
liability. The Audit Committee met twice in 1996.

The Compensation Committee determines the annual salary, bonus and other
benefits of selected senior officers of the Company and establishes and reviews,
as appropriate, performance standards under compensation programs for senior
officers. The Compensation Committee met once in 1996.

The Stock Incentive Plan Committee grants stock options under the Company's
1991 Stock Incentive Plan, as amended. The Stock Option Committee met four times
in 1996.

The Corporate Compliance Committee monitors the Company's adherence to
general corporate policies. The Corporate Compliance Committee met four times in
1996.

Director Compensation
Directors are reimbursed for out-of-pocket expenses incurred in connection
with attendance at Board of Directors and Committee meetings. Upon becoming
directors, each of Messrs. Andress, Sheldon and Stone also received an option to
purchase 24,000 shares of Common Stock of the Company at an exercise price of
$3.75 per share pursuant to the Company's 1991 Stock Incentive Plan. An
additional grant of an option to purchase 20,000 shares at an exercise price of
$4.38 was made to each Director in November 1995. At the first meeting of 1996,
the annual granting of an option to purchase 7,500 shares per Director was
approved. These options were granted in March 1996 at an exercise price of $4.25
per share.

Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934 requires all executive officers,
directors and beneficial owners of more than 10% of the Company's Common Stock
to report any changes in the ownership of common stock of the Company to the
Securities and Exchange Commission, the Nasdaq Stock Market, Inc. and the
Company.

Based solely upon a review of these reports and written representations
that no additional reports were required to be filed in fiscal 1996, the Company
believes that all reports were filed on a timely basis.

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company, by (i) each director of
the Company, (ii) each executive officer of the Company named in the Summary
Compensation Table, (iii) all directors and executive officers of the Company as
a group, and (iv) each person known by the Company to be the beneficial owner of
more than 5% of the Common Stock of the Company. The information shown assumes
the exercise by each person (or all directors and executive officers as a group)
of

4
<PAGE>

stock options owned by such person which are currently exercisable or are
exercisable within 60 days after the date of this Proxy Statement and the
exercise by no other person of stock options or exchange rights. Except as
otherwise noted, the indicated owners have sole voting and investment power with
respect to all shares shown to be beneficially owned by them.
<TABLE>
<CAPTION>

Number
of Shares Percent
Name of Beneficial Owner Beneficially Owned of Class
- ------------------------ ------------------ --------
<S> <C> <C>

James G. Andress (1) 30,875 .3

Cathy Bellehumeur (1) 6,250 .0

J. Jeffrey Fox (1) 37,500 .4

Erick E. Hanson (2) 89,600 .8

Dr. John N. Kapoor (3) 6,221,195 57.9
EJ Financial Enterprises
225 Deerpath Road, Suite 250
Lake Forest IL 60045

Michael T. Prime (4) 606,500 5.6
1370 Ridgewood Drive, Suite 20
Chico, CA 95926

Jerome F. Sheldon (1) 30,875 .3

Roger W. Stone (5) 50,875 .5

All directors and executive officers as a group (7 persons) 6,467,170 60.2
- -----------------
</TABLE>
(1) Represents shares issuable pursuant to options which are exercisable within
60 days.

(2) Represents 87,500 shares issuable pursuant to options which are exercisable
within 60 days.

(3) Represents 3,154,528 shares owned by the John N. Kapoor Trust dated
September 20, 1989 (the "Kapoor Trust") of which Dr. Kapoor is the sole
trustee and sole current beneficiary, 1,200,000 shares owned by the EJ
Financial Investments II Limited Partnership, of which Dr. Kapoor is the
sole general partner, and 1,866,667 shares owned by the Kapoor Family
Partnership, L.P., of which Dr. Kapoor is the sole general partner.

(4) Mr. Prime shares voting and investment power with respect to these shares
with his wife.

(5) Represents 30,875 shares issuable pursuant to options which are exercisable
within 60 days.

5
<PAGE>

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth the compensation of
certain of the Company's executive officers and former executive officers
who were employed by the Company during the year ended December 31, 1996.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

Long-Term
----------
Annual Compensation Compensation
-------------------------- ------------
Securities
Fiscal Underlying All Other
Name & Principal Position Year Salary ($) Bonus ($) Options/SARs (#) Compensation ($)(1)
- ------------------------- ------ ---------- --------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>

John N. Kapoor 1996 $132,667 $ 0 0 $ 0
Chairman 1995 $212,000 $ 0 0 $ 0
1994 $212,000 $ 0 0

Erick E. Hanson (2) 1996 $220,269 $45,000 125,000 $7,579
Director, President and 1995 $124,000 $ 0 125,000 $1,918
Chief Executive Officer 1994 $ 0 $ 0 0 0

J. Jeffrey Fox (3) 1996 $130,400 $24,343 0 $ 1,911
Vice President and 1995 $122,675 $ 4,000 50,000 $28,853
Chief Financial Officer 1994 $ 39,038 $ 0 25,000 0

Cathy Bellehumeur 1996 $129,767 $17,500 5,000 $ 1,919
Vice President and 1995 $125,009 $10,000 15,000 $ 1,836
General Counsel 1994 $ 86,590 $ 0 25,000 0
</TABLE>

(1) Amounts shown in this column for 1995 and 1996 represent Company
contributions to the Company's 401(k) plan and reimbursement of relocation
expenses of $26,313 for Mr. Fox in 1995.
(2) Mr. Hanson's 1995 salary reflects compensation for a partial year of
employment.
(3) Mr. Fox resigned as Chief Financial Officer on January 13, 1997 and his
employment terminated on February 28, 1997.

AGGREGATED OPTION/SAR EXERCISES IN 1996 AND FISCAL YEAR END OPTION VALUES

The following table sets forth certain information concerning the value of stock
option exercises during the year ended December 31, 1996 and of stock options
held as of December 31, 1996.
<TABLE>
<CAPTION>

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options Held at Fiscal Year End (#) Fiscal YearEnd($) 1)
----------------------------------- --------------------

Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>

John N. Kapoor 0 0 0 0 0 0

Erick E. Hanson 0 0 87,500 162,500 243,500 418,500

J. Jeffrey Fox 0 0 56,250 18,750 239,063 79,687

Cathy Bellehumeur 15,000 52,500 6,250 23,750 24,688 81,562

</TABLE>

(1) Based upon the closing price of the Company's common stock of $6.50 per
share on December 31, 1996, as reported by the Nasdaq National Market.

6
<PAGE>

GRANTS OF STOCK OPTIONS

The following table sets forth certain information with respect to
individual grants of stock options to the Company's executive officers named in
the Summary Compensation Table during the year ended December 31, 1996. No SARs
were granted during 1996.

OPTION GRANTS DURING LAST FISCAL YEAR
<TABLE>
<CAPTION>

Number of Securities % of Total Potential Realizable Value at
Underlying Options Exercise Assumed Annual Rates of Stock
Options Granted to Employees or Base Expiration Price appreciation for Option Term(2)
Name Granted (#)(1) in Fiscal Year Price($/sh) Date 5% ($) 10% ($)
- ---- -------------- -------------- ---------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
John N. Kapoor 0 .0% 0 NA NA NA

Erick E. Hanson 125,000 63.3% 4.25 03/13/06 334,100 846,676

J. Jeffrey Fox 0 0% 0 NA NA NA

Cathy Bellehumeur 5,000 2.5% 5.00 11/06/06 15,722 39,844
</TABLE>
(1) All options were granted under the Company's 1991 Stock Incentive Plan.
These options are non-qualified and vest 25% each year on the first four
anniversaries of the grant date.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the Securities and
Exchange Commission and, therefore, are not intended to forecast possible
future appreciation, if any, in the Company's stock price. The calculations
were based on the exercise prices and the 10-year term of the options. No
gain to the optionee is possible without an increase in stock price, which
will benefit all shareholders proportionately.

TEN YEAR OPTION REPRICINGS
--------------------------
<TABLE>
<CAPTION>

Option Repriced Time of Repricing Time of Repricing
Name Date or Amended (#) or Amendment ($) or Amendment ($)
---- ---- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Cathy Bellehumeur 02/21/95 10,000 2.25 3.875
Vice President, General 02/21/95 15,000 2.25 2.625
Counsel and Secretary

J. Jeffrey Fox 02/21/95 25,000 2.25 3.50
Vice President Finance
and Chief Financial Officer
</TABLE>

<TABLE>
<CAPTION>
Length of Original Option
Exercise Term Remaining at Date
Price of Repricing or Amendment
----- -------------------------
<S> <C> <C>
Cathy Bellehumeur 2.25 9 yrs
Vice President, General 2.25 9 yrs
Counsel and Secretary

J. Jeffrey Fox 2.25 9 yrs
Vice President Finance
and Chief Financial Officer
</TABLE>

7
<PAGE>

REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors was comprised during
fiscal 1996 of James G. Andress, Jerry Sheldon and Roger W. Stone. All
Committee members are non-employee directors of the Company. All decisions by
the Compensation Committee relating to the compensation of the Company's
executive officers are reviewed by the full Board. In accordance with
Commission rules designed to enhance disclosure of companies' policies toward
executive compensation, the following is a report submitted by the above-listed
committee members in their capacity as the Board's Compensation Committee,
addressing the Company's compensation policy as it related to the named
executive officers for fiscal 1996.

This report by the Compensation Committee and the Performance Graph and the
Ten-Year Option/SAR Repricings Table contained in this Proxy Statement shall not
be deemed to be incorporated by reference by any general statement which
incorporates by reference this Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, and they shall
not otherwise be deemed filed under such Acts.

Compensation Policy

The goal of the Company's executive compensation policy is to ensure that an
appropriate relationship exists between executive pay and the creation of
shareholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policies
integrate annual base compensation with cash bonuses based upon corporate
performance and individual initiatives and performance and stock options granted
under the Company's 1991 Stock Incentive Plan, as amended. Measurement of
corporate performance is primarily based on Company goals and industry
performance levels. Accordingly, in years in which performance goals and
industry levels are achieved or exceeded, executive compensation would be higher
than in years in which performance is below expectations. Annual cash
compensation is designed to attract and retain qualified executives. All
executive officers, and management in general, are also eligible for and
participate in an incentive compensation plan that consists of cash bonuses and
stock options.

Performance Measures

In evaluating annual bonuses, the Committee examines earnings per share and
sales growth as well as subjective factors relating to performance of management
objectives. No specific weight is assigned to any of these factors. The
earnings factors are compared with designated Company performance goals, prior
years' performance and performance of other companies in the industry.
Accordingly, the Company believes it is important that its performance be
compared to that of other home healthcare companies in order to demonstrate the
impact of management's objectives and performance. Therefore, the Company
compares its performance against a peer industry group currently consisting of
one company in the infusion and health care franchise business. Such peer
industry group is the same group included as the peer group in the performance
graph included elsewhere in this Proxy Statement. The Company considers itself
a high-tech pharmaceutical therapy company, although approximately 30% of its
revenues during 1996 came from franchising pharmaceutical therapy and 70% came
from direct pharmaceutical therapy services.

8
<PAGE>

Fiscal 1996 Compensation

For fiscal 1996, the Company's executive compensation program consisted of
base salary, adjusted from the prior year, a bonus pool based upon the
performance measurements described above, and stock options which are granted
from time to time to members of management. Options are granted based
primarily on each such person's potential contribution to the Company's growth
and profitability. The Committee believes that options and other stock-based
performance compensation arrangements are an effective incentive for managers to
create value for shareholders since the value of an option bears a direct
relationship to the Company's stock price.

Base salary, maximum annual bonus, and annual stock option grants for the
Chief Executive Officer and all other executive officers were established by a
combination of objective and subjective factors. Actual bonus payout is
determined by a combination of objective factors, relating to the Company's
performance relative to targets and comparative companies, and subjective
factors, relating to the completion of specific management objectives.

The Company's objective is to obtain a financial performance that achieves
several goals over time including sales volume and earnings-per-share growth of
20 to 25 percent. In fiscal 1996, the Company achieved an 8% growth rate in
revenues while reporting net income of $3,563,000 before a non-cash write down
of intangible assets. As a result, 1996 bonuses included reduced payments for
the Company performance-related component.

Base salaries are believed to be within the range of those persons holding
comparably responsible positions at other companies, both regionally and
nationally. In addition, other factors are taken into consideration, such as
cost of living increases, competitors' performance, as well as the individual's
past performance and potential with the Company. Bonus compensation is also tied
to performance goals.

The Committee believes that linking executive compensation to corporate
performance results in a better alignment of compensation with corporate goals
and shareholder interest. If performance goals are met or exceeded, resulting
in increased value to shareholders, executives are rewarded commensurately. The
Committee believes that compensation levels during fiscal 1996 adequately
reflect the Company's compensation goals and policies.

James G. Andress
Roger W. Stone
Jerry Sheldon

9
<PAGE>

STOCK PRICE PERFORMANCE GRAPH

The Stock Price Performance Graph set forth below compares the cumulative
total shareholder return on the Common Stock of the Company for the period from
April 15, 1992, the date of the Company's initial public offering, to December
31, 1996, with the cumulative total return on the Nasdaq National Market
Composite Index and a peer group index over the same period assuming the
investment of $100 in each on April 15, 1992, at the April 14, 1992, closing
price.

[GRAPH APPEARS HERE]

Apr 14, 1992 Dec 31, 1992 Dec 31, 1993 Dec 31, 1994 Dec 31, 1995 Dec 31, 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>

Option Care, Inc. 100.00 94.87 38.46 21.79 34.67 66.67

Nasdaq 100.00 114.56 131.50 128.54 181.78 223.61

Peer Group 100.00 93.33 90.00 190.00 183.33 280.00

</TABLE>

(1) The peer group index consists of Rotech Medical Corporation. Curaflex Health
Services, Inc. and T2 Medical, Inc. were formerly included in the peer group,
but merged into Coram Healthcare Corp. in July 1994. Medicine Shoppe
International, Inc., Quantum Health Resources, Inc., Tokos Medical Corp. and
Total Pharmaceutical Care were formerly included in the peer group, but merged
or were acquired in 1995. Caremark International, Inc. was formerly included in
the peer group, but was acquired in 1996.

10
<PAGE>

CERTAIN TRANSACTIONS WITH MANAGEMENT AND DIRECTORS

The Company and EJ Financial Enterprises, Inc., which is 100% owned by Dr.
Kapoor, have entered into a consulting agreement dated as of January 1, 1991
pursuant to which EJ Financial provides independent consulting services to the
Company. EJ Financial receives an annual fee of $147,406, which increases 10%
per year, for ongoing consulting services. The agreement may be terminated by
either party on any January 1. EJ Financial will provide consulting principally
on strategic corporate objectives and operations, including sales and marketing
strategies, growth strategies, and acquisition opportunities of the Company.

PROPOSAL TO AMEND AND RESTATE THE 1991 STOCK INCENTIVE PLAN

On February 21, 1997 the Board of Directors of the Company approved the
amendment and restatement of the Option Care, Inc. 1991 Stock Incentive Plan
(the "1991 Plan"). The Option Care, Inc. 1991 Stock Incentive Plan as amended
and restated may hereinafter be referred to as the "1997 Plan". The full text
of the Option Care, Inc. Amended and Restated Stock Incentive Plan (1997)
appears as Exhibit A hereto.

The stated purpose of the 1997 Plan is to aid in maintaining and developing
strong management capable of assuring the future success of the Company. The
1997 Plan is designed to secure for the Company and its shareholders the
benefits of the incentive inherent in the ownership of Shares by those employees
who are largely responsible for its future growth and financial success. All
directors and employees of the Company and its subsidiaries and vendors of the
Company are eligible to be granted awards under the 1997 Plan.

The Board of Directors has proposed that the 1997 Plan be submitted to the
Company's shareholders for their consideration and approval. As described in
more detail herein, the amendments to the 1991 Plan would, among other things,
(i) increase the number of Shares authorized for issuance pursuant to awards
which may be made from 1,660,000 under the 1991 Plan to 2,000,000 under the 1997
Plan; and (ii) provide certain administrative flexibility. Approval of the
1997 Plan requires the affirmative vote of a majority of the votes represented
by common stock of the Company which are present in person or represented by
proxy at the Annual Meeting.

The Proposed 1997 Plan

Purpose of Proposed Increase in Authorized Shares

As of the date hereof, only 560,280 Shares remain available for awards under
the 1991 Plan. Because the Board of Directors desires to continue its use as a
vehicle to compensate non-employee directors and to compensate and motivate
employees, the Board believes that the 1991 Plan should be amended to make an
additional 340,000 Shares available to serve as the basis of future awards
thereunder.

The following sets forth certain information regarding non-qualified stock
options to purchase Shares granted to all directors and executive officers of
the Company individually over the course of the 1996 fiscal year.

11
<PAGE>

<TABLE>
<CAPTION>
1991 STOCK INCENTIVE PLAN
-------------------------

Number of Shares
Issuable Upon Exercise
Exercise of Stock Date Price Per
Name Position Grant Date Options Exercisable Share
- ---- -------- ---------- ----------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
John Kapoor Director N/A N/A N/A N/A

James Andress Director 3/13/96 7,500 (1) $4.25

Jerome Sheldon Director 3/13/96 7,500 (1) $4.25

Roger Stone Director 3/13/96 7,500 (1) $4.25

Erick E. Hanson Director/ 3/13/96 125,000 (1) $4.25
President

Cathy Bellehumeur Vice President/ 11/6/96 5,000 (1) $5.00
General Counsel

J. Jeffrey Fox Chief Financial N/A N/A N/A N/A
Officer
</TABLE>

(1) These options become exercisable in increments of 25% per year over the
four years following the Grant Date.

Over the course of the 1996 fiscal year the Company granted to 32 non-
executive officers and employees, non-qualified stock options to purchase 44,850
Shares at exercise prices ranging from $4.25 per share to $7.50 per share, based
on the fair market value of the Shares as of the date of grant. Furthermore, at
the February 21, 1997 meeting of the Company's Board of Directors, the Company
granted non-qualified stock options to the following executive officers: James
Duncan, Senior Vice President, in the amount of 100,000 Shares, Paul Jurewicz,
Chief Financial Officer and Senior Vice President, in the amount of 100,000
Shares, Erick E. Hanson, Director and President, in the amount of 50,000 Shares
and to Cathy Bellehumeur, Senior Vice President, in the amount of 55,000 Shares,
all at an exercise price of $6.00. At this same meeting the Company granted to
10 non-executive employees, non-qualified stock options to purchase 65,850
Shares at an exercise price of $6.00.

Such non-qualified stock options become exercisable in increments and
expire 10 years from the date on which they were granted, as is the case with
the non-qualified stock options awarded to the individuals listed in the table
above.

It is expected that if the 1997 Plan is approved by the Company's
shareholders, Erick E. Hanson, Cathy Bellehumeur, James Duncan, Paul Jurewicz,
John Kapoor, James Andress, Jerome Sheldon, Roger Stone as well as the Company's
non-executive employees, may receive additional awards under the 1997 Plan.
Because the timing and the amount of any future awards will be at the discretion
of the Board of Directors, the specifics of future awards cannot be determined
at this time.

Purpose of Provision for award of options to employee members of the Board
of Directors.

In order to reward and compensate those directors of the Company who
provide valuable and necessary services to the Company, the Company deems it
advisable and appropriate to amend the 1991 Plan to provide for the ongoing
ability to grant options to such Directors.

12
<PAGE>

Purpose of Other Amendments to the 1991 Plan.

The Board of Directors approved certain other amendments to the 1991 Plan
for the purpose of providing greater flexibility in its administration. These
amendments include (i) changing the period over which a performance award may be
structured from two to five years to one to five years; (ii) changing the period
during which an award may be exercised after termination of employment or
service on the Board from a set time period to such period of time as may be
negotiated in an employment or severance agreement between the Company and the
participant; (iii) allowing the Board to accelerate or extend the date on which
an option may be exercised to the extent permitted by applicable law; (iv)
limiting the circumstances under which shareholder approval of amendments to the
1991 Plan are required to those which would otherwise cause the 1991 Plan to
fail to comply with Rule 16b-3 of the Securities and Exchange Act of 1934 or any
other requirement of applicable law or regulation; (v) changing the
circumstances under which options will become immediately exercisable upon a
change in control of the Company to exclude equity offerings, and events
reportable under federal securities law if John N. Kapoor owns at least 40% of
the combined voting power of the Company's then outstanding securities; and (vi)
adding a provision whereby each option holder is required to appoint the Chief
Financial Officer of the Company as his or her attorney-in-fact to sell his or
her options upon the sale of a majority of the outstanding shares of Common
Stock of the Company on substantially the same terms and conditions as the
majority holders.

Recommendation of the Board of Directors

The Board recommends that the holders of Shares vote "FOR" the 1997 Amended
and Restated Stock Incentive Plan, which will, among other things, (i) increase
the number of Shares which may be issued pursuant to awards made under the 1991
Plan from 1,660,000 to 2,000,000, (ii) provide administrative flexibility.

Description of the 1997 Amended and Restated Stock Incentive Plan Upon
Effectiveness of Amendments Adopted by the Board of Directors and the
Shareholders

Administration of the 1997 Plan

Under the 1997 Plan the Board of Directors shall designate a committee of
two or more directors to administer the Plan (the "Committee"). The Committee
shall, subject to the terms of the Plan, establish selection guidelines, select
officers and other employees, directors and vendors for participation, and
determine the form of grant, either as an incentive award, stock option, stock
appreciation rights or combination thereof. The Committee shall also determine
the form of stock option, the number of shares subject to the grant, the fair
market value of the Shares when necessary, the time and conditions of vesting or
exercise and all other terms and conditions of the grant.

All grants and awards under the 1997 Plan shall be evidenced by written
agreements between the Company and the eligible recipients. The Committee may
interpret the 1997 Plan and establish rules and regulations for the
administration of the 1997 Plan, including, without limitation, the imposition
of conditions with respect to competitive employment and provisions accelerating
vesting or exercisability.

Incentive Awards

Incentive awards, whether Performance Awards or Fixed Awards (as described
below), may be made to eligible recipients under the 1997 Plan in the form of
cash, stock units, shares of Common Stock or any combination of the foregoing.

Performance Awards may be made in terms of a stated potential maximum
dollar amount, percentage of compensation or number of units or shares, with the
actual amount, number or percentage to be determined by reference

13
<PAGE>

to the level of achievement of specific objectives over a performance period of
one year through five years, as determined by the Committee.

Fixed Awards may be made which are not contingent on the performance of
objectives, but are contingent on the recipient's continuing in the Company's
employ for a period to be specified in the award, which period shall be one year
to ten years from the date of the award.

Stock Options

Options to purchase shares of Common Stock of the Company may be granted
under the 1997 Plan to such eligible recipients as may be selected by the
Committee. No option shall be exercisable earlier than one year, nor more than
ten years after the date of grant. Options may be exercised during the
optionee's continued employment with, or in the case of a vendor, engagement by,
the Company or service on the Board, as the case may be, and for a period of
ninety days following termination of such employment, engagement or service on
the Board, or such other period of time provided in a relevant employment or
severance agreement between the optionee and the Company, provided, however,
that if employment or engagement of the optionee by the Company or service on
the Board, as the case may be, shall have terminated by reason of retirement at
or after age 65 or total and permanent disability, then the option may be
exercised for a period of one year following termination of employment,
engagement or service on the Board, or such other period of time provided in a
relevant employment or severance agreement between the optionee and the Company,
but in any event not after the expiration of the term of the option.

The types of stock options which may be awarded under the 1997 Plan include
Incentive Stock Options and any other form of option permitted under the
Internal Revenue Code. An Incentive Stock Option entitles the Participant to
purchase Shares at an option price of not less than the fair market value of the
Shares on the date of the grant and other forms of options entitle the eligible
recipient to purchase Shares at 100% of the fair market value of the Shares on
the date of the grant; provided however that if at any time an option designated
as and intended to be an incentive stock option is otherwise to be granted
pursuant to the 1997 Plan, the optionee owns directly or indirectly (within the
meaning of section 424(d) of the Code) shares of Common Stock of the Company
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary corporations, if any within the
meaning of section 422(b) (63 of the Code), then the option price shall be not
less than 110% of the fair market value of the Common Stock as of the date the
option is granted, and such option by its terms shall not be exercisable after
the expiration of five (5) years from the date the option is granted.

Each option will be evidenced by an option agreement containing such terms
and conditions consistent with the 1997 Plan that are approved by the Committee.
Option agreements may provide for the exercise of options in whole or in part
from time to time during the term of the Option, or in such installments and at
such times as the Committee may determine. Options granted under the 1997 Plan
are non-transferable, except in the event of death of an optionee during
employment, engagement or service on the Board, or the retirement of the
employee at or after age 65 or the employee's total and permanent disability. No
option may be exercised after the expiration of its term. The option exercise
price is payable in full upon exercise of an option. No optioner has any of the
rights or privileges of a shareholder of the Company with respect to Shares
issuable upon exercise of an option until certificates representing such Shares
have been issued and delivered to the optioner.

Stock Appreciation Rights ("SAR")

Rights entitling the grantee to receive cash or shares of Common Stock
having a fair market value equal to the appreciation in market value of a stated
number of shares of Common Stock from the date of grant, or in the case of
rights granted in tandem with or by reference to a stock option granted prior to
the grant of such rights, from the date of grant

14
<PAGE>

of the related stock option to the date of exercise, may be granted to such
eligible directors, officers and other employees as may be selected by the
Committee and approved by the Board. Such right shall not be exercisable unless
it shall have been outstanding for at least six months, nor shall such right be
exercisable more than ten years after the date of the grant. Stock appreciation
rights may be exercised during the individual's continued employment with the
Company or service on the Board as the case may be, and for a period of ninety
days following termination of employment or engagement or service, or such other
period of time provided in a relevant employment or severance agreement between
the individual and the Company, and only within the original term of the grant.
Upon exercise of a right, the grantee shall be paid the excess of the then fair
market value of the number of shares to which the right relates over the fair
market value of such number of shares as of the date of the grant of the right
or of the related stock option, as the case may be. Such excess shall be paid in
cash or shares of Common Stock having a fair market value equal to such excess
or in such combination thereof as the Committee shall determine.

Amendment; Termination

The 1997 Plan will terminate on the tenth anniversary of shareholder
approval of the 1997 Plan, unless sooner terminated by action of the Board. No
further grants will be made under the Plan after termination, but termination
will not affect the rights of any participant under any grants made prior to
termination.

The 1997 Plan may be amended or terminated by the Board in any respect
except that no amendment may be made without shareholder approval if such
amendment would cause the 1997 Plan to fail to comply with Rule 16b-3 under the
Securities Exchange Act of 1934 (as such Rule 16b-3 may be amended or applicable
from time to time) or any other requirement of applicable law or regulation.

Appropriate adjustments may be made by the Committee in the maximum number
of shares to be issued under the 1997 Plan, the maximum number of shares to be
issued pursuant to incentive awards and in the number of shares subject to any
option grant, to give effect to any stock splits, stock dividends and other
relevant changes in capitalization occurring after the effective date of the
1997 Plan.

Federal Tax Consequences

An optioner will not realize any income, nor will the Company be entitled
to a deduction, at the time an Incentive Stock Option is granted under the 1997
Plan. If an optioner does not dispose of the Shares acquired on the exercise of
an Incentive Stock Option within one year after the transfer of such shares to
him and within two years from the date the Incentive Stock Option was granted to
him, then for federal income tax purposes: (a) the Participant will not
recognize any income at the time of exercise of his Incentive Stock Option; (b)
the amount by which the fair market value (determined without regard to short-
swing profit restrictions) of the Shares at the time of exercise exceeds the
exercise price is an item of tax preference subject to the alternative minimum
tax on individuals; and (c) the difference between the Incentive Stock Option
price and the amount realized upon the sale of the Shares of the Participant
will be treated as long-term capital gain or loss. The Company will not be
entitled to a deduction upon the exercise of an Incentive Stock Option.

Except in the case of a disposition following the death of a Participant
and certain other very limited exceptions, if the Shares acquired pursuant to an
Incentive Stock Option are not held for the minimum periods described above, the
excess of the fair market value of the Shares at the time of exercise over the
amount paid for the Shares generally will be taxed as ordinary income to the
Participant in the year of disposition. The Company is entitled to a deduction
for federal income tax purposes at the time and in the amount in which income is
taxed to the optioner as ordinary income by reason of the sale of stock acquired
upon the exercise of an Incentive Stock Option.

15
<PAGE>

An optioner will not realize any income at the time a Non-qualified Stock
Option or a SAR is granted under the 1997 Plan, nor will the Company be entitled
to a deduction at that time. Upon exercise of a Non-qualified Stock Option or a
SAR, the Participant will recognize ordinary income (a) in the case of an
exercise of a Non-qualified Stock Option (whether the Non-qualified Stock Option
price is paid in cash or by the surrender of previously owned Shares), in an
amount equal to the difference between the option price and the fair market
value of the Shares to which the Non-qualified Stock Option pertains, and (b) in
the case of an exercise of a SAR, in an amount equal to the sum of the fair
market value of the Shares and any cash received on the exercise. In the event
that the Participant cannot sell shares acquired on exercise of a Non-qualified
Stock Option or SAR without incurring liability under Section 16(b) of the
Exchange Act, the taxable event described above will be delayed until six months
after acquisition of the Shares, or the first day on which the sale of such
property no longer subjects the person to suit under Section 16(b) of the
Exchange Act, whichever is earlier. The Company will be entitled to a tax
deduction in an amount equal to the amount of ordinary income realized by the
optioner.

INDEPENDENT PUBLIC ACCOUNTANTS

The Company has selected KPMG Peat Marwick to serve as the Company's
independent public accountants in 1997. Representatives of that firm are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they so desire and to be available to respond to appropriate
questions.

SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

Proposals of shareholders intended to be presented at the 1998 Annual
Meeting must be received by December 19, 1997 to be considered for inclusion in
the Company's Proxy Statement and Form of Proxy relating to that meeting. Such
proposals should be addressed to Option Care, Inc., 100 Corporate North, Suite
212, Bannockburn, Illinois 60015, Attn.: Secretary.

DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS

Management does not now intend to bring before the 1997 Annual Meeting any
matters other than those specified in the notice of the meeting, and it does not
know of any business which persons other than the management intend to present
at the meeting. Should any other matter requiring a vote of the shareholders
properly come before the meeting, the persons named in the accompanying Proxy
intend to vote the shares represented by them in accordance with their best
judgment.

By Order of the Board of Directors

Cathy Bellehumeur
Senior Vice President, General Counsel
and Secretary

April 18, 1997

16
<PAGE>

EXHIBIT A

OPTION CARE, INC.
AMENDED AND RESTATED
STOCK INCENTIVE PLAN
(1997)

I. GENERAL

1. Plan. To provide incentives to employees of OPTION CARE, Inc., a
Delaware Corporation (the "Company"), or its subsidiary corporations, members
of the Board of Directors of the Company (the "Board") and other persons who
provide services to the Company or its subsidiary corporations on a regular and
substantial basis ("vendors") through rewards based upon the ownership and
performance of the common stock of the Company, the Committee hereinafter
designated may grant incentive awards, stock options, stock appreciation
rights, or combinations thereof, to eligible officers and other employees and
vendors on the terms and subject to the conditions stated in this Plan. In
addition, members of the Board other than John N. Kapoor ("Directors") are or
may be granted options on the terms and subject to the conditions set forth in
this Plan. References hereinafter to employment by or the provision of services
to the Company shall include references to its subsidiary corporations within
the meaning of section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code"). All employees, officers, Directors and vendors eligible to receive
grants or awards under this Plan shall be collectively referred to herein as
"Eligible Recipients."

2. Eligibility. Officers and other employees of the Company and its
subsidiaries, and vendors, shall, upon selection by the Committee, be eligible
to receive incentive awards, stock options or stock appreciation rights, either
singly or in combination, as the Committee, in its discretion, shall determine.
Directors shall receive stock options on the terms and subject to the conditions
stated in this Plan.

3. Shares to be Issued. The maximum number of shares of common stock, par
value $.01 per share of the Company ("Common Stock"), to be issued pursuant to
all grants made under the Plan shall be 2,000,000. Shares awarded pursuant to
grants which, by reason of the expiration, cancellation or other termination of
the grants prior to issuance, are not issued, shall again be available for
future grants. Shares of Common Stock to be issued nay be authorized and
unissued shares, treasury stock or a combination thereof.

4. Administration of the Plan. The Plan shall be administered by a committee
designated by the Board (the "Committee"). No member of the Committee shall be
eligible to participate in, or within one year prior to appointment to the
Committee (but disregarding any participation or eligibility for participation
during any period of time before the initial registration statement under
Section 12 of the Securities Exchange Act of 1934 of the Company or any of its
affiliates becomes effective) shall have participated in or shall have been
eligible to participate in, this Plan or any other stock purchase, incentive
award, stock option, stock appreciation rights or other stock incentive plan of
the Company, except as provided in Article III, Section l(b). The Committee
shall, subject to the terms of the Plan establish selection guidelines, select
officers and other employees, directors and vendors for participation, and
determine the form of grant, either as an incentive award, stock option or
stock appreciation rights or combination thereof, determine the form of stock
option, the number of shares subject to the grant, the fair market value of the
Common Stock when necessary, the time and conditions of vesting or exercise, and
all other terms and conditions of the grant. All grants and awards under

17
<PAGE>

this Plan shall be evidenced by written agreements ("Option Agreements") between
this Company and the participants and no such grant or award shall be valid
until so evidenced. The Committee may interpret the Plan and establish rules
and regulations for the administration of the Plan, including without
limitation, the imposition of conditions with respect to competitive employment
and provisions accelerating vesting or exercisability, not inconsistent with or
conflicting with the terms of the Plan. All such rules, regulations, and
interpretations relating to the Plan adopted by the Committee shall be
conclusive and binding on all parties. The foregoing notwithstanding, neither
the Board nor the Committee shall have any discretion to alter the number of
shares subject to stock options granted to directors pursuant to Article 3,
Section l(b) or the terms or conditions under which such shares are granted
except as provided in Article I, Section 5.

5. Adjustments for Changes in Capitalization. Appropriate adjustments shall
be made by the Committee in the maximum number of shares to be issued under
the Plan, the maximum number of shares to be issued pursuant to incentive
awards and in the number of shares the subject of any option grant, to give
effect to any stock splits, stock dividends and other relevant changes in
capitalization occurring after the effective date of the Plan and its amendment
and restatements, as applicable.

6. Effective Date and Term of Plan. The Plan as amended and restated shall
be submitted to the stockholders of the Company for approval and if approved
shall become effective on the date thereof. The Plan shall terminate ten years
thereafter, unless terminated earlier by action of the Board. No further grants
shall be made under the Plan after termination, but termination shall not affect
the rights of any participant under any grants made prior to termination.

7. Amendments. The Plan may be amended or terminated by the Board in any
respect except that no amendment may be made without stockholder approval if
such amendment would cause the Plan to fail to comply with Rule 16b-3 under the
Securities Exchange Act of 1934 (as such Rule 16b-3 may be amended or applicable
from time to time) or any other requirement of applicable law or regulation
("Applicable Law").

8. Securities Matters.

(a) Compliance with Law. The exercise or vesting of any grant or award
hereunder shall be effective only at such time as counsel to the Company
shall have determined that the issuance and delivery of shares of Common
Stock of the Company pursuant thereto will not violate any state or federal
securities or other laws. The person entitled to receive shares of stock
pursuant to any grant or award hereunder may be required by the Company, as
a condition prerequisite to such delivery, to agree in writing that all
shares of Common Stock to be acquired pursuant thereto shall be held for
his or her own account without a view to any further distribution thereof,
that the certificates for such shares shall bear an appropriate legend to
that effect and that such shares will not be transferred or disposed of
except in compliance with applicable federal and state securities laws. The
Company may, in its sole discretion, defer the effectiveness of any
exercise of an option granted hereunder in order to allow the issuance of
Common Stock to be made pursuant thereto to be made pursuant to
registration or an exemption from registration or other methods for
compliance available under federal or state securities laws. The Company
shall be under no obligation to effect the registration pursuant to the
Securities Act of 1933 of any shares of Common Stock to be issued hereunder
or to effect similar compliance under any state laws. The Company shall
inform the optionee in writing of any decision to defer the effectiveness
of the exercise of an option granted hereunder. During the period that the
effectiveness

18
<PAGE>

of the exercise of an option has been deferred, the optionee may, by
written notice, withdraw such exercise and obtain the refund of any amount
paid with respect thereto.

(b) Blue Sky Limitations. Anything in this Plan to the contrary
notwithstanding, in the event the Company makes any public offering of its
securities and determines in its sole discretion that it is necessary to
reduce the number of granted but unexercised stock options so as to comply
with any state securities or Blue Sky law limitation with respect thereto,
the Committee shall have the right (a) to accelerate the dates on which
options granted hereunder may be exercised and (b) cancel any such
accelerated options if they are not exercised within fourteen (14) days
after notice of such acceleration has been given to the optionee.

9. Change of Control. Subject to the requirement of Article III, Section 2
hereof that an option must be held by an Eligible Recipient for at least
one year before becoming vested with such Eligible Recipient, upon a Change
of Control any other vesting period shall end and all otherwise unvested
options shall become immediately exercisable. For these purposes, a "Change
of Control" shall mean the occurrence of any of the following events:

(a) a merger, consolidation or reorganization of or involving the Company,
in which the Company does not survive as an entity independent of other
parties to such merger, consolidation or reorganizations;

(b) a sale of all or substantially all of the assets of the Company;

(c) the first purchase of shares of Common Stock of the Company pursuant to
a tender or exchange offer for a majority of the Company's outstanding
shares of Common Stock by any person other than John N. Kapoor;

(d) any change in control (other than as a result of a public issuance of
securities by the Company) of a nature that, in the opinion of the Board,
would be required to be reported under federal securities laws, unless
after (and taking into consideration) the occurrence of such event John N.
Kapoor owns or will own a majority of the Company's outstanding shares of
Common Stock;

(e) any change of control of a nature that, in the opinion of the Board,
would be required to be reported under federal securities laws, unless
after (and taking into consideration) the occurrence of such event John N.
Kapoor owns or will own at least forty percent (40%) of the combined voting
power of the Company's then-outstanding securities;

(f) the date on which any person, other than John N. Kapoor, becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing at least a majority of the combined voting power of the
Company's then-outstanding securities; and

(g) the date on which a majority of the individuals who constitute the
members of the Board cease to be comprised of persons who (i) were members
of the Board two years prior to such date (the "Determining Board Members")
or (ii) were approved as directors by a vote of at least seventy percent
(70%) of the Determining Board Members.

19
<PAGE>

10. Sale or Other Disposition By Majority Interest. Each recipient shall
irrevocably appoint the Company and its Chief Executive Officer, or either of
them, as such recipient's agents and attorneys-in-fact, with full power of
substitution in the recipient's name, to sell, exchange, transfer or otherwise
dispose of all or a portion of such recipient's shares of Common Stock or
options, or both, and to do any and all things and to execute any and all
documents and instruments (including, without limitation, any stock transfer
powers) in connection therewith, such power of attorney not to become operable
until such time as the holder or holders of a majority of the issued and
outstanding shares of Common Stock of the Company sell, exchange, transfer or
otherwise dispose of, or contract to sell, exchange, transfer or otherwise
dispose of, all or substantially all of their shares of Common Stock of the
Company. Any sale, exchange, transfer other disposition of all or a portion of a
recipient's shares of Common Stock pursuant to the foregoing powers of attorney
shall be made upon substantially the same terms and conditions (including sale
price per share) applicable to a sale, exchange, transfer or other dispositions
of all or a portion of shares of Common Stock of the Company owned by the holder
or holders of a majority of the issued and outstanding shares of Common Stock of
the Company. For purposes of determining the sale price per share of Common
Stock under this Section 10, there shall be excluded the consideration (if any)
paid or payable to the holder or holders of a majority of the issued and
outstanding shares of Common Stock of the Company in connection with any
employment, consulting, noncompetition or similar agreements which such holder
or holders may enter into in connection with or subsequent to such sale,
transfer, exchange or other disposition. The foregoing powers of attorney shall
be irrevocable and coupled with an interest and shall not terminate by operation
of law, whether by death, bankruptcy or adjudication of incompetency or insanity
of the recipient or the occurrence of any other event.

11. Additional Provisions.

(h) Additional Option Provisions. The Board or Committee may, in its sole
discretion, include additional provisions in any option granted under the
Plan, including, without limitation, restrictions on transfer, repurchase
rights, or commitments (i) to pay cash bonuses, (ii) to make, arrange for
or guaranty loans, or (iii) to transfer other property to optionees upon
exercise of options, or such other provisions as shall be determined by the
Board of Directors or Committee; provided that such additional provisions
shall not be inconsistent with any other term or condition of the Plan.

(i) Acceleration. The Board or Committee may, in its sole discretion, (i)
accelerate the date or dates on which all or any particular option or
options granted under the Plan may be exercised; or (ii) extend the dates
during which all or any particular option or options granted under the Plan
may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Applicable Law
(as defined in Article I, Section 7).

II. INCENTIVE AWARDS

1. Form of Award. Incentive awards, whether Performance Awards or Fixed
Awards (as described below), may be made to Eligible Recipients in the form of
(i) cash, whether in an absolute amount or as a percentage of compensation,
(ii) stock units, without power to vote and without the entitlement to current
dividends, (iii) shares of Common Stock issued to the Eligible Recipient but
forfeitable and with restrictions on transfer in any form as hereinafter
provided or ( iv) any combination of the foregoing. In addition, in the
Committee's discretion, the Company may satisfy all or any part of its
obligation under an

20
<PAGE>

incentive award payable in cash by delivering shares of Common Stock with a then
fair market value equal to the amount of such obligation or such part thereof.

2. Performance Awards. Performance Awards may be made in terms of a stated
potential maximum dollar amount, percentage or compensation, or number of
units or shares, with the actual such amount, percentage and number to be
determined by reference to the level of achievement of corporate, group,
division, individual or other specific objectives over a performance period of
not less than one year nor more than five years, as determined by the Committee.
No rights or interests of any kind shall be vested in an individual receiving a
Performance Award until the conclusion of the performance period and the
determination of the level of achievement specified in the award. The vesting
period, if any, for a Performance Award shall be as specified in the applicable
award or Option Agreement.

3. Fixed Awards. Fixed Awards may be made which are not contingent on the
performance of objectives, but are contingent on the recipient's continuing in
the Company's employ for a period to be specified in the award, which period
shall be not less than one year nor more than ten years from the date of award.

4. Rights with Respect to Restricted Shares. If shares of restricted Common
Stock are issued pursuant to an Incentive Award, the recipient shall have the
right to vote the shares and to receive dividends thereon from the date of
issuance, unless and until forfeited.

5. Rights with Respect to Stock Units. If stock units are credited to a
recipient pursuant to an Incentive Award, amounts equal to dividends otherwise
payable on a like number of shares of Common Stock after the crediting of the
units shall be credited to an account for the recipient and held until the award
is forfeited or paid out. Interest shall be credited on the account annually at
a rate equal to the return on five year U.S. Treasury obligations.

6. Vesting and Resultant Events. At the time an Incentive Award vests, the
award, if in stock units, shall be paid to the recipient either in shares of
Common Stock equal to the number of units, in cash equal to the fair market
value of such shares, or in such combination thereof as the Committee shall
determine, and the recipient's account to which dividends and interest have been
credited shall be paid in cash. Shares of restricted Common Stock issued
pursuant to an award shall, at the time of vesting, be released from the
restrictions.

III. STOCK OPTIONS FOR OFFICERS,
OTHER EMPLOYEES, VENDORS AND DIRECTORS

1. Grants of Options for Eligible Recipients. Options to purchase shares of
Common Stock of the Company may be granted to such Eligible Recipients as
may be selected by the Committee. These options may, but need not, constitute
"incentive stock options," as defined in section 422 of the Code, or any other
form of option under the Code as hereafter amended.

2. Terms of Options.

(a) No option shall be exercisable earlier than one year, nor more than ten
years after the date of grant. Subject to the preceding sentence, the
exercisability of an option may be conditioned upon the

21
<PAGE>

achievement of performance goals established by the Committee. Options
granted to non-employee Directors shall become exercisable with respect to
25 percent of the shares subject thereto on each of the first four
anniversaries of the date of grant.

(b) The per share option price under incentive stock options shall be not
less; than 100% of, and the per share option price under options granted to
directors shall be 100% of, the fair market value of a share of Common
Stock at the time the option is granted, provided, however, that if at the
time an option designated as and intended to be an incentive stock option
is otherwise to be granted pursuant to the Plan, the optionee owns directly
or indirectly (within the meaning of section 424(d) of the Code) shares of
Common Stock of the Company possessing more than ten percent (10%) of the
total combined voting power of all classes of stock cf the Company or its
parent or subsidiary corporations, if any within the meaning of section
422(b) (63 of the Code), then the option price shall be not less than 110%
of the fair market value of the Common Stock as of the date the option is
granted, and such option by its terms shall not be exercisable after the
expiration of five (5) years from the date the option is granted.

(c) Upon exercise, the option price may be paid in cash, in shares of
Common Stock having a fair market value equal to the option price, or in a
combination thereof. Options may be exercised during the individual's
continued employment with, or in the case of a vendor, engagement by, the
Company or service on the Board, as the case may be, and for a period of
ninety days following termination of such employment, engagement or service
on the Board (or such other period of time provided in a relevant
employment or severance agreement between the optionee and the Company) and
only within the original term of that option; provided, however, that if
employment of the optionee by the Company or service on the Board, as the
case may be, shall have terminated by reason of retirement at or after age
65 or total and permanent disability, then the option may be exercised for
a period not in excess of one year following such termination of employment
or service on the Board (or such other period of time provided in a
relevant employment or severance agreement between the optionee and the
Company), but in any event not after the expiration of the term of the
option. If and to the extent the Committee may, in its discretion,
determine the change in an option holder's status from an employee to a
vendor, or the transfer of an individual from the employment or engagement
or vice versa, the Company or its subsidiaries to the employment or
engagement of any affiliate of the Company shall not be treated as a
termination of employment or engagement by the Company. The status of
another entity as an affiliate of the Company shall be determined by the
Committee.

(d) Options shall not be transferable, except that in the event of the
death of an optionee (i) during employment, engagement or service on the
Board, as the case may be, (ii) within a period not in excess of one year
after termination of employment or service on the Board, as the case may
be, by reason of retirement at or after age 65 or total and permanent
disability or (iii) within ninety days after termination of employment,
engagement or service on the Board, as the case may be, for any other
reason, outstanding options may be exercised by the executor, administrator
or personal representative at such deceased optionee during the remainder
of the period during which the optionee could have exercised the option had
he survived, but not less than ninety days after the death of such
optionee.

3. Withholding Tax. An option may provide that the optionee may elect to
deliver to the Company (or authorize the Company to retain from the shares
purchased upon exercise of such option) whole shares of Common Stock to satisfy
the Company's obligation, if any, to withhold federal, state and local income
tax

22
<PAGE>

required to be withheld in respect of such exercise, provided, however, that in
the case of an optionee who is an executive officer or director of the Company
(within the meaning of Section 16 of the Securities Exchange Act of 1934), such
election may not be made during the six-month period beginning on the date of
grant of such option and must be made either (i) at least six months prior to
the date on which the amount of such withholding tax is determined, (ii) during
the ten business day period beginning on the third business day following each
release of the Company's quarterly or annual summary of sales and earnings, or
(iii) in advance of such ten business day period to be effective within such ten
business day period. Any such election shall be irrevocable, but subject to
disapproval by the Committee.

IV. STOCK APPRECIATION RIGHTS

1. Grants. Rights entitling the grantee to receive cash or shares of Common
Stock having a fair market value equal to the appreciation in market value of
a stated number of shares of Common Stock from the date of grant, or in the case
of rights granted in tandem with or by reference to a stock option granted prior
to the grant of such rights, from the date of grant of the related stock option
to the date of exercise, nay be granted to such eligible officers and other
employees as may be selected by the Committee and approved by the Board.

2. Terms of Grant. Such rights may be granted in tandem with or with
reference to a related stock option, in which event the grantee may elect to
exercise either the option or the right, but not both, as to the same shares of
Common Stock subject to the option and the right, or the right may be granted
independently of a related stock option. In either event, the right shall not
be exercisable unless it shall have been outstanding for at least 6 months nor
shall such right be exercisable more than ten years after the date of grant.
Stock appreciation rights shall not be transferable, except that in the event of
the death of a grantee such right shall be exercisable by the same persons and
for the same period of time as the related option. Stock appreciation rights
may be exercised during the individual's continued employment with the Company
and for a period of ninety days following termination of employment or
engagement (or such other period of time provided in a relevant employment or
severance agreement between the optionee and the Company), as the case may be,
and only within the original term of that grant; provided, however, that if
employment of the grantee by the Company and its subsidiaries shall have
terminated by reason of the grantee's death, retirement after age 65 or total
and permanent disability, or if the grantee dies after termination of
employment on account of such retirement or disability, then such right shall be
exercisable by the same persons and for the same period of time as the related
option. If and to the extent the Committee may, in its discretion, determine
the change in an option holder's status from an employee to a vendor, or the
transfer of an individual from the employment or engagement or vice versa, the
Company or its subsidiaries to the employment or engagement of any affiliate of
the Company shall not be treated as a termination of employment or engagement by
the Company. The status of another entity as an affiliate of the Company shall
be determined by the Committee.

3. Payment on Exercise. Upon exercise of a right, the grantee shall be paid
the excess of the then fair market value of the number of shares to which the
right relates over the fair market value of such number of shares at the date of
grant of the right or of the related stock option, as the case may be. Such
excess shall be paid in cash or in shares of Common Stock having a fair market
value equal to such excess or in such combination thereof as the Committee shall
determine.

23
<PAGE>

OPTION CARE, INC.
100 CORPORATE NORTH
SUITE 212
BANNOCKBURN, ILLINOIS 60015

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Paul S. Jurewicz and Cathy Bellehumeur as
Proxies, each with the power to appoint a substitute, and hereby authorizes
them, and each of them, to represent and vote, as designated below, all of the
shares of Common Stock of Option Care, Inc. (the "Company") held of record by
the undersigned, or over which the undersigned had voting power, at the close of
business on March 28, 1997 at the Annual Meeting of Shareholders to be held on
May 9, 1997 or any adjournment or adjournments thereof.

This Proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no direction is made, this Proxy will be voted
for Proposals 1 and 2 and in favor of any proposals to adjourn the meeting in
order to allow the Company additional time to obtain sufficient Proxies with
regard thereto.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:

1. Election of Directors.

[_] FOR the nominees listed below (except [_] WITHHOLD AUTHORITY to vote
marked to the contrary below). for the nominees below

(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike such nominee's name from the list below.)

John N. Kapoor

Roger W. Stone

2. Approval of the Option Care, Inc. Amended and Restated Stock Incentive Plan
(1997).

[_] FOR [_] AGAINST [_] ABSTAIN

(continued on reverse side)

3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

Dated:______________________, 1997

---------------------------------
Signature

---------------------------------
Signature, if held jointly

Please sign exactly as name appears
on stock certificate. When shares
are held by joint tenants, both
should sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If a
corporation, please sign in full
corporate name by the President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.

PLEASE SIGN, DATE AND MAIL PROMPTLY