REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                                STERICYCLE, INC.
             (Exact name of Registrant as specified in its charter)

                                                          
           DELAWARE                          4953                  36-3640402
 (State or other jurisdiction    (Primary Standard Industrial   (I.R.S. Employer
              of                 Classification Code Number)     Identification
incorporation or organization)                                      Number)

                         1419 LAKE COOK ROAD, SUITE 410
                           DEERFIELD, ILLINOIS 60015
                                 (847) 945-6550
         (Address, including zip code, and telephone number, including
            area code, of Registrant's principal executive offices)
 
                                 MARK C. MILLER
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                STERICYCLE, INC.
                         1419 LAKE COOK ROAD, SUITE 410
                           DEERFIELD, ILLINOIS 60015
                                 (847) 945-6550
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)
                           --------------------------
 
                                   COPIES TO:

                                       
        Craig P. Colmar, Esq.                   Geoffrey E. Liebmann, Esq.
          Michael Bonn, Esq.                     Cahill Gordon & Reindel
          Johnson and Colmar                          80 Pine Street
        300 South Wacker Drive                   New York, New York 10005
       Chicago, Illinois 60606

                           --------------------------
 
        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
 
                           --------------------------
 
    If  any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to  Rule 415 under the Securities Act  of
1933, check the following box. / /
 
    If  this Form  is filed  to register  additional securities  for an offering
pursuant to Rule 426(b) under the Securities Act, please check the following box
and list  the  Securities  Act  registration statement  number  of  the  earlier
effective registration statement for the same offering. / /
 
    If  this Form  is a post-effective  amendment filed pursuant  to Rule 462(c)
under the Securities Act,  check the following box  and list the Securities  Act
registration  Statement number  of the earlier  effective registration statement
for the same offering. / /
 
    If delivery of the prospectus is expected  to be made pursuant to Rule  434,
please check the following box. / /
                           --------------------------
 
                        CALCULATION OF REGISTRATION FEE

                                                                        PROPOSED MAXIMUM
                                       AMOUNT TO      PROPOSED MAXIMUM     AGGREGATE
      TITLE OF EACH CLASS OF               BE          OFFERING PRICE       OFFERING         AMOUNT OF
   SECURITIES TO BE REGISTERED       REGISTERED (1)    PER SHARE (2)       PRICE (2)      REGISTRATION FEE
                                                                              
Common Stock, par value $.01
 share............................  3,450,000 shares       $13.00        $44,850,000.00      $15,465.52

(1)  Includes 450,000 shares  that the Underwriters have  the option to purchase
    from the Company to cover over-allotments, if any.
 
(2) Estimated solely for purposes of calculating the registration fee.
                           --------------------------
 
    THE REGISTRANT HEREBY  AMENDS THIS  REGISTRATION STATEMENT ON  SUCH DATE  OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE  A  FURTHER  AMENDMENT  WHICH SPECIFICALLY  STATES  THAT  THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE  IN ACCORDANCE WITH SECTION 8(A)  OF
THE  SECURITIES ACT  OF 1933  OR UNTIL  THE REGISTRATION  STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION  8(A),
MAY DETERMINE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                STERICYCLE, INC.
                            ------------------------
 
                             CROSS-REFERENCE SHEET
 
           PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION
                   IN PROSPECTUS OF PART I ITEMS OF FORM S-1

            ITEM NUMBER AND HEADING IN
         FORM S-1 REGISTRATION STATEMENT                  LOCATION OR CAPTION IN PROSPECTUS
- --------------------------------------------------  ---------------------------------------------
                                              
 1.  Forepart of the Registration Statement and     Forepart of Registration Statement; Outside
      Outside Front Cover Page of Prospectus......  Front Cover Page
 
 2.  Inside Front and Outside Back Cover Pages of   Inside Front Cover Page; Outside Back Cover
      Prospectus..................................  Page
 
 3.  Summary Information, Risk Factors and Ratio    Prospectus Summary; Risk Factors
      of Earnings to Fixed Charges................
 
 4.  Use of Proceeds..............................  Use of Proceeds
 
 5.  Determination of Offering Price..............  Outside Front Cover Page; Underwriting
 
 6.  Dilution.....................................  Dilution
 
 7.  Selling Security Holders.....................  Not Applicable
 
 8.  Plan of Distribution.........................  Outside and Inside Front Cover Pages;
                                                    Underwriting; Outside Back Cover Page
 
 9.  Description of Securities to be Registered...  Outside Front Cover Page; Prospectus Summary;
                                                    Dividend Policy; Capitalization; Description
                                                    of Capital Stock; Shares Eligible for Future
                                                    Sale
 
10.  Interests of Named Experts and Counsel.......  Not Applicable
 
11.  Information with Respect to the Registrant...  Outside and Inside Front Cover Pages;
                                                    Prospectus Summary; Risk Factors; Use of
                                                    Proceeds; Dividend Policy; Capitalization;
                                                    Dilution; Selected Consolidated Financial
                                                    Data; Management's Discussion and Analysis of
                                                    Financial Condition and Results of
                                                    Operations; Business; Management; Certain
                                                    Transactions; Principal Stockholders; Shares
                                                    Eligible for Future Sale; Description of
                                                    Capital Stock; Additional Information;
                                                    Consolidated Financial Statements; Outside
                                                    Back Cover Page
 
12.  Disclosure of Commission Position on           Not Applicable
      Indemnification for Securities Act
      Liabilities.................................

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

                   SUBJECT TO COMPLETION, DATED JUNE 11, 1996
 
                                3,000,000 SHARES
 
                                STERICYCLE, INC.
 
                                  Common Stock
 
    The 3,000,000 shares of Common Stock, par value $.01 per share (the  "Common
Stock"),  offered hereby (this "Offering") are being offered by Stericycle, Inc.
("Stericycle" or the "Company"). Prior to this Offering there has been no public
market for the Common Stock. It  is currently estimated that the initial  public
offering  price will be between $11.00  and $13.00 per share. See "Underwriting"
for the factors considered in determining the initial public offering price.
 
    The Company has  applied for  quotation of the  Common Stock  on the  Nasdaq
National Market ("Nasdaq") under the symbol "SRCL."
 
    FOR  A DISCUSSION OF CERTAIN RISKS OF  AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 7 TO 14.
                               -----------------
THESE   SECURITIES   HAVE   NOT   BEEN   APPROVED   OR   DISAPPROVED   BY    THE
   SECURITIES    AND   EXCHANGE   COMMISSION    OR   ANY   STATE   SECURITIES
     COMMISSION  NOR  HAS  THE   SECURITIES  AND  EXCHANGE  COMMISSION   OR
       ANY   STATE  SECURITIES   COMMISSION  PASSED   UPON  THE  ACCURACY
           OR  ADEQUACY  OF   THIS  PROSPECTUS.  ANY   REPRESENTATION
                       TO THE CONTRARY IS A CRIMINAL OFFENSE.
                              -------------------

                                                                       UNDERWRITING
                                                  PRICE TO             DISCOUNTS AND           PROCEEDS TO
                                                   PUBLIC              COMMISSIONS*             COMPANY+
                                                                                 
Per Share.................................            $                      $                      $
Total++...................................            $                      $                      $

- ------------
 
*     The  Company  has agreed  to  indemnify the  Underwriters  against certain
    liabilities, including liabilities  under the  Securities Act  of 1933.  See
    "Underwriting."
 
+    Before deducting expenses of this Offering payable by the Company estimated
    to be $800,000.
 
++   The Company has granted the Underwriters a 30-day option to purchase up  to
    450,000 additional shares of Common Stock on the same terms per share solely
    to  cover over-allotments, if any. If such  option is exercised in full, the
    total price to public will be  $         , the total underwriting  discounts
    and  commissions will be $        and the total proceeds to the Company will
    be $        . See "Underwriting."
                              -------------------
 
    The Common Stock  is being offered  by the Underwriters  as set forth  under
"Underwriting" herein. It is expected that the delivery of certificates therefor
will  be made at the offices of Dillon, Read  & Co. Inc., New York, New York, on
or about         , 1996, against payment therefor. The Underwriters include:
 
DILLON, READ & CO. INC.
                              SALOMON BROTHERS INC
                                                         WILLIAM BLAIR & COMPANY
 
                THE DATE OF THIS PROSPECTUS IS          , 1996.

                                 [Illustration]
 
    Steri-Cement-Registered   Trademark-,   Steri-Fuel-Registered    Trademark-,
Steri-Plastic-Registered  Trademark-  and  Steri-Tub-Registered  Trademark-  are
registered trademarks and  Stericycle-SM- is  a registered service  mark of  the
Company.
 
    IN  CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT  A LEVEL ABOVE  THAT WHICH  MIGHT OTHERWISE PREVAIL  IN THE  OPEN
MARKET.  SUCH  TRANSACTIONS MAY  BE EFFECTED  ON THE  NASDAQ NATIONAL  MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                                       2

                               PROSPECTUS SUMMARY
 
    THE  FOLLOWING SUMMARY  IS QUALIFIED  IN ITS  ENTIRETY BY  THE MORE DETAILED
INFORMATION AND THE  CONSOLIDATED FINANCIAL  STATEMENTS, CONDENSED  CONSOLIDATED
FINANCIAL  STATEMENTS  AND RELATED  NOTES  THERETO APPEARING  ELSEWHERE  IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL  INFORMATION IN THIS PROSPECTUS  (I)
REFLECTS A 1-FOR-5.3089 REVERSE STOCK SPLIT TO BE EFFECTIVE IMMEDIATELY PRIOR TO
COMPLETION  OF  THIS OFFERING,  (II) REFLECTS  THE REDESIGNATION  OF ALL  OF THE
COMPANY'S OUTSTANDING SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK AS
A LIKE NUMBER OF SHARES OF COMMON STOCK, WHICH WILL OCCUR AUTOMATICALLY UPON THE
CLOSING  OF   THIS  OFFERING,   AND  (III)   ASSUMES  THAT   THE   UNDERWRITERS'
OVER-ALLOTMENT  OPTION  IS NOT  EXERCISED. SEE  "DESCRIPTION OF  CAPITAL STOCK,"
"CAPITALIZATION" AND  "UNDERWRITING."  UNLESS THE  CONTEXT  REQUIRES  OTHERWISE,
REFERENCES  TO "STERICYCLE" AND THE "COMPANY"  REFER TO STERICYCLE, INC. AND ITS
SUBSIDIARIES. PROSPECTIVE INVESTORS  SHOULD CAREFULLY  CONSIDER THE  INFORMATION
UNDER "RISK FACTORS."
 
                                  THE COMPANY
 
    Stericycle  is  a  multi-regional integrated  company  employing proprietary
technology  to  provide  environmentally-responsible  management  of   regulated
medical waste for the health care industry. Because of the Company's health care
orientation, proprietary technology and breadth of service, the Company believes
that  it is in a unique position to meet the fundamental need of the health care
industry to manage regulated medical waste  in a safe and cost-effective  manner
and  to capitalize on  the current consolidation trend  in the regulated medical
waste management  industry. The  Company believes  that its  exclusive focus  on
regulated  medical waste and the experience of its management in the health care
industry distinguish  the  Company from  its  chief competitors,  most  of  whom
participate  in multiple businesses  and most of  whose management experience is
primarily in the solid waste business.  The Company believes that its  regulated
medical waste management system, including its proprietary
ELECTRO-THERMAL-DEACTIVATION    ("ETD")   treatment   process,   is   the   only
commercially-proven system that provides all  of the following benefits: (i)  it
kills  human  pathogens in  regulated  medical waste  without  generating liquid
effluents or regulated  air emissions;  (ii) it affords  certain operating  cost
advantages  over  the principal  competing  technologies; (iii)  it  reduces the
volume of  regulated medical  waste by  up  to 85%;  (iv) it  renders  regulated
medical  waste  unrecognizable; (v)  it permits  the  recovery and  recycling of
usable plastics from regulated medical waste; and (vi) it enables the  remaining
regulated  medical waste to be safely landfilled  or used as an alternative fuel
in energy production. The Company's full-service program is designed to help  to
protect  its  customers and  their employees  against potential  liabilities and
injuries in  connection  with  the  handling,  transportation  and  disposal  of
regulated medical waste.
 
    The   Company's   integrated  services   include  regulated   medical  waste
collection, transportation, treatment, disposal, reduction, reuse and  recycling
services,  together  with related  training  and education  programs, consulting
services and product sales,  in four geographic  service areas: (i)  California;
(ii)  Washington, Oregon, Idaho and British Columbia; (iii) Wisconsin, Illinois,
Indiana and Michigan;  and (iv)  Massachusetts, Maine,  New Hampshire,  Vermont,
Rhode Island, Connecticut, New York and New Jersey. As of December 31, 1995, the
Company  served  over 13,000  customers, consisting  of  two principal  types of
regulated medical  waste generators.  Approximately 70%  of the  Company's  1995
revenues   were  derived   from  hospitals,   blood  banks   and  pharmaceutical
manufacturers ("Core" generators),  and approximately 30%  of its revenues  were
derived from long-term and subacute care facilities, outpatient clinics, medical
and   dental  offices,  industrial   clinics,  dialysis  centers,  laboratories,
biotechnology and  biomedical companies,  veterinary offices,  municipal  health
departments,  ambulance, fire  and police  departments, correctional facilities,
schools, park districts  and funeral  homes ("Alternate  Care" generators).  The
Company's  current  operations  are  comprised of  four  treatment  centers, one
recycling center, five transfer stations and four customer service centers.
 
    Regulated medical waste is generally defined as any waste that can cause  an
infectious  disease  or  that reasonably  can  be suspected  of  harboring human
pathogenic organisms.  Regulated medical  waste includes  single-use  disposable
items such as needles, syringes, gloves and laboratory, surgical, emergency room
and  other supplies  which have  been in  contact with  blood or  bodily fluids;
cultures and stocks of infectious agents; and blood and blood products.
 
    Generators of regulated medical  waste are responsible  for that waste  from
its  origin through  its disposal.  The Company  seeks to  offer a single-source
solution to  a  wide  spectrum  of regulated  medical  waste  management  issues
 
                                       3

confronting   generators  of  regulated  medical  waste,  thereby  managing  the
generators' compliance responsibilities relating to proper packaging,  labeling,
handling,  treatment, disposal, tracking and reporting. In addition, the Company
offers programs  to assist  customers in  educating their  employees on  safety,
resource  conservation  and  compliance issues.  This  full-service  approach to
regulated medical waste management assists customers in dealing cost-effectively
with the  increasingly  complex  regulatory framework  in  which  generators  of
regulated medical waste operate.
 
    An  independent  study published  in  1995 estimated  that  the size  of the
regulated medical  waste management  market in  the United  States in  1995  was
approximately  $1  billion.  Based  upon  certain  public  information  and  the
Company's estimates of its competitors'  revenues, the Company believes that  it
is the second-largest provider of regulated medical waste management services in
the United States.
 
    The  Company  believes that  the  demand for  its  services will  grow  as a
consequence of certain  trends in the  health care and  regulated medical  waste
industries:
 
    - The  handling and  disposal of the  large quantities  of regulated medical
      waste generated  by  the health  care  industry has  attracted  increasing
      public  awareness and  regulatory attention.  The Occupational  Health and
      Safety Administration ("OSHA") has issued regulations concerning  employee
      exposure   to  bloodborne  pathogens   and  other  potentially  infectious
      materials  that  require,  among  other  things,  special  procedures  for
      handling  regulated medical waste and annual training of all personnel who
      are potentially exposed to blood and bodily fluids.
 
    - Alternate Care generators have become an increasingly important source  of
      revenues  in the  regulated medical  waste industry.  Individual Alternate
      Care generators, however, typically do not produce regulated medical waste
      in sufficient volumes to justify substantial capital expenditures on their
      own waste  treatment  facilities  or  the  expense  of  hiring  regulatory
      compliance personnel. Accordingly, Alternate Care generators often rely on
      a  regulated  medical  waste  management provider  for  a  broad  range of
      regulated medical waste management services.
 
    - The health care industry is under increasing pressure to reduce costs  and
      improve efficiency, which the Company believes can be achieved in the case
      of  regulated medical  waste by  obtaining waste  management services from
      outside sources.
 
    - Governmental clean air regulations and public opposition are combining  to
      increase the cost and difficulty of obtaining permits to build and operate
      incinerators.   As  a  result,   many  hospitals  have   shut  down  their
      incinerators, and the Company  expects that many more  will do so, with  a
      corresponding  increase  in  demand  for  off-site  alternative  treatment
      services such as those offered by the Company.
 
    - Although  the  regulated   medical  waste   management  industry   remains
      fragmented, the number of competitors is rapidly decreasing as a result of
      industry consolidation.
 
    The Company believes that it has the opportunity to increase its penetration
of  the geographic service  areas in which  it currently operates  as well as to
expand into adjacent service areas and offer additional products and services to
its customers.  Since August  1993,  the Company  has acquired  eight  regulated
medical  waste management businesses. The Company  intends to continue to expand
through business acquisitions, in  which it will  attempt to acquire  businesses
that  can be integrated into the Company's existing operations and businesses in
new geographic  service  areas  that can  be  assembled  in a  "hub  and  spoke"
configuration  using  transfer  stations  and  treatment  facilities.  Through a
combination of logistics  and marketing efforts  and business acquisitions,  the
Company intends to improve its operating efficiency.
 
    Stericycle,  Inc.  is a  Delaware corporation  with its  principal executive
offices located at 1419  Lake Cook Road, Suite  410, Deerfield, Illinois  60015.
Its telephone number is (847) 945-6550.
 
                                       4

                                  THE OFFERING

                                               
Common Stock offered by the Company.............  3,000,000 shares
Common Stock to be outstanding after this         9,218,455 shares (1)
Offering........................................
Use of proceeds.................................  To  repay  bank  and other  debt  and for
                                                  general  corporate  purposes,   including
                                                  capital expenditures, working capital and
                                                  potential  future acquisitions.  See "Use
                                                  of Proceeds."
Proposed Nasdaq National Market symbol..........  SRCL

- ------------------------
(1) Based on  the number  of shares  outstanding as  of June  1, 1996.  Excludes
    397,555  shares  issuable upon  the  exercise of  outstanding  stock options
    exercisable within 60 days of June  1, 1996, at a weighted average  exercise
    price  of $0.66 per share, and 388,270  shares issuable upon the exercise of
    outstanding warrants all of which were exercisable  as of June 1, 1996 at  a
    weighted  average exercise price  of $5.31 per  share. Also excludes 328,036
    shares issuable  upon  the  exercise  of outstanding  stock  options,  at  a
    weighted  average  exercise  price of  $1.33  per share,  and  21,578 shares
    issuable upon the  exercise of  outstanding warrants at  a weighted  average
    exercise price of $34.41 per share, which either were not exercisable within
    60  days of June 1,  1996 or were exercisable at  prices in excess of $12.00
    per share, the mid-point of the price  range as set forth on the cover  page
    of  this Prospectus. See  "Description of Capital Stock  -- Options" and "--
    Warrants."
 
                                       5

                      SUMMARY CONSOLIDATED FINANCIAL DATA
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                                                          THREE MONTHS ENDED
                                             YEAR ENDED DECEMBER 31,                          MARCH 31,
                            ----------------------------------------------------------  ----------------------
                               1991      1992(2)       1993        1994        1995        1995        1996
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                                               
STATEMENTS OF OPERATIONS
 DATA:
Revenues..................  $    1,563  $    5,010  $    9,141  $   16,141  $   21,339  $    5,446  $    5,578
Cost of revenues..........       1,845       5,198       8,947      13,922      17,478       4,227       4,337
Selling, general and
 administrative
 expenses.................       3,377      11,223       5,988       7,927       8,137       2,762       1,505
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
Loss from operations......      (3,659)    (11,411)     (5,794)     (5,708)     (4,276)     (1,543)       (264)
Interest expense..........         (77)       (244)       (245)       (260)       (277)        (54)        (83)
Interest income...........         243         283         201         156           9           6          --
Other.....................        (160)       (268)       (190)         --          --          --          --
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
Net loss..................  $   (3,653) $  (11,640) $   (6,028) $   (5,812) $   (4,544) $   (1,591) $     (347)
Less cumulative preferred
 dividends................      (1,351)     (2,737)     (3,733)     (4,481)         --(3)     (1,573)         --
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
Loss applicable to common
 stock....................  $   (5,004) $  (14,377) $   (9,761) $  (10,293) $   (4,544) $   (3,164) $     (347)
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
Net loss per common share
 (1)......................  $    (1.95) $    (4.99) $    (3.41) $    (3.59) $    (0.70) $    (1.10) $    (0.05)
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
Weighted average number of
 common shares
 outstanding..............   2,566,218   2,878,292   2,862,292   2,864,292   6,495,310   2,864,292   6,577,287
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------

 
                                      MARCH 31, 1996
                            ----------------------------------
                                                    PRO FORMA,
                                           PRO          AS
                              ACTUAL     FORMA(4)   ADJUSTED(5)
                            ----------  ----------  ----------
                                                                               
BALANCE SHEET DATA:
Cash and cash equivalents..............................................  $     120    $     120      $   28,800
Total assets...........................................................     23,876       25,710          54,390
Current portion of long-term debt......................................        759        2,593             759
Long-term debt, net of current maturities..............................      5,996        5,996           2,342
Shareholders' equity...................................................     12,228       12,228          46,396

- ------------------------------
(1)  See Note  2  to  the  Consolidated  Financial  Statements  for  information
     concerning the computation of loss per share.
 
(2)  During  1992, the Company approved a restructuring plan which resulted in a
     nonrecurring charge of $2,747,000, primarily to write-off assets associated
     with a technology used by the Company  prior to the development of the  ETD
     process.
 
(3)  In  August 1995 and  in connection with a  recapitalization of the Company,
     the liquidation preference on the Company's preferred stock was  eliminated
     and the Company's preferred stock was reclassified as Class A common stock.
     See "Description of Capital Stock -- 1995 Recapitalization."
 
(4)  Adjusted  to give  effect to  the acquisition  of certain  assets of Sharps
     Incinerator of Fort,  Inc. in  April 1996  and the  acquisition of  certain
     assets  of Doctors Environmental Control,  Inc. in May 1996.  See Note 2 to
     the March 31, 1996 Condensed Consolidated Financial Statements.
 
(5)  Adjusted to give  effect to the  sale of 3,000,000  shares of Common  Stock
     offered  hereby (at an assumed initial  public offering price of $12.00 per
     share, the mid-point of the price range  as set forth on the cover page  of
     this   Prospectus,  and  after  the  deduction  of  estimated  underwriting
     discounts and commissions  and estimated offering  expenses payable by  the
     Company)  and the application of the estimated net proceeds to the Company.
     See "Use of Proceeds."
 
                                       6

                                  RISK FACTORS
 
    IN  ADDITION  TO THE  OTHER INFORMATION  CONTAINED  IN THIS  PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN INVESTMENT  IN
THE COMMON STOCK OFFERED BY THIS PROSPECTUS.
 
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
 
    The  Company is engaged in the  regulated medical waste management business.
The Company's  operations  have not  been  profitable since  the  Company  began
operations in 1989. As of March 31, 1996, the Company had an accumulated deficit
of  approximately  $37,449,000. For  the year  ended December  31, 1995  and the
quarter ended  March 31,  1996,  the Company  had  net losses  of  approximately
$4,544,000,  or $0.70 per share, and approximately $347,000, or $0.05 per share,
respectively. There can be no assurance that the Company will be able to operate
profitably in the future. The Company is subject to the risks and  uncertainties
inherent  in the  growth of  a developing  business in  its industry, including,
among other  things,  limited access  to  capital, difficulties  and  delays  in
obtaining  necessary  government  permits and  authorizations,  other  delays in
implementing its business  strategy in particular  geographic service areas  and
significant competition.
 
IMPACT OF GOVERNMENT REGULATION
 
    The  regulated  medical waste  management industry  is subject  to extensive
federal,  state,  local  and  applicable  foreign  laws  and  regulations.   The
collection,  transportation, treatment  and disposal of  regulated medical waste
require applicable government permits, authorizations and approvals ("permits"),
the nature of which may vary  from jurisdiction to jurisdiction, and  continuing
compliance  with required packaging, labeling, handling, treatment, disposal and
documentation procedures  and  notice  and reporting  obligations.  The  Company
believes  that it  has obtained all  government permits required  to operate its
existing business and  that it is  in compliance in  all material respects  with
these  permits and all applicable laws and regulations. State and local laws and
regulations change with some frequency,  however, and the amendment of  existing
laws or regulations or the adoption of new laws or regulations could require the
Company  to obtain new  government permits or  to modify its  current methods of
operation in order to comply with these changes. There can be no assurance  that
the  Company would be  able to obtain any  such new permits or  that the cost of
compliance with any such changes would not have a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Governmental Regulation."
 
    The permits  that  the  Company  requires, and  in  particular  the  permits
required  to build and  operate treatment and  transfer facilities and transport
regulated medical waste, are difficult and time-consuming to obtain and, if  and
when  issued,  may be  subject  to conditions  or  restrictions which  limit the
Company's ability to operate efficiently  in the applicable jurisdiction.  There
can be no assurance that the Company will be successful in obtaining the permits
necessary  in order to expand the geographic  service areas in which it operates
or that any  such permits will  be obtained when  contemplated by the  Company's
expansion  plans  or under  conditions or  with  restrictions acceptable  to the
Company. The Company's inability to expand the geographic service areas in which
it operates, either  because it  is unable to  obtain the  necessary permits  or
because  they are  issued under  conditions or  with restrictions  which are not
acceptable to the Company, could have a material adverse effect on the Company's
business,  financial  condition  and   results  of  operations.  The   Company's
applications  for treatment and transfer facility permits are frequently subject
to opposition  by elected  officials,  local residents  or citizen  groups,  and
public  opposition could force the Company  to delay or withdraw its application
and abandon its plans to expand into a particular geographic service area or  to
locate  a treatment  or transfer  facility at  a particular  site. Even  after a
permit  is  issued,  opponents   may  initiate  administrative  proceedings   or
litigation  to compel the applicable regulatory  agency to modify the conditions
under which the permit was granted or to revoke the issuance of the permit.  The
Company's  withdrawal of a permit application, after incurring substantial costs
in the  preparation and  prosecution of  the application  and underlying  market
studies,  site selection,  facility design  and pre-marketing  activities, could
have a material adverse  effect on the  Company's business, financial  condition
and results of operations. See "Business -- Governmental Regulation."
 
    The  Company's failure  to operate in  compliance with  the requirements and
limitations of any permit,  or with the laws  and regulations pursuant to  which
the   permit  was  issued,  could  jeopardize  the  permit.  Routine  compliance
inspections by the  issuing regulatory agency,  as well as  complaints filed  or
anonymously  sponsored by the Company's competitors  or others alleging that the
Company  is  not  operating  in  compliance  with  a  particular  permit,  could
 
                                       7

result  in administrative proceedings  to modify, suspend  or revoke the permit.
Any such modification, suspension  or revocation could  have a material  adverse
effect on the Company's business, financial condition and results of operations.
Some permits have to be renewed periodically, and there can be no assurance that
any existing or future permit which is required to be renewed will be renewed by
the issuing regulatory agency. The failure to obtain any such renewal could have
a  material adverse  effect on the  Company's business,  financial condition and
results of  operations. Subsequent  to the  issuance of  the Company's  original
license  for its Woonsocket, Rhode Island treatment facility, the State of Rhode
Island enacted legislation  that required  the Company to  obtain an  additional
license  for its regulated medical waste operations. The Company has applied for
but not yet received this additional  license. Until regulatory action is  taken
in  respect of this additional license, the  Company is permitted to continue to
operate under its current  license. There can be  no assurance that the  Company
will  receive the additional license. Denial of this license could result in the
Company being required to cease treatment  operations in Rhode Island and  could
have  a material adverse  effect on the  Company's business, financial condition
and results of operations. See "Business -- Governmental Regulation."
 
    The Company's treatment  technology is  an alternative  to the  conventional
treatment technologies of incineration and autoclaving and has not been approved
in all states for the treatment of regulated medical waste. The Company has been
permitted  to  operate its  treatment technology  in  13 states  with additional
applications pending. There  can be  no assurance, however,  that the  Company's
treatment  technology will  be approved for  the treatment  of regulated medical
waste in each state or other jurisdiction where the Company may seek  regulatory
approval  in  the future  to  construct and  operate  a treatment  facility. The
Company's inability to obtain any such regulatory approval could have a material
adverse effect on  the Company's  business, financial condition  and results  of
operations.  Like any technology, the Company's treatment process may be subject
to certain technological limitations. Although the Company has never been denied
regulatory approval because  of any  technological limitation  on its  treatment
process,  there  can  be no  assurance  that  specific limitations  will  not be
identified by a regulatory agency as a sufficient reason to withhold a necessary
permit in  a  particular  jurisdiction  or  used  by  competitors  to  encourage
customers  or potential customers to engage  their services rather than those of
the Company. There can be  no assurance that any such  actions would not have  a
material  adverse  effect on  the  Company's business,  financial  condition and
results of operations.
 
    The Company has been  and may continue  to be subject from  time to time  to
governmental  enforcement proceedings  and has been  and may be  required to pay
fines and penalties or undertake remedial work at its facilities. The amount  of
any  such fines and  penalties and the cost  of any such  remedial work could be
substantial and could have a material adverse effect on the Company's  business,
financial  condition  and results  of operations.  In  August 1995,  the Company
entered into  a  voluntary  settlement  with  the  Rhode  Island  Department  of
Environmental   Management  ("RIDEM")  pursuant   to  which,  without  admitting
liability, the Company agreed  to pay $400,000 over  a seven-year period and  to
perform  community services  and conduct seminars  over a  five-year period. The
settlement arose  from  certain  notices  of  violation  that  RIDEM  issued  in
September  1994  and April  1995  pursuant to  which  RIDEM sought  penalties of
$3,356,000, claiming that the Company had violated state medical waste and solid
waste regulations by,  among other things,  mishandling and improperly  treating
medical waste and endangering its employees' health by failing to provide proper
training  and protective  clothing. RIDEM  has recently  contacted the Company's
local counsel and informally suggested that  it may issue additional notices  of
violation.  The Company believes that there is  no basis for the issuance of any
such additional notices and that the resolution of the matter will be  favorable
to  the Company. There can  be no assurance, however,  that if the resolution is
unfavorable to the Company,  the Company's obligations as  a result of any  such
additional  notices of violation would not have a material adverse effect on the
Company's business, financial condition or results of operations.
 
    The  Company  believes  that  the   action  by  RIDEM  prompted   regulatory
authorities  in all of  the other states  in which the  Company does business to
investigate  or  inquire   into  the   Company's  operations.   None  of   these
investigations  or inquiries  has resulted in  any fines,  penalties or remedial
work. The Company believes that the Massachusetts Attorney General inquired into
the Company's activities in Massachusetts but does not know whether the inquiry,
if any, is still pending. The Company believes, however, that if there is or was
any such inquiry, it was begun following the adverse publicity that the  Company
received in connection with the notices of violation from RIDEM. The Company has
settled   unrelated  allegations  of  violations  with  other  state  regulatory
authorities. There can be  no assurance that the  Company will be successful  in
its defense of any future government enforcement
 
                                       8

proceeding  or in obtaining a settlement of  any fines or penalties sought to be
imposed on terms  acceptable to the  Company. The expense  and time involved  in
defending  against any  such enforcement  proceeding, the  cost of  any fines or
penalties imposed or  paid in  settlement, and  the adverse  publicity, loss  of
customers  and  additional  investigations  or  inquiries  associated  with  any
proceeding, could  have a  material adverse  effect on  the Company's  business,
financial  condition and results of operations.  See "Business -- Regulatory and
Legal Proceedings."
 
    In the State  of Washington,  the Company is  subject to  regulation by  the
Utilities  and Transportation Commission, which regulates all businesses engaged
in transportation  in the  state.  As a  regulated  business, the  Company  must
receive approval from the Utilities and Transportation Commission for the prices
that  it  charges  for its  services  in  Washington. While  the  Commission has
approved the  Company's current  prices,  there can  be  no assurance  that  the
Commission  will approve the prices  that the Company may  seek to charge in the
future or that the  prices approved will  be adequate to  enable the Company  to
earn  an acceptable  return on  its operations  in Washington.  There can  be no
assurance that the Company will  not be regulated in  a similar manner in  other
states  or jurisdictions in the future. Any  such regulation could result in the
Company's failure  to attain  otherwise available  levels of  profitability  and
could  have  a  material adverse  effect  on the  Company's  business, financial
condition and results of operations. See "Business -- Governmental Regulation."
 
IMPORTANCE OF GOVERNMENTAL ENFORCEMENT OF ENVIRONMENTAL REGULATIONS
 
    The Company  believes  that  its  business prospects  are  enhanced  by  the
enforcement  of stringent statutory and  regulatory requirements relating to the
collection, transportation, treatment and  disposal of regulated medical  waste.
These  laws and  regulations are,  and will continue  to be,  a principal factor
affecting demand for the Company's regulated medical waste management  services.
In  addition, the Company views laws and regulations that make it more difficult
or expensive to  use competing regulated  medical waste treatment  technologies,
such as incineration and autoclaving, as advantageous to its business prospects.
The  Company believes that legislative initiatives offering financial incentives
for or otherwise encouraging  the recycling of  treated medical waste  similarly
enhance the Company's business prospects. Changes in the law or regulations that
relax the requirements governing regulated medical waste, including changes that
reduce  incentives to  landfill diversion and  resource recovery  or that remove
obstacles to  the use  of  incineration and  autoclaving  for the  treatment  of
regulated  medical waste, could have a  material adverse effect on the Company's
business, financial condition  and results  of operations. The  level of  future
enforcement  of existing and new laws and  regulations, the scope of future laws
and regulations and the  impact of technological changes  on existing or  future
laws  and  regulations cannot  be predicted.  The level  of enforcement  in each
jurisdiction is  subject  to  changing  political  and  budgetary  pressures.  A
significant  reduction in  government enforcement  in one  or more jurisdictions
could have  a  material adverse  effect  on the  Company's  business,  financial
condition and results of operations.
 
INTENSE COMPETITION WITHIN INDUSTRY
 
    The  Company  operates within  the  intensely competitive  regulated medical
waste  management  industry.  Competition  in  the  industry  has  resulted   in
substantial  price reductions in virtually all geographic areas. Although prices
have stabilized in  certain areas, there  can be no  assurance that  competitive
pressures within the regulated medical waste management industry will not result
in   continued  or  accelerated  price   reductions.  Substantial  continued  or
accelerated price  reductions  would  have  a material  adverse  effect  on  the
Company's business, financial condition and results of operations.
 
    The  Company  faces  competition  from  several  national  waste  management
companies and many regional and local  businesses in its present locations,  and
will be confronted in the future with such competition in each location where it
seeks  to expand. The Company's business  strategy involves selling its services
to customers  who may  have established  relationships with  existing  regulated
medical  waste management businesses  and who therefore may  be reluctant to use
the Company's services. Several of the Company's competitors are larger and have
substantially  greater  capital  resources,  regulatory  experience,  sales  and
marketing  capabilities  and  broader  product and  service  offerings  than the
Company and are well established in their respective markets. Among these larger
competitors are  Browning-Ferris  Industries, Inc.  ("BFI"),  WMX  Technologies,
Inc.,  Laidlaw Waste  Systems, Inc. and  USA Waste Services,  Inc. The Company's
primary competitor is BFI.  BFI or other competitors,  either alone or  together
with  competitors  having sufficient  resources, could  engage  in a  variety of
actions that may have the effect of delaying or preventing the implementation of
the   Company's    business    strategy.   These    activities    may    include
 
                                       9

aggressive  price competition,  bundling of  regulated medical  waste management
services with other services including solid waste management, lobbying or other
government relations initiatives  designed to  impede the  Company's ability  to
obtain  or  maintain  necessary  permits  and  approvals,  financial  support of
citizens' groups  that oppose  the Company's  plans to  locate a  facility at  a
particular  site, offering  a higher level  of customer service,  and efforts to
recruit the Company's customers.  There can be no  assurance that the  Company's
competitors  will  not  substantially  increase  their  commitment  of resources
devoted to competing aggressively with the  Company or that the Company will  be
able to compete profitably with BFI or other competitors. To the extent that the
Company's  competitors  are  able  to secure  significant  numbers  of long-term
customer agreements with penalties for  early termination in geographic  service
areas that the Company targets for growth, the Company may be unable to meet its
growth  objectives. In addition, the  widespread adoption of long-term regulated
medical waste management agreements among the Company's potential customers  may
increase   the  likelihood  that  the  Company   will  be  accused  of  wrongful
interference with the contractual rights of a competitor if and when the Company
attempts to persuade  a potential  customer to terminate  its relationship  with
that  competitor  and  become  a  customer  of  the  Company.  See  "Business --
Competition."
 
GROWTH STRATEGY DEPENDENT UPON ACQUISITIONS
 
    The Company's growth strategy depends in significant part on its ability  to
acquire  other regulated  medical waste management  businesses. There  can be no
assurance that  the Company  will be  able to  identify suitable  businesses  to
acquire,  successfully negotiate their acquisition,  improve the productivity of
their operations or integrate their operations into the Company's business.  The
recent  consolidation  in the  regulated medical  waste management  industry may
increase competition for the  acquisition of existing  businesses and result  in
fewer  acquisition  opportunities  and  higher  purchase  prices.  Some  of  the
Company's competitors for acquisitions  are larger companies with  significantly
greater  resources than the Company. If the Company is successful in identifying
suitable regulated  medical  waste  management  businesses  to  acquire  and  in
negotiating  terms of  acquisition acceptable  to the  Company, there  can be no
assurance that any debt or equity  financing which may be necessary to  complete
their  acquisition could be  obtained on terms satisfactory  to the Company. Any
additional  equity  financing  may  be   dilutive  to  the  Company's   existing
stockholders,  and any debt financing,  if available, may significantly increase
the Company's debt and involve  restrictive covenants which limit the  Company's
operations.  The Company's failure to implement successfully its growth strategy
could delay the Company's achievement of profitable operations and could have  a
material  adverse  effect on  the  Company's business,  financial  condition and
results of operations. See "Use of  Proceeds" and "Business -- Growth  Strategy"
and "-- Acquisition Program."
 
    If the Company is successful in acquiring additional regulated medical waste
management businesses, the Company may experience a period of rapid growth which
could   place  significant  additional  demands  on  the  Company's  management,
resources and management  information systems. The  Company's failure to  manage
any  such rapid growth effectively  could have a material  adverse effect on the
Company's business, financial condition and results of operations.
 
FUTURE CAPITAL REQUIREMENTS
 
    The Company  anticipates that  its future  acquisitions of  other  regulated
medical  waste  management  businesses will  be  made  by the  payment  of cash,
including cash from the net proceeds of  this Offering, the issuance of debt  or
equity  securities or a combination of these methods. In addition, the Company's
growth through internal expansion of its existing business as well as continuing
operations will require substantial  expenditures. If the  Company is unable  to
use   debt  or  equity  securities  to  make  business  acquisitions  after  the
substantial exhaustion of  the net proceeds  of this Offering,  there can be  no
assurance  that  the Company  will have  sufficient  capital resources  for that
purpose, or  other  purposes, or  that  it will  be  able to  obtain  additional
resources  on terms acceptable to  the Company or at  all. Any additional equity
financing may be dilutive to the  Company's existing stockholders, and any  debt
financing,  if  available, may  involve  restrictive covenants  which  limit the
Company's operations. The Company's failure to raise capital if and when  needed
could  delay or suspend the  Company's growth strategy and  result in a material
modification of the Company's business strategy. The Company's inability to fund
its capital requirements could have a  material adverse effect on the  Company's
business,  financial condition and results of  operations. See "Use of Proceeds"
and "Business -- Growth Strategy" and "-- Acquisition Program."
 
                                       10

DEPENDENCE ON PATENTS AND PROPRIETARY INFORMATION
 
    The Company owns four United States patents and is the owner or licensee  of
a  number of United  States and foreign patent  applications covering aspects of
the  treatment  of  medical  waste  through  ELECTRO-THERMAL  DEACTIVATION   and
irradiation.  The Company also  owns one United States  patent for its STERI-TUB
container. The Company believes that its patents are important to its  prospects
for  success.  There can  be no  assurance, however,  that the  Company's patent
applications will  issue as  patents or  that any  issued patents  will  provide
competitive  advantages to the Company or will not be successfully challenged or
circumvented by competitors or other third parties. In addition, there can be no
assurance that the Company's regulated medical waste treatment processes do  not
infringe the patent or other proprietary rights of third parties. Litigation may
be  required to  enforce the  Company's patents,  to defend  the Company against
claims of infringement  by third  parties and to  determine the  enforceability,
validity  and scope  of third parties'  proprietary rights.  Any such litigation
could involve a substantial expense to the Company and require significant  time
and attention of the Company's management. The Company also could be required to
participate  in  interference  proceedings  declared  by  the  U.S.  Patent  and
Trademark Office  to determine  the  priority of  inventions, which  also  could
involve  a substantial  expense. A determination  adverse to the  Company in any
such litigation  or  interference  proceedings could  result  in  a  substantial
liability  to the  Company or  prevent the  Company from  continuing to  use its
regulated medical waste treatment processes. In the former event, the  liability
could  have  a  material adverse  effect  on the  Company's  business, financial
condition and results of operations. In the latter event, the Company could seek
a license from  the third  party or attempt  to redesign  its regulated  medical
waste treatment processes to avoid infringement. The Company's failure to obtain
such  a license on terms  acceptable to the Company,  or its failure to redesign
its processes to  avoid infringement,  similarly could have  a material  adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Patents and Proprietary Rights."
 
    In  addition  to  patent  protection,  the  Company  seeks  to  protect  its
proprietary information through confidentiality  agreements with its  employees,
consultants  and collaborators. There  can be no  assurance that such agreements
will not be breached, that the Company will have adequate remedies for any  such
breach  or that the Company's proprietary  information will not otherwise become
known to  or  be  independently  developed by  the  Company's  competitors.  See
"Business -- Patents and Proprietary Rights."
 
    The  Company  holds federal  registrations  of the  trademarks "Steri-Fuel,"
"Steri-Plastic,"  "Steri-Tub"   and  "Steri-Cement"   and  the   service   marks
"Stericycle"  and  a mark  consisting  of a  graphic  that the  Company  uses in
association with its name  and services in  the United States.  There can be  no
assurance that the registered or unregistered trademarks of the Company will not
infringe  upon  the  rights of  third  parties.  The requirement  to  change any
trademark, service mark or trade name of the Company would result in the loss of
any goodwill associated with that trademark,  service mark or trade name,  could
entail  significant  expense and  could have  a material  adverse effect  on the
Company's business, financial condition and results of operation.
 
POTENTIAL LIABILITY; INSURANCE
 
    The  regulated  medical  waste  management  industry  involves   potentially
significant  risks of statutory, contractual, tort and common law liability. The
Company's failure to comply  with applicable laws and  regulations or to  manage
regulated  medical  waste  in an  environmentally  safe manner  could  result in
environmental contamination, personal  injury and property  damage. The  Company
maintains  pollution  liability,  general  liability  and  workers' compensation
insurance which  the Company  considers  adequate to  protect its  business  and
employees. An uninsured or partially insured claim against the Company, however,
could  have  a  material adverse  effect  on the  Company's  business, financial
condition and  results of  operations. The  federal Comprehensive  Environmental
Response,  Compensation and  Liability Act of  1980, as  amended ("CERCLA"), and
similar state laws, impose  strict, joint and several  liability on current  and
former  owners  and operators  of facilities  from  which releases  of hazardous
substances have occurred  and on  generators and transporters  of the  hazardous
substances  that come to be located  at such facilities. Responsible parties may
be liable  for  substantial waste  site  investigation and  clean-up  costs  and
natural  resource damages,  regardless of  whether they  exercised due  care and
complied with applicable laws and regulations. If the Company were found to be a
responsible party for a particular site, it could be required to pay the  entire
cost  of waste site  investigation and clean-up, even  though other parties also
may  be  liable.  The  Company's  ability  to  obtain  contribution  from  other
responsible  parties may be limited by the Company's inability to identify those
parties and  by their  financial inability  to contribute  to investigation  and
clean-up costs. There can be no
 
                                       11

assurance  that the Company will  not face claims under  CERCLA or similar state
laws, or under other  laws, resulting in a  substantial liability for which  the
Company  is unable to obtain contribution from other responsible parties and for
which the  Company  is  uninsured  or  only  partially  insured.  The  Company's
pollution liability insurance excludes liabilities under CERCLA. The Company may
experience  difficulty in the future in obtaining adequate insurance coverage on
acceptable terms.  A  successful claim  against  the  Company for  which  it  is
uninsured  or  only partially  insured, and  for  which it  is unable  to obtain
contribution from  other  responsible parties,  could  have a  material  adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Potential Liability and Insurance."
 
ALTERNATIVE TECHNOLOGIES; TECHNOLOGICAL OBSOLESCENCE
 
    The   regulated  medical  waste   management  industry  presents  continuing
opportunities  for  the  development  of  alternative  treatment  and   disposal
technologies.  These  alternative  technologies  may  emphasize  operating  cost
efficiencies, reductions in the volume  of regulated medical waste generated  or
other   environmental   factors.  The   development  and   commercialization  of
alternative treatment or disposal technologies that are more cost-efficient than
the Company's technologies or that reduce the volume of regulated medical  waste
generated  or afford other  environmental benefits could place  the Company at a
competitive disadvantage. The Company is aware of certain new regulated  medical
waste   management  technologies,  including  the   production  of  reusable  or
degradable   medical   products,   which,   if   successfully   developed    and
commercialized,  could have a material adverse effect on the Company's business,
financial condition and results of operations.
 
COST OF REUSE AND RECYCLING
 
    One of the components of the Company's business and marketing strategy is to
reuse and recycle treated regulated medical  waste. The demand for reusable  and
recyclable  regulated  medical waste  products can  be  volatile and  subject to
changing market conditions. The Company does not currently make a profit on  its
reuse  and recycling operations, and there can  be no assurance that the Company
will do so in the future. In the event that the cost of operating its reuse  and
recycling  programs  increases  significantly  in the  future,  the  Company may
abandon those programs. Their abandonment would  deprive the Company of what  it
considers to be a significant marketing and sales advantage over its competitors
who  do not  offer such services  while increasing the  Company's disposal costs
related to such  waste, and thus  could have  a material adverse  effect on  the
Company's business, financial condition and results of operations.
 
DEPENDENCE ON KEY PERSONNEL
 
    The  Company is dependent upon a limited number of key management, technical
and sales personnel. The Company's future success will depend, in part, upon its
ability to  attract and  retain highly  qualified personnel.  The Company  faces
competition for such personnel from other companies and organizations, and there
can  be no assurance that the Company  will be successful in hiring or retaining
qualified personnel. The  Company does  not have  written employment  agreements
with  its officers providing for specific  terms of employment, and officers and
other key personnel  could leave the  Company's employ with  little or no  prior
notice.  The Company's loss of key personnel,  especially if the loss is without
advance notice, or  the Company's  inability to  hire or  retain key  personnel,
could  have  a  material adverse  effect  on the  Company's  business, financial
condition and results of operations. The Company does not carry any key man life
insurance.
 
BROAD DISCRETION IN USE OF PROCEEDS
 
    The Company intends to  use the major  portion of the  net proceeds of  this
Offering  to acquire other regulated medical  waste management businesses and to
use the  remaining net  proceeds for  debt repayment,  working capital  and  the
development  of the Company's  transfer station in San  Leandro, California as a
combined treatment and transfer facility. As of the date of this Prospectus, the
Company has  no pending  agreements, commitments  or understandings  to  acquire
other  regulated medical waste  management businesses. At  the discretion of the
Company's Board of Directors, the Company could use a substantial portion of the
net proceeds of this Offering to make  one or more acquisitions, or could  apply
the  net  proceeds for  other purposes,  which some  or even  a majority  of the
Company's stockholders might oppose but which  would not be submitted to a  vote
of the stockholders for their approval. See "Use of Proceeds."
 
                                       12

CONTROL BY OFFICERS, DIRECTORS AND AFFILIATED ENTITIES
 
    Following  completion of  this Offering,  the Company's  executive officers,
directors and  entities  affiliated with  them  will beneficially  own,  in  the
aggregate,  approximately 32.9%  of the  Company's outstanding  Common Stock. If
they were  to  act  together,  these  stockholders  would  be  able  to  control
substantially  all  matters requiring  approval  by the  Company's stockholders,
including the  election  of directors  and  the  approval of  mergers  or  other
business combination transactions. This concentration of ownership could prevent
a change in control of the Company. See "Principal Stockholders."
 
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
 
    The  Company has not elected  to be excluded from  the provisions of Section
203 of the Delaware General Corporation Law, which imposes certain  restrictions
on  transactions between a corporation and "interested stockholders" (as defined
in Section 203). These restrictions could  operate to delay or prevent a  change
in  control of the Company and to discourage, impede or prevent a merger, tender
offer or proxy contest involving the Company. See "Description of Capital  Stock
- -- Anti-Takeover Provisions of Delaware Law."
 
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
 
    Prior  to this  Offering, there  has been  no public  market for  the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or, if one develops,  that it will be sustained. The  initial
public  offering  price  for  the  shares of  Common  Stock  offered  hereby was
determined by  negotiation between  the Company  and the  Managing  Underwriters
based  upon several factors and may not be indicative of the market price of the
Common Stock after this  Offering. See "Underwriting." The  market price of  the
Common  Stock may  be volatile. The  market price  of the Common  Stock could be
adversely affected by  fluctuations in  the Company's operating  results or  the
operating  results of  the Company's competitors,  the failure  of the Company's
operating results to  meet the  expectations of market  analysts and  investors,
changes  in regulated medical waste management  laws and regulations, actions by
regulatory authorities,  developments  in  respect  of  patents  or  proprietary
rights,  changes in market analyst recommendations  regarding the Company or the
regulated  medical   waste  management   industry  generally,   general   market
conditions, or other events and factors.
 
SHARES ELIGIBLE FOR FUTURE SALE
 
    Sales  of substantial numbers of shares of Common Stock in the public market
following this Offering could  adversely affect the market  price of the  Common
Stock.  Such sales  could also make  it more  difficult for the  Company to sell
equity securities or equity-related securities in the future at a time and price
that the Company considers desirable.
 
    Upon completion of this Offering, the Company will have 9,218,455 shares  of
Common   Stock   outstanding,  assuming   no   exercise  of   the  Underwriters'
over-allotment option and no exercise of outstanding stock options and  warrants
after  June 1, 1996. Of these outstanding shares, the 3,000,000 shares of Common
Stock sold in  this Offering  will be  freely tradeable  without restriction  or
further  registration  under  the  Securities  Act  of  1933,  as  amended  (the
"Securities Act"), unless they are purchased by an "affiliate" of the Company as
that term  is  defined in  Rule  144 under  the  Securities Act.  The  remaining
6,218,455  shares of  Common Stock held  by the  Company's existing stockholders
will be "restricted securities" as  that term is defined  in Rule 144 under  the
Securities  Act,  and  were  issued  and sold  by  the  Company  in  reliance on
exemptions from  the  registration requirements  of  the Securities  Act.  These
shares  may be sold in  the public market only if  they are registered under the
Securities Act or if they qualify for an exemption from registration under  Rule
144. Holders of 5,571,624 shares of Common Stock, including all of the Company's
officers and directors, have entered into "lock-up" agreements with the Managing
Underwriters  pursuant to  which such  holders have  agreed not  to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of, directly
or indirectly, any of their shares of Common Stock, or any shares that they  may
acquire through the exercise of stock options or warrants, or to exercise any of
their  registration rights  in respect  of their shares  of Common  Stock, for a
period of 180 days after the date  of this Prospectus without the prior  written
consent  of Dillon, Read & Co. Inc. on behalf of the Managing Underwriters. Upon
the expiration of these agreements, 5,039,451  shares will be eligible for  sale
without restriction pursuant to Rule 144(k), 325,547 shares will be eligible for
sale  subject to the volume limitation and other conditions of Rule 144, and the
remaining 853,457 shares will become eligible for sale pursuant to Rule 144 upon
the expiration of  their respective  two-year holding periods  on various  dates
occurring  more than 180  days after the  date of this  Prospectus. In addition,
holders
 
                                       13

of 5,045,996 shares of Common Stock, warrants to purchase 6,773 shares of Common
Stock and a  note payable  upon completion  of this  Offering by,  in part,  the
Company's  issuance of 98,001 shares of  Common Stock, have certain registration
rights in  respect of  such shares.  By  virtue of  the lock-up  agreements,  no
registration  rights can be exercised for a period of 180 days after the date of
this Prospectus without the prior written consent of Dillon, Read & Co. Inc.  on
behalf  of the Managing Underwriters. The number  of shares of Common Stock sold
in the public  market could  increase significantly if  holders of  registration
rights  were to  exercise their rights  following the expiration  of the lock-up
agreements. See "Description of Capital Stock -- Registration Rights of  Certain
Holders" and "Shares Eligible for Future Sale."
 
    As  of  June 1,  1996, there  were outstanding  options under  the Company's
Incentive Compensation Plan (the "1995  Stock Plan") to purchase 704,167  shares
of  Common Stock, of which options for 381,137 shares were exercisable within 60
days of June 1, 1996, and other options outstanding to purchase 21,424 shares of
Common Stock, of which options for 16,419 shares were exercisable within 60 days
of June 1,  1996. Of the  total options exercisable  within 60 days  of June  1,
1996,  options for 286,769 shares were held by officers, directors and employees
of the Company  and other parties  subject to the  lock-up agreements  described
above.  Shortly  after  completion  of this  Offering,  the  Company  intends to
register the 1,506,904 shares of Common Stock issued or issuable under the  1995
Stock  Plan and the 285,000 shares of  Common Stock issuable under the Company's
Directors Stock  Option  Plan.  The  shares registered  will  be  available  for
immediate sale in the public market, subject to the volume limitation under Rule
144 in the case of sales by affiliates of the Company, except to the extent that
the   shares  are  subject  to  the  lock-up  agreements  described  above.  See
"Management -- Stock Option Plans" and "Shares Eligible for Future Sale."
 
    As of June  1, 1996,  there were  outstanding warrants  to purchase  409,848
shares  of Common Stock, all of which were then exercisable. Holders of warrants
to purchase 387,829 shares of Common Stock are subject to the lock-up agreements
described above.
 
    After completion of this Offering, the Company may issue unregistered shares
of  Common  Stock  as  full   or  partial  consideration  for  future   business
acquisitions  and may grant  registration rights to the  holders of such shares.
The Company has agreed  that no such grant  of registration rights would  permit
the  rights to  be exercised for  a period  of 180 days  after the  date of this
Prospectus without  the prior  written consent  of Dillon,  Read &  Co. Inc.  on
behalf of the Managing Underwriters. See "Business -- Acquisition Program."
 
IMMEDIATE AND SUBSTANTIAL DILUTION
 
    The  initial  public offering  price is  substantially  higher than  the net
tangible book value per share of  Common Stock. New investors purchasing  Common
Stock in this Offering accordingly will incur immediate dilution of $7.57 in the
net  tangible book  value per  share of  Common Stock  purchased (at  an assumed
initial public offering price of $12.00, the mid-point of the price range as set
forth on the cover page of this Prospectus and after the deduction of  estimated
underwriting  discounts and commissions and  estimated offering expenses payable
by the Company). See "Dilution."
 
ABSENCE OF DIVIDENDS
 
    The Company has never paid any cash  dividends on its Common Stock and  does
not  anticipate paying cash  dividends in the  foreseeable future. See "Dividend
Policy."
 
                                       14

                                USE OF PROCEEDS
 
    The net  proceeds to  the Company  from this  Offering are  estimated to  be
approximately  $32,680,000  ($37,702,000  if  the  Underwriters'  over-allotment
option is  exercised in  full), assuming  an initial  public offering  price  of
$12.00  per share, the  mid-point of the price  range as set  forth on the cover
page of this  Prospectus, and after  deducting estimated underwriting  discounts
and commissions and estimated offering expenses payable by the Company.
 
    Approximately  $1,200,000  of the  net proceeds  will be  used to  repay the
Company's outstanding  indebtedness under  its  revolving credit  facility  with
Silicon  Valley Bank. The  Company's borrowings under  this credit facility were
incurred primarily to refinance  other debt, to provide  working capital and  to
finance  the Company's acquisitions of certain assets of Bio-Med of Oregon, Inc.
and WMI Medical Services of  New England, Inc. in  January 1996, and of  Doctors
Environmental  Control, Inc. ("Doctors") and Sharps Incinerator of Fort, Inc. in
May 1996,  at  an  aggregate  cost  of $2,426,000,  of  which  an  aggregate  of
$1,062,000  was paid in  cash at the respective  closings of these acquisitions.
The Company's  revolving  credit  facility  provides for  borrowings  of  up  to
$2,500,000,   subject  to  certain  limitations  based  upon  eligible  accounts
receivable, had a weighted average interest rate of 11.5% per annum at  December
31, 1995 and will mature in October 1997.
 
    Approximately  $600,000  of  the net  proceeds  will  be used  to  repay the
Company's outstanding indebtedness under certain notes given in connection  with
the Doctors acquisition in May 1996. The notes have an interest rate of 6.0% per
annum and are scheduled to mature in May 1998.
 
    Approximately  $222,000  of  the net  proceeds  will  be used  to  repay the
Company's outstanding  indebtedness  under a  note  to Security  State  Bank  in
connection  with a loan to acquire and equip the Company's treatment facility at
Morton, Washington. The note had an interest rate of 9.78% per annum at December
31, 1995 and is scheduled to mature in December 2007.
 
    Approximately $992,000 of  the net  proceeds will be  used to  pay the  cash
portion  of a  note (the  "Safe Way  Note") to  Safe Way  Disposal Systems, Inc.
("Safe Way")  which was  given  in connection  with  the Company's  purchase  of
certain  of  Safe Way's  assets  in September  1994. The  Safe  Way Note  is for
$2,480,000, does not bear interest, is due upon completion of this Offering  and
is  payable in cash  for 40% of its  face amount and in  98,001 shares of Common
Stock for the balance.
 
    Approximately $1,000,000  of the  net proceeds  will be  used to  repay  the
Company's  outstanding indebtedness  to holders  of subordinated  notes that the
Company issued  in May  1996 in  connection with  a short-term  loan to  provide
working  capital. The  subordinated notes  are interest-free  if paid  when due,
subject to certain exceptions,  and are due within  30 days after completion  of
this  Offering. In connection with this loan, the Company issued warrants to the
lenders to purchase an aggregate of 226,036 shares of Common Stock at a price of
$7.96 per share. See "Certain Transactions."
 
    The Company intends to  use a portion  of the net  proceeds to complete  the
construction  and  equipping  of  a  treatment  facility  at  its  San  Leandro,
California transfer  station.  The  Company  currently  estimates  the  cost  of
completion  at approximately $1,600,000. The remainder  of the net proceeds will
be used for general corporate purposes, including capital expenditures,  working
capital  and  potential future  acquisitions. After  repayment of  the revolving
credit facility, the Company also will be able to redraw on the credit  facility
for  capital expenditures,  potential future  acquisitions, working  capital and
other general corporate purposes. Pending use  of the net proceeds, the  Company
intends  to  invest  the  net  proceeds  in  interest-bearing,  investment-grade
securities.
 
                                DIVIDEND POLICY
 
    The Company has never paid cash dividends on its capital stock. The  Company
currently  expects that it will retain future  earnings for use in the operation
and expansion of its business and does not anticipate paying any cash  dividends
in  the foreseeable future. The Company is prohibited from paying cash dividends
under the terms of its revolving credit facility with Silicon Valley Bank and is
restricted from paying cash dividends under an agreement in connection with  the
industrial   development  revenue   bonds  issued   to  finance   the  Company's
construction  of  its  treatment  facility  at  Woonsocket,  Rhode  Island.  See
"Management's  Discussion  and Analysis  of Financial  Condition and  Results of
Operations."
 
                                       15

                                    DILUTION
 
    Dilution is the reduction in the value of a purchaser's investment in Common
Stock measured by the  difference between the purchase  price per share and  the
net  tangible book value per  share of the Common  Stock after the purchase. The
net tangible  book  value per  share  of the  Common  Stock represents  the  net
tangible  book value of  the Company divided  by the number  of shares of Common
Stock outstanding. The  net tangible book  value of the  Company represents  its
total  assets  less  its  total liabilities  and  intangible  assets (consisting
primarily of goodwill).
 
    As of  March 31,  1996,  the net  tangible book  value  of the  Company  was
approximately  $4,410,000,  and  the  net  tangible  book  value  per  share was
approximately $0.79. The pro forma net tangible book value of the Company as  of
March  31, 1996  was approximately $38,578,000,  and the pro  forma net tangible
book value per  share was approximately  $4.43, after giving  effect to (i)  the
sale  of the  3,000,000 shares  of Common  Stock offered  hereby (at  an assumed
initial public offering price  of $12.00 per share,  the mid-point of the  price
range as set forth on the cover page of this Prospectus, and after the deduction
of  estimated  underwriting  discounts and  commissions  and  estimated offering
expenses payable by the Company)  and (ii) payment of  the Safe Way Note,  which
was  outstanding as  of March 31,  1996 and  is payable upon  completion of this
Offering by payment of $992,000 in cash and delivery of 98,001 shares of  Common
Stock.  This difference  represents an immediate  increase in  net tangible book
value per share of $3.64 to  existing stockholders and an immediate dilution  in
net  tangible book value per  share of $7.57 to  new investors purchasing Common
Stock in this Offering. The following table illustrates this per share dilution:

                                                                       
Assumed initial public offering price per share.........................  $   12.00
  Net tangible book value per share before this Offering................       0.79
  Increase per share attributable to new investors (1)..................       3.64
 
Pro forma net tangible book value per share after this Offering.........       4.43
                                                                          ---------
 
Dilution per share to new investors.....................................  $    7.57
                                                                          ---------
                                                                          ---------

- ------------------------
(1) After deduction  of estimated  underwriting  discounts and  commissions  and
    estimated offering expenses payable by the Company.
 
    The  following table summarizes, on a pro  forma basis as of March 31, 1996,
the difference between the number of  shares of Common Stock purchased from  the
Company,  the total consideration paid  and the average price  per share paid by
the existing stockholders and by new  investors purchasing Common Stock in  this
Offering  (at an assumed initial public offering  price of $12.00 per share, the
mid-point of the price range as set forth on the cover page of this  Prospectus,
before  deduction  of  estimated  underwriting  discounts  and  commissions  and
estimated offering expenses payable by the Company):

                                                                 TOTAL CASH CONSIDERATION
                                            SHARES PURCHASED
                                         ----------------------  -------------------------  AVERAGE PRICE
                                           NUMBER     PERCENT       AMOUNT       PERCENT      PER SHARE
                                         ----------  ----------  -------------  ----------  -------------
                                                                             
Existing shareholders..................   5,714,652       65.6%  $  49,677,000       58.0%    $    8.69
New investors..........................   3,000,000       34.4      36,000,000       42.0         12.00
                                         ----------      -----   -------------      -----
    Total..............................   8,714,652      100.0%  $  85,677,000      100.0%
                                         ----------      -----   -------------      -----
                                         ----------      -----   -------------      -----

    Both of these tables assume no exercise of outstanding options and  warrants
and  no exercise  of the  Underwriters' over-allotment  option. As  of March 31,
1996, there  were outstanding  options to  purchase 1,013,077  shares of  Common
Stock,  at a weighted average exercise price of $0.66 per share, and outstanding
warrants to  purchase 242,396  shares of  Common Stock,  at a  weighted  average
exercise price of $4.52 per share. To the extent that these options and warrants
are exercised, there will be further dilution to new investors.
 
                                       16

                                 CAPITALIZATION
 
    The   following  table  sets  forth,  as  of  March  31,  1996,  the  actual
capitalization of the Company, the capitalization of the Company on a pro  forma
basis, and the capitalization of the Company on a pro forma basis as adjusted to
give  effect  to  (i)  a  reverse  1-for  5.3089  stock  split  to  be effective
immediately prior  to completion  of this  Offering, (ii)  the redesignation  of
outstanding  shares of Class A  Common Stock and Class B  common stock as a like
number of shares  of Common Stock  effective upon completion  of this  Offering,
(iii)  the receipt and application by the  Company of the estimated net proceeds
from the sale  of the 3,000,000  shares of  Common Stock offered  hereby (at  an
assumed  initial public offering price of $12.00 per share, the mid-point of the
price range as set  forth on the  cover page of this  Prospectus, and after  the
deduction  of  estimated underwriting  discounts  and commissions  and estimated
offering expenses payable by  the Company) and (iv)  the decrease in  authorized
common stock from 58,000,000 to 30,000,000 shares:

                                                                                       MARCH 31, 1996
                                                                           ---------------------------------------
                                                                                                       PRO FORMA,
                                                                            ACTUAL    PRO FORMA (1)   AS ADJUSTED
                                                                           ---------  --------------  ------------
                                                                                       (IN THOUSANDS)
                                                                                             
Short-term debt:
  Current portion of long-term debt......................................  $     759    $    2,593     $      759
Long-term debt:
  Industrial development revenue bonds and other.........................      2,564         2,564          2,342
  Note payable to bank...................................................        952           952              0
  Note payable...........................................................      2,480         2,480              0
                                                                           ---------  --------------  ------------
    Total long-term debt.................................................      5,996         5,996          2,342
Shareholders' Equity:
  Common Stock, $0.01 par value; 30,000,000 shares authorized actual;
   5,616,651 shares issued and outstanding actual, 8,714,652 shares
   issued and outstanding pro forma, as adjusted.........................         56            56             87
  Additional paid-in-capital.............................................     49,621        49,621         83,758
  Accumulated deficit....................................................    (37,449)      (37,449)       (37,449)
                                                                           ---------  --------------  ------------
    Total shareholders' equity...........................................     12,228        12,228         46,396
                                                                           ---------  --------------  ------------
      Total capitalization...............................................  $  18,983    $   20,817     $   49,497
                                                                           ---------  --------------  ------------
                                                                           ---------  --------------  ------------

- ------------------------
(1) Adjusted  to  give effect  to the  acquisition of  certain assets  of Sharps
    Incinerator of  Fort, Inc.  in April  1996 and  the acquisition  of  certain
    assets of Doctors Environmental Control, Inc. in May 1996. See Note 2 to the
    Condensed Consolidated Financial Statements.
 
                                       17

                      SELECTED CONSOLIDATED FINANCIAL DATA
 
    The  following table sets forth selected  consolidated financial data of the
Company. The statements  of operations  data for  the years  ended December  31,
1991, 1992, 1993, 1994 and 1995 and the balance sheet data at December 31, 1991,
1992,  1993, 1994  and 1995  have been  derived from  the consolidated financial
statements of the Company, which are  included elsewhere in this Prospectus  and
which  have  been  audited  by  Ernst &  Young  LLP,  independent  auditors. The
statements of operations data for the three months ended March 31, 1996 and  the
balance  sheet  data at  March  31, 1995  and  1996 are  derived  from unaudited
financial statements  included  elsewhere  in  this  Prospectus.  The  unaudited
financial   statements  include  all  adjustments,  consisting  only  of  normal
recurring  adjustments,  that  the  Company  considers  necessary  for  a   fair
presentation  of  the  financial position  and  results of  operations  for that
period. Operating results  for the  three months ended  March 31,  1996 are  not
necessarily  indicative of the results that may  be expected for the entire year
ending December 31, 1996. The data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the  Consolidated Financial  Statements, Condensed  Consolidated
Financial  Statements  and  related  Notes thereto  included  elsewhere  in this
Prospectus.

                                                                                                 THREE MONTHS ENDED
                                                    YEAR ENDED DECEMBER 31,                          MARCH 31,
                                   ----------------------------------------------------------  ----------------------
                                      1991      1992(2)       1993        1994        1995        1995        1996
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                    (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                                                      
STATEMENTS OF OPERATIONS DATA:
  Revenues.......................  $    1,563  $    5,010  $    9,141  $   16,141  $   21,339  $    5,446  $    5,578
  Cost of revenues...............       1,845       5,198       8,947      13,922      17,478       4,227       4,337
  Selling, general and
   administrative expenses.......       3,377      11,223       5,988       7,927       8,137       2,762       1,505
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Loss from operations...........      (3,659)    (11,411)     (5,794)     (5,708)     (4,276)     (1,543)       (264)
  Interest expense...............         (77)       (244)       (245)       (260)       (277)        (54)        (83)
  Interest income................         243         283         201         156           9           6          --
  Other..........................        (160)       (268)       (190)         --          --          --          --
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Net loss.......................      (3,653)    (11,640)     (6,028)     (5,812)     (4,544)     (1,591)       (347)
  Less cumulative preferred
   dividends.....................      (1,351)     (2,737)     (3,733)     (4,481)         --(3)     (1,573)         --
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Loss applicable to common
   stock.........................  $   (5,004) $  (14,377) $   (9,761) $  (10,293) $   (4,544) $   (3,164) $     (347)
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Net loss per common share
   (1)...........................  $    (1.95) $    (4.99) $    (3.41) $    (3.59) $     (.70) $    (1.10) $     (.05)
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Weighted average number of
   common shares outstanding.....   2,566,218   2,878,292   2,862,292   2,864,292   6,495,310   2,864,292   6,577,287
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------

                                                                    DECEMBER 31,
                                                -----------------------------------------------------   MARCH 31,
                                                  1991       1992       1993       1994       1995        1996
                                                ---------  ---------  ---------  ---------  ---------  -----------
                                                                          (IN THOUSANDS)
                                                                                     
BALANCE SHEET DATA:
  Cash and cash equivalents...................  $   7,046  $  11,343  $   7,690  $   1,206  $     138   $     120
  Total assets................................     12,720     21,368     21,355     27,809     23,491      23,876
  Long-term debt, net of current maturities...      1,256      2,935      2,293      4,838      5,622       5,996
  Convertible redeemable preferred stock......  $  20,617  $  40,354  $  52,079  $  62,909         --          --
  Shareholders' equity (net capital
   deficiency)................................  $ (11,068) $ (25,663) $ (35,106) $ (45,363) $  12,574   $  12,228

- ------------------------
(1) See  Note  2  to  the  Consolidated  Financial  Statements  for  information
    concerning the computation of loss per share.
 
(2)  During 1992, the Company approved a  restructuring plan which resulted in a
    nonrecurring charge of $2,747,000, primarily to write-off assets  associated
    with  a technology used by  the Company prior to  the development of the ETD
    process.
 
(3) In August 1995  and in connection with  a recapitalization, the  liquidation
    preference on the Company's preferred stock was eliminated and the Company's
    preferred  stock was reclassified as Class  A common stock. See "Description
    of Capital Stock -- 1995 Recapitalization."
 
                                       18

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
    THE   FOLLOWING  DISCUSSION  OF  THE  FINANCIAL  CONDITION  AND  RESULTS  OF
OPERATIONS OF  THE COMPANY  SHOULD BE  READ IN  CONJUNCTION WITH  THE  COMPANY'S
CONSOLIDATED  FINANCIAL STATEMENTS, CONDENSED  CONSOLIDATED FINANCIAL STATEMENTS
AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
 
BACKGROUND
 
    The Company was incorporated in  March 1989. The Company provides  regulated
medical  waste collection, transportation, treatment, disposal, reduction, reuse
and recycling  services to  its customers,  together with  related training  and
education  programs and  consulting services.  The Company  also sells ancillary
supplies and transports pharmaceuticals,  photographic chemicals, lead foil  and
amalgam  for  recycling in  selected geographic  service areas.  As part  of its
recycling services, the Company supplies recycled treated medical waste plastics
to  a  plastics   manufacturer  and   supplies  treated  medical   waste  as   a
refuse-derived  fuel for  use in  the production  of electricity.  The Company's
regulated medical  waste treatment  facilities  utilize its  patented  treatment
technology,  ELECTRO-THERMAL DEACTIVATION ("ETD"). The  Company opened its first
full-scale ETD  treatment facility  in Morton,  Washington in  January 1992  and
opened  additional treatment  facilities in Loma  Linda, California, Woonsocket,
Rhode Island,  and Yorkville,  Wisconsin  in November  1992, December  1992  and
November 1993, respectively.
 
    The  Company's results of operations from its inception through December 31,
1995 reflect  significant  expenditures  to develop  proprietary  treatment  and
recycling  processes, obtain required governmental  permits and approvals, build
and equip the Company's  treatment facilities and a  recycling and research  and
development  center,  and  open its  transfer  stations. The  Company  also made
significant expenditures to  develop its  sales and marketing  resources and  to
acquire  selected assets of other regulated medical waste management businesses.
The Company  believes  that  additional  revenues  for  its  existing  treatment
facilities,  and in particular  additional revenues derived  from Alternate Care
generators (as defined below), will significantly enhance operating efficiencies
at the Company's treatment facilities, all of which currently operate at  levels
below capacity.
 
    The Company's revenues have increased from $1,563,000 in 1991 to $21,339,000
in  1995. From  January 1991 to  July 1993,  the Company relied  entirely on its
internal sales force to add new  customers in existing geographic service  areas
and  to develop customers in  new areas. The Company's  sales force consisted of
sales representatives with backgrounds in the health care industry. Beginning in
1993, these direct sales enabled the Company to generate sufficient revenues  to
cover its cost of revenues.
 
    Since  August  1993,  the  Company has  acquired  selected  assets  of eight
regulated medical waste management companies. In each of these acquisitions  the
Company  purchased  specific  assets  of the  seller  consisting  principally of
customer lists, customer contracts, vehicles and related supplies and equipment.
In some of these acquisitions the  Company also assumed certain of the  seller's
liabilities.  The Company  did not  acquire any  of the  regulated medical waste
treatment facilities or technology of any of the sellers, and those sellers with
their own regulated medical waste treatment facilities within the service  areas
of  the acquired businesses  subsequently closed their  facilities. All of these
acquisitions were accounted for  as purchases, and  accordingly, the results  of
operations  of  the  acquired businesses  have  been included  in  the Company's
financial statements only from  their respective dates  of acquisition and  have
affected  period-to-period comparisons  of the Company's  operating results. The
Company anticipates that a  significant portion of its  future growth will  come
from the acquisition of additional regulated medical waste management or related
businesses.    Such   additional   acquisitions   could   continue   to   affect
period-to-period comparisons of the Company's operating results.
 
RESULTS OF OPERATIONS
 
GENERAL
 
    Revenues from regulated medical waste collection, transportation,  treatment
and  disposal  accounted  for approximately  95%  of the  Company's  revenues of
$21,339,000 during the year ended December  31, 1995. Revenues from the sale  of
ancillary  supplies and  miscellaneous products  and services  accounted for the
remaining 5% of the Company's 1995 revenues.
 
                                       19

    The Company derives  its revenues from  services to two  principal types  of
generators   of  regulated  medical  waste:   (i)  hospitals,  blood  banks  and
pharmaceutical manufacturers ("Core" generators) and (ii) long-term and subacute
care facilities,  outpatient clinics,  medical  and dental  offices,  industrial
clinics, dialysis centers, laboratories, biotechnology and biomedical companies,
veterinary  offices, municipal  health departments,  ambulance, fire  and police
departments, correctional  facilities, schools  and park  districts and  funeral
homes ("Alternate Care" generators). Substantially all of the Company's services
are  provided  pursuant to  customer  contracts specifying  either  scheduled or
on-call regulated medical  waste management  services, or  both. Contracts  with
hospitals  and other  Core generators,  which may  run for  more than  one year,
typically include price  escalator provisions  which allow  for price  increases
generally  tied to an  inflation index or  set at a  fixed percentage. Contracts
with Alternate Care generators generally provide for annual price increases  and
have  an automatic  renewal provision unless  the customer  notifies the Company
prior to completion of the  contract. As of December  31, 1995, the Company  had
more than 13,000 customers.
 
    In  1993,  the  Company  began  to  make  acquisitions  of  selected assets,
including customer  lists  and  customer  contracts,  of  competitors  who  were
withdrawing  in whole  or in  part from  the regulated  medical waste management
business. These acquisitions provided the Company with a substantial new base of
customers, principally Alternate Care  generators. These new customers  provided
the  Company with additional volume for its treatment facilities, generally at a
higher unit pricing  than the unit  pricing of Core  generators. Alternate  Care
generators  typically require  greater service  and support  in relation  to the
volume of  regulated  medical  waste  produced  than  do  Core  generators,  and
accordingly,  the  Company can  price its  services at  levels permitting  it to
realize higher gross  profit margins on  Alternate Care generators  than it  can
realize  on  Core  generators.  The  growth  in  the  number  of  Alternate Care
generators that the  Company serves  has contributed  to an  improvement in  the
Company's  operating results. The  Company has continued  to pursue acquisitions
within the  geographic areas  in which  it currently  operates and  to focus  on
acquisitions  that provide  the desired  proportion of  Core and  Alternate Care
generators  and   allow  the   Company  to   improve  the   efficiency  of   its
transportation, treatment and sales functions.
 
    Prices  for the Company's services  are determined on the  basis of the type
and frequency  of the  services  required, the  weight  and types  of  regulated
medical  waste  to be  collected, container  count,  container volume,  type and
quantity of equipment and supplies furnished, distance to collection site, types
of medical waste, special treatments required, state tariffs and prices  charged
for  similar  services by  competitors. The  Company's ability  to pass  on cost
increases may be limited by the  terms of its contracts. Service agreements  are
generally  for a  period of  one to  five years  with renewal  options, although
customers may  terminate on  written  notice and  typically  upon payment  of  a
penalty.
 
    The   Company's  operating  expenses  for  the  collection,  transportation,
treatment and disposal of regulated medical waste include direct labor wages and
benefits, equipment lease payments, expenses for fuel, electricity,  processing,
safety  supplies,  containers,  ancillary  supplies  and  equipment maintenance,
depreciation of plant,  equipment, vehicles  and containers,  and disposal  fees
paid to landfills and waste-to-energy facilities.
 
    As  part of the Company's marketing  strategy, the Company offers reduction,
resource recovery and recycling services to customers. Accordingly, the  Company
has  invested funds to treat and  recover the plastics from single-use products,
and as a part of that strategy, the Company has entered into an agreement with a
plastic products  manufacturer  to  provide  recycled  regulated  medical  waste
plastics  for use in a line of  medical waste sharps containers. The Company has
delivered the recycled plastics as required under the agreement and continues to
recycle plastics as part of the Company's commitment to provide  environmentally
sound  alternatives  to other  regulated  medical waste  treatment  methods. The
demand for  recycled  treated  regulated medical  waste  plastics  is  currently
limited.  The  Company continues  to  search for  additional  uses and  users of
recycled plastics. See "Risk Factors -- Cost of Reuse and Recycling."
 
    In 1994, as  a result  of increasing demand  for customer  service from  the
growing  number of Alternate  Care generators, the  Company began implementing a
transition from the use of a national contract carrier to its own transportation
of regulated medical waste. The Company has obtained its own permits, hired  and
trained  its own drivers,  purchased or leased  its own trucks  and trailers and
obtained approvals for and opened  transfer stations. The Company believes  that
since  it has  assumed control  of transportation, it  has been  able to improve
service levels,  equipment  utilization  and  route  density  and  provide  more
efficient dispatching.
 
                                       20

    Selling, general and administrative expenses include management salaries and
benefits,  clerical and administrative expenses, costs associated with the sales
force,  permitting  fees,  research  and  development  expenses,  office  rental
expenses,  legal  and audit  expenses, travel  expenses, depreciation  of office
equipment and amortization of goodwill.
 
    The Company expenses as incurred  all permitting, design and start-up  costs
associated with all of its facilities. The Company elects to expense rather than
to  capitalize the  costs of obtaining  permits and approvals  for each proposed
facility regardless of whether the Company is ultimately successful in obtaining
the desired  permits and  approvals  and developing  the facility.  The  Company
recognizes  as  a current  expense all  legal  fees and  other costs  related to
obtaining and  maintaining  permits  and approvals.  In  addition,  the  Company
expenses all costs related to research and development as incurred.
 
    The  Company has currently invested $1,000,000 and expensed $800,000 against
operating  results  in  a  project  to  utilize  treated  medical  waste  as  an
alternative  fuel  for use  in  the production  of  cement. The  Company  may be
required to expend additional  amounts to complete this  project or may  abandon
the  project if  it is  unable to  incorporate successfully  the treated medical
waste into the cement production process.
 
    As of December 31,  1995, the Company had  net operating loss  carryforwards
for  income  tax purposes  of approximately  $36,493,000, expiring  beginning in
2004. No income  tax expense has  been recorded since  the Company's  inception.
Utilization  of the Company's net operating loss carryforwards may be subject to
annual limitations under  the Internal Revenue  Code of 1986,  as amended, as  a
result of changes in the Company's ownership, which could significantly restrict
or partially eliminate their utilization.
 
    Inflation  has  not  had  a  significant impact  to  date  on  the Company's
operations.
 
QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED MARCH 31, 1995
 
    REVENUES.  Revenues increased  $132,000, or 2.4%,  to $5,578,000 during  the
quarter  ended March 31,  1996 from $5,446,000 during  the comparable quarter in
1995 as  the  Company  continued  to  implement  its  strategy  of  focusing  on
higher-margin  Alternate  Care  generators while  simultaneously  paring certain
higher-revenue but  lower-margin accounts  with Core  generators. This  increase
also  reflects the  inclusion of  a full quarter  of revenues  from the Safetech
Health Care, Inc. ("Safetech")  acquisition, which was  completed in June  1995,
and  two months of revenues  from the WMI Medical  Services of New England, Inc.
("WMI-NE") acquisition, which  was completed  in January 1996.  The increase  in
revenues was partially offset by a decline in revenues attributable to a lack of
any  miscellaneous product sales during the quarter ended March 31, 1996 and the
sale in April 1995 of certain unprofitable customer accounts and related  assets
obtained through acquisitions.
 
    COST  OF  REVENUES.    Cost  of revenues  increased  $110,000,  or  2.6%, to
$4,337,000 during the quarter  ended March 31, 1996  from $4,227,000 during  the
comparable  quarter in 1995. The principal  reasons for the increase were higher
transportation costs as  a result of  the Safetech and  WMI-NE acquisitions  and
start-up  expenses related to the Company's  expansion into new geographic areas
where the Company primarily serves  Alternate Care generators. Cost of  revenues
as a percentage of revenues increased slightly to 77.8% during the quarter ended
March 31, 1996 from 77.6% during the comparable quarter in 1995.
 
    SELLING,   GENERAL  AND  ADMINISTRATIVE  EXPENSES.    Selling,  general  and
administrative expenses decreased to $1,505,000  during the quarter ended  March
31,  1996 from $2,762,000  during the comparable quarter  in 1995. This decrease
was  primarily  attributable  to  a   reduction  in  research  and   development
expenditures  to  develop treated  medical waste  as an  alternate fuel  for the
production of cement  and to  savings from  the integration  into the  Company's
operations  of the Safe  Way Disposal Systems, Inc.  ("Safe Way") acquisition in
September 1994.  These  savings  resulted  from  the  elimination  of  redundant
employee and staff positions and the reallocation of resources to Alternate Care
generators.  In addition, corporate costs and  permitting expenses were at lower
levels during  the  quarter ended  March  31, 1996  than  they were  during  the
comparable  quarter in 1995.  Selling, general and  administrative expenses as a
percentage of revenues  decreased to 27.0%  during the quarter  ended March  31,
1996 from 50.7% during the comparable quarter in 1995.
 
                                       21

    INTEREST EXPENSE AND INTEREST INCOME.  Interest expense increased to $83,000
during  the  quarter ended  March 31,  1996 from  $54,000 during  the comparable
quarter in 1995. This increase was primarily attributable to higher indebtedness
under the Company's  revolving credit  facility. Interest income  declined to  a
negligible amount during the quarter ended March 31, 1996 from $6,000 during the
comparable quarter in 1995.
 
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
 
    REVENUES.   Revenues increased $5,198,000, or  32.2%, to $21,339,000 in 1995
from $16,141,000  in  1994. This  increase  was attributable  primarily  to  the
inclusion  of a full year of revenues from customers acquired as a result of the
Recovery Corporation of  Illinois ("RCI")  acquisition, which  was completed  in
March 1994, and the Safe Way acquisition, which was completed in September 1994.
Revenues  for 1995 reflected only  a partial year of  revenues from the Safetech
acquisition, which was completed in June 1995.
 
    COST OF  REVENUES.   Cost of  revenues increased  $3,556,000, or  25.5%,  to
$17,478,000  in 1995  from $13,922,000  in 1994.  The principal  reasons for the
increase were higher  transportation costs, processing  costs, disposal  volumes
and  container costs attributable to  additional customers acquired during 1995.
Cost of revenues as  a percentage of  revenues decreased to  81.9% in 1995  from
86.3%  in  1994.  This  percentage  decrease  was  primarily  due  to  increased
utilization of the Company's  treatment facilities and transportation  equipment
as a result of increased volumes.
 
    SELLING,   GENERAL  AND  ADMINISTRATIVE  EXPENSES.    Selling,  general  and
administrative expenses increased to $8,137,000 in 1995 from $7,927,000 in 1994.
The increase was primarily attributable  to an increase in amortization  expense
as  a result  of additional goodwill  from the  Company's acquisitions. Selling,
general and administrative  expenses as  a percentage of  revenues decreased  to
38.1%  in 1995 from 49.1% in 1994. This percentage decrease was due primarily to
lower permitting costs and reduced administrative expenses, as partially  offset
by higher goodwill amortization expense.
 
    INTEREST  EXPENSE  AND  INTEREST  INCOME.    Interest  expense  increased to
$277,000 in 1995 from $260,000 in 1994, primarily as a result of commitment fees
and higher  interest  rates  associated  with  the  Company's  revolving  credit
facility. In addition, the Company incurred higher levels of indebtedness during
1995. Interest income decreased to $9,000 in 1995 from $156,000 in 1994.
 
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
 
    REVENUES.   Revenues increased $7,000,000, or  76.6%, to $16,141,000 in 1994
from $9,141,000  in  1993.  This  increase was  attributable  primarily  to  the
inclusion  of revenues from customers  acquired as a result  of the RCI and Safe
Way  acquisitions,  which   were  completed   in  March   and  September   1994,
respectively, and the addition of Core generators as new customers.
 
    COST  OF  REVENUES.   Cost of  revenues increased  $4,975,000, or  55.6%, to
$13,922,000 in  1994 from  $8,947,000  in 1993.  The  primary reasons  for  this
increase  were higher  transportation costs, processing  costs, disposal volumes
and container costs attributable to additional customers and the inclusion of  a
full   year's  depreciation  expense  for  the  Company's  Yorkville,  Wisconsin
treatment facility. Cost of  revenues as a percentage  of revenues decreased  to
86.3%  in 1994 from 97.9% in 1993. This percentage decrease was primarily due to
increased utilization of the  Company's treatment facilities and  transportation
equipment as a result of increased volumes.
 
    SELLING,   GENERAL  AND  ADMINISTRATIVE  EXPENSES.    Selling,  general  and
administrative expenses increased to $7,927,000 in 1994 from $5,988,000 in 1993.
This increase was the result  of an increase in sales  personnel as a result  of
the  Safe Way acquisition, additional marketing and sales expenses for Alternate
Care generators  and  an  increase  in  amortization  expense  as  a  result  of
additional  goodwill  from  the  Company's  acquisitions.  Selling,  general and
administrative expenses as a percentage of  revenues decreased to 49.1% in  1994
from  65.5%  in  1993.  This  percentage  decrease  was  primarily  due  to  the
integration of sales and administrative  personnel resulting from the  Company's
Safe Way acquisition.
 
    INTEREST  EXPENSE  AND  INTEREST  INCOME.    Interest  expense  increased to
$260,000 in 1994 from $245,000 in 1993 primarily as a result of additional  debt
related  to equipment financing at  the Company's Yorkville, Wisconsin treatment
facility. Interest income decreased to $156,000 in 1994 from $201,000 in 1993.
 
    OTHER EXPENSES.   Other expenses of  $190,000 were incurred  in 1993 in  the
development of a treatment facility.
 
                                       22

LIQUIDITY AND CAPITAL RESOURCES
 
    To  date,  the Company  has been  financed principally  through the  sale of
preferred stock to investors. Purchasers  of preferred stock have invested  more
than   $49,677,000  in  capital  which  has  been  used  to  fund  research  and
development, acquisitions, capital  expenditures, ongoing  operating losses  and
working capital requirements. The Company has also been able to secure plant and
equipment  leasing or financing in connection with some of its facilities. These
debt facilities are  secured by security  interests in the  financed assets.  In
addition, during 1995 the Company was able to obtain a $2,500,000 revolving line
of  credit secured by accounts  receivable and a security  interest in all other
assets of the Company.
 
    During 1995 the Company's stockholders approved a plan of  recapitalization,
pursuant  to which  all of the  Company's outstanding shares  of preferred stock
were reclassified  as shares  of new  Class A  common stock.  As a  result,  the
Company  was able to eliminate any liability for accrued but unpaid dividends on
its preferred stock  and the preferential  rights on liquidation  of holders  of
preferred stock.
 
    At  March 31,  1996, the Company's  working capital was  $39,000 compared to
$1,770,000 at March 31, 1995. This reduction was due to a lower cash position, a
lower level of accounts receivable as a result of improved collections, a  lower
level  of  prepaid insurance  and  a reduced  supply  of recycled  plastics. The
Company continues to use all available cash and working capital to fund  current
operating  losses and capital  requirements. During the  quarter ended March 31,
1996, the  Company's  loss from  operations  of  $264,000 was  exceeded  by  its
depreciation  and amortization expense of $479,000,  resulting in cash flow from
operations of $215,000.
 
    The Company is also using  its line of credit  to fund cash requirements  of
any  acquisitions. At March 31, 1996, the Company had drawn $952,000 on its line
of credit  and  had approximately  $1,348,000  available. The  revolving  credit
facility  matures in October 1997. The facility requires the Company to maintain
certain financial ratios  and consult  with the  bank on  acquisitions and  also
includes  a prohibition on the payment of  dividends. In April 1996, the Company
used substantially all of its remaining line of credit to fund the cash  portion
of  two  additional acquisitions,  for Doctors  Environmental Control,  Inc. and
Sharps Incinerator of  Fort, Inc. The  bank agreed to  revise certain  financial
covenants  in order to allow the Company  to complete the acquisitions. The loan
agreement allows  the  bank  to  demand immediate  repayment  of  the  Company's
indebtedness  if the  bank, acting  in a  commercially reasonable  manner, deems
itself insecure.
 
    In May 1996, the Company borrowed $1,000,000 under a short-term loan from  a
lending  group comprised of certain officers,  directors and stockholders of the
Company to provide working capital. The subordinated notes issued in  connection
with  this  loan  are  interest-free  if  paid  when  due,  subject  to  certain
exceptions, and are due  within 30 days after  completion of this Offering.  See
"Certain Transactions."
 
    The  Company's  other financial  obligations include  industrial development
revenue bonds issued on behalf of and  guaranteed by the Company to finance  its
Woonsocket,  Rhode Island treatment  facility and equipment.  These bonds, which
had an outstanding balance of $1,602,000  as of March 31, 1996, require  monthly
payments  of approximately $25,000  and are due in  various amounts through June
2017 at fixed  interest rates ranging  from 5.8% to  7.4%. An agreement  entered
into  by the Company in connection with the issuance of these bonds requires the
Company to maintain specified levels of  working capital and other debt and  net
worth  ratios. As  of December 31,  1995, the Company  reclassified its reusable
containers as long-term  assets based  upon their expected  useful lives,  which
resulted  in a  violation of the  Company's requirement to  maintain a specified
current ratio on December  31, of each  year. The Company  received a waiver  of
this  requirement for  December 31, 1995,  to the  extent of any  violation as a
result of  the  Company's  reclassification  of  its  reusable  containers.  Any
violation  of  this or  the  other requirements  of  the Company's  agreement in
connection with the issuance of  the industrial development revenue bonds  would
constitute  a default under the Company's revolving credit facility with Silicon
Valley Bank.
 
    In connection with the Safe Way acquisition, the Company issued the Safe Way
Note which does not bear interest and  is due upon completion of this  Offering.
The  Safe Way Note is payable  in cash for 40% of  its face amount, or $992,000,
and 60% in stock, or 98,001 shares of Common Stock.
 
    The Company  has  an  obligation to  pay  the  Rhode Island  Air  and  Water
Protection Fund $35,000 each year from 1995 to 1998, $50,000 in 1999, $60,000 in
2000  and $150,000 in  2001. Without admitting liability,  the Company agreed to
make these payments as part of a settlement of two notices of violations  issued
by the Rhode
 
                                       23

Island  Department of  Environmental Management in  1994 and  1995. Although the
Company disputed  both the  nature and  extent of  the alleged  violations,  the
Company  entered into the settlement in order  to resolve the matter in the best
interests of  the Company  and its  customers in  a timely  manner. The  Company
recorded  the present value of all payments to the Air and Water Protection Fund
and the Company's legal fees relating to  the matter as expenses in 1995.  Under
the  settlement  agreement,  the Company  is  also required  to  perform certain
community service and educational  projects, including conducting  environmental
management  seminars.  The  Company  has accrued  the  expenses  associated with
conducting  these  activities.  See  "Risk  Factors  --  Impact  of   Government
Regulation."
 
    Capital  expenditures for 1996  are currently estimated  to be approximately
$2,350,000, of  which  approximately  $1,600,000 is  for  the  construction  and
equipping  of  a treatment  facility at  the  Company's San  Leandro, California
transfer station and approximately $750,000 is for containers and transportation
equipment. Capital expenditures were  $726,000 in 1995  and $1,910,000 in  1994.
The  Company did not open any new  treatment facilities during 1995. The Company
may decide to build additional treatment  facilities as volumes increase in  the
Company's  current geographic services areas or as the Company enters new areas.
The Company  also may  elect  to increase  capacity  in its  existing  treatment
facilities,  which would  require additional capital  expenditures. In addition,
capital requirements for transportation equipment  will continue to increase  as
the  Company  grows.  The  amount  and level  of  these  expenditures  cannot be
determined currently  as they  will depend  upon the  nature and  extent of  the
Company's  growth and acquisition opportunities.  The Company believes that cash
flow from operations and funds provided from this Offering will fund its capital
requirements through 1997.
 
    Net cash used for operations decreased  to $871,000 in 1995 from  $6,712,000
in  1994.  The reduced  cash  usage reflects  a  smaller operating  loss, higher
depreciation and  amortization expenses  and  improved collections  of  accounts
receivables.
 
    Net  cash  used in  investing activities  was $393,000  in 1995  compared to
$3,440,000 in 1994. The reduction in 1995 from the prior year was due to reduced
plant requirements and fewer business acquisitions. The Company benefitted  from
the  sale in  April 1995 of  certain unprofitable customer  accounts and related
assets obtained through acquisitions.
 
    Net cash provided by financing activities decreased to $196,000 in 1995 from
$3,668,000 in 1994. The difference is  primarily attributable to no issuance  of
preferred  stock during 1995 compared to the issuance of $3,458,000 in preferred
stock in 1994.
 
                                       24

                                    BUSINESS
 
INTRODUCTION
 
    Stericycle is  a  multi-regional integrated  company  employing  proprietary
technology   to  provide  environmentally-responsible  management  of  regulated
medical waste for the health care industry. Because of the Company's health care
orientation, proprietary technology and breadth of service, the Company believes
that it is in a unique position to meet the fundamental need of the health  care
industry  to manage regulated medical waste  in a safe and cost-effective manner
and to capitalize on  the current consolidation trend  in the regulated  medical
waste  management industry.  The Company  believes that  its exclusive  focus on
regulated medical waste and the experience of its management in the health  care
industry  distinguish  the  Company from  its  chief competitors,  most  of whom
participate in multiple businesses  and most of  whose management experience  is
primarily  in the solid waste business.  The Company believes that its regulated
medical waste management system, including its proprietary
ELECTRO-THERMAL-DEACTIVATION   ("ETD")   treatment   process,   is   the    only
commercially-proven  system that provides all of  the following benefits: (i) it
kills human  pathogens  in regulated  medical  waste without  generating  liquid
effluents  or regulated  air emissions; (ii)  it affords  certain operating cost
advantages over the principal competing treatment methods; (iii) it reduces  the
volume  of  regulated medical  waste by  up  to 85%;  (iv) it  renders regulated
medical waste  unrecognizable; (v)  it  permits the  recovery and  recycling  of
usable  plastics from regulated medical waste; and (vi) it enables the remaining
regulated medical waste to be safely  landfilled or used as an alternative  fuel
in  energy production. The Company's full-service program is designed to help to
protect its  customers and  their employees  against potential  liabilities  and
injuries  in  connection  with  the  handling,  transportation  and  disposal of
regulated medical waste.
 
    The  Company's   integrated  services   include  regulated   medical   waste
collection,  transportation, treatment, disposal, reduction, reuse and recycling
services, together  with related  training  and education  programs,  consulting
services  and product sales,  in four geographic  service areas: (i) California;
(ii) Washington, Oregon, Idaho and British Columbia; (iii) Wisconsin,  Illinois,
Indiana  and Michigan;  and (iv)  Massachusetts, Maine,  New Hampshire, Vermont,
Rhode Island, Connecticut, New York and New Jersey. As of December 31, 1995, the
Company served  over 13,000  customers,  consisting of  two principal  types  of
generators  of regulated medical waste. Approximately  70% of the Company's 1995
revenues  were   derived  from   hospitals,  blood   banks  and   pharmaceutical
manufacturers  ("Core" generators), and  approximately 30% of  its revenues were
derived from long-term and subacute care facilities, outpatient clinics, medical
and  dental  offices,  industrial   clinics,  dialysis  centers,   laboratories,
biotechnology  and  biomedical companies,  veterinary offices,  municipal health
departments, ambulance, fire  and police  departments, correctional  facilities,
schools,  park districts  and funeral  homes ("Alternate  Care" generators). The
Company's current  operations  are  comprised of  four  treatment  centers,  one
recycling center, five transfer stations and four customer service centers.
 
    Regulated  medical waste is generally defined as any waste that can cause an
infectious disease  or  that can  reasonably  be suspected  of  harboring  human
pathogenic  organisms.  Regulated medical  waste includes  single-use disposable
items such as needles, syringes, gloves and laboratory, surgical, emergency room
and other  supplies which  have been  in contact  with blood  or bodily  fluids;
cultures  and  stocks of  infectious agents;  and blood  and blood  products. An
independent study published  in 1995 estimated  that the size  of the  regulated
medical  waste management market in the  United States in 1995 was approximately
$1 billion.
 
    Based upon certain  public information  and the Company's  estimates of  its
competitors'  revenues,  the  Company  believes that  it  is  the second-largest
provider of regulated medical waste management services in the United States.
 
TRENDS IN THE HEALTH CARE AND MEDICAL WASTE INDUSTRIES
 
    The Company  believes  that the  demand  for its  services  will grow  as  a
consequence  of certain  trends in the  health care and  regulated medical waste
industries.
 
    INCREASED AWARENESS OF REGULATED MEDICAL  WASTE.  The handling and  disposal
of  the large quantities of regulated medical waste generated by the health care
industry has attracted increased public awareness and regulatory attention.  The
proper  management  of  potentially  infectious  medical  waste  gained national
attention in 1988 when disposable syringes and other medical waste washed ashore
on New Jersey and New York coastlines. These events
 
                                       25

raised concerns about the potential transmission  of hepatitis B, HIV and  other
infectious diseases. The Medical Waste Tracking Act of 1988 ("MWTA") was enacted
in response to this problem and established a two-year demonstration program for
the  proper tracking  and treatment of  medical waste. Many  states have enacted
legislation modeled on MWTA's requirements.
 
    In addition, OSHA  has issued  regulations concerning  employee exposure  to
bloodborne  pathogens and  other potentially  infectious material  that require,
among other  things,  special  procedures  for  the  handling  and  disposal  of
regulated medical waste and annual training of all personnel who are potentially
exposed to blood and other bodily fluids. The Company believes that the scope of
these  regulations will  help to  expand the  market for  the Company's services
beyond traditional providers of health care.
 
    As a  consequence  of  these legislative  and  regulatory  initiatives,  the
Company  believes that health  care providers and  other generators of regulated
medical waste have become increasingly  concerned about the handling,  treatment
and  disposal of regulated medical waste.  These concerns are reflected by their
desire to (i)  reduce on-site handling  of regulated medical  waste in order  to
minimize  employee contact; (ii) assure safe transportation of regulated medical
waste to treatment  sites; (iii)  assure destruction  of potentially  infectious
human   pathogens;   (iv)   render   the   treated   regulated   medical   waste
non-recognizable in order to reduce liability and to increase disposal  options;
(v)  minimize the  impact of  the treatment process  on the  environment and the
volume of solid waste deposited in landfills; and (vi) participate in  recycling
programs where possible.
 
    GROWING  IMPORTANCE OF ALTERNATE CARE GENERATORS.  The Company believes that
in response to managed  care and other  health care cost-containment  pressures,
patient  care is increasingly  shifting from higher-cost  acute-care settings to
less expensive off-site treatment alternatives. According to a report  published
by  the U.S. Health  Care Financing Authority,  total alternate-site health care
expenditures in the  United States  increased from approximately  $5 billion  in
1985   to  approximately  $22  billion  in   1994.  The  Company  believes  that
alternate-site health care  expenditures will  continue to grow  in response  to
governmental  and private cost-containment initiatives. Many common diseases and
conditions, including  pulmonary diseases,  neurological conditions,  infectious
diseases,  digestive disorders, AIDS  and various forms of  cancer are now being
treated in alternate-site settings.
 
    Alternate Care generators  have become an  increasingly important source  of
revenues  in the regulated medical waste industry. An independent report in 1990
estimated that  approximately 23%  (by weight)  of regulated  medical waste  was
produced  by Alternate Care  generators. Based on  the Company's experience, the
Company believes both that this percentage has increased significantly and  that
Alternate  Care generators account for a greater percentage of regulated medical
waste treatment revenues than the  percentage of regulated medical waste  volume
that  they  generate.  Individual  Alternate Care  generators  typically  do not
produce a sufficient volume  of regulated medical  waste to justify  substantial
capital  expenditures on their own waste  treatment facilities or the expense of
hiring regulatory compliance personnel.  Accordingly, the Company believes  that
Alternate  Care  generators are  extremely  service-sensitive, relying  on their
regulated medical waste management provider  for timely waste removal,  creative
solutions for safer regulated medical waste handling, establishment of regulated
medical  waste  management  protocols,  education  on  regulated  medical  waste
reduction techniques  and assistance  with  compliance and  record-keeping.  The
Company  believes that  growth in the  number of Alternate  Care generators will
generate growth in the  overall regulated medical waste  market and may  provide
growth opportunities for the Company.
 
    HEALTH CARE COST CONTAINMENT INITIATIVES.  The health care industry is under
increasing pressure to reduce costs and improve efficiency. The Company believes
that its regulated medical waste management services facilitate cost containment
by  health care  providers by reducing  their regulated  medical waste tracking,
handling and compliance  costs, reducing  their potential  liability related  to
employee  exposure  to  bloodborne pathogens  and  other  potentially infectious
material, and significantly reducing the  amount of capital invested in  on-site
treatment of regulated medical waste.
 
    SHIFT FROM ON-SITE INCINERATION TO OFF-SITE TREATMENT.  The Company believes
that during the past five years, government clean air regulations have increased
both  the  capital  costs  required to  bring  many  existing  incinerators into
compliance  with  such  regulations  and   the  operating  costs  of   continued
compliance.  As a result, many hospitals have shut down their incinerators. This
trend is expected to  accelerate when the  U.S. Environmental Protection  Agency
("EPA")  adopts proposed regulations  which are currently  being revised and are
scheduled to be released in July  1997. These regulations are expected to  limit
the   discharge   into   the   atmosphere  of   nine   pollutants   released  by
 
                                       26

hospital waste incineration. The EPA had predicted that under the regulations as
initially proposed, many  of the nation's  hospital-based incinerators would  be
shut  down and that many  planned medical waste incinerators  would not be built
due to the  increased costs  of installing  air pollution  control systems.  The
Company  expects to benefit from this trend as former users of incinerators seek
alternatives for the treatment of their regulated medical waste.
 
    INDUSTRY CONSOLIDATION.   Although  the regulated  medical waste  management
industry  remains fragmented, the number of competitors is rapidly decreasing as
a result  of industry  consolidation. National  attention on  regulated  medical
waste   in  the  late  1980s  led  to   rapid  growth  in  the  industry  and  a
highly-fragmented competitive  structure. Entrants  into the  industry  included
several  large  municipal  waste  companies  and  many  independent  haulers and
incinerator operators. Since 1990, however, government clean air regulations and
public concern  about  the  environment  have increased  the  costs  and  public
opposition  to both on- and off-site  regulated medical waste incineration. As a
result, the Company believes that independent haulers and incinerator  operators
have  encountered increasing difficulty competing with integrated companies like
Stericycle, which typically  have their  own low-cost  treatment plants  located
within  the geographic areas that they serve.  The Company believes that many of
these independent haulers  and incinerator  operators are  withdrawing from  the
regulated  medical waste industry. The Company's internal estimates show that in
its geographic  service  areas,  the  number  of  competitors  has  fallen  from
approximately  50 in 1991  to approximately 30 in  1996, a decline  of 40%. As a
result of industry consolidation,  the Company believes  that it has  increasing
opportunities to acquire regulated medical waste management businesses.
 
GROWTH STRATEGY
 
    The  Company believes  that it is  currently the  second-largest provider of
regulated medical waste management services in the United States. The  Company's
goals  are  to accelerate  its revenue  growth  through penetration  of existing
geographic service areas and expansion into  new areas and to become  profitable
and   increase  profits  through   the  more  efficient   use  of  its  existing
infrastructure.
 
    INCREASED PENETRATION  OF EXISTING  SERVICE  AREAS.   All of  the  Company's
treatment  facilities are  currently operating below  capacity. Due  to the high
fixed costs associated with  the collection and  treatment of regulated  medical
waste,  the Company's operating  margins would increase  with incremental volume
gains. Accordingly, the Company is  currently implementing a number of  programs
to  increase customer density and penetration of its existing geographic service
areas in  order to  maximize  operating efficiencies.  The Company  focuses  its
telemarketing and direct sales efforts at securing agreements with new customers
among  both Core and  Alternate Care generators. The  Company intends to acquire
competitors and enter  into marketing alliances  with various hospitals,  health
maintenance organizations, medical suppliers and others.
 
    GEOGRAPHIC  EXPANSION.   In  order to  expand  its geographic  coverage, the
Company plans,  among other  things, to  develop additional  transfer  stations,
acquire independent haulers and integrated competitors, expand its telemarketing
and   direct  sales  efforts  and  where  appropriate  construct  new  treatment
facilities. The Company estimates that its existing transportation and treatment
system enables it to serve effectively an area encompassing approximately 25% of
the U.S. population.  The Company believes  that expanding its  "hub and  spoke"
transportation  strategy would allow it to  maximize the utilization of existing
treatment  facilities  by  channeling  waste  through  existing  and  additional
transfer  stations. The Company estimates that doing so would enable it to serve
effectively an area encompassing  approximately 55% of  the U.S. population.  In
order  to reach new geographic service areas, the Company is exploring acquiring
independent  haulers   and  integrated   competitors.   The  Company   is   also
investigating  expanding into  international markets. The  Company believes that
expanding telemarketing and direct sales efforts will increase customer  density
in existing and new geographic service areas. A combination of these factors may
lead to the construction of additional treatment and other facilities.
 
    OTHER   GROWTH  OPPORTUNITIES.    The  Company  believes  that  it  has  the
opportunity to  expand its  business by  increasing the  range of  products  and
services  that it offers  to its existing  customers and by  adding new customer
categories. The  Company, for  example, may  expand its  collection,  treatment,
disposal  and  recycling of  regulated medical  waste  generated by  health care
providers to include wastes that are currently handled by the Company only on  a
limited  basis, such as  photographic chemicals, lead foils  and amalgam used in
dental and radiology laboratories. In addition, the Company may decide to  offer
single-use  disposable  medical  supplies  to  its  customers.  The  Company  is
exploring marketing alliances  with organizations that  focus on Alternate  Care
generators.
 
                                       27

ACQUISITION PROGRAM
 
    The  acquisition  of other  regulated  medical waste  management businesses,
including both independent haulers and integrated competitors, is a key  element
of  the Company's strategy  to increase the  number of customers  in its current
markets and to  expand its  operations geographically. Many  of these  potential
acquisition  candidates participate in both the  solid waste industry as well as
the regulated medical waste  industry. The Company  believes that its  exclusive
focus  on the regulated medical waste industry  makes it an attractive buyer for
the medical waste operations of these  companies. The Company believes that  its
expansion strategy also makes it an attractive buyer to haulers whose owners may
wish  to  remain active  in their  businesses,  both as  managers and  as equity
holders, while participating  in the  growth potential inherent  in an  industry
consolidation. In addition, the Company believes that its customer-service focus
makes  it an attractive buyer to owners  who place significant importance on the
assurance that their customers will  receive quality service following the  sale
of their businesses.
 
    The   Company's  senior  management  is  actively  involved  in  identifying
acquisition candidates and consummating acquisitions. In determining whether  to
proceed  with a business acquisition, the Company evaluates a number of factors,
including: (i) the composition and size of the seller's customer base; (ii)  the
efficiencies that may be obtained when the acquisition is integrated with one or
more  of the Company's existing operations; (iii) the potential for enhancing or
expanding the Company's geographic service area and allowing the Company to make
other acquisitions in the  same service area; (iv)  the seller's historical  and
projected  financial results; (v) the purchase  price negotiated with the seller
and the  Company's  expected  internal  rate of  return;  (vi)  the  experience,
reputation  and  personality  of  the seller's  management;  (vii)  the seller's
customer service  reputation  and relationships  with  the communities  that  it
serves;  and (viii) if  the acquisition involves  the assumption of liabilities,
the extent  and  nature of  the  seller's liabilities,  including  environmental
liabilities.  Following this Offering, the Company will also consider the effect
of the proposed acquisition on the Company's earnings per share as an evaluation
factor.
 
    The  Company  has  established  a  procedure  for  efficiently   integrating
newly-acquired  companies into its  business while minimizing  disruption of the
continuing operations of  both the  Company and  the acquired  business. Once  a
medical  waste management business is  acquired, the Company promptly implements
programs designed  to  improve  customer  service,  sales,  marketing,  routing,
equipment utilization, employee productivity, operating efficiencies and overall
profitability.
 
    The  Company  anticipates that  its future  acquisitions of  other regulated
medical waste  management  businesses will  be  made  by the  payment  of  cash,
including  cash from the net proceeds of  this Offering, the issuance of debt or
equity securities or a combination of  these methods. The Company believes  that
its  acquisition strategy will be enhanced by the fact that the Company's Common
Stock will be publicly-traded. Historically, the Company's acquisition  strategy
has  been  to  acquire selected  assets  of regulated  medical  waste management
businesses,  consisting  principally  of  customer  lists,  customer  contracts,
vehicles  and related supplies and equipment. Some of the Company's acquisitions
have also  involved  the Company's  assumption  of certain  liabilities  of  the
seller. The following table shows the Company's completed acquisitions since the
Company began its acquisition program in August 1993.
 
                                       28

                         ACQUISITIONS SINCE AUGUST 1993

                                                                                     STERICYCLE
                SELLER                  ACQUISITION DATE         LOCATION        TREATMENT FACILITY
- --------------------------------------  -----------------  --------------------  ------------------
                                                                        
Therm-Tec Destruction Service of        August 1993        Portland, OR          Morton, WA
 Oregon, Inc.
Recovery Corporation of Illinois        March 1994         Lombard, IL           Yorkville, WI
Safe Way Disposal Systems, Inc.         September 1994     Middletown, CT        Woonsocket, RI
Safetech Health Care                    June 1995          Valencia, CA          Loma Linda, CA
Bio-Med of Oregon, Inc.                 January 1996       Portland, OR          Morton, WA
WMI Medical Services of New England,    January 1996       Hudson, NH            Woonsocket, RI
 Inc.
Doctors Environmental Control, Inc.     May 1996           Santa Ana, CA         Loma Linda, CA
Sharps Incinerator of Fort, Inc.        May 1996           Fort Atkinson, WI     Yorkville, WI

TREATMENT TECHNOLOGY
 
    The   three  most  common  off-site  commercial  technologies  for  treating
regulated  medical  waste  are  incineration,  autoclaving  and  the   Company's
proprietary  ETD treatment process. Alternative  technologies and methods, which
have  not  gained  wide  commercial  acceptance,  include  chemical   treatment,
microwaving  and certain specialized or experimental technologies, including the
development and marketing of reusable or degradable medical products designed to
reduce the generation of regulated medical waste. The Company believes that  the
ETD treatment process has certain advantages over incineration and autoclaving.
 
    PRINCIPAL TREATMENT TECHNOLOGIES
 
    - INCINERATION.   Incineration  accounts for approximately  70% of permitted
      off-site capacity  to treat  regulated medical  waste. Incineration  burns
      regulated  medical waste at  elevated temperatures and  reduces it to ash.
      Like ETD, incineration significantly reduces  the volume of waste, and  it
      is  the recommended  treatment and  disposal option  for certain  types of
      regulated  medical  waste  such  as  anatomical  waste  or  residues  from
      chemotherapy  procedures. Incineration has come under increasing criticism
      from the public and from state  and local regulators, however, because  of
      the  airborne emissions that it generates. Emissions from incinerators can
      contain pollutants  such as  dioxins,  furans, carbon  monoxide,  mercury,
      cadmium, lead and other toxins which are subject to federal, state and, in
      some  cases, local regulation. The  fly-ash by-product of incineration may
      also constitute a hazardous substance. As a result, there is a significant
      cost to  construct new  incineration facilities,  or to  improve  existing
      facilities,   to  insure  that  their  operation  is  in  compliance  with
      regulatory standards.
 
    - AUTOCLAVING.   Autoclaving accounts  for  approximately 22%  of  permitted
      off-site  capacity to  treat regulated  medical waste.  Autoclaving treats
      regulated medical waste  with steam  at high temperature  and pressure  to
      kill  pathogens.  The technology  is most  effective  if all  surfaces are
      uniformly exposed to the steam, but uniform exposure may not always occur,
      potentially leaving  some pathogens  untreated. In  addition,  autoclaving
      alone  does not change the appearance of waste, and recognizable regulated
      medical waste may not be accepted by landfill operators. To compensate for
      this disadvantage,  autoclaving  may  be  combined  with  a  shredding  or
      grinding  process to render the  regulated medical waste non-recognizable.
      The high temperatures  generated in the  autoclaving process  occasionally
      change   the  physical  properties  of   plastic  waste,  prohibiting  its
      recycling.
 
    - ETD TREATMENT  PROCESS.   The  Company's  patented ETD  treatment  process
      accounts  for  approximately 7%  of permitted  off-site capacity  to treat
      regulated medical  waste.  ETD  also includes  a  proprietary  system  for
      grinding  regulated medical waste. ETD uses an oscillating energy field of
      low-frequency radio waves to heat regulated medical waste to  temperatures
      that  destroy pathogens  such as  viruses, vegetative  bacteria, fungi and
      yeast without  melting the  plastic  content of  the  waste. ETD  is  most
      effective on materials with low
 
                                       29

      electrical  conductivity that contain polar molecules, including all human
      pathogens.  Polar  molecules  are   molecules  that  have  an   asymmetric
      electronic structure and tend to align themselves with an imposed electric
      field.  When  the  polarity  of the  applied  field  changes  rapidly, the
      molecules try  to keep  pace with  the alternating  field direction,  thus
      vibrating  and  in the  process dissipating  energy  as heat.  The Company
      believes that the electric  field created by  ETD produces high  molecular
      agitation and thus rapidly creates high temperatures. All of the molecules
      exposed to the field are agitated simultaneously, and accordingly, heat is
      produced  evenly throughout  the waste instead  of being  imposed from the
      surface as  in conventional  heating. This  phenomenon, called  volumetric
      heating,  transfers  energy directly  to the  waste, resulting  in uniform
      heating throughout the entire waste material and eliminating the  inherent
      inefficiency  of transferring  heat first from  an external  source to the
      surface of the  waste and then  from the  surface to the  interior of  the
      waste  material. ETD  employs low-frequency  radio waves  because they can
      penetrate deeper than high-frequency waves, such as microwaves, which  can
      penetrate  regulated medical waste of a typical density only to a depth of
      approximately five inches.  ETD uses specific  frequencies that match  the
      physical properties of regulated medical waste generally, enabling the ETD
      treatment  process to kill pathogens  while maintaining the temperature of
      the non-pathogenic waste at temperatures as low as 90 DEG. C. Although ETD
      is effective  in destroying  pathogens present  in anatomical  waste,  the
      Company does not currently treat anatomical waste through the ETD process.
 
    ADVANTAGES  OF ETD.  The Company believes that its proprietary ETD treatment
process provides  certain advantages  over incineration  and certain  advantages
over autoclaving.
 
    - PERMITTING.   It  is difficult  and time-consuming  to obtain  the permits
      necessary to construct and operate  any regulated medical waste  treatment
      facility,  regardless of  the treatment technology  to be  employed at the
      proposed facility. Local residents,  citizen groups and elected  officials
      frequently  object to the construction and operation of proposed regulated
      medical waste treatment facilities solely because regulated medical  waste
      will be transported to and stored and handled at the facility. The Company
      believes,  however, that the fact that  the ETD treatment process does not
      generate liquid  effluents  or  regulated air  emissions  may  enable  the
      Company  to  locate treatment  facilities  near dense  population centers,
      where  greater  numbers  of  potential  customers  are  found,  with  less
      difficulty  than would be encountered by a competitor attempting to locate
      an incinerator in the same area.
 
    - COST.  The  Company believes that  it is less  expensive to construct  and
      operate  an ETD treatment facility than  to construct and operate either a
      like-capacity incinerator  or  a like-capacity  autoclave  with  shredding
      capability,  which may enable the Company  to price its treatment services
      competitively. The Company believes that the comparative advantage that it
      possesses in  its  ability  to  locate  treatment  facilities  near  dense
      population   centers  may   also  provide   transportation  and  operating
      efficiencies.
 
    - VOLUME REDUCTION AND UNRECOGNIZABILITY.   The Company's regulated  medical
      waste  management program reduces the  overall volume of regulated medical
      waste in several ways. The Company's patented reusable container, called a
      STERI-TUB, replaces the  use of  corrugated containers for  many Core  and
      Alternate  Care generators  of large  amounts of  regulated medical waste,
      thus reducing waste volume  by as much as  10-15%. Once medical waste  has
      undergone  the ETD  treatment process,  the original  cubic volume  of the
      waste is reduced  by approximately 85%.  This reduction in  the volume  of
      regulated  medical waste is comparable to the volume reduction obtained by
      incineration. Autoclaving alone  does not reduce  the volume of  regulated
      medical  waste or render it unrecognizable.  To reduce waste volume and to
      overcome  the  unwillingness   of  many  landfill   operators  to   accept
      recognizable treated regulated medical waste, autoclaving must be combined
      with  a shredding or grinding operation, adding to its cost. A proprietary
      grinding feature is a component of the ETD treatment process. The  Company
      believes  that the ability of its ETD treatment process both to reduce the
      volume of regulated medical  waste and to  render it unrecognizable  gives
      the  process an  advantage over autoclave  operations that  do not include
      shredding or grinding.
 
    - REUSE AND RECYCLING.   The Company believes that  its reuse and  recycling
      capabilities  provide a marketing  advantage with customers  who prefer to
      use a regulated  medical waste  management provider with  a commitment  to
      resource  conservation.  The  Company's  customers  can  participate  in a
      voluntary recycling program by source-segregating their regulated  medical
      waste. The source-segregated regulated medical
 
                                       30

      waste  is treated by the ETD  treatment process and then processed through
      the  Company's  proprietary   systems  for  the   automatic  recovery   of
      polypropylene plastics. The recovered polypropylene plastics are used by a
      third party to manufacture a line of "sharps" containers which are used by
      health  care providers  to dispose  of sharp  objects such  as needles and
      blades. In addition, in two of the Company's geographic service areas, the
      Company's treated  regulated  medical  waste is  transported  to  resource
      recovery   facilities  owned  by  third  parties   where  it  is  used  as
      refuse-derived fuel in  "waste-to-energy" plants  to produce  electricity.
      The  Company is working to develop a  process in conjunction with a cement
      manufacturer to utilize treated regulated  medical waste as a fossil  fuel
      substitute  in cement kilns. As a result of grinding, reuse and recycling,
      only approximately  7%  of the  original  cubic volume  of  the  regulated
      medical  waste  treated by  the  Company during  1995  was disposed  of in
      landfills.
 
MARKETING AND SALES
 
    MARKETING  STRATEGY.    The  Company's  marketing  strategy  is  to  provide
customers  with  a complete  cost management  and  compliance program  for their
regulated medical waste. In addition to its regulated medical waste  collection,
transportation,  treatment  and disposal  services,  the Company  also  offers a
variety of  training  and education  programs  and consulting  services  to  its
customers.  The Company's senior management and  many of its other employees are
experienced health  care professions  able  to convey  the importance  of  these
issues in the healthcare marketplace.
 
    The Company's marketing strategy recognizes that its potential customers are
generally  health care providers, who approach  the problem of regulated medical
waste management from a different  perspective than typical generators of  solid
or  municipal waste. Health care personnel have become increasingly sensitive to
the risk of contracting diseases such  as AIDS and hepatitis through  accidental
contact  with  infected patient  blood. In  addition, patients  are increasingly
demanding that practitioners demonstrate continual vigilance against such risks.
Regulations which were recently adopted by  OSHA require annual training of  all
personnel  who potentially can  come into contact  with bloodborne pathogens and
other  potentially  infectious   materials.  These   regulations  also   require
documentation  of handling procedures and detailed  clean-up plans. As a result,
there has been  heightened awareness  by health care  providers of  the need  to
implement safeguards against such risks.
 
    The  Company has developed programs to  help train employees of customers on
the proper methods  of handling,  segregating and  containing regulated  medical
waste  in order to reduce their potential  exposure. The Company can also advise
health care providers on the proper  methods of recording and documenting  their
regulated  medical waste management  in order to comply  with federal, state and
local regulations.  In  addition,  the  Company  offers  consulting  and  review
services  to  such providers  regarding  their internal  collection  and control
systems and assists  them in  developing systems  to provide  for the  efficient
management of their regulated medical waste from the point of generation through
treatment  and  disposal. The  Company also  offers  consulting services  to its
health care customers to assist them in reducing the amount of regulated medical
waste at the point of generation.
 
    The Company's  marketing and  sales  efforts are  an  integral part  of  its
strategy  of pursuing opportunities for targeted growth. The Company attempts to
focus its marketing and sales efforts on potential customers that will yield the
greatest transportation and operating advantages.
 
    CORE GENERATORS.    The  Company's  marketing  and  sales  efforts  to  Core
generators  are conducted  by account executives  whose responsibilities include
identifying and  attracting new  customers and  serving existing  customers.  In
addition,  the Company  employs customer  service representatives  to assist its
account executives. The Company's marketing  and sales personnel are trained  to
understand the issues confronting Core generators of regulated medical waste. In
addition  to  securing customer  contracts,  the Company's  marketing  and sales
personnel provide consulting  services to  its health care  customers to  assist
them  in  reducing the  amount of  regulated medical  waste that  they generate,
training their employees on  safety issues and  implementing programs to  audit,
classify and segregate regulated medical waste in a proper manner.
 
    The  Company has secured several large  and prestigious hospitals and health
care  institutions  as  customers,  including  Sharp  HealthCare  and   Stanford
University  Medical  Center in  California; the  Kaiser Permanente  Medical Care
Program in California, Washington and Oregon; Northwestern Memorial Hospital  in
Illinois; and VHA
 
                                       31

Healthfront  in New  England. The  Company believes  that its  relationship with
these and other similarly  well-known institutions will  enhance its ability  to
market  its services  to other  Core generators  and surrounding  Alternate Care
generators.
 
    The Company's marketing and  sales efforts directed  to Core generators  are
supplemented  by  several strategic  marketing alliances.  In October  1993, the
Company entered into  an alliance agreement  with Baxter Healthcare  Corporation
("Baxter").  A  key component  of this  agreement is  the expansion  of Baxter's
Procedure-Based Delivery  System ("PBDS")  to  include regulated  medical  waste
disposal  by the Company. Under PBDS, Baxter hospital supplies are custom-packed
in containers provided by  the Company based on  the requirements of a  specific
hospital  and, in many  cases, the requirements of  a specific medical provider.
Baxter's agreement to include regulated medical  waste disposal as part of  PBDS
was  intended to assist its  customers in consolidating the  specific costs of a
patient procedure.  In  connection  with the  alliance  agreement,  Baxter  paid
$8,000,000  to purchase  shares of the  Company's preferred stock,  of which the
Company was required to spend $1,000,000 for research and development related to
enhancements of  the  Company's technology  to  increase recycling  of  Baxter's
products.  In  addition to  the Baxter  alliance, the  Company has  entered into
strategic marketing  alliances with  several hospital  associations pursuant  to
which the Company may receive endorsements or marketing assistance.
 
    ALTERNATE  CARE GENERATORS.   The Company's marketing  and sales efforts for
Alternate Care generators are  conducted by telemarketing representatives  whose
principal  responsibility  is utilizing  the  Company's proprietary  database to
identify and qualify potential customers and set appointments for the  Company's
trained  field sales representatives. These  field sales representatives provide
follow-up customer service and ancillary product sales. The Company has  refined
its  telemarketing system and believes it to  be a cost-effective means to reach
the numerous Alternate Care generators of small quantities of regulated  medical
waste.  The  Company's  sales  efforts  are  supplemented  by  several strategic
marketing agreements with, for example, the Massachusetts Dental Society and the
Sisters of Providence Health  System in Washington and  Oregon, under which  the
Company may receive endorsements or marketing assistance.
 
    SERVICE  AGREEMENTS.   The Company negotiates  individual service agreements
with each Core and Alternate Care generator customer. Although the Company has a
standard form of  agreement, terms  vary depending upon  the customer's  service
requirements and volume of regulated medical waste generated. Service agreements
typically  include  provisions relating  to  types of  containers,  frequency of
collection, pricing,  treatment and  documentation for  tracking purposes.  Each
agreement also specifies the customer's obligation to pack its regulated medical
waste  in approved containers. Service agreements  are generally for a period of
one to five years and include renewal options, although customers may  terminate
on  written notice and typically upon payment of a penalty. Many payment options
are available including flat monthly or  quarterly charges. The Company may  set
its prices on the basis of the number of containers that it collects, the weight
of  the  regulated medical  waste that  it  collects and  treats, the  number of
collection stops that it makes on the customer's route, the number of collection
stops that it makes for a particular multi-site customer, and other factors.
 
    The Company has a diverse customer base, with no single customer  accounting
for more than three percent of the Company's 1995 revenues. The Company does not
believe  that the  loss of  any single  customer would  have a  material adverse
effect on its business, financial condition or results of operations.
 
LOGISTICS
 
    An important element of the Company's  business strategy is to maximize  the
efficiency  with which  it collects and  transports a large  volume of regulated
medical waste  and directs  the  deployment of  many collection  vehicles.  This
aspect of the Company's operations -- referred to as logistics -- represents the
Company's  single  largest operating  cost.  Accordingly, the  Company considers
logistics to  be a  critical  component of  its  operating plan.  The  Company's
integrated approach to regulated medical waste management is designed to provide
it  with  numerous  logistic advantages  in  the process  of  managing regulated
medical waste.
 
    PRE-COLLECTION.  Before regulated medical waste is collected, the  Company's
integrated waste management approach can "build in" efficiencies that will yield
logistic  advantages. For example, the  Company's consulting services can assist
its customers in minimizing their regulated medical waste volume at the point of
generation. In
 
                                       32

addition, the Company  provides customers with  the documentation necessary  for
regulatory  compliance which, if properly completed, will minimize interruptions
in the regulated medical  waste treatment cycle  for verification of  regulatory
compliance.
 
    CONTAINERS.   A key element of  the Company's pre-collection measures is the
use of specially-designed containers by most of the Company's Core and Alternate
Care generators of  large volumes of  regulated medical waste.  The Company  has
developed and patented a reusable leak- and puncture-resistant container, called
a STERI-TUB, made from recycled plastic. The STERI-TUB enables regulated medical
waste  generators to reduce costs by reducing the number of times that regulated
medical waste is handled, eliminating the cost (and weight) of corrugated  boxes
and  potentially reducing  workers' compensation liability  resulting from human
contact with  regulated  medical  waste. The  Company  recently  introduced  two
smaller sizes of STERI-TUBS that are popular in certain areas of hospitals, such
as the laboratory, and with many Alternate Care generators. The Company has also
developed  a step-on lid opener and a sliding  lid that fit the various sizes of
STERI-TUB and make STERI-TUBS even safer and more convenient to use.  STERI-TUBS
are  designed to maximize the loads that  will fit within the cargo compartments
of standard trucks and  trailers. The Company believes  these features to be  an
improvement over its competitors' reusable "point-of-generation" containers. The
Company's customers are responsible for packing their regulated medical waste in
a  STERI-TUB or approved corrugated container  and placing the loaded containers
at a designated  collection area on  their premises. If  a customer generates  a
large  volume  of  waste,  the  Company will  place  a  large  temporary storage
container or trailer on the customer's premises. In order to maximize regulatory
compliance and minimize potential liability, the Company will not accept medical
waste unless  it  is  properly  packaged by  customers  in  Company-supplied  or
Company-approved containers.
 
    COLLECTION  AND TRANSPORTATION.  Efficiency of collection and transportation
is a critical element of the Company's logistics. The Company seeks to  maximize
route  density and the number of stops on each route. The Company also employs a
tracking system  for  its collection  vehicles  which is  designed  to  maximize
logistic  efficiency.  The  Company  deploys  dedicated  collection  vehicles of
different capacities depending upon the amount of regulated medical waste to  be
collected  at a particular stop  or on a particular  route. The Company collects
containers of regulated medical waste from its customers at intervals  depending
upon  customer requirements,  terms of the  service agreement and  the volume of
regulated medical waste produced. All containers are inspected at the customer's
site prior to  pickup. The  waste is  then transported  directly to  one of  the
Company's  treatment facilities  or to  one of  the Company's  transfer stations
where it is aggregated with other  regulated medical waste and then  transported
to  a treatment facility. In certain circumstances, the Company transports waste
to other specially-licensed  regulated medical waste  treatment facilities.  The
Company   transports  small   quantities  of   hazardous  substances,   such  as
photographic fixer, lead foils and amalgam,  from certain of its customers to  a
metals recycling operation.
 
    TRANSFER  STATIONS.    The use  of  transfer stations  is  another important
component of the Company's logistics. The Company utilizes transfer stations  in
a  "hub  and  spoke"  configuration  which  allows  the  Company  to  expand its
geographic service area and increase the volume of regulated medical waste  that
can  be treated at a particular facility.  Smaller loads of waste containers are
stored at  the  transfer stations  until  they  can be  consolidated  into  full
truckloads and transported to a treatment facility.
 
    INSPECTION,  TREATMENT AND DISPOSAL.  Upon  arrival at a treatment facility,
each container of regulated medical waste is scanned to verify that it does  not
contain  any unacceptable materials such  as hazardous substances or radioactive
material. Any container which is  discovered to contain hazardous substances  or
radioactive  material is returned  to the customer. In  some cases the Company's
operating permits require that unacceptable waste be reported to the appropriate
regulatory authorities. After inspection, the regulated medical waste is  loaded
into the processing system and ground, compacted and treated using the Company's
ETD  treatment process.  Upon completion  of this  process, the  treated medical
waste  is  transported  for  resource  recovery,  recycling  or  disposal  in  a
nonhazardous  waste landfill. After  the STERI-TUBS have  been emptied, they are
washed, sanitized and returned to customers for re-use.
 
    DOCUMENTATION.  The Company provides complete documentation to its customers
for all regulated  medical waste  that it collects,  including the  name of  the
generator,   date   of   pick-up   and  date   of   delivery   to   a  treatment
 
                                       33

facility. The Company's documentation system meets all applicable federal, state
and local regulations regarding the packaging and labeling of regulated  medical
waste,  including, but  not limited to,  all relevant regulations  issued by the
U.S. Department of Transportation, OSHA and state and local authorities.
 
FACILITIES
 
    The Company's  corporate offices  occupy  7,300 square  feet under  a  lease
expiring in April 1999. The Company owns or leases the following facilities:

   PRINCIPAL FUNCTION           LOCATION              OWNED OR LEASED               SIZE
- ------------------------  ---------------------  --------------------------  -------------------
                                                                    
Treatment facility        Loma Linda, CA         Leased; lease expires in    11,500 square feet
                                                  December 2001
Treatment facility        Morton, WA             Owned                       15,000 square feet
Treatment facility        Woonsocket, RI         Leased; lease expires in    24,000 square feet
                                                  June 2017; option to
                                                  purchase for $2,000
Treatment facility        Yorkville, WI          Owned                       18,000 square feet
Recycling and research    West Memphis, AR       Owned                       10,000 square feet
 development facility
Transfer station          San Leandro, CA        Leased; lease expires in    22,500 square feet
                                                  December 2002
Transfer station          Valencia, CA           Leased; month-to-month      5,900 square feet

    The  Company also utilizes  three transfer stations, in  New York, New York,
Haverhill, Massachusetts and Vancouver, British Columbia, at facilities owned by
third parties licensed  to operate transfer  stations. In addition,  all of  the
Company's  treatment  facilities are  authorized  to transfer  regulated medical
waste. The Company also leases sales  and customer service centers in  Kirkland,
Washington,  Salem, New  Hampshire and Middletown,  Connecticut, and  a depot in
Valparaiso, Indiana.
 
    The Company's lease of  its treatment facility  at Woonsocket, Rhode  Island
expires  in June 2017 upon the maturity of  the last to mature of the industrial
development revenue  bonds which  were  issued to  finance the  acquisition  and
equipping  of the facility. The Company's leasehold interest in the facility and
the Company's machinery and equipment at the facility are pledged as  collateral
to  secure the Company's obligations in connection with these bonds. The Company
has an option to purchase the facility  for $2,000 upon the repayment of all  of
the  bonds. The  Company's machinery and  equipment at  its Yorkville, Wisconsin
treatment facility are leased under an equipment lease expiring in February 1999
and are pledged  as collateral  to secure  the Company's  obligations under  the
lease.  Substantially  all  of  the  Company's  property  and  equipment provide
collateral for the  Company's obligations  under its  revolving credit  facility
with  Silicon Valley Bank. The Company believes that its existing facilities are
generally adequate for its current needs.
 
COMPETITION
 
    The  regulated  medical  waste  services  industry  is  highly  competitive,
fragmented,  and  requires  substantial  labor  and  capital  resources. Intense
competition exists  within the  industry not  only for  customers but  also  for
businesses   to  acquire.  The  Company's   largest  competitor  is  BFI.  Other
significant competitors include WMX  Technologies, Inc., Laidlaw Waste  Systems,
Inc. and USA Waste Services, Inc. A large number of regional and local companies
also  compete in the industry. The Company faces competition from these national
waste management companies and  from many regional and  local businesses in  its
present  locations and will be confronted with such competition in the future in
each location  where  it intends  to  expand.  In addition,  the  Company  faces
competition  from  businesses and  other  organizations that  are  attempting to
commercialize alternate treatment technologies or products designed to reduce or
eliminate the  generation  of  regulated  medical waste,  such  as  reusable  or
degradable medical products.
 
                                       34

    The  Company competes for service agreements  primarily on the basis of cost
effectiveness, quality of service,  geographic location and  generator-perceived
liability  risks. The Company's ability to  obtain new service agreements may be
limited by  the fact  that a  potential customer's  current vendor  may have  an
excellent  service history or  may reduce its prices  to the potential customer.
See "Risk Factors -- Intense Competition Within Industry."
 
GOVERNMENTAL REGULATION
 
    The Company operates within the regulated medical waste management industry,
which is subject to extensive and  frequently changing federal, state and  local
laws and regulations. This statutory and regulatory framework imposes compliance
burdens  and risks on the Company, including requirements to obtain and maintain
government permits. These permits grant  the Company the authority, among  other
things, to construct and operate treatment and transfer facilities, to transport
regulated medical waste within and between relevant jurisdictions, and to handle
particular  regulated  substances. The  Company's  permits must  be periodically
renewed and are subject to modification or revocation by the issuing  regulatory
authority.  In addition to the requirement  that it obtain and maintain permits,
the  Company  is  subject  to  extensive  federal,  state  and  local  laws  and
regulations  that,  among  other  things,  govern  the  definition,  generation,
segregation,  handling,  packaging,   transportation,  treatment,  storage   and
disposal  of regulated medical  waste. The Company is  also subject to extensive
regulation designed to minimize employee exposure to regulated medical waste. In
addition, the Company is subject to certain foreign laws, rules and regulations.
See "Risk Factors -- Impact of Government Regulation."
 
    FEDERAL REGULATION
 
    There are at least  four federal agencies that  have authority over  medical
waste.  These agencies are  the EPA, OSHA,  Department of Transportation ("DOT")
and Postal Service.  These agencies regulate  medical waste under  a variety  of
statutory and regulatory authorities.
 
    MEDICAL  WASTE TRACKING ACT OF 1988.  In  the late 1980s, the EPA outlined a
two-year demonstration program  pursuant to  the Medical Waste  Tracking Act  of
1988  ("MWTA"), which was added  as Subtitle J to  the Resource Conservation and
Recovery Act of 1976 ("RCRA").  The MWTA was adopted  in response to health  and
environmental  concerns over infectious medical waste after medical waste washed
ashore on beaches, particularly in New York and New Jersey during the summer  of
1988.  Public  safety  concerns  were amplified  by  media  reports  of careless
management of medical  waste. The  MWTA was  intended to  be the  first step  in
addressing  these problems. The primary objective of the MWTA was to ensure that
regulated medical wastes which were generated in a covered state and which posed
environmental (including  aesthetic)  problems  were delivered  to  disposal  or
treatment  facilities with a minimum of exposure to waste management workers and
the public. The MWTA's tracking  requirements included accounting for all  waste
transported and imposed civil and criminal sanctions for violations.
 
    In  its regulations implementing the MWTA, the EPA defined regulated medical
waste and  established guidelines  for its  segregation, handling,  containment,
labeling  and transport. Under the MWTA, the EPA was to deliver three reports to
Congress on  different aspects  of regulated  medical waste  management and  the
success  of the demonstration program for  tracking regulated medical waste. Two
of these reports were completed; the third  report has not yet been issued.  The
third report is expected to cover the use of alternative medical waste treatment
technologies,  including the Company's ETD technology. There can be no assurance
that if and when  the third report  is issued, it will  not contain findings  or
make  recommendations that are adverse to  the Company's medical waste treatment
technology. Any such adverse findings  or recommendations could have a  material
adverse  effect on  the Company's business,  financial condition  and results of
operations.
 
    The MWTA demonstration program expired in  1991, but the MWTA established  a
model  followed  by  many  states in  developing  their  specific  medical waste
regulatory frameworks.
 
    RESOURCE CONSERVATION AND RECOVERY  ACT OF 1976.   In 1976, Congress  passed
RCRA  as a response to growing public concern about problems associated with the
handling and disposal  of solid and  hazardous waste. RCRA  required the EPA  to
promulgate regulations identifying hazardous wastes. RCRA also created standards
for the generation, transportation, treatment, storage and disposal of solid and
hazardous  wastes,  including  a  manifest  program  for  the  transportation of
hazardous wastes and  a permit  system for  solid and  hazardous waste  disposal
facilities.  Regulated  medical  wastes are  currently  considered non-hazardous
solid wastes under RCRA. However,
 
                                       35

certain substances  collected  by  the  Company  from  some  of  its  customers,
including  photographic fixer developer  solutions, lead foils  and amalgam, are
considered hazardous  wastes,  for  which the  Company  provides  transportation
services for metals recycling.
 
    DEPARTMENT   OF  TRANSPORTATION  REGULATIONS.     The  DOT  has  implemented
regulations under the  Hazardous Materials Transportation  Authorization Act  of
1994  governing  the transportation  of  hazardous materials,  regulated medical
waste and  infectious  substances.  Under  these  regulations,  the  Company  is
required  to package regulated  medical waste in  compliance with the bloodborne
pathogens standards  issued by  OSHA. Under  these standards,  the Company  must
identify  its packaging with  a "biohazard" marking on  the outer packaging, and
its  regulated  medical  waste  container  must  be  rigid,  puncture-resistant,
leak-resistant, properly sealed and impervious to moisture.
 
    The  transportation  of  infectious  substances  is  subject  to  additional
packaging standards. However, the Company is presently party to an exemption  to
these  standards  which authorizes  the transportation  of certain  cultures and
stocks of infectious substances if they are described and properly packaged. The
exemption issued by DOT is scheduled to expire on December 31, 1997. The Company
believes that  it would  be able  to fully  comply with  the stricter  packaging
standards  applicable to the infectious substances it transports if and when the
exemption expires. DOT regulations also require that a transporter of  hazardous
substances  be capable of responding on a  24 hour-per-day basis in the event of
an accident, spill or  release to the environment  of a hazardous material.  The
Company  has  entered  into an  agreement  with CHEMTREC,  an  organization that
provides 24-hour emergency spill  coverage in the United  States and Canada,  to
provide spill cleanup services in all of the Company's service areas.
 
    The  Company's drivers  are specifically trained  on topics  such as safety,
hazardous materials, specifically-regulated  medical waste, hazardous  chemicals
and  infectious  substances.  Employees  are  trained  to  deal  with  emergency
situations including spills, accidents and  releases in to the environment,  and
the  Company  has a  written contingency  plan for  these events.  The Company's
vehicles are outfitted with spill control equipment and the drivers are  trained
in their use.
 
    COMPREHENSIVE  ENVIRONMENTAL  RESPONSE,  COMPENSATION AND  LIABILITY  ACT OF
1980.  The Comprehensive Environmental Response, Compensation and Liability  Act
of 1980, as amended ("CERCLA"), established a regulatory and remedial program to
provide  for the investigation  and clean-up of facilities  from which there has
been  an  actual  or  threatened  release  of  hazardous  substances  into   the
environment.  CERCLA and  similar state laws,  impose strict,  joint and several
liability on the  current and  former owners  and operators  of facilities  from
which  releases of hazardous substances have  occurred and on the generators and
transporters of  the  hazardous substances  that  come  to be  located  at  such
facilities.  Responsible  parties  may  be  liable  for  substantial  waste site
investigation and clean-up  costs and  natural resource  damages, regardless  of
whether   they  exercised  due  care  and  complied  with  applicable  laws  and
regulations. If  the  Company  were  found  to be  a  responsible  party  for  a
particular  site, it  could be  required to  pay the  entire cost  of waste site
investigation and clean-up, even  though other parties also  may be liable.  The
Company's  ability to obtain contribution from  other responsible parties may be
limited by  the Company's  inability  to identify  those  parties and  by  their
financial inability to contribute to investigation and clean-up costs.
 
    The  Company utilizes  landfills for  disposal of  treated regulated medical
waste from three  of its  facilities. Following  treatment by  the Company,  the
waste  is considered non-hazardous solid waste. Non-hazardous solid waste is not
regulated as  hazardous  unless  it  has  been  contaminated  with  a  hazardous
substance.  The  Company  employs  quality control  measures  to  check incoming
regulated medical  waste  for  hazardous  substances.  Customer  contracts  also
require  the exclusion of hazardous substances or radioactive materials from the
regulated medical  waste.  Separate  customer  contracts  govern  the  Company's
transportation  for recycling of limited  quantities of its customers' hazardous
substances.
 
    OCCUPATIONAL SAFETY AND  HEALTH ACT OF  1970.  The  Occupational Safety  and
Health  Act  of 1970,  as amended,  authorizes  OSHA to  promulgate occupational
safety and health standards. Various standards  apply to certain aspects of  the
Company's  operations.  These  standards  include  rules  governing  exposure to
bloodborne pathogens and  other potentially infectious  materials, lock  out/tag
out  procedures,  medical  surveillance  requirements,  use  of  respirators and
personal protective equipment, emergency planning, hazard communication,  noise,
ergonomics,  and forklift safety, among others. OSHA regulations are designed to
minimize the exposure of employees  to hazardous work environments. The  Company
is  subject  to  unannounced  safety  inspections  at  any  time.  Employees are
 
                                       36

required by Company policy  to receive new  employee training, annual  refresher
training  and training in their specific tasks. As part of the Company's medical
surveillance program, employees receive pre-employment physicals, including drug
testing, annually-required medical surveillance and exit physicals. The  Company
also subscribes to a drug-free workplace policy.
 
    UNITED  STATES POSTAL SERVICE.  The Company  was required to obtain a permit
from the U. S.  Postal Service to conduct  its "mail-back" program, pursuant  to
which  customers  mail appropriately  packaged  sharps containers  which contain
regulated medical waste directly to the Company's treatment facilities.
 
    STATE AND LOCAL REGULATION
 
    The Company currently conducts some type of business activity in 17  states.
These   activities   include   the   collection,   transportation,   processing,
transferring or  recycling  of regulated  medical  waste and,  in  somes  cases,
hazardous  substances.  Each  state  has  its  own  regulations  related  to the
handling, treatment and storage of  regulated medical waste. Although there  are
many  differences among the various state  laws and regulation, many states have
followed the regulated medical waste model  under the MWTA and are  implementing
programs under RCRA. Regulations cover the Company's transportation of regulated
medical  waste both intrastate and  interstate. In each of  the states where the
Company operates a  treatment facility or  transfer station, it  is required  to
comply  with  numerous state  and  local laws  and  regulations as  well  as its
site-specific operating plan.  Agencies writing regulations  at the state  level
typically  include  departments  of health  and  state  environmental protection
agencies. In  addition,  many municipalities  have  ordinances, local  laws  and
regulations  affecting the  Company's operations,  including but  not limited to
zoning and health measures.
 
    In recent  years, a  number of  communities have  instituted "flow  control"
requirements,  which typically require that  waste collected within a particular
area be deposited at a designated facility. In May 1994, the U.S. Supreme  Court
ruled that a flow control ordinance was inconsistent with the Commerce Clause of
the  Constitution of the  United States. A  number of lower  federal courts have
struck down similar measures. Although the U. S. Senate passed a bill  proposing
the  Interstate Transportation of Municipal Solid Waste Act of 1995, which would
have partially  granted flow  control  authority to  states under  the  Commerce
Clause,  the U. S. House  of Representatives rejected the  bill in January 1996.
The Company believes  that the  U.S. Congress  will continue  to consider  other
bills  that could at least partially overturn these court decisions and immunize
particular governmental actions from Commerce Clause scrutiny.
 
    Similarly, the U.  S. Supreme  Court has  consistently held  that state  and
local  measures that seek to restrict  the importation of extraterritorial waste
or  tax  imported  waste  at  a  higher  rate  are  unconstitutional.  To  date,
congressional  efforts to enable states,  under certain circumstances, to impose
differential taxes on out-of-state waste or restrict waste importation have been
unsuccessful. At  present,  a  bill  that would  partially  grant  flow  control
authority  to  states and  authorize  certain restrictions  on  interstate waste
disposal  is  being   considered  by   a  committee   of  the   U.S.  House   of
Representatives.
 
    In  the absence of federal legislation, certain local laws that direct waste
flows to designated  facilities may be  unenforceable, and discriminatory  taxes
and  waste importation  restrictions should continue  to be  subject to judicial
invalidation. If  the U.  S. Congress  adopts legislation  allowing for  certain
types of flow control or restricting the importation of waste, or if legislation
affecting  interstate transportation of waste is adopted at the federal or state
level, such  legislation  could adversely  affect  the Company's  medical  waste
collection,  transport, treatment and disposal operations and hence would have a
material adverse  effect  on the  Company's  business, financial  condition  and
results of operations.
 
    In 1993, the Company challenged an ordinance enacted by the City of Delavan,
Wisconsin,  which sought to  prohibit transporting regulated  medical waste into
Delavan. The Company succeeded at trial in having the Delavan ordinance declared
unconstitutional. Despite this favorable outcome, however, the Company abandoned
its plans to construct and operate a regulated medical waste treatment  facility
in  Delavan. The Company incurred significant  expense in its abandoned efforts,
and there can  be no  assurance that other  municipalities will  not attempt  to
block  or discourage the Company from  locating a treatment or transfer facility
within their limits by passing similar  ordinances, even though the Company  may
ultimately prevail in challenging the constitutionality of such ordinances.
 
                                       37

    States  predominantly regulate medical  waste as a  solid or "special" waste
and not as  a hazardous  waste under RCRA.  State definitions  of medical  waste
include,  but are not limited to,  microbiological waste (cultures and stocks of
infectious agents); pathology waste (human body parts from surgical and  autopsy
waste); blood and blood products; and sharps.
 
    Most  states  require segregation  of different  types of  regulated medical
waste at  the  point  of generation.  A  majority  of states  require  that  the
universal  biohazard symbol or related label appear on medical waste containers.
Storage regulations  may apply  to the  generator, the  treatment facility,  the
transport  vehicle,  or  all  three. Storage  rules  center  on  identifying and
securing the storage area for public safety as well as setting standards for the
manner and length  of storage. Many  states mandate employee  training for  safe
environmental  clean-up through emergency spill  and decontamination plans. Many
states mandate that transporters carry spill equipment in their vehicles.  Those
states  whose  regulatory  framework  relies on  the  MWTA  model  have tracking
document systems in place.
 
    In the State  of Washington,  the Company is  subject to  regulation by  the
Utilities  and Transportation Commission, which regulates all businesses engaged
in transportation  in the  state.  As a  regulated  business, the  Company  must
receive approval from the Utilities and Transportation Commission for the prices
it  charges  for its  services in  Washington.  See "Risk  Factors --  Impact of
Government Regulation."
 
    The Company maintains numerous permits and licenses to conduct its  business
from  various state and local authorities. The Company's permits vary from state
to state  based upon  the Company's  activities  within that  state and  on  the
applicable state and local laws and regulations. These permits include transport
permits  for  solid waste,  regulated  medical waste  and  hazardous substances,
permits to construct and operate treatment facilities, permits to construct  and
operate  transfer stations,  permits governing  discharge of  sanitary water and
registration of equipment under air  regulations, specific approval for the  use
of  ETD  to treat  regulated medical  waste, a  bulk pool  irradiator operator's
license for the  Company's currently  inactive irradiator at  its West  Memphis,
Arkansas facility and various business operator's licenses. The Company believes
that  it is in substantial  compliance with all applicable  state and local laws
and regulations.
 
    The Company's treatment  technology is  an alternative  to the  conventional
treatment technologies of incineration and autoclaving and has not been approved
in all states for the treatment of regulated medical waste. The Company has been
permitted  to  operate its  treatment technology  in  13 states  with additional
applications pending. There  can be  no assurance, however,  that the  Company's
treatment  technology will  be approved for  the treatment  of regulated medical
waste in each state or other jurisdiction where the Company may seek  regulatory
approval  in  the future  to  construct and  operate  a treatment  facility. The
Company's inability to obtain any such regulatory approval could have a material
adverse effect on  the Company's  business, financial condition  and results  of
operations.
 
    FOREIGN REGULATION
 
    The  Company presently conducts  business in only  one foreign jurisdiction,
British Columbia,  Canada, where  it  collects regulated  medical waste  in  the
Vancouver  area and transports it to  the Company's Morton, Washington treatment
facility. The  Company's activities  in  British Columbia  are governed  at  the
federal  level by the Canadian Transportation  of Dangerous Goods Act, 1992, and
at the  provincial level  by  the British  Columbia  Waste Management  Act.  The
federal  Transportation of Dangerous Goods Act,  1992, regulates the movement of
dangerous goods, including infectious substances and other "specified  dangerous
goods,"  by all modes of transportation, and imposes joint and several liability
on all persons who  are responsible for,  or who caused  or contributed to,  the
release  of any  "specified dangerous good"  into the  environment. Any business
engaged in a regulated activity is presumed  to be liable for any such  release,
unless  the business  can demonstrate that  it acted  reasonably. The provincial
Waste Management  Act  regulates the  storage,  transportation and  disposal  of
waste,  including  biomedical  waste,  and  imposes  strict,  joint  and several
liability for  all  clean-up costs  associated  with the  release  of  hazardous
substances  into the environment. The Company  has obtained all permits required
by these two acts. There can be no assurance, however, that the Company will not
be required in the future to pay for waste clean-up costs incurred under  either
act on a joint and several basis.
 
    If  the Company expands its operations  into other foreign jurisdictions, it
will be  required  to  comply  with  the  laws  and  regulations  of  each  such
jurisdiction.
 
                                       38

    PERMITTING PROCESS
 
    Each  state  in which  the Company  operates,  and each  state in  which the
Company may operate in the future, has a specific permitting process. After  the
Company  has  identified  a geographic  area  in  which it  wishes  to  locate a
treatment or transfer facility, the Company will identify one or more  locations
for  a potential new site. Typically, the Company will develop a site contingent
on obtaining  zoning approval  and  local and  state operating  authority.  Most
communities  rely on state authorities to provide operating rules and safeguards
for their community.  Usually the state  provides public notice  of the  project
and, if a sufficient threshold of public interest is shown, a public hearing may
be  held. If the  Company is successful in  meeting all regulatory requirements,
the state may  issue a permit  to construct the  treatment facility or  transfer
station.  Once the  facility is  constructed, the  state may  again issue public
notice of its intent to issue an operating permit and provide an opportunity for
public opposition  or other  action that  may impede  the Company's  ability  to
construct or operate the planned facility.
 
    The  Company  has  been  successful in  obtaining  permits  for  its current
regulated medical waste  transfer, treatment and  processing facilities and  for
its  transportation  operations.  Several  of  the  Company's  past  attempts to
construct and  operate regulated  medical waste  treatment facilities,  however,
have  met with  significant community  opposition. In  some of  these cases, the
Company has withdrawn from the permitting process. Permitting for transportation
operations frequently involves registration of vehicles, inspection of equipment
and background investigations on the Company's officers and directors.
 
REGULATORY AND LEGAL PROCEEDINGS
 
    In August 1995,  the Company entered  into a voluntary  settlement with  the
Rhode Island Department of Environmental Management ("RIDEM") pursuant to which,
without  admitting  liability,  the  Company  agreed  to  pay  $400,000  over  a
seven-year period and to perform community services and conduct seminars over  a
five-year  period.The settlement  arose from  certain notices  of violation that
RIDEM issued in  September 1994 and  April 1995 pursuant  to which RIDEM  sought
penalties  of $3,356,000, claiming  that the Company  had violated state medical
waste and  solid  waste regulations  by,  among other  things,  mishandling  and
improperly  treating  medical waste  and  endangering its  employees'  health by
failing to provide proper training  and protective clothing. RIDEM has  recently
contacted the Company's local counsel and informally suggested that it may issue
additional notices of violation. The Company believes that there is no basis for
the  issuance of  any such  additional notices  and that  the resolution  of the
matter will be  favorable to the  Company. There can  be no assurance,  however,
that  if the resolution is unfavorable to the Company, the Company's obligations
as a  result of  any  such additional  notices of  violation  would not  have  a
material  adverse  effect  on  the Company's  business,  financial  condition or
results of operations.
 
    The Company believes that the  Massachusetts Attorney General inquired  into
the Company's activities in Massachusetts but does not know whether the inquiry,
if any, is still pending. The Company believes, however, that if there is or was
any  such inquiry, it was begun following the adverse publicity that the Company
received in  connection with  the notices  of violation  from RIDEM.  See  "Risk
Factors -- Impact of Governmental Regulation."
 
    In  September 1995, the Connecticut  Department of Revenue Services notified
the Company that it was being assessed for sales and use tax of $219,000 as  the
successor  in interest to Safe  Way. The Company appealed  the assessment on the
ground that, as a purchaser of assets, it was not legally obligated to pay  Safe
Way's  debts. The Company has  been informed that its  appeal has been denied by
the Department of Revenue Services. Safe Way has indemnified the Company for any
liability as a result of Safe Way's obligations arising prior to the closing  of
the   Safe  Way  acquisition  in  September  1994.  Safe  Way's  indemnification
obligation is secured first by 129,985 shares of Common Stock issued to Safe Way
which are currently held  in escrow and  then by off-set  rights of the  Company
under the Safe Way Note.
 
    In  April 1996, Local 174,  International Brotherhood of Teamsters, AFL-CIO,
filed an unfair  labor practice  charge against  the Company  with the  National
Labor Relations Board. The charge arose from an attempt by the union to organize
the  the Company's truck drivers  in Washington and Oregon,  and claims that the
Company's elimination  of  certain drivers'  positions  shortly before  a  union
recognition  election, which  the union  lost, unlawfully  discriminated against
employees engaged in protected activity. The Company is defending its actions as
unrelated to  any  union  activity. The  Company's  production  and  maintenance
employees  at its Morton, Washington facility voted to affiliate with the union.
The Company is challenging the results of that vote.
 
                                       39

    The Company operates in a highly competitive industry and may be exposed  to
regulatory  inquiries or investigations from time to time. Investigations can be
initiated for a  variety of reasons.  The Company has  been involved in  several
legal  and  administrative  proceedings  that  have  been  settled  or otherwise
resolved on terms acceptable to the  Company, without having a material  adverse
effect  on the Company's business, financial condition or results of operations.
From time to time the Company may consider it more cost-effective to settle such
proceedings than to involve itself  in costly and time-consuming  administrative
actions  or litigation. The Company is also a party to various legal proceedings
arising in the ordinary  course of its business.  The Company believes that  the
resolution of these other matters will not have a material adverse effect on the
Company's business, financial condition or results of operations.
 
POTENTIAL LIABILITY AND INSURANCE
 
    The   regulated  medical  waste  management  industry  involves  potentially
significant risks  of statutory,  contractual, tort  and common  law  liability.
Potential  liability  could involve,  for  example, claims  for  clean-up costs,
personal injury or damage to the environment, claims of employees, customers  or
third parties for personal injury or property damages occurring in the course of
the  Company's operations, or claims  alleging negligence or professional errors
or omissions in the planning or performance  of work. The Company could also  be
subject to fines in connection with violations of regulatory requirements.
 
    The   Company  carries  liability  insurance  coverage  which  it  considers
sufficient to  meet regulatory  and  customer requirements  and to  protect  the
Company's  employees,  assets  and  operations.  The  availability  of liability
insurance within  the  regulated  medical  waste  industry  has  been  adversely
affected  by  the  constrained  market  for  environmental  liability  and other
insurance.  More  aggressive   enforcement  of   environmental  and   management
regulations,  as  well as  legal decisions  and  judgments adverse  to companies
exposed to pollution damage claims, could lead to a substantial reduction in the
availability  and  extent  of  insurance  coverage.  In  the  future,  available
insurance  may  be  at  significantly  increased  premiums  with  less extensive
coverage. If the Company  is unable to obtain  adequate insurance coverage at  a
reasonable  cost, it may  become exposed to potential  liability claims. In such
event, a successful claim of sufficient magnitude could have a material  adverse
effect on the Company's business, financial condition or results of operation.
 
    CERCLA and similar state statutes impose strict, joint and several liability
on the present and former owners and operators of facilities from which releases
of  hazardous substances have occurred and on the generators and transporters of
the hazardous substances that come to be located at such facilities. Responsible
parties may be liable  for waste site investigation,  waste site clean-up  costs
and  natural resource damages,  which costs could  be substantial, regardless of
whether they  exercised  due  care  and complied  with  all  relevant  laws  and
regulations.  There can be  no assurance that  the Company will  not face claims
under CERCLA or similar state laws resulting in substantial liability for  which
the  Company is uninsured and which could  have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
pollution liability  insurance  excludes  liabilities under  CERCLA.  See  "Risk
Factors -- Potential Liability; Insurance."
 
PATENTS AND PROPRIETARY RIGHTS
 
    The  Company  considers the  protection of  its  technology relating  to the
processing of  regulated medical  waste  to be  material  to its  business.  The
Company's  policy is to protect its technology  by a variety of means, including
applying for patents in the United States and in appropriate foreign  countries.
See "Risk Factors -- Dependence on Patents and Proprietary Information."
 
    The Company holds four United States patents and has three additional patent
applications  pending in the United States relating to the ETD treatment process
and other aspects of processing regulated  medical waste. The Company has  filed
counterpart  patent applications in  several foreign countries  and has received
patents in Mexico and Australia. The Company also holds one United States patent
for its STERI-TUB container.
 
    In November 1995,  the Company  entered into  a license  agreement with  IIT
Research Institute ("IITRI"). Under this agreement, IITRI granted to the Company
a  royalty-free  exclusive license  in North  America,  Europe, Japan  and other
industrialized countries throughout the world  to use and commercialize  certain
patent  rights and know-how held by IITRI relating to the use of radio-frequency
technology in the treatment of regulated medical waste, and the Company  granted
to  IITRI a  royalty-free exclusive  license in  the remaining  countries of the
world to
 
                                       40

use and commercialize certain corresponding  patent rights and know-how held  by
the  Company. The agreement continues until the expiration of the last-to-expire
of any of the subject patents held by either IITRI or the Company.
 
    An issued  patent grants  to the  owner  the right  to exclude  others  from
practicing  the inventions claimed in the patent. In the United States, a patent
filed before June 8, 1995 is enforceable for 17 years from the date of  issuance
or  20 years  from the  effective date of  filing, whichever  is longer. Patents
issued on applications filed on or after  June 8, 1995 expire 20 years from  the
effective  date of filing.  The last-to-expire of  the Company's existing United
States patents relating to its ETD treatment process will expire in April 2013.
 
    In addition, the Company has  additional proprietary technology relating  to
the  processing  of  regulated  medical  waste  that  the  Company  believes  is
patentable. The Company has chosen, however,  not to file for patent  protection
for this technology at this time.
 
    There  can be no assurance that any  claims which are included in pending or
future patent applications will be issued, that any issued patents will  provide
the  Company  with competitive  advantages or  will not  be challenged  by third
parties or that the existing or future patents of third parties will not have an
adverse effect on  the ability  of the  Company to  carry out  its business.  In
addition,  there can be no assurance that other companies will not independently
develop similar processes or engineer around  patents that may have been  issued
to  the Company.  Litigation or administrative  proceedings may  be necessary to
enforce the patents issued to the Company or to determine the scope and validity
of others' proprietary rights. Any litigation or administrative proceeding could
result in  substantial cost  to the  Company and  distraction of  the  Company's
management.  An adverse  ruling in  any litigation  or administrative proceeding
could have  a  material adverse  effect  on the  Company's  business,  financial
condition and results of operations.
 
    The  commercial success  of the  Company will also  depend in  part upon the
Company's not  infringing  patents  issued  to  competitors.  There  can  be  no
assurance  that patents belonging to competitors will not require the Company to
alter its processes, pay licensing fees  or cease development of its current  or
future  processes. Litigation or administrative  proceedings may be necessary to
enforce the patents issued to the Company or to determine the scope and validity
of others' proprietary rights. Any litigation or administrative proceeding could
result in  substantial cost  to the  Company and  distraction of  the  Company's
management.  An adverse  ruling in  any litigation  or administrative proceeding
could have  a  material adverse  effect  on the  Company's  business,  financial
condition and results of operations. In addition, there can be no assurance that
the  Company would be able to license  the technology rights that it may require
at a reasonable cost or  at all. Failure by the  Company to obtain a license  to
any  technology that  the Company  currently uses  to process  regulated medical
waste would have a material adverse effect on the Company's business,  financial
condition  and results of operations. In  addition, to determine the priority of
inventions or  patent  applications  the  Company may  have  to  participate  in
interference  proceedings declared by the U.S. Patent and Trademark Office or in
proceedings before foreign agencies,  any of which  would result in  substantial
costs to the Company and distraction of the Company's management.
 
    The  Company  holds federal  registrations  of the  trademarks "Steri-Fuel,"
"Steri-Plastic,"  "Steri-Tub"   and  "Steri-Cement"   and  the   service   marks
"Stericycle"  and a mark consisting of a graphic the Company uses in association
with its name and services in the United States. There can be no assurance  that
the  registered or unregistered trademarks of the Company will not infringe upon
the rights of third  parties. The requirement to  change any trademark,  service
mark  or trade  name of  the Company would  result in  the loss  of any goodwill
associated with that  trademark, service  mark or  trade name  and could  entail
significant expense.
 
    The  Company  also  relies  on unpatented  and  unregistered  trade secrets,
trademarks, proprietary know-how and continuing technological innovation that it
seeks to protect,  in part,  by confidentiality agreements  with its  employees,
vendors  and consultants. There  can be no assurance  that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets or know-how will not otherwise become known  or
independently discovered by third parties.
 
EMPLOYEES
 
    At  December 31, 1995,  the Company employed 216  full-time employees and 27
part-time employees engaged primarily in sales and marketing.
 
                                       41

    The Company considers its employee  relations generally to be  satisfactory.
None of the Company's employees is covered by a collective bargaining agreement.
The  Company's production  and maintenance  employees at  its Morton, Washington
facility have voted  to affiliate  with a union.  See "--  Legal and  Regulatory
Proceedings."
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
    The  directors and executive officers of  Stericycle, Inc. and their ages as
of June 1, 1996, are as follows:

             NAME                   AGE                                   POSITION
- ------------------------------      ---      ------------------------------------------------------------------
                                       
Mark C. Miller                          40   President, Chief Executive Officer and Director
Anthony J. Tomasello                    49   Vice President, Operations
Linda D. Lee                            39   Vice President, Regulatory Affairs and Quality Assurance
James F. Polark                         46   Vice President, Finance and Chief Financial Officer
Michael J. Bernert                      42   Vice President, Eastern Region
Richard O. Shea                         43   Vice President, Western Region
Jack W. Schuler (1)                     55   Chairman of the Board of Directors
Patrick F. Graham (2)                   56   Director
John Patience (2)                       48   Director
Lloyd D. Ruth (2)                       49   Director
Peter Vardy (1)                         66   Director
L. John Wilkerson, Ph.D (1)             52   Director

- ------------------------
(1) Member of Compensation Committee
 
(2) Member of Audit Committee
 
    MARK C. MILLER  has served as  President and Chief  Executive Officer and  a
director  of  the Company  since May  1992. From  May 1989  until he  joined the
Company, Mr. Miller served as Vice President for the Pacific, Asia and Africa in
the International Division of Abbott Laboratories,  which he joined in 1976  and
where  he  held  a number  of  management  and marketing  positions.  Mr. Miller
received a B.S.  degree in  computer science  from Purdue  University, where  he
graduated Phi Beta Kappa.
 
    ANTHONY  J. TOMASELLO has served as the Company's Vice President, Operations
since August 1990. For five years prior to joining Stericycle, Mr. Tomasello was
President and Chief  Operating Officer  of Pi Enterprises  and Orbital  Systems,
companies  providing  process and  automation services.  From  1980 to  1985, he
served as  Vice President  of Operations  for Spang  and Company,  an  operating
service  firm specializing in resource  recovery and recycling for manufacturing
and process  industries. Mr.  Tomasello  received a  B.S. degree  in  mechanical
engineering from the University of Pittsburgh.
 
    LINDA  D. LEE has served as the Company's Vice President, Regulatory Affairs
and Quality Assurance since  July 1990. She previously  served as the  Company's
Executive  Director for Regulatory  Compliance. Prior to  joining the Company in
November 1989, she served for six years as Director of Environmental Health  and
Safety for Medical Services at the University of Arkansas. Ms. Lee has served as
the  chairperson of  the American Hospital  Association's Environmental Advocacy
Committee and on the American Society for Hospital Engineers' Safety  Committee.
She has also served on a number of government committees, including the Arkansas
Governor's  Task  Force on  Medical  Waste, and  has  written several  books and
articles on  safety  and waste  disposal.  Ms. Lee  received  a B.S.  degree  in
environmental  health sciences from Indiana State  University and an M.S. degree
in operations management from the University of Arkansas.
 
    JAMES F. POLARK  has served  as the  Company's Vice  President, Finance  and
Chief Financial Officer since July 1993. From 1980 until joining the Company, he
served    in   various    capacities   with    Sara   Lee    Corporation,   most
 
                                       42

recently as Chief Financial Officer of  Superior Coffee and Foods, Inc., one  of
Sara  Lee' divisions. Prior to joining Sara Lee,  Mr. Polark was a member of the
audit staff at Price  Waterhouse. He received a  B.S. degree in accounting  from
the University of Northern Iowa.
 
    MICHAEL  J.  BERNERT has  served as  the  Company's Vice  President, Eastern
Region, with  responsibility  for sales  and  service  in New  England  and  the
Midwest,  since February 1992. Prior  to joining the Company  in 1992, he held a
series of management positions with Abbott Laboratories. Mr. Bernert received  a
B.A.  degree in economics  from Brown University  and an M.B.A.  degree from the
University of Dallas.
 
    RICHARD O. SHEA has served as the Company's Vice President, Western  Region,
with  responsibility  for  sales  and  service  in  the  Pacific  Northwest  and
California, since April  1991. From September  1989 to March  1991, he was  Vice
President  of  Sales  and  Marketing  for  Microprobe  Corporation  in  Bethell,
Washington. He previously held several management positions with the Diagnostics
Division of Abbott Laboratories.  Mr. Shea received a  B.S. degree in  marketing
from Nichols College.
 
    JACK  W. SCHULER  has served as  Chairman of  the Board of  Directors of the
Company since January 1990. From January 1987 to August 1989, Mr. Schuler served
as President and Chief Operating  Officer of Abbott Laboratories, a  diversified
health  care company  which he  joined in  1972 and  where he  held a  number of
management and marketing positions and served  as a director from April 1985  to
August  1989. Mr. Schuler serves as a director of Chiron Corporation, Medtronic,
Inc. and Somatogen,  Inc., and  several privately held  companies. He  is a  co-
founder  of Crabtree  Partners, a  private investment  partnership in Deerfield,
Illinois, which was formed in June 1995. He received a B.S. degree in mechanical
engineering from  Tufts  University  and  an M.B.A.  degree  from  the  Stanford
University Graduate School of Business Administration.
 
    PATRICK F. GRAHAM has served as a director of the Company since May 1991. He
is a co-founder of Bain & Company, Inc., a management consulting firm in Boston,
Massachusetts,  where  he  has  served  in a  number  of  positions  since 1973,
including Vice Chairman and Chief Financial  Officer. He was previously a  Group
Vice  President  with  Boston Consulting  Group.  Mr.  Graham is  a  director of
WorldCorp, Inc. and several privately held companies. He received a B.A.  degree
from Knox College.
 
    JOHN   PATIENCE  has  served  as  a   director  of  the  Company  since  its
incorporation in  March  1989.  He  is a  co-founder  and  partner  of  Crabtree
Partners,  a private  investment partnership  in Deerfield,  Illinois, which was
formed in June 1995. From January 1988 to March 1995, Mr. Patience was a general
partner of the general  partner of Marquette Venture  Partners, L.P., a  venture
capital  fund  which  he  co-founded  and  which  participated  in  the  initial
capitalization of the  Company. He  was previously  a director  with McKinsey  &
Company,  Inc., a general management consulting firm. Mr. Patience is a director
of TRO Learning, Inc.,  and several privately held  companies. He received  B.A.
and B.L. degrees from the University of Sydney, Sydney, Australia, and an M.B.A.
degree from the Wharton School of Business of the University of Pennsylvania.
 
    LLOYD  D. RUTH has served as a director of the Company since September 1995.
He previously served as a director of the Company from December 1989 to  October
1990.  Mr. Ruth is a  co-founder of Marquette Venture  Partners, L.P., a venture
capital fund in Deerfield, Illinois, where he has served as a general partner of
its general partner since January 1988. From 1981 until 1988 he served with  the
Sprout  Group, a venture capital fund  affiliate of Donaldson, Lufkin & Jenrette
Securities  Corporation.  Mr.  Ruth  received   a  B.S.  degree  in   industrial
engineering from Cornell University, an M.S. degree in computer science from the
Naval  Postgraduate School  in Monterey,  California and  an M.B.A.  degree from
Stanford University.
 
    PETER VARDY has served as a director  of the Company since July 1990. He  is
the   Managing  Director   of  Peter   Vardy  &   Associates,  an  international
environmental consulting firm  in Chicago,  Illinois, which he  founded in  June
1990.  From April 1973 to  May 1990, Mr. Vardy  served at Waste Management, Inc.
(now WMX Technologies, Inc.), a waste management services company, where he  was
Vice  President, Environmental Management.  He is a director  of EMCON, which he
co-founded in 1971. Mr. Vardy received  a B.S. degree in geological  engineering
from the University of Nevada.
 
    L. JOHN WILKERSON, PH.D., has served as a director of the Company since July
1992.  He  is  a consultant  to  The  Wilkerson Group,  a  health  care products
consulting firm in  New York,  New York,  where he  has served  since 1982.  Dr.
Wilkerson  also serves  as a  general partner  of the  general partner  of Galen
Partners, L.P. and Galen Partners
 
                                       43

International, L.P.,  affiliated venture  capital  funds. He  is a  director  of
British  Biotech Plc, Gensia, Inc.,  TheraTx, Incorporated and several privately
held companies. Dr. Wilkerson received a B.S. degree in biological sciences from
Utah State University and a Ph.D.  degree in managerial economics and  marketing
research from Cornell University.
 
BOARD OF DIRECTORS
 
    Directors  are elected at the annual meeting of stockholders and hold office
until the next annual  meeting or until their  successors have been elected  and
qualified.  Members of the  Board of Directors receive  no cash compensation for
their services  as directors.  During  the year  ended  December 31,  1995,  the
Company  granted options to Jack W. Schuler,  Patrick F. Graham and Peter Vardy,
all of whom are members  of the Board of  Directors, to purchase 52,857,  32,723
and  7,120  shares of  Common Stock,  respectively.  These options  were granted
pursuant to  an equity  restructuring program  which was  intended, among  other
purposes, to reverse the dilutive effect of a recapitalization pursuant to which
the  Company's outstanding shares of preferred stock were reclassified as common
stock. See "-- 1995 Equity Adjustment Program" and "Description of Capital Stock
- -- 1995 Recapitalization."
 
    Pursuant to the Company's Directors Stock Option Plan, which was adopted  by
the  Board of Directors and approved by the Company's stockholders in June 1996,
directors who  are not  employees of  the Company  will be  eligible to  receive
periodic option grants. See "-- Stock Option Plans."
 
    The  Compensation Committee of the Board of Directors, consisting of Messrs.
Schuler and Vardy and Dr. Wilkerson, makes recommendations to the full Board  of
Directors  concerning salaries and  incentive compensation for  employees of the
Company and administers  the Company's  Incentive Compensation  Plan. The  Audit
Committee  of the Board of Directors, consisting of Messrs. Graham, Patience and
Ruth makes  recommendations  to  the  full  Board  of  Directors  regarding  the
selection  of independent auditors,  reviews the results and  scope of the audit
and other services provided  by the Company's  independent auditors and  reviews
and evaluates the Company's internal control functions.
 
EXECUTIVE COMPENSATION
 
    The  following table sets forth the  compensation paid by the Company during
the year ended December 31, 1995 to the Company's President and Chief  Executive
Officer   and  its  four  other   most  highly  compensated  executive  officers
(collectively, the "Named Executive Officers"):
 
                           SUMMARY COMPENSATION TABLE

                                                                                                       LONG-TERM
                                                                                                  COMPENSATION AWARDS
                                                                                     ANNUAL      ---------------------
                                                                                  COMPENSATION   NUMBER OF SECURITIES
NAME AND PRINCIPAL POSITION                                         FISCAL YEAR      SALARY       UNDERLYING OPTIONS
- ------------------------------------------------------------------  -----------  --------------  ---------------------
                                                                                        
Mark C. Miller....................................................        1995     $  212,083            485,620
  President and Chief Executive Officer
Anthony J. Tomasello..............................................        1995        146,875             31,816
  Vice President, Operations
Linda D. Lee......................................................        1995        127,916             28,621
  Vice President, Regulatory Affairs and
  Quality Assurance
Michael J. Bernert................................................        1995        108,750             49,515
  Vice President, Eastern Region
Richard O. Shea...................................................        1995        113,541             46,353
  Vice President, Western Region

STOCK OPTION INFORMATION
 
    The following table sets forth  certain information regarding stock  options
that  the Company granted to the Named  Executive Officers during the year ended
December 31, 1995. In accordance with  the rules of the Securities and  Exchange
Commission,  the following table also sets  forth the potential realizable value
over the term of the options (the period  from the date of grant to the date  of
expiration) based upon assumed rates of stock appreciation
 
                                       44

of 5% and 10%, compounded annually. These amounts do not represent the Company's
estimate  of future appreciation of  the price of its  Common Stock. The Company
did not grant stock  appreciation rights to any  Named Executive Officer  during
the year ended December 31, 1995.
 
                       OPTIONS GRANTS IN LAST FISCAL YEAR

                                            INDIVIDUAL GRANTS
                                        --------------------------                                 POTENTIAL REALIZABLE
                                                      % OF TOTAL                                     VALUE AT ASSUMED
                                                        OPTIONS                                   ANNUAL RATES OF STOCK
                                         NUMBER OF    GRANTED TO                                  PRICE APPRECIATION FOR
                                        SECURITIES   EMPLOYEES IN                                     OPTION TERM(4)
                                        UNDERLYING      FISCAL      EXERCISE PRICE   EXPIRATION   ----------------------
                                        OPTIONS(1)      YEAR(2)      PER SHARE(3)       DATE          5%         10%
                                        -----------  -------------  ---------------  -----------  ----------  ----------
                                                                                            
Mark C. Miller........................     485,620        52.60%       $    0.53        11/1/05   $  161,864  $  410,195
Anthony J. Tomasello..................      31,816          3.4%            0.53        11/1/05       10,605      26,874
Linda D. Lee..........................      28,621          3.1%            0.53        11/1/05        9,540      24,176
Michael J. Bernert....................      49,515          5.4%            0.53        11/1/05       16,504      41,825
Richard O. Shea.......................      46,353          5.0%            0.53        11/1/05       15,450      39,154

- ------------------------
(1) All  of the  options granted  to the  Named Executive  Officers were granted
    under the  Company's Incentive  Compensation Plan  (the "1995  Stock  Plan")
    pursuant to an equity adjustment program which was substantially implemented
    in November 1995. See "-- Stock Option Plans" and "-- 1995 Equity Adjustment
    Program."  The  options granted  were for  shares of  the Company's  Class B
    common stock. The  number of  options granted shown  in the  table has  been
    adjusted  to reflect  the 1-for-5.3089 reverse  stock split  to be effective
    prior to this Offering. All of the Company's outstanding options to purchase
    shares of Class B common stock will be converted automatically into  options
    to  purchase a like number of shares of Common Stock upon completion of this
    Offering. See "Description  of Capital  Stock -- Reverse  Stock Split."  The
    options  granted  to  the Named  Executive  Officers vest  in  equal monthly
    increments over periods of 12, 24 or 36 months.
 
(2) Based on an  aggregate of 923,292  options granted to  employees during  the
    year ended December 31, 1995, all of which were granted under the 1995 Stock
    Plan.
 
(3) The  exercise price  per share of  each option  is equal to  the fair market
    value of  the  Company's Class  B  common stock  on  the date  of  grant  as
    determined by the Company's Board of Directors.
 
(4) The  potential realizable value was calculated  based on the 10-year term of
    each option on its date of grant, assuming that the fair market value of the
    underlying stock on the  date of grant appreciates  at the indicated  annual
    rate  compounded annually  for the  entire term of  the option  and that the
    option is exercised and sold on the last day of its term for the appreciated
    stock price. The potential  realizable value of  each option was  calculated
    using  the exercise  price of  the option  as the  fair market  value of the
    underlying stock on the  date of grant. The  actual realizable value of  the
    options  could be considerably  higher than the  potential realizable values
    shown in the table.
 
                                       45

OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
 
    The following table sets forth certain information with respect to the value
of the stock options held by the Named Executive Officers at December 31,  1995.
No  Named Executive  Officer exercised any  stock options  or stock appreciation
rights during the  year ended December  31, 1995 or  had any stock  appreciation
rights outstanding at the end of the year.
 
                         FISCAL YEAR END OPTION VALUES

                                                                        NUMBER OF SECURITIES
                                                                                                VALUE OF UNEXERCISED
                                                                       UNDERLYING UNEXERCISED
                                                                       OPTIONS AT FISCAL YEAR   IN-THE-MONEY OPTIONS
                                                                               END(1)          AT FISCAL YEAR END(2)
                                                                       ----------------------  ----------------------
                                                                        VESTED     UNVESTED     VESTED     UNVESTED
                                                                       ---------  -----------  ---------  -----------
                                                                                              
Mark C. Miller.......................................................    333,275     152,345      --          --
Anthony J. Tomasello.................................................     16,383      15,433      --          --
Linda D. Lee.........................................................     12,814      15,808      --          --
Michael J. Bernert...................................................     23,567      25,948      --          --
Richard O. Shea......................................................     30,627      15,725      --          --

- ------------------------
(1) All unexercised options at December 31, 1995 were options to purchase shares
    of  the Company's  Class B common  stock. The number  of unexercised options
    shown in the table has been adjusted to reflect a 1-for-5.3089 reverse stock
    split to be effective  prior to this Offering.  See "Description of  Capital
    Stock -- Reverse Stock Split."
 
(2) The  value of  unexercised options was  calculated based on  the fair market
    value of the  underlying shares  of the Company's  Class B  common stock  at
    December 31, 1995 ($0.53 per share), as determined by the Company's Board of
    Directors,  less  the  exercise price  payable  for such  shares  ($0.53 per
    share), adjusting both  amounts to  reflect the  1-for-5.3089 reverse  stock
    split  to  be  effective  prior  to  this  Offering.  All  of  the Company's
    outstanding options  to purchase  shares of  Class B  common stock  will  be
    converted  automatically into options to purchase a like number of shares of
    Common Stock upon completion of  this Offering. See "Description of  Capital
    Stock -- Reverse Stock Split."
 
                                       46

STOCK OPTION PLANS
 
    1995 STOCK PLAN.  The Company's Incentive Compensation Plan (the "1995 Stock
Plan")  was adopted by the Board of Directors in August 1995 and approved by the
Company's stockholders in September 1995  in connection with a  recapitalization
of  the Company. See "Description of Capital Stock -- 1995 Recapitalization." As
amended by the  Board of  Directors in  May and June  1996 and  approved by  the
Company's  stockholders in June 1996, the 1995  Stock Plan authorizes a total of
1,506,904 shares of Common  Stock to be issued  pursuant to options granted  and
restricted  stock awarded under  the plan. If  an option granted  under the 1995
Stock Plan expires unexercised or is surrendered, or if the Company  repurchases
shares  of restricted stock awarded  under the plan, the  shares of Common Stock
subject to the option or repurchased by the Company once again become  available
for  option grants and restricted stock awards  under the 1995 Stock Plan. As of
June  1,  1996,  options  to  purchase  an  aggregate  of  704,167  shares  were
outstanding  and  31,174  shares  were available  for  future  option  grants or
restricted stock awards. The 1995 Stock Plan  has a 10-year term, and no  option
may  be granted or shares  of restricted stock awarded  under the plan after its
expiration in July 2005.
 
    The 1995  Stock Plan  provides  for the  grant  of incentive  stock  options
intended to satisfy the requirements of Section 422 of the Internal Revenue Code
of  1986, as  amended, nonstatutory stock  options and  restricted stock awards.
Incentive stock options  may be granted  and shares of  restricted stock may  be
awarded  only to  employees of  the Company.  Nonstatutory stock  options may be
granted only to employees of and consultants to the Company. The 1995 Stock Plan
is administered by the Compensation Committee  of the Board of Directors,  which
selects  the eligible persons to whom options are granted or restricted stock is
awarded and, subject to the provisions of the plan, determines the terms of each
option or award, including, in the case of an option, the number of shares, type
of option, exercise price and vesting schedule, and, in the case of an award  of
restricted stock, the purchase price, if any, and the restrictions applicable to
the award.
 
    The  exercise price of options granted under  the 1995 Stock Plan must be at
least equal to the fair market value of  the Common Stock on the date of  grant,
with  the exception that the exercise price of an incentive stock option granted
to an employee of the Company holding more than 10% of the outstanding stock  of
the  Company must be at least 110% of the fair market value. The maximum term of
any option may not exceed 10 years. An  option may be exercised only when it  is
vested  and, in the case of options  granted to employees, only while the holder
of the option remains  an employee of  the Company or  during the 90-day  period
following  the  termination  of  his  or  her  employment.  In  the Compensation
Committee's discretion,  this 90-day  period  may be  extended  in the  case  of
nonstatutory  stock options to any date ending  on or before the expiration date
of the  option.  In addition,  the  Compensation Committee  may  accelerate  the
exercisability  of an option at any time.  With the approval of the Compensation
Committee, the holder  of an  option may pay  the exercise  price by  delivering
other  shares of Common Stock, or by directing the Company to withhold shares of
Common Stock  otherwise issuable  upon exercise  of the  option, having  a  fair
market value on the date of exercise equal to the exercise price.
 
    DIRECTORS STOCK OPTION PLAN.  The Company's Directors Stock Option Plan (the
"Directors  Plan") was  adopted by  the Board of  Directors and  approved by the
Company's stockholders in June  1996. The Directors Plan  authorizes a total  of
285,000  shares  of Common  Stock to  be issued  pursuant to  nonstatutory stock
options granted under the plan to  eligible directors of the Company. Under  the
Directors  Plan, each director who is not an  employee of the Company and who is
elected or  re-elected as  a director  at the  annual meeting  of the  Company's
stockholders,  beginning  with the  annual meeting  in 1997,  will automatically
receive an option exercisable at the average of the closing bid and asked prices
of the Common Stock on  the date of the  annual meeting (the "exercise  price").
The  option  will be  for the  number of  shares of  Common Stock  determined by
multiplying 7,000 shares by a fraction, the numerator of which is $12.00 and the
denominator of which is the exercise price, subject to a maximum option grant of
9,500 shares and a minimum option grant of 4,500 shares. The term of each option
will be six  years from the  date of grant.  Each option will  vest in 12  equal
quarterly  installments and  may be  exercised only when  it is  vested and only
while the holder of the option remains  a director of the Company or during  the
90-day  period following the date that he or  she ceases to serve as a director.
With the approval of the  full Board of Directors, the  holder of an option  may
pay  the  exercise price  by  delivering other  shares  of Common  Stock,  or by
directing the Company to withhold shares of Common Stock otherwise issuable upon
exercise of the option, having a fair market value on the date of exercise equal
to the exercise price. The Directors Plan has a six-year term, and no option may
be granted under the plan after its expiration in June 2002.
 
                                       47

1995 EQUITY ADJUSTMENT PROGRAM
 
    In November 1995, the Company substantially implemented a program to  adjust
the  equity interests of the Company's officers and employees and certain of its
directors to reflect a plan of recapitalization of the Company which was adopted
by the  Board  of  Directors  in  August 1995  and  approved  by  the  Company's
stockholders  in September  1995 and which,  among other  things, authorized the
issuance of Class A and Class B common stock. See "Description of Capital  Stock
- --  1995 Recapitalization." The  purpose of the  program was to  (i) restore the
percentages of potential ownership interests  in the Company of participants  in
the  program to  substantially the  same percentages  that existed  prior to the
recapitalization, (ii) substantially restore the potential value of stock in the
Company that participants had  previously purchased or for  which they had  been
granted stock options, (iii) provide additional potential ownership interests by
option  grants for  voluntary participation  in a  new salary  reduction program
being adopted  for  the Company's  management  and (iv)  provide  the  Company's
President  and Chief  Executive Officer,  Mark C.  Miller, with  the opportunity
potentially to acquire  a 5% ownership  interest in the  Company. In  connection
with  this  equity  adjustment  program,  the  Company  allowed  participants to
surrender their existing options to purchase shares of Class A common stock  for
options  to purchase  a larger  number of  shares of  Class B  common stock. The
Company also agreed to reduce the purchase  price of Class A common stock  being
purchased  by  participants  under  non-recourse notes  to  reflect  the stock's
current fair  market value,  as determined  by the  Board of  Directors, and  to
accept  shares of Class A common stock  in satisfaction of the unpaid balance of
the notes and issue shares of Class B common stock in exchange for the shares of
Class A common stock for which the  purchase price had been paid. The  following
table  sets  forth certain  information  for the  year  ended December  31, 1995
regarding the Named  Executive Officers  and the  directors of  the Company  who
participated in the equity adjustment program:

                                          OPTIONS      SHARES OF STOCK   NEW OPTIONS     NEW SHARES OF
NAME                                  SURRENDERED(1)    EXCHANGED(1)     RECEIVED(2)   STOCK RECEIVED(2)
- ------------------------------------  ---------------  ---------------  -------------  -----------------
                                                                           
Mark C. Miller......................        37,989           38,262         485,620            3,868
Anthony J. Tomasello................         4,031           12,244          31,816           48,974
Linda D. Lee........................         3,014            8,288          28,621           26,465
Michael J. Bernert..................         7,791            2,825          49,515              283
Richard O. Shea.....................         4,073            8,476          46,353           11,584
Jack W. Schuler.....................         6,404           80,768          52,857          211,429
Patrick F. Graham...................         1,601            9,306          32,723           --
Peter Vardy.........................         5,463            6,404           7,120           28,480

- ------------------------
(1) All  options surrendered were  options to purchase, and  all shares of stock
    exchanged were, shares of the Company's Class A common stock. The number  of
    options  surrendered and  shares of  stock exchanged  have been  adjusted to
    reflect a 1-for-5.3089  reverse stock split  to be effective  prior to  this
    Offering. See "Description of Capital Stock -- Reverse Stock Split."
 
(2) All  options  received were  options to  purchase, and  all shares  of stock
    received were, shares of the Company's  Class B common stock. The number  of
    options  and  shares  of stock  received  have  been adjusted  to  reflect a
    1-for-5.3089 reverse stock split to be effective prior to this Offering. See
    "Description of Capital Stock -- Reverse Stock Split." All of the  Company's
    outstanding  shares  of  Class B  common  stock and  outstanding  options to
    purchase shares of Class B common stock will be converted automatically into
    a like number  of shares  of Common  Stock, or  options to  purchase a  like
    number  of shares of  Common Stock, as  the case may  be, upon completion of
    this Offering. See "Description of Capital Stock -- Reverse Stock Split."
 
                                       48

OTHER PLANS
 
    The Company maintains a  401(k) plan in which  employees who have  completed
one  year's employment and attained age 21 are eligible to participate. The plan
permits  the  Company  to  make  matching  contributions  of  a  percentage   of
participants'  deferrals to be  determined each year by  the Board of Directors.
For 1993, 1994 and 1995, the Company  made matching contributions of 30% of  the
first $1,000 contributed by participants.
 
EMPLOYMENT AGREEMENTS
 
    The  Company has not entered into  written employment agreements with any of
its executive officers or employees. All of the Company's executive officers and
employees have signed confidentiality agreements with the Company.
 
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
 
    The Company's  Certificate of  Incorporation provides  that to  the  fullest
extent permitted by Delaware law, the Company's directors will not be liable for
monetary  damages for breach of a director's duty of care to the Company and its
stockholders. This provision does not eliminate  a director's duty of care,  and
in  appropriate circumstances equitable remedies such  as an injunction or other
forms of  non-monetary relief  will remain  available under  Delaware law.  Each
director  continued to  remain liable  for a  breach of  the director's  duty of
loyalty to the Company,  for acts or  omissions not in  good faith or  involving
intentional  misconduct  or  a  knowing  violation  of  the  law,  for  improper
distributions to stockholders and  for any transaction  from which the  director
derives  an improper  personal benefit.  This provision  also does  not affect a
director's liability under other laws, such as the federal securities laws.
 
    The Company's By-Laws provide that the Company will indemnify its  directors
and  executive officers and  may indemnify its other  officers and employees and
other agents  to the  fullest  extent permitted  by  Delaware law.  The  Company
believes  that indemnification under its By-Laws  covers at least negligence and
gross negligence on the part of indemnified parties. The Company's By-Laws  also
permit  it  to  enter into  indemnification  agreements with  its  directors and
officers and to purchase insurance on behalf  of any person whom it is  required
or  permitted to  indemnify. Prior to  completion of this  Offering, the Company
intends to  enter into  indemnification agreements  with each  of its  executive
officers  and  directors,  indemnifying  them  for  certain  expenses (including
attorneys'  fees),  judgments,   fines  and  settlement   payments  in   certain
circumstances,  and to  obtain a  policy of  directors' and  officers' liability
insurance to insure against certain liabilities.
 
    There is no pending litigation or proceeding involving a director or officer
of the  Company for  which indemnification  is required  or permitted,  and  the
Company  is not aware of any pending or threatened litigation that may result in
claims for indemnification by any director or officer.
 
                                       49

                              CERTAIN TRANSACTIONS
 
    In July 1995, the Company borrowed  $830,000 under a 90-day line of  credit,
at  the prime rate  plus 3% per annum,  from a lending  group comprised of Galen
Partners, L.P., Galen International, L.P. and Marquette Venture Partners,  L.P.,
stockholders of the Company, and John Patience, Jack W. Schuler and Peter Vardy,
directors  of the  Company. The  Company's notes to  the members  of the lending
group were secured by the Company's accounts receivable. In connection with this
line of credit, the Company issued warrants  to members of the lending group  to
purchase  an aggregate of 220,559 shares  of Common Stock. These warrants expire
in July 2000 and are exercisable at any time at the price of $1.59 per share (or
70% of the  per share  purchase price  if the Company  sells Common  Stock in  a
single  transaction prior to July 27, 1996 in which the aggregate purchase price
is at least $1,000,000). As of June 1, 1996, warrants for 59,128 shares had been
exercised.
 
    In May 1996, the Company borrowed $1,000,000 under a short-term loan from  a
lending  group comprised of Galen Partners,  L.P. and Galen International, L.P.,
stockholders of the Company, Jack W. Schuler, Mark C. Miller, John Patience  and
Peter  Vardy,  directors of  the Company  (and,  in Mr.  Miller's case,  also an
executive officer)  and Michael  J.  Bernert, James  F.  Polark and  Anthony  J.
Tomasello, executive officers of the Company. The Company's notes to the members
of  the lending  group are  interest-free if paid  when due,  subject to certain
exceptions, and are due within 30 days after completion of this Offering or upon
the occurrence  of  certain  other  events. The  notes  are  unsecured  and  are
subordinated  to certain bank and other debt.  In connection with this loan, the
Company issued warrants to members of the lending group to purchase an aggregate
of 226,036 shares of  Common Stock. These  warrants expire in  May 2001 and  are
exercisable  at any time at a price of  $7.96 per share. The Company will record
as an interest expense  the excess over  the exercise price  of the fair  market
value  at the  time of  exercise of  the shares  of Common  Stock for  which any
warrant is exercised. Each warrant may be exercised by the holder at any time by
directing the Company to  withhold in payment, from  the shares of Common  Stock
otherwise  issuable upon  the exercise  of the  warrant, a  number of  shares of
Common Stock having a  fair market value  on the date of  exercise equal to  the
exercise  price.  In connection  with  the loan,  the  Company also  amended the
warrants issued in connection with the July 1995 line of credit held by  members
of  the lending group  to add a  similar "cashless exercise"  provision to those
warrants.
 
                                       50

                             PRINCIPAL STOCKHOLDERS
 
    The  following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as  of June 1, 1996, and as adjusted  to
reflect the sale by the Company of the shares of Common Stock offered hereby, by
(i)  each person known  to the Company to  beneficially own more  than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of  the
Named  Executive Officers and  (iv) all directors and  executive officers of the
Company as a group:

                                                                                                 PERCENTAGE BENEFICIALLY
                                                                                                        OWNED (1)
                                                                                                 ------------------------
                                                                                     NUMBER OF     BEFORE        AFTER
                             NAME OF BENEFICIAL OWNER                               SHARES (1)    OFFERING     OFFERING
- ----------------------------------------------------------------------------------  -----------  -----------  -----------
                                                                                                     
Marquette Venture Partners, L.P. (2) .............................................   1,154,731        18.7%        12.5%
 Corporate 500 Center
 520 Lake Cook Road, Suite 450
 Deerfield, Illinois 60015
State Farm Mutual Automobile Insurance Company ...................................     937,521        15.3%        10.2%
 One State Farm Plaza
 Bloomington, Illinois 61710
Missner Venture Partners II, Limited Partnership (3) .............................     466,212         7.6%         5.1%
 Two First National Bank Plaza, Suite 2020
 Chicago, Illinois 60603
Baxter Healthcare Corporation ....................................................     461,028         7.5%         5.0%
 One Baxter Parkway
 Deerfield, Illinois 60015
Galen Partners, L.P (4) ..........................................................     433,476         7.0%         4.7%
 666 West Third Avenue, Suite 1400
 New York, New York 10017
Jack W. Schuler (5)...............................................................     814,512        13.0%         8.7%
Mark C. Miller (6)................................................................     558,171         9.0%         6.0%
Linda D. Lee (7)..................................................................      55,333        *            *
Anthony J. Tomasello (8)..........................................................     131,003         2.1%         1.4%
Michael J. Bernert (9)............................................................      52,590        *            *
Richard O. Shea (10)..............................................................      55,315        *            *
Patrick F. Graham (11)............................................................      35,727        *            *
John Patience (12)................................................................     200,858         3.3%         2.2%
Lloyd D. Ruth (2).................................................................      --            *            *
Peter Vardy (13)..................................................................     157,846         2.6%         1.7%
L. John Wilkerson, Ph.D. (14).....................................................      --            *            *
All officers and directors as a group (11 persons) (15)...........................   2,118,988        31.2%        21.4%

- ------------------------
  * Less than 1%.
 
 (1)Beneficial ownership  is determined  in  accordance with  the rules  of  the
    Securities   and  Exchange  Commission  and  generally  includes  voting  or
    investment power with respect to  securities. Unless otherwise indicated  in
    the  footnotes to  this table and  subject to  applicable community property
    laws, the persons named in this table have sole voting and investment  power
    with  respect to all shares  of Common Stock shown  as beneficially owned by
    them. Shares  of  Common Stock  subject  to  options or  warrants  that  are
    currently  exercisable or  exercisable within  60 days  of June  1, 1996 are
    considered outstanding  for  purposes of  computing  the percentage  of  the
    person  holding the option or warrant but are not considered for purposes of
    computing the percentage of  any other person. The  98,001 shares of  Common
    Stock  issuable under  the Safe  Way Note  are considered  outstanding after
    completion of this Offering.
 
 (2)Includes 53,811 shares issuable under  a warrant exercisable within 60  days
    of  June 1,  1996. Lloyd D.  Ruth, a director  of the Company,  is a general
    partner  of  the  general  partner  of  Marquette  Venture  Partners,   L.P.
 
                                       51

    ("Marquette").  Mr. Ruth  disclaims any beneficial  ownership in  any of the
    shares held by  Marquette except  to the  extent of  his pecuniary  interest
    arising  from his  general partnership  interest in  the general  partner of
    Marquette.
 
 (3)Includes 35,414 shares owned by Richard Missner, who is a general partner of
    the general  partner of  Missner Venture  Partners II,  Limited  Partnership
    ("Missner  Partners"). Mr. Missner disclaims any beneficial ownership of the
    shares held  by Missner  Partners except  to the  extent of  his  individual
    ownership  and his pecuniary  interest arising from  his general partnership
    interest in Missner Partners.
 
 (4)Includes 81,374 shares issuable under  a warrant exercisable within 60  days
    of  June 1, 1996 and 40,459 shares  (including 8,377 shares issuable under a
    warrant exercisable within 60 days  of June 1, 1996)  which are owned by  an
    affiliate,  Galen International Partners,  L.P. L. John  Wilkerson, Ph.D., a
    director of  the  Company, is  a  general  partner of  the  general  partner
    ("Galen") of Galen Partners, L.P. and Galen International Partners, L.P. Dr.
    Wilkerson  disclaims any  beneficial ownership of  the shares  held by Galen
    Partners, L.P. or Galen International Partners, L.P. except to the extent of
    his individual ownership and his pecuniary interest arising from his general
    partnership interest in Galen.
 
 (5)Includes 89,524 shares issuable under warrants exercisable within 60 days of
    June 1, 1996, 39,643 shares issuable under stock options exercisable  within
    60  days of June  1, 1996 and 32,716  shares owned by  Mr. Schuler's wife or
    trusts for the  benefit of  his children, in  respect of  which Mr.  Schuler
    disclaims any beneficial ownership.
 
 (6)Includes  27,509 shares issuable  under stock options  exercisable within 60
    days of June 1, 1996 and 63,290 shares issuable under a warrant  exercisable
    within  60 days of June  1, 1996, and 75,345 shares  owned by trusts for the
    benefit of Mr. Miller's children, in  respect of which Mr. Miller  disclaims
    any beneficial ownership.
 
 (7)Includes  25,519 shares issuable  under stock options  exercisable within 60
    days of June 1, 1996.
 
 (8)Includes 29,687 shares  issuable under stock  options exercisable within  60
    days  of June 1, 1996 and 12,432 shares issuable under a warrant exercisable
    within 60 days of June 1, 1996.
 
 (9)Includes 40,041 shares  issuable under stock  options exercisable within  60
    days  of June 1, 1996 and 11,302 shares issuable under a warrant exercisable
    within 60 days of June 1, 1996.
 
(10)Includes 43,544 shares  issuable under stock  options exercisable within  60
    days of June 1, 1996.
 
(11)Includes  31,087 shares issuable  under stock options  exercisable within 60
    days of June 1, 1996.
 
(12)Includes 1,627 shares  issuable under  stock options  exercisable within  60
    days  of June 1, 1996 and 32,684 shares issuable under a warrant exercisable
    within 60 days of June 1, 1996.
 
(13)Includes 20,705 shares issuable under  a warrant exercisable within 60  days
    of  June 1, 1996, 1,648 shares  issuable under options exercisable within 60
    days of June 1, 1996  and 67,613 shares owned by  trusts for the benefit  of
    Mr. Vardy's children, in respect of which Mr. Vardy disclaims any beneficial
    ownership.
 
(14)L. John Wilkerson, Ph.D., a director of the Company, is a general partner of
    the   general  partner   ("Galen")  of   Galen  Partners,   L.P.  and  Galen
    International  Partners,  L.P.  Dr.   Wilkerson  disclaims  any   beneficial
    ownership  of the shares held by Galen Partners, L.P. or Galen International
    Partners, L.P. except  to the  extent of  his individual  ownership and  his
    pecuniary interest arising from his general partnership interest in Galen.
 
(15)Includes  286,769 shares issuable under  stock options exercisable within 60
    days of June 1, 1996 and 243,139 shares issuable under warrants  exercisable
    within 60 days of June 1, 1996.
 
                                       52

                          DESCRIPTION OF CAPITAL STOCK
 
    Upon  completion of  this Offering,  the Company's  authorized capital stock
will consist of 30,000,000 shares of Common Stock, par value $.01 per share. The
following description  reflects (i)  a 1-for-5.3089  reverse stock  split to  be
effective  immediately  prior  to  completion  of  this  Offering  and  (ii) the
automatic redesignation upon completion of this Offering of all of the Company's
outstanding shares of Class A and  Class B common stock and outstanding  options
to purchase shares of Class A or Class B common stock as a like number of shares
of  Common Stock or options to purchase a like number of shares of Common Stock,
as the case may be. See "-- Reverse Stock Split."
 
COMMON STOCK
 
    As of June 1, 1996, there were 6,218,455 shares of Common Stock  outstanding
which were held of record by 139 stockholders.
 
    Holders of Common Stock are entitled to one vote per share on all matters to
be  voted upon by the  stockholders but do not  have cumulative voting rights in
respect of the election  of directors. Holders of  Common Stock are entitled  to
receive  ratably such dividends, if any, as may be declared from time to time by
the Company's Board of Directors out of legally available funds. In the event of
the liquidation, dissolution  or winding up  of the Company,  holders of  Common
Stock  are  entitled  to share  ratably  in all  of  the assets  of  the Company
remaining after payment or provision  for payment of the Company's  liabilities.
Holders  of  Common Stock  have no  preemptive or  other subscription  rights to
purchase any securities of  the Company, and there  are no conversion rights  or
redemption  or  sinking  fund  provisions  in  respect  the  Common  Stock.  All
outstanding shares of Class A  and Class B Common Stock  are, and all shares  of
Common  Stock to be outstanding upon completion  of this Offering will be, fully
paid and non-assessable.
 
WARRANTS
 
    As of June  1, 1996,  there were  outstanding warrants  to purchase  409,848
shares of Common Stock, all of which were then exercisable at a weighted average
exercise  price of $6.84 per share.  Of these outstanding warrants, warrants for
15,608 shares of Common Stock, at an exercise price of $17.63 per share,  expire
in  March 1998; warrants for 6,773 shares  of Common Stock, at an exercise price
of $69.02 per share, expire in March 1999; warrants for 161,432 shares of Common
Stock, at an exercise price of $1.59 per share (or 70% of the per share purchase
price if the Company sells  Common Stock in a  single transaction prior to  July
27,  1996 in which the aggregate purchase  price is at least $1,000,000), expire
in July 2000; and warrants  for 226,035 shares of  Common Stock, at an  exercise
price  of $7.96, expire in  May 2001. Holders of  the warrants expiring on March
17, 1999 are entitled to certain rights in respect of the registration under the
Securities Act of  1933, as  amended (the "Securities  Act"), of  the shares  of
Common  Stock issued  upon the  exercise of  the warrants.  See "-- Registration
Rights of Certain Holders."
 
OPTIONS
 
    As of  June 1,  1996, there  were outstanding  options to  purchase  725,591
shares of Common Stock, at a weighted average exercise price of $0.96 per share,
of  which options for  397,555 shares, at  a weighted average  exercise price of
$0.66 per share,  were exercisable  within 60  days of  June 1,  1996. With  the
exception of options for 9,943 shares, which were granted under terminated plans
and  are held  by former employees  and vendors  to the Company  and options for
11,481 shares  issued  to consultants  engaged  by  the Company,  all  of  these
outstanding  options were granted under the  1995 Stock Plan. See "Management --
Stock Option Plans."
 
REGISTRATION RIGHTS OF CERTAIN HOLDERS
 
    Upon completion  of this  Offering, holders  of 5,150,771  shares of  Common
Stock  (including  6,773 shares  issuable upon  the exercise  of certain  of the
Company's outstanding warrants and 98,001 shares to be issued in partial payment
of an outstanding note due upon  completion of this Offering) (the  "Registrable
Shares")  will be entitled to  certain rights in respect  of the registration of
the Registrable Shares under the Securities Act. Under the Amended and  Restated
Registration Agreement dated October 19, 1994, as amended, among the Company and
such  holders, holders of a  majority of the Registrable  Shares have the right,
until the Company is eligible  to file a registration  statement on Form S-2  or
Form  S-3, to  request on  two occasions  that the  Company file  a registration
statement on Form S-1 to register all or a portion of their Registrable  Shares.
If and when the Company is eligible to file a registration statement on Form S-2
or  Form  S-3,  holders of  at  least 25%  of  the Registrable  Shares  have the
 
                                       53

right to request on  an unlimited number  of occasions that  the Company file  a
registration  statement on Form S-2 or Form S-3  to register all or a portion of
their Registrable Shares. In addition, one holder of 937,521 Registrable  Shares
has  the right, until July  10, 1996 or the  closing of this Offering, whichever
occurs first, to request on two  occasions that the Company file a  registration
statement  on any available form to register all or a portion of its Registrable
Shares; and a second holder of  461,028 Registrable Shares has the right,  which
may be exercised at any time, to request on one occasion that the Company file a
registration statement on any available form to register all or a portion of its
Registrable  Shares. If the Company proposes at  any time to register any of its
securities under  the Securities  Act, either  for its  own account  or for  the
account of other security holders exercising registration rights, all holders of
Registrable  Shares are entitled to notice  of the proposed registration and may
request all or  a portion  of their  Registrable Shares  to be  included in  the
registration.  In general, the Company is required to pay all of the expenses in
connection with any registration of  Registrable Shares, including the fees  and
expenses  of one counsel for the selling holder or holders of Registrable Shares
but excluding underwriting discounts and  commissions. The rights of holders  of
Registrable  Shares are subject to certain conditions and limitations, including
(i) a  prohibition on  the registration  of any  Registrable Shares  within  six
months  after the effective date of any prior registration of Registrable Shares
and (ii) in the  case of any proposed  registration of the Company's  securities
which  are  to be  sold in  an underwritten  public offering,  the right  of the
underwriters to limit the number of  Registrable Shares that may be included  in
the registration.
 
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
 
    The  Company is subject  to Section 203 of  the Delaware General Corporation
Law regulating  corporate  takeovers.  Section  203  prevents  certain  Delaware
corporations,  including  those  whose  securities are  listed  on  Nasdaq, from
engaging in any "business combination"  with any "interested stockholder" for  a
period  of  three  years  following  the date  that  the  stockholder  became an
interested stockholder, with three exceptions: (i) prior to such date, the board
of directors of the corporation approved either the business combination or  the
transaction   which  resulted   in  the   stockholder  becoming   an  interested
stockholder; (ii) upon the consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time that
the transaction commenced, excluding for  purposes of determining the number  of
shares  outstanding  the shares  owned  by persons  who  are both  directors and
officers of the  corporation and  the shares owned  by employee  stock plans  in
which  employee participants do  not have the  right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii)  on or subsequent  to the  date that the  stockholder became  an
interested  stockholder, the  business combination is  approved by  the board of
directors of the corporation and authorized  at an annual or special meeting  of
stockholders, and not pursuant to written consent, by the affirmative vote of at
least  66 2/3%  of the  outstanding voting  stock of  the corporation, excluding
voting stock owned by  the interested stockholder.  The restrictions in  Section
203 also do not apply to certain business combinations proposed by an interested
stockholder  following  the  announcement  or  notification  of  one  of certain
extraordinary transactions involving  the corporation (for  example, a  proposed
tender or exchange offer for 50% or more of the corporation's outstanding voting
stock)  which is  approved or  not opposed  by a  majority of  the corporation's
directors then in office and which  is with or by a  person who had not been  an
interested  stockholder  during  the  preceding three  years  or  who  became an
interested  stockholder  with  the  approval  of  the  corporation's  board   of
directors.
 
    Section  203 defines a "business combination" as, in general: (i) any merger
or consolidation involving the corporation and the interested stockholder;  (ii)
any  sale,  lease,  transfer,  pledge or  other  disposition  to  the interested
stockholder of 10% or more of the corporation's assets; (iii) subject to certain
exceptions, any transaction  which results in  the issuance or  transfer by  the
corporation  to the interested stockholder of any stock of the corporation; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share  of the  stock of  any  class or  series, or  of  securities
convertible  into the stock of any class  or series, which is beneficially owned
by the interested stockholder; or (v) the receipt by the interested  stockholder
of  the benefit of  any loans, advances, guarantees,  pledges or other financial
benefits provided  by  or  through  the  corporation.  Section  203  defines  an
"interested  stockholder"  as, in  general, any  person or  entity who  or which
directly or indirectly beneficially owns 15%  or more of the outstanding  voting
stock  of the corporation and any person or entity affiliated or associated with
or controlling or controlled by that person or entity.
 
                                       54

    The provisions of Section 203 could operate to delay or prevent the  removal
of  incumbent directors of  the Company or  a change in  control of the Company.
They also could discourage,  impede or prevent a  merger, tender offer or  proxy
contest  involving the Company, even if such  an event would be favorable to the
interests of the Company's stockholders  generally. By adopting an amendment  to
the   Company's  certificate   of  incorporation   or  by-laws,   the  Company's
stockholders may elect not to have Section 203 apply to the Company effective 12
months after the adoption of the amendment. Neither the Company's Certificate of
Incorporation  nor  its   By-Laws  currently  exclude   the  Company  from   the
restrictions imposed by Section 203.
 
1995 RECAPITALIZATION
 
    In  order to simplify the Company's  capital structure and align stockholder
interests, the Board of Directors adopted  a plan of recapitalization in  August
1995  which  was  approved  by the  Company's  stockholders  in  September 1995.
Pursuant to the plan of recapitalization, the Company authorized the issuance of
Class A and  Class B  common stock  and reclassified  its outstanding  preferred
stock,  consisting of nine  classes, as shares  of Class A  common stock using a
reclassification formula for each class reflecting the conversion rate for  that
class   and  certain  other  adjustments.  The  Company  also  reclassified  its
outstanding common stock as a like number of shares of Class A common stock. The
new Class  B common  stock could  be issued  only pursuant  to the  exercise  of
options  granted and  restricted stock  awarded under  the 1995  Stock Plan. The
Class B common stock was subject to certain first refusal rights in the event of
any proposed sale or transfer at the lower of the original exercise or  purchase
price or the price to be paid by the proposed purchaser or transferee.
 
REVERSE STOCK SPLIT
 
    Immediately  prior to completion of this Offering, the Company will effect a
1-for-5.3089 reverse stock  split pursuant  to which each  outstanding share  of
Class  A and Class B  common stock will become 0.1884  shares, and the number of
shares  and  exercise  price  of  each  outstanding  option  will  be   adjusted
accordingly.  All  of  the  Company's  outstanding  warrants  will  be similarly
adjusted in accordance with their terms.  Upon completion of this Offering,  all
of  the Company's  outstanding shares of  Class A  and Class B  common stock and
outstanding options to purchase shares of Class  A or Class B common stock  will
be  redesignated  as a  like  number of  shares of  Common  Stock or  options to
purchase a like number of shares of Common Stock, as the case may be.
 
TRANSFER AGENT AND REGISTRAR
 
    The transfer agent and  registrar for the Common  Stock is Harris Trust  and
Savings Bank.
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
    Prior to this Offering, there has been no public market for the Common Stock
of  the Company.  Future sales  of substantial  amounts of  Common Stock  in the
public market could  adversely affect the  market price of  Common Stock.  Aside
from the 3,000,000 shares sold in this Offering, only a limited number of shares
will  be available  for sale immediately  following completion  of this Offering
because of certain contractual  and legal restrictions  on resale (as  described
below). Accordingly, sales of substantial amounts of Common Stock of the Company
in  the public market after these  restrictions lapse could adversely affect the
prevailing market price and the ability  of the Company to raise equity  capital
in the future.
 
    Upon  completion  of this  Offering, the  Company  will have  outstanding an
aggregate of  9,218,455 shares  of Common  Stock, assuming  no exercise  of  the
Underwriters' over-allotment option and no exercise of outstanding stock options
and  warrants. Of these outstanding shares of Common Stock, the 3,000,000 shares
sold in this Offering  will be freely tradeable  without restriction or  further
registration under the Securities Act, unless purchased by an "affiliate" of the
Company as that term is defined in Rule 144 under the Securities Act.
 
    The remaining 6,218,455 shares of Common Stock held by existing stockholders
(the  "Restricted  Shares")  will be  "restricted  securities" as  that  term is
defined in Rule 144 under the Securities Act. The Restricted Shares may be  sold
in  the public market only if they are registered under the Securities Act or if
they qualify  for  an exemption  from  registration  under Rule  144  under  the
Securities  Act (which is  summarized below). Sales of  the Restricted Shares in
the public market, or the availability of the Restricted Shares for sale,  could
adversely affect the market price of the Common Stock.
 
                                       55

    Certain  stockholders of the  Company, including all  executive officers and
directors and the individuals and entities  named in the table under  "Principal
Stockholders,"  who will beneficially own  in the aggregate 5,571,624 Restricted
Shares after  the Offering,  have  entered into  "lock-up" agreements  with  the
Managing  Underwriters pursuant  to which they  have agreed not  to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of, directly
or indirectly, any  of their Restricted  Shares, or any  shares of Common  Stock
that  they may acquire through the exercise  of stock options or warrants, or to
exercise any of their registration rights  in respect of their shares of  Common
Stock,  for a period  of 180 days from  the date of  this Prospectus without the
prior written consent  of Dillon,  Read &  Co. Inc.  on behalf  of the  Managing
Underwriters.  As a result  of these contractual  restrictions, shares of Common
Stock subject  to the  lock-up agreements  are restricted  from sale  until  the
lock-up  agreements expire, notwithstanding that  they otherwise may be eligible
for sale under Rule 144. Upon  the expiration of the lock-up agreements,  shares
will be eligible for sale pursuant to Rule 144.
 
    In  general, under Rule 144 as currently  in effect, beginning 90 days after
the date of this Prospectus, a person  (or persons whose shares are required  to
be  aggregated) who  has beneficially owned  Restricted Shares for  at least two
years (including the  holding period  of any  prior beneficial  owner except  an
affiliate  of  the Company)  would be  entitled to  sell during  any three-month
period a number of Restricted Shares that does not exceed the greater of (i)  1%
of  the number of  shares of Common  Stock then outstanding  or (ii) the average
weekly trading  volume  of the  Common  Stock  during the  four  calendar  weeks
preceding  the  filing of  the required  notice of  sale on  Form 144.  Sales of
Restricted Shares under  Rule 144 are  also subject to  compliance with  certain
conditions relating to the manner of sale, the requirement to file notice of the
sale   with  the  Securities  and  Exchange  Commission  on  Form  144  and  the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any  time
during  the  90  days preceding  a  sale,  and who  has  beneficially  owned the
Restricted Shares proposed to  be sold for at  least three years (including  the
holding  period of any prior owner except an affiliate), may sell the Restricted
Shares under  Rule  144  without  regard  to  any  volume  limitation  or  other
conditions   or  requirements   of  the  rule.   Accordingly,  unless  otherwise
restricted, holders of Restricted Shares who are eligible to use Rule 144(k) may
sell their shares immediately upon completion of this Offering.
 
    As of June 1, 1996, there were outstanding options under the 1995 Stock Plan
to purchase 704,167 shares of Common Stock, of which options for 381,137  shares
were  exercisable within  60 days  of June 1,  1996. Of  the options exercisable
within 60 days of June 1, 1996, options for 286,769 shares were held by officers
and directors of the Company subject to the lock-up agreements described  above.
Shortly  after  completion  of this  Offering,  the  Company intends  to  file a
registration statement on Form  S-8 to register the  1,506,904 shares of  Common
Stock  issued or issuable  under the 1995  Stock Plan and  the 285,000 shares of
Common Stock issuable under the Directors Plan. This registration statement will
become effective automatically upon filing. Accordingly, shares registered under
this registration statement  will be available  for sale in  the public  market,
subject  to  the volume  limitations  under Rule  144 in  the  case of  sales by
affiliates of the Company, except to the  extent that the shares are subject  to
contractual restrictions on sale under the lock-up agreements described above.
 
    As  of June  1, 1996,  there were  outstanding warrants  to purchase 409,848
shares of Common Stock, all of which were then exercisable. Holders of  warrants
to purchase 387,829 shares of Common Stock are subject to the lock-up agreements
described above.
 
                                       56

                                  UNDERWRITING
 
    The  names of the Underwriters of the  shares of Common Stock offered hereby
and the aggregate number of shares of Common Stock that each of them has  agreed
to  purchase from the Company, subject to  the terms and conditions specified in
the Underwriting Agreement, are as follows:

UNDERWRITERS                                                                 NUMBER OF SHARES
- ---------------------------------------------------------------------------  -----------------
                                                                          
Dillon, Read & Co. Inc.....................................................
Salomon Brothers Inc.......................................................
William Blair & Company L.L.C..............................................
                                                                                   --------
      Total................................................................       3,000,000
                                                                                   --------
                                                                                   --------

    The Managing Underwriters are Dillon, Read & Co. Inc., Salomon Brothers  Inc
and William Blair & Company L.L.C.
 
    If  any  shares  of  Common  Stock  offered  hereby  are  purchased  by  the
Underwriters, all such shares will  be so purchased. The Underwriting  Agreement
contains  certain  provisions  whereby,  if  any  Underwriter  defaults  in  its
obligation to  purchase  such  shares,  and the  aggregate  obligations  of  the
Underwriters  so defaulting do not exceed 10%  of the shares offered hereby, the
remaining Underwriters, or some of them, must assume such obligations.
 
    The Common Stock offered hereby is being initially offered severally by  the
Underwriters  for  sale  at  the price  set  forth  on the  cover  page  of this
Prospectus, or at such price less a concession not to exceed $      per share on
sales to  certain dealers.  The Underwriters  may allow,  and such  dealers  may
reallow,  a concession not to exceed $       per share on sales to certain other
dealers. The offering of shares is made  for delivery when, as, and if  accepted
by  the Underwriters and  subject to prior sale  and withdrawal, cancellation or
modification of the offer without notice. The Underwriters reserve the right  to
reject  any  order for  the purchase  of  the shares.  After the  initial public
offering, the public offering price, the  concession and the reallowance may  be
changed by the Managing Underwriters.
 
    The  Company has  granted to  the Underwriters  an over-allotment  option to
purchase up  to  an  aggregate  of  450,000  shares  of  Common  Stock.  If  the
Underwriters  exercise this  option, each of  the Underwriters will  have a firm
commitment, subject to  certain conditions, to  purchase approximately the  same
percentage of the aggregate shares to be purchased as the number of shares to be
purchased  by it shown in  the above table bears  to 3,000,000. The Underwriters
may exercise such option  on or before  the thirtieth day from  the date of  the
Underwriting  Agreement and only to cover  over-allotments made of the shares in
connection with this Offering.
 
    The Company  has  agreed in  the  Underwriting Agreement  to  indemnify  the
Underwriters  against  certain  liabilities,  including  liabilities  under  the
Securities Act,  or to  contribute  to payments  that  the Underwriters  may  be
required to make in respect thereof.
 
    The Company and certain of its officers, directors and stockholders prior to
this Offering have agreed not to offer, sell, contract to sell, grant any option
to  sell, or otherwise dispose of, directly  or indirectly, any shares of Common
Stock, or securities convertible  into or exercisable  or exchangeable for,  any
shares  of Common Stock or warrants or other rights to purchase shares of Common
Stock, or permit the registration of any shares of Common Stock for a period  of
180 days after the date of this Prospectus, without the prior consent of Dillon,
Read & Co. Inc. acting on behalf of the Managing Underwriters.
 
    Prior to this Offering, there has been no public market for the Common Stock
of  the Company. Consequently, the initial  public offering price was determined
by negotiation  between  the  Company and  the  Managing  Underwriters.  Factors
considered  in determining this  price included, among  other things, prevailing
market conditions, the state of the Company's development, the future  prospects
of  the Company and  its industry, market valuations  of securities of companies
engaged in activities deemed by the Managing Underwriters to be similar to those
of the Company, and other factors deemed relevant. Consideration was also  given
to  the general state  of the securities  market, the market  conditions for new
issues of  securities  and  the  demand for  similar  securities  of  comparable
companies.  The Company has applied for quotation  of the Common Stock on Nasdaq
under the symbol "SRCL."
 
    The Underwriters do not expect to confirm sales to accounts over which  they
exercise discretionary authority.
 
                                       57

    At  the request of the Company, the Underwriters have reserved up to 150,000
shares of Common Stock for  sale at the initial  offering price to employees  of
the  Company and certain other parties. The  number of shares available for sale
to the general public  will be reduced to  the extent such individuals  purchase
such  reserved shares. Any reserved shares not so purchased will be released for
sale by the Underwriters to the general public no later than the closing date of
this Offering (which is  expected to be  three business days  after the date  of
this  Prospectus) on the same terms as the other shares offered hereby. Reserved
shares purchased by such  individuals will, except  as restricted by  applicable
securities laws, be available for resale following this Offering.
 
                                 LEGAL MATTERS
 
    Certain legal matters in connection with the Common Stock offered hereby are
being  passed upon for the Company by  Johnson and Colmar, Chicago, Illinois and
for the  Underwriters by  Cahill Gordon  & Reindel  (a partnership  including  a
professional corporation), New York, New York.
 
                                    EXPERTS
 
    The  consolidated financial statements of  Stericycle, Inc. and subsidiaries
at December 31, 1994  and 1995, and for  each of the three  years in the  period
ended  December 31, 1995,  appearing in this Prospectus  and in the Registration
Statement have been audited by Ernst  & Young LLP, independent auditors, as  set
forth  in their report  with respect thereto, appearing  elsewhere herein and in
the Registration Statement and are included  in reliance upon such report  given
upon the authority of such firm as experts in accounting and auditing.
 
                             ADDITIONAL INFORMATION
 
    This  Prospectus forms  part of  a Registration  Statement on  Form S-1 (the
"Registration Statement") which the  Company has filed  with the Securities  and
Exchange  Commission (the "Commission"), Washington,  D.C., under the Securities
Act. In accordance with the Commission's rules and regulations, this  Prospectus
omits  certain of the information  in the Registration Statement  and all of its
exhibits, and reference is made to  the Registration Statement and its  exhibits
for  further information  relating to the  Company and the  Common Stock offered
hereby. Copies of the Registration Statement  and its exhibits may be  inspected
without  charge at the public reference  facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington,  D.C. 20549, and copies of this  material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street,  N.W., Washington,  D.C. 20549 at  prescribed rates.  Statements in this
Prospectus concerning  the  provisions  of  any contract  or  document  are  not
necessarily  complete, and each  such statement is qualified  in its entirety by
reference to the copy of the relevant  contract or document filed as an  exhibit
to the Registration Statement.
 
                                       58

                       STERICYCLE, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                                PAGE
                                                                                                                -----
                                                                                                          
REPORT OF INDEPENDENT AUDITORS.............................................................................         F-2
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1994 AND 1995..................................................         F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED DECEMBER 31,
 1995......................................................................................................         F-4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) FOR EACH OF THE YEARS
 IN THE THREE-YEAR PERIOD ENDED DECEMBER 31, 1995..........................................................         F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED DECEMBER 31,
 1995......................................................................................................         F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................................................         F-7
CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1996 (UNAUDITED)........................................        F-16
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
 (UNAUDITED)...............................................................................................        F-17
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
 (UNAUDITED)...............................................................................................        F-18
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)...........................................        F-19

                                      F-1

                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors and Shareholders
Stericycle, Inc.
 
    We  have audited the accompanying consolidated balance sheets of Stericycle,
Inc. and  Subsidiaries  as  of December  31,  1994  and 1995,  and  the  related
consolidated  statements  of operations,  changes  in shareholders'  equity (net
capital deficiency), and  cash flows  for each of  the years  in the  three-year
period  ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express  an
opinion on these consolidated financial statements based on our audits.
 
    We  conducted  our audits  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe our audits provide a reasonable basis for our opinion.
 
    In  our  opinion, the  consolidated financial  statements referred  to above
present fairly, in all material respects, the consolidated financial position of
Stericycle, Inc.  and  Subsidiaries at  December  31,  1994 and  1995,  and  the
consolidated  results of their operations  and their cash flows  for each of the
years in  the three-year  period ended  December 31,  1995, in  conformity  with
generally accepted accounting principles.
 
Chicago, Illinois
March 20, 1996,
except for the first paragraph of Note 7,
as to which the date is      , 1996
 
- --------------------------------------------------------------------------------
 
    The  foregoing report is in the form that will be signed upon the completion
of the reverse stock  split, the approval of  the decrease in authorized  common
stock,  and the redesignation of the Class A  and Class B common stock as a like
number of shares of common stock effective upon the closing of an initial public
offering as  described  in  the first  paragraph  of  Note 7  to  the  financial
statements.
 
                                             ERNST & YOUNG LLP
 
Chicago, Illinois
June 11, 1996
 
                                      F-2

                       STERICYCLE, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                                                                                              DECEMBER 31,
                                                                                            ----------------
                                                                                             1994     1995
                                                                                            -------  -------
                                                                                             (IN THOUSANDS)
                                                                                               
ASSETS
Current assets:
Cash and cash equivalents.................................................................  $ 1,206  $   138
Accounts receivable, less allowance for doubtful accounts
 of $150 in 1994 and $138 in 1995.........................................................    4,817    3,731
Parts and supplies........................................................................      603      468
Prepaid expenses..........................................................................      405      431
Other current assets......................................................................      657      424
                                                                                            -------  -------
  Total current assets....................................................................    7,688    5,192
Property, plant and equipment:
Land......................................................................................       90       90
Buildings and improvements................................................................    5,348    5,394
Machinery and equipment...................................................................    7,240    7,644
Office equipment and furniture............................................................      390      406
Construction in progress..................................................................      784      281
                                                                                            -------  -------
                                                                                             13,852   13,815
Less accumulated depreciation and amortization............................................   (2,219)  (3,587)
                                                                                            -------  -------
  Property, plant and equipment-net.......................................................   11,633   10,228
                                                                                            -------  -------
Other assets:
Organization costs, net...................................................................       75       32
Goodwill, less accumulated amortization
 of $97 in 1994 and $417 in 1995..........................................................    7,782    7,517
Other.....................................................................................      631      522
                                                                                            -------  -------
  Total other assets......................................................................    8,488    8,071
                                                                                            -------  -------
    Total assets..........................................................................  $27,809  $23,491
                                                                                            -------  -------
                                                                                            -------  -------

                                                                                               
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Current portion of long-term debt.........................................................  $   603  $   297
Accounts payable..........................................................................    1,291    1,868
Accrued liabilities.......................................................................    2,655    1,956
Deferred revenue..........................................................................      629      632
                                                                                            -------  -------
    Total current liabilities.............................................................    5,178    4,753
                                                                                            -------  -------
Long-term debt:
Industrial development revenue bonds and other............................................    2,358    2,284
Note payable to bank......................................................................       --      858
Note payable..............................................................................    2,480    2,480
                                                                                            -------  -------
    Total long-term debt..................................................................    4,838    5,622
                                                                                            -------  -------
Other liabilities.........................................................................      247      542
Convertible redeemable preferred stock (par value $.01 per share; 550,200 shares
 authorized,
 489,079 issued and outstanding in 1994; none in 1995)....................................   62,909       --
Shareholders' Equity (net capital deficiency):
Common stock (par value $.01 per share, 30,000,000 shares authorized, 369,808 issued and
 outstanding in 1994, 5,582,385 issued and outstanding in 1995)...........................        4       55
Additional paid-in capital................................................................      811   49,621
Accumulated dividends on convertible redeemable preferred stock...........................  (13,001)      --
Notes receivable for common stock purchases...............................................     (619)      --
Accumulated deficit.......................................................................  (32,558) (37,102)
                                                                                            -------  -------
  Total shareholders' equity (net capital deficiency).....................................  (45,363)  12,574
                                                                                            -------  -------
    Total liabilities and shareholders' equity (net capital deficiency)...................  $27,809  $23,491
                                                                                            -------  -------
                                                                                            -------  -------

   The accompanying notes are an integral part of these financial statements.
 
                                      F-3

                       STERICYCLE, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
             (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)

                                                                               FOR THE YEARS ENDED DECEMBER 31,
                                                                              ----------------------------------
                                                                                 1993        1994        1995
                                                                              ----------  ----------  ----------
                                                                                             
Revenues....................................................................  $    9,141  $   16,141  $   21,339
Costs and expenses:
Cost of revenues............................................................       8,947      13,922      17,478
Selling, general and administrative expenses................................       5,988       7,927       8,137
                                                                              ----------  ----------  ----------
  Total costs and expenses..................................................      14,935      21,849      25,615
                                                                              ----------  ----------  ----------
Loss from operations........................................................      (5,794)     (5,708)     (4,276)
Other income (expense):
Interest income.............................................................         201         156           9
Interest expense............................................................        (245)       (260)       (277)
Other, net..................................................................        (190)         --          --
                                                                              ----------  ----------  ----------
  Total other income (expense)..............................................        (234)       (104)       (268)
                                                                              ----------  ----------  ----------
Net loss....................................................................      (6,028)     (5,812)     (4,544)
Less cumulative preferred dividends.........................................      (3,733)     (4,481)         --
                                                                              ----------  ----------  ----------
Loss applicable to common stock.............................................  $   (9,761) $  (10,293) $   (4,544)
                                                                              ----------  ----------  ----------
                                                                              ----------  ----------  ----------
Net loss per common share...................................................  $    (3.41) $    (3.59) $    (0.70)
                                                                              ----------  ----------  ----------
                                                                              ----------  ----------  ----------
Weighted average number of common shares outstanding........................   2,862,292   2,864,292   6,495,310
                                                                              ----------  ----------  ----------
                                                                              ----------  ----------  ----------

   The accompanying notes are an integral part of these financial statements.
 
                                      F-4

                       STERICYCLE, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            (NET CAPITAL DEFICIENCY)
                  YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
                                 (IN THOUSANDS)
                                  COMMON STOCK

                                                                              ACCUMULATED
                                                                              DIVIDENDS
                                                                                  ON         NOTES                        TOTAL
                                                                              CONVERTIBLE  RECEIVABLE                 SHAREHOLDERS'
                                          ISSUED AND             ADDITIONAL   REDEEMABLE   FOR COMMON                  EQUITY (NET
                                          OUTSTANDING             PAID-IN     PREFERRED      STOCK      ACCUMULATED      CAPITAL
                                            SHARES      AMOUNT    CAPITAL       STOCK      PURCHASES      DEFICIT      DEFICIENCY)
                                          -----------   ------   ----------   ----------   ----------   -----------   -------------
                                                                                                 
BALANCES AT DECEMBER 31, 1992...........       372       $  4     $   813     $ (4,787)      $(974)      $(20,718)      $(25,662)
Issuance of common stock................         6                     35                       (4)                           31
Shares repurchased and retired..........        (9)                   (37)                      46                             9
Accumulated dividends...................                                        (3,733)                                   (3,733)
Principal payments under notes
 receivable.............................                                                       277                           277
Net loss for the year ended December 31,
 1993...................................                                                                   (6,028)        (6,028)
                                             -----      ------   ----------   ----------     -----      -----------   -------------
BALANCES AT DECEMBER 31, 1993...........       369       $  4     $   811     $ (8,520)      $(655)      $(26,746)      $(35,106)
Issuance of common stock................         1
Accumulated dividends...................                                        (4,481)                                   (4,481)
Principal payments under notes
 receivable.............................                                                        36                            36
Net loss for the year ended December 31,
 1994...................................                                                                   (5,812)        (5,812)
                                             -----      ------   ----------   ----------     -----      -----------   -------------
BALANCES AT DECEMBER 31, 1994...........       370       $  4     $   811     $(13,001)      $(619)      $(32,558)      $(45,363)
Common stock issued in exchange for
 preferred stock........................     5,043         50      49,439                                                 49,489
Common stock issued -- $.01 per share...       350          3                                                                  3
Accumulated dividends canceled..........                                        13,001                                    13,001
Notes receivable canceled...............      (181)        (2)       (629)                     619                           (12)
Net loss for the year ended December 31,
 1995...................................                                                                   (4,544)        (4,544)
                                             -----      ------   ----------   ----------     -----      -----------   -------------
BALANCES AT DECEMBER 31, 1995...........     5,582       $ 55     $49,621     $     --       $  --       $(37,102)      $ 12,574
                                             -----      ------   ----------   ----------     -----      -----------   -------------
                                             -----      ------   ----------   ----------     -----      -----------   -------------

   The accompanying notes are an integral part of these financial statements.
 
                                      F-5

                       STERICYCLE, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                          FOR THE YEARS ENDED
                                                                                             DECEMBER 31,
                                                                                    -------------------------------
                                                                                      1993       1994       1995
                                                                                    ---------  ---------  ---------
                                                                                            (IN THOUSANDS)
                                                                                                 
OPERATING ACTIVITIES:
  Net loss........................................................................  $  (6,028) $  (5,812) $  (4,544)
Adjustments to reconcile net loss to
 net cash used in operating activities:
  Depreciation and amortization...................................................        869      1,306      1,916
  Settlement with regulatory agency...............................................         --         --        273
  Other, net......................................................................        100         --        129
Change in net operating assets, net of
 effect of acquisitions and divestitures:
  Accounts receivable.............................................................       (800)    (3,126)       866
  Parts and supplies..............................................................        (84)      (241)       135
  Prepaid expenses and other current assets.......................................       (174)      (486)       196
  Other assets....................................................................       (185)      (278)       128
  Accounts payable................................................................       (464)       879        570
  Accrued liabilities.............................................................     (1,026)       766       (838)
  Deferred revenue and other liabilities..........................................          2        280        298
                                                                                    ---------  ---------  ---------
Net cash used in operating activities.............................................     (7,790)    (6,712)      (871)
                                                                                    ---------  ---------  ---------
INVESTING ACTIVITIES:
  Capital expenditures............................................................     (3,368)    (1,910)      (726)
  Payments for acquisitions, net of cash acquired.................................         --     (1,530)      (459)
  Proceeds from divestitures......................................................         --         --        792
  Restricted certificate of deposit...............................................        285         --         --
                                                                                    ---------  ---------  ---------
Net cash used in investing activities.............................................     (3,083)    (3,440)      (393)
                                                                                    ---------  ---------  ---------
FINANCING ACTIVITIES:
  Repayment of long-term debt.....................................................       (220)       (79)      (171)
  Net proceeds from note payable to bank..........................................         --         --        858
  Proceeds from sale and leaseback of equipment...................................         --        882         --
  Principal payments under capital lease obligations..............................       (586)      (629)      (482)
  Proceeds from issuance of convertible redeemable preferred stock................      8,000      3,458         --
  Repurchase of preferred stock...................................................         (8)        --         --
  Principal payments on notes receivable for common stock purchases...............        319         36         --
  Issuance of common stock........................................................         --         --         18
  Other...........................................................................         --         --        (27)
                                                                                    ---------  ---------  ---------
Net cash provided by financing activities.........................................      7,505      3,668        196
                                                                                    ---------  ---------  ---------
  Net decrease in cash and cash equivalents.......................................     (3,368)    (6,484)    (1,068)
Cash and cash equivalents at beginning of year....................................     11,058      7,690      1,206
                                                                                    ---------  ---------  ---------
Cash and cash equivalents at end of year..........................................  $   7,690  $   1,206  $     138
                                                                                    ---------  ---------  ---------
                                                                                    ---------  ---------  ---------

   The accompanying notes are an integral part of these financial statements.
 
                                      F-6

                       STERICYCLE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1995
 
NOTE 1 -- DESCRIPTION OF BUSINESS
    Stericycle,  Inc. (the "Company") was incorporated in Delaware in March 1989
for the purpose  of providing collection,  transportation, treatment,  disposal,
reduction, reuse and recycling services for regulated medical waste to hospitals
and other healthcare providers in the United States and Canada.
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    PRINCIPLES OF CONSOLIDATION:
 
    The  consolidated financial  statements include the  accounts of Stericycle,
Inc. and its wholly-owned subsidiaries, Stericycle of Arkansas, Inc., Stericycle
of  Washington,   Inc.  and   SWD  Acquisition   Corporation.  All   significant
intercompany accounts and transactions have been eliminated.
 
    REVENUE RECOGNITION:
 
    The  Company recognizes revenue when the treatment of the infectious medical
waste is completed on-site or the  waste is shipped off-site for processing  and
disposal.  For waste  shipped off-site, all  associated costs  are recognized at
time of shipment.
 
    CASH EQUIVALENTS:
 
    The Company considers all highly liquid instruments with a maturity of  less
than three months when purchased to be cash equivalents.
 
    PROPERTY, PLANT AND EQUIPMENT:
 
    Property,   plant  and  equipment  are  stated  at  cost.  Depreciation  and
amortization, which includes the amortization  of assets recorded under  capital
leases,  are computed using  the straight-line method  over the estimated useful
lives of the assets as follows:
 
       Buildings and Improvements -- 10 to 30 years
       Machinery and Equipment -- 3 to 10 years
       Office Equipment and Furniture -- 5 to 10 years.
 
    ORGANIZATION COSTS:
 
    Organization costs are  amortized using the  straight-line method over  five
years.  Accumulated amortization at December 31,  1994 and 1995 was $141,000 and
$184,000, respectively.
 
    GOODWILL:
 
    Goodwill is amortized using  the straight-line method over  15 to 25  years.
The Company periodically assesses whether a change in circumstances has occurred
subsequent to an acquisition which would indicate that the future useful life or
carrying  value of goodwill should be  revised. The Company considers the future
earnings potential of the acquired  business in assessing the recoverability  of
goodwill.
 
    NEW PLANT DEVELOPMENT AND PERMITTING COSTS:
 
    The  Company expenses  costs associated  with the  operations of  new plants
prior to the commencement of services to customers and all initial and  on-going
costs related to permitting.
 
    STOCK OPTIONS:
 
    The  Company  accounts  for  stock  options  in  accordance  with Accounting
Principles Board  Opinion No.  25, "Accounting  for Stock  Issued to  Employees"
("APB  25"). In accordance with  APB 25, as the  exercise price of the Company's
employee stock options  equals the fair  value, as determined  by the  Company's
Board  of  Directors,  of  the  underlying  stock  on  the  date  of  grant,  no
compensation expense is recorded.
 
                                      F-7

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    RESEARCH AND DEVELOPMENT COSTS:
 
    The Company  expenses  costs associated  with  research and  development  as
incurred.  Research  and  development  expense  for  1993,  1994,  and  1995 was
$231,000, $1,082,000, and $975,000, respectively.
 
    INCOME TAXES:
 
    Deferred income taxes reflect the  net tax effects of temporary  differences
between  the carrying amounts of assets  and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax  liabilities
and  assets  are  determined  based  on  the  difference  between  the financial
statement and tax  basis of assets  and liabilities using  enacted tax rates  in
effect for the year in which the differences are expected to reverse.
 
    LONG-LIVED ASSETS:
 
    In  March 1995,  the Financial  Accounting Standards  Board issued Financial
Accounting Standards  No.  121, "Accounting  for  the Impairment  of  Long-Lived
Assets  and for Long-Lived Assets to Be Disposed Of" ("FAS 121"), which requires
impairment losses to be  recorded on long-lived assets  used in operations  when
indicators  of impairment are present and  the undiscounted cash flows estimated
to be generated by those assets are  less than the assets' carrying amount.  FAS
121  also addresses the accounting for long-lived assets that are expected to be
disposed of.  The Company  will adopt  FAS 121  in 1996  and, based  on  current
circumstances,  does not believe the effect of  adoption will be material to the
Company's financial position.
 
    FINANCIAL INSTRUMENTS:
 
    The Company's financial  instruments consist of  cash and cash  equivalents,
accounts  receivable and  payable and long-term  debt. The fair  values of these
financial instruments were not materially different from their carrying  values,
except  for long-term debt  as discussed in Note  5. Financial instruments which
potentially subject  the  Company  to  concentrations  of  credit  risk  consist
principally   of  accounts  receivable.  The  Company  performs  ongoing  credit
evaluations of  its  customers and  maintains  allowances for  potential  credit
losses.  These losses, when incurred, have been within the range of management's
expectations.
 
    USE OF ESTIMATES:
 
    The  preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect  the amounts  reported in the  financial statements  and
accompanying notes. Actual results could differ from those estimates.
 
    EARNINGS PER SHARE:
 
    Earnings  per share computations are based on the weighted average number of
shares of common  stock outstanding  and include  the dilutive  effect of  stock
options  and warrants  using the  treasury stock  method. The  computations also
reflect the effect of the  stock split and the  redesignation of Class A  common
stock and Class B common stock as common stock as discussed in Note 7.
 
    Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin
No.  83, stock options and warrants granted  by the Company during the 12 months
immediately preceding the initial filing  of a registration statement have  been
included as common stock equivalents as if they were outstanding for all periods
presented,  whether or not dilutive, because the  sale or option price per share
was below the initial public offering price per share.
 
NOTE 3 -- INCOME TAXES
    At December 31, 1995, the Company  had net operating loss carryforwards  for
income  tax purposes of  approximately $36,493,000, expiring  beginning in 2004.
Based on the  Internal Revenue  Code of  1986, as  amended, and  changes in  the
ownership  of the Company,  utilization of the  net operating loss carryforwards
may be  subject to  annual limitations,  which could  significantly restrict  or
partially eliminate the utilization of the net operating losses.
 
                                      F-8

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 3 -- INCOME TAXES (CONTINUED)
    The  Company's deferred tax  liabilities and assets as  of December 31, 1994
and 1995 are as follows:

                                                                     1994            1995
                                                                --------------  --------------
                                                                          
Deferred tax liabilities:
  Property, plant, and equipment..............................  $     (280,000) $     (319,000)
  Goodwill....................................................         (42,000)       (122,000)
                                                                --------------  --------------
Total deferred tax liabilities................................        (322,000)       (441,000)
Deferred tax assets:
  Accrued liabilities.........................................         395,000         298,000
  Capital lease obligations...................................         146,000              --
  Research and development costs..............................              --         324,000
  Other.......................................................          60,000         190,000
  Net operating tax loss carryforward.........................      13,214,000      14,597,000
                                                                --------------  --------------
Total deferred tax assets.....................................      13,815,000      15,409,000
                                                                --------------  --------------
Net deferred tax assets.......................................      13,493,000      14,968,000
Valuation allowance...........................................     (13,493,000)    (14,968,000)
                                                                --------------  --------------
  Net deferred tax assets.....................................  $           --  $           --
                                                                --------------  --------------
                                                                --------------  --------------

NOTE 4 -- ACQUISITIONS AND DIVESTITURES
    In January 1996, the Company purchased  the customer list and certain  other
assets  of WMI Medical  Services of New  England, Inc. for  $100,000 in cash and
$492,000 in notes payable issued to sellers.
 
    In July 1995, the  Company sold selected customer  lists and related  assets
for  $248,000. The  Company recognized  a gain  of $50,000  on this transaction,
which is included in the 1995  Consolidated Statement of Operations as  Selling,
General and Administrative Expense.
 
    In  June 1995  the Company  purchased the  customer list  and transportation
equipment and assumed certain contract  obligations of Safetech Health Care  for
$160,000.
 
    In  April 1995, the Company sold the St.  Louis portion of its business to a
competitor. The Company received $544,000 as  payment for the customer list  and
concurrently  agreed  to  resolve  an anti-trust  lawsuit  brought  against this
competitor by the Company. The Company recognized a gain on this transaction  of
$408,000,  which is included in the 1995 Consolidated Statement of Operations as
Selling, General and Administrative Expense.
 
    In September 1994, SWD Acquisition Corporation, a wholly owned subsidiary of
the Company, purchased selected assets  and assumed certain liabilities of  Safe
Way  Disposal Systems, Inc. ("Safe Way").  The assets purchased consisted of the
customer list, containers,  transportation equipment and  office equipment.  The
Company  paid $900,000 in cash  and issued a $2,480,000  note payable and 23,929
shares of preferred stock with a liquidation  value of $100 per share. The  note
payable and stock are held in escrow (see Note 5). As part of the agreement, the
Company  agreed to pay up to $575,000 of certain current liabilities of Safe Way
upon its  request. In  consideration  for these  payments, the  preferred  stock
issued  under such  agreement would  be reduced.  As of  December 31,  1995, the
Company has paid $468,000 of additional liabilities.
 
    As a result  of the Company's  1995 recapitalization, the  23,929 shares  of
preferred stock issued to Safe Way were reclassified as 129,985 shares of common
stock. See further discussion in Note 7.
 
    In  March  1994, the  Company purchased  the  customer list,  containers and
transportation equipment of  Recovery Corporation  of Illinois  for $630,000  in
cash  and 5,000 shares of  preferred stock with a  liquidation value of $100 per
share.
 
                                      F-9

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 4 -- ACQUISITIONS AND DIVESTITURES (CONTINUED)
    For financial reporting purposes,  each acquisition was  accounted for as  a
purchase,   and  the  purchase  price  was  allocated  to  assets  acquired  and
liabilities assumed based  on the  estimated fair market  value at  the date  of
acquisition.  The excess  of the  purchase price over  fair market  value of net
assets acquired is reflected in the accompanying consolidated balance sheets  as
goodwill. The results of operations of these acquired businesses are included in
the  consolidated statements  of operations  from the  date of  acquisition. The
effect of  these  acquisitions  would  not have  a  significant  effect  on  the
Company's operations, except for the Safe Way acquisition.
 
    Based  on unaudited  data, the  following table  presents selected financial
information for the Company and its subsidiaries on a pro forma basis,  assuming
the Company and Safe Way had been combined since January 1, 1993:

                                                               YEAR ENDED           YEAR ENDED
                                                            DECEMBER 31, 1993    DECEMBER 31, 1994
                                                           -------------------  -------------------
                                                                          
Revenues.................................................      $    16,655          $    20,494
Loss applicable to common stock..........................          (10,604)             (10,597)
Net loss per common share................................      $     (3.70)         $     (3.70)

    The pro forma results are not necessarily indicative of future operations or
the  actual results that would  have occurred had the  Safe Way acquisition been
made as of January 1, 1993.
 
NOTE 5 -- LONG-TERM DEBT
    Long-term debt consists of the following at December 31:

                                                                               1994       1995
                                                                             ---------  ---------
                                                                                (IN THOUSANDS)
                                                                                  
Industrial development revenue bonds.......................................  $   1,753  $   1,633
Obligations under capital leases...........................................        970        488
Note payable to bank.......................................................         --        858
Note payable...............................................................      2,480      2,480
Mortgage payable and other.................................................        238        460
                                                                             ---------  ---------
                                                                             $   5,441  $   5,919
Less: Current portion......................................................        603        297
                                                                             ---------  ---------
    TOTAL..................................................................  $   4,838  $   5,622
                                                                             ---------  ---------
                                                                             ---------  ---------

    On October 31,  1995, the Company  entered into a  revolving line of  credit
with Silicon Valley Bank. To secure this line of credit, the Company granted the
bank  a lien on all of the Company's assets. Borrowings under the line of credit
are limited  to  the lesser  of  $2,500,000 or  a  specified percentage  of  the
Company's  eligible receivables, as defined in  the loan and security agreement.
Outstanding borrowings bear interest at the bank's prime rate (8.5% at  December
31,  1995), plus 3.0%.  At December 31,  1995, the outstanding  loan balance was
$858,000 and  the  Company  had  unused borrowing  capacity  of  $821,000.  This
agreement  has a maturity date  of October 31, 1997  and is subject to automatic
renewal for  additional one  year  periods, unless  60  days written  notice  is
provided by either party in advance of the maturity date. Under the terms of the
loan and security agreement, the Company is, among other things, restricted from
paying  dividends and  is required  to maintain  minimum levels  of tangible net
worth and debt to tangible net worth.
 
    In 1995,  an agreement  was  reached with  the  Rhode Island  Department  of
Environmental  Management regarding two notices of  violation issued in 1994 and
1995. Although the  Company believed  that the allegations  were meritless,  the
agreement  was entered into in order to resolve the matter in the best interests
of the Company and its customers in  a timely manner. The Company agreed to  pay
$35,000  each  year from  1995 to  1998, $50,000  in 1999,  $60,000 in  2000 and
$150,000 in 2001 to the Rhode Island Air and Water Protection Fund. In addition,
the
 
                                      F-10

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 5 -- LONG-TERM DEBT (CONTINUED)
Company agreed  to  perform  community  services and  conduct  seminars  over  a
five-year  period. The Company recorded this  obligation based on the discounted
cash flows expected to be paid over the term of agreement, using a discount rate
of 11.75%. The  recorded obligation of  $240,000 at December  31, 1995 has  been
included in mortgage payable and other long-term debt. An expense of $458,000 is
included  in the 1995  Consolidated Statement of  Operations as Selling, General
and Administrative Expense.  This amount  reflects the  recorded obligation  and
legal fees incurred in the settlement.
 
    In 1994, a non-interest bearing note payable in the amount of $2,480,000 was
issued  as part of the purchase of the  net assets of Safe Way. Upon maturity, a
portion of the note is payable in 98,001 shares of common stock (see Note 7) and
a portion is payable in  cash. The note will mature  on the earlier of June  25,
1997 or an initial public offering, as defined in the purchase agreement between
the Company and Safe Way.
 
    During  1992 the  Company entered  into certain  obligations to  finance the
development of its Woonsocket, Rhode  Island and Morton, Washington  facilities.
The  development and purchase of substantially all of the property and equipment
for the Woonsocket,  Rhode Island  facility was  financed from  the issuance  of
industrial  development  revenue bonds.  The bonds  are  due in  various amounts
through 2017  at fixed  interest rates  ranging  from 5.75%  to 7.375%  and  are
collateralized  by the  property and equipment  at the  Woonsocket, Rhode Island
facility. The terms of an agreement entered into in connection with the issuance
of the  bonds  contain, among  other  provisions, requirements  for  maintaining
defined levels of working capital and various financial ratios including debt to
net worth.
 
    As part of the development of the Company's Morton, Washington facility, the
Company  entered into a loan agreement with  a bank for $255,000. The Company is
required to make monthly payments of  $2,361 for principal and interest  through
2007. Interest paid is based upon a specified index plus 4.5%. The interest rate
was  9.54% and 9.78%  at December 31,  1994 and 1995,  respectively. The loan is
collateralized by the property and equipment at the Morton, Washington facility.
 
    Payments due on long-term debt, excluding capital lease obligations,  during
each of the five years subsequent to December 31, 1995 are as follows:

                                                                      (IN THOUSANDS)
                                                                   
1996................................................................     $     159
1997................................................................         3,514
1998................................................................           182
1999................................................................           208
2000................................................................           223

    The  Company paid interest of $282,000,  $271,000 and $262,000 for the years
ended December 31, 1993, 1994 and 1995, respectively.
 
    The fair  value  of the  Company's  long term  debt  was estimated  using  a
discounted  cash  flow  analysis,  based on  the  Company's  current incremental
borrowing rates for  similar types  of borrowing arrangements.  At December  31,
1995 the fair value of the Company's debt was approximately $4,275,000.
 
    CAPITAL LEASES:
 
    In  February 1994, the Company entered into a sale and leaseback transaction
for equipment acquisitions at the Yorkville, Wisconsin facility in the amount of
$882,000. No gain or loss  was recognized on the  sale and leaseback. The  lease
arrangement  has a term  of 60 months and  at the end of  the lease, the Company
will have the option to  renew the lease, return  the equipment or purchase  the
equipment  at a  fair market value  not to  exceed 11% of  the original purchase
price.
 
                                      F-11

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 5 -- LONG-TERM DEBT (CONTINUED)
    The Company is the  lessee of machinery and  equipment under capital  leases
expiring  in 1999. At  December 31, property under  capital leases included with
Property, Plant and Equipment in the accompanying Consolidated Balance Sheets is
as follows:

                                                                              1994       1995
                                                                            ---------  ---------
                                                                               (IN THOUSANDS)
                                                                                 
Machinery and equipment...................................................  $   1,880  $     882
Less-Accumulated depreciation and amortization............................       (345)      (169)
                                                                            ---------        ---
                                                                            $   1,535  $     713
                                                                            ---------        ---
                                                                            ---------        ---

    Minimum future lease payments under capital leases are as follows:

                                                                       (IN THOUSANDS)
                                                                   
1996................................................................      $     176
1997................................................................            176
1998................................................................            176
1999................................................................             26
                                                                              -----
Total minimum lease payments........................................            554
Less -- Amounts representing interest...............................            (66)
                                                                              -----
Present value of net minimum lease payment..........................            488
Less -- Current portion.............................................           (138)
                                                                              -----
Long-term obligations under capital leases..........................      $     350
                                                                              -----
                                                                              -----

NOTE 6 -- LEASE COMMITMENTS
    The Company leases various plant equipment, office furniture and  equipment,
motor  vehicles and office and warehouse  space under operating lease agreements
which expire at various dates over the next seven years. The leases for most  of
the properties contain renewal provisions.
 
    Rent  expense  for  1993,  1994  and  1995  was  $1,930,000,  $1,643,000 and
$1,739,000, respectively.
 
    Minimum future rental  payments under non-cancelable  operating leases  that
have  initial or remaining terms  in excess of one year  as of December 31, 1995
for each of the next five years and in the aggregate are as follows:

                                                                      (IN THOUSANDS)
                                                                   
1996................................................................     $   1,324
1997................................................................         1,132
1998................................................................           985
1999................................................................           591
2000................................................................           442
Thereafter..........................................................           462
                                                                            ------
    Total minimum rental payments...................................     $   4,936
                                                                            ------
                                                                            ------

NOTE 7 -- COMMON AND PREFERRED STOCK
    STOCK SPLIT:
 
    In June 1996,  the Company's  Board of Directors  authorized a  1-for-5.3089
reverse stock split, effective upon the closing of an initial public offering of
the  Company's common  stock. Upon  the closing  of an  initial public offering,
5,236,209 shares of Class A  common stock and 346,176  shares of Class B  common
stock  will be redesignated as a like number  of shares of common stock. In June
1996, the Company's Board of Directors and
 
                                      F-12

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 7 -- COMMON AND PREFERRED STOCK (CONTINUED)
shareholders authorized a decrease in the number of authorized shares of  common
stock from 58,000,000 shares to 30,000,000 shares. All common shares, per share,
weighted  average shares outstanding and stock option data have been adjusted to
reflect this stock split, the  redesignation of the Class  A and Class B  common
stock as common stock, and the decrease in authorized common stock.
 
    The  following  table  details the  convertible  redeemable  preferred stock
activities for each  of the years  in the three-year  period ended December  31,
1995:

                                                                         SHARES
                                                                       -----------      AMOUNT
                                                                                    --------------
                                                                                    (IN THOUSANDS)
                                                                              
Balances at December 31, 1992........................................         356     $   40,353
  Issuance of Class E preferred stock................................          70          8,000
  Shares retired.....................................................          --             (8)
  Accumulated dividends..............................................          --          3,733
                                                                            -----        -------
Balances at December 31, 1993........................................         426     $   52,078
  Issuance of Classes F, G, H & I preferred stock....................          63          6,350
  Accumulated dividends..............................................          --          4,481
                                                                            -----        -------
Balances at December 31, 1994........................................         489     $   62,909
  Canceled shares of preferred stock.................................          (4)          (419)
  Common stock issued in exchange for preferred stock................        (485)       (62,490)
                                                                            -----        -------
Balances at December 31, 1995........................................   $      --     $       --
                                                                            -----        -------
                                                                            -----        -------

    In  August 1995  the Board of  Directors adopted a  plan of recapitalization
which was approved by the Company's stockholders in September 1995, pursuant  to
which  the Company reclassified its outstanding convertible redeemable preferred
stock as 5,043,418 shares  of common stock and  increased the authorized  common
stock  to 57,000,000 shares from 9,400,000 shares and in April 1996 authorized a
further increase in the authorized common stock to 58,000,000 (see Note 8).
 
    Shares of the Company's  common stock have been  reserved for issuance  upon
conversion  of  the Safe  Way  note payable  (see Note  5)  and the  exercise of
warrants and options. These shares have been reserved as follows at December 31,
1995:

                                                                
Safe Way note payable............................................     98,001
1993 Plan options................................................      9,943
1995 Plan options................................................    923,286
Warrants.........................................................    242,396
                                                                   ---------
    Total shares reserved........................................  1,273,626
                                                                   ---------
                                                                   ---------

    As part  of the  plan of  recapitalization, all  conversion, redemption  and
liquidation  rights associated  with the convertible  redeemable preferred stock
were terminated in  exchange for  the issuance of  shares of  common stock.  The
liquidation  preference  of the  preferred  stock as  of  December 31,  1994 was
$61,909,112 and was canceled by the plan of recapitalization.
 
                                      F-13

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 8 -- STOCK OPTIONS AND WARRANTS
 
    STOCK OPTIONS:
 
    In September  1993,  the  Company's shareholders  approved  an  amended  and
restated stock option plan (the "1993 Plan"), which provided for the granting of
options  to purchase up to 113,018 shares of common stock. In November 1995, the
outstanding options of all current  employees were canceled in conjunction  with
the Company's recapitalization (see Note 7).
 
    The following table summarizes option activity through December 31, 1995:

                                                                            OPTION PRICE    # SHARES    EXERCISABLE
                                                                           --------------  -----------  -----------
                                                                                               
Outstanding at December 31, 1992.........................................  $  5.31-$42.47      35,412        5,274
Granted..................................................................  $         5.84      45,961
Granted..................................................................  $         6.90       1,130
                                                                                           -----------
Outstanding at December 31, 1993.........................................  $  5.31-$42.47      82,503       15,626
Granted..................................................................  $         5.84         377
Granted..................................................................  $         6.90      29,254
Canceled.................................................................                      (2,405)
                                                                                           -----------
Outstanding at December 31, 1994.........................................  $  5.31-$42.47     109,729       39,864
Canceled.................................................................                     (99,786)
                                                                                           -----------
Outstanding at December 31, 1995.........................................  $  5.31-$42.47       9,943        4,938
                                                                                           -----------
                                                                                           -----------

    In  1995,  the Company's  Board of  Directors  and shareholders  approved an
Incentive Compensation Plan (the "1995  Plan"), which provides for the  granting
of additional shares of common stock in the form of stock options and restricted
stock  to employees,  officers, directors  and consultants  of the  Company. The
exercise price of options granted under the 1995 Plan must be at least equal  to
the  fair market value  of the common  stock on the  date of grant.  The sale or
transfer of outstanding shares of common stock is subject to the right of  first
refusal  by the Company.  As of December  31, 1995, options  to purchase 923,292
shares of common stock at an exercise price of $0.53 per share had been  granted
and were outstanding, of which 537,682 were exercisable.
 
    WARRANTS:
 
    The  Company, in  conjunction with a  lease financing  agreement, issued the
lessor warrants to purchase up  to 14,805 shares of  common stock at $18.58  per
share.  At December 31, 1995, all of  these warrants were outstanding and expire
on March 3, 1998.
 
    The Company, in connection with the  issuance of preferred stock, which  was
subsequently  reclassified  as common  stock (see  Note  7), issued  warrants to
purchase up to 6,773 shares of common  stock at an exercise price of $69.02  per
share.  At December 31,  1995, warrants to  purchase 6,773 shares  at $69.02 per
share were issued and outstanding. These warrants expire on March 16, 1999.
 
    During 1995, several of the Company's shareholders and directors provided  a
bridge  loan to the  Company. The loan  totaled $830,000 with  interest at prime
plus 3%. In addition to the interest, the lenders received warrants to  purchase
220,559 shares of common stock at $1.59 per share. These warrants expire on July
31,  2000. The bridge  loan was repaid  in November 1995  with proceeds from the
Company's revolving line of credit.
 
NOTE 9 -- REGISTRATION AGREEMENT
    The Company  is a  party to  a Registration  Agreement which  gives  certain
shareholders of the Company registration rights for their shares. The parties to
the Registration Agreement are the original holders of the Company's prior Class
A,  B,  C,  D,  E,  F,  H, and  I  preferred  stock.  After  the  Company's 1995
recapitalization, the
 
                                      F-14

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 9 -- REGISTRATION AGREEMENT (CONTINUED)
Registration Agreement  was  amended to  provide  that the  registration  rights
applied  to the  shares of  common stock  that the  parties to  the Registration
Agreement received  pursuant  to  the recapitalization,  shares  issuable  under
certain  warrants issued to purchasers of  the Company's prior Class F preferred
stock and the common stock to be delivered by the Company in payment of the Safe
Way Note. According to the Registration  Agreement (i) at any time, the  holders
of  a majority of  the shares which  are subject to  the registration rights can
request registration of their  shares on Form  S-1 (a "Long-Form  Registration")
and  the holders  of at least  25% of  these shares can  request registration of
their shares on Form S-2 or S-3, (ii) at any time after either an initial public
offering or July  10,1996, one shareholder  who is a  party to the  Registration
Agreement  may request  a Long  Form registration,  (iii) at  any time  after an
initial public offering, another shareholder who is a party to the  Registration
Agreement  can request  a Long  Form registration, and  (iv) the  parties to the
Registration  Agreement  have  the  right   to  include  their  shares  in   any
registration  which is requested  or in any other  registration that the Company
may otherwise undertake. If any registration is requested, the Company will  use
its best efforts to effect the requested registration at its own expense.
 
NOTE 10 -- EMPLOYEE BENEFIT PLAN
    The  Company  has a  defined contribution  retirement savings  plan covering
substantially all employees of the Company. Each participant may elect to  defer
a portion of his or her compensation subject to certain limitations. The Company
may  match up to 30%  of the first $1,000  contributed to the retirement savings
plan by each employee. The Company's contributions for the years ended  December
31,  1993,  1994  and  1995  were  approximately  $9,000,  $13,000  and $14,000,
respectively.
 
NOTE 11 -- RELATED PARTIES
    In October 1993, the Company entered into an Alliance Agreement ("Alliance")
with an investor in the Company. The purpose of the Alliance was to develop  new
technologies  and procedures for recycling  regulated medical waste. The Company
devoted resources to the  Alliance research and  development program during  the
first  18 months of  the Alliance. The  investor has rights  with respect to the
development of any Alliance technology as  part of the research and  development
program.  During the initial 18 months of the Alliance, the Company provided for
$1 million of  research and development  costs under this  agreement. A  license
agreement  is  effective upon  the non-renewal  of the  Alliance and  grants the
investor a license to use the Alliance technology subject to certain conditions.
 
    Under  the  Alliance,  the  investor   and  the  Company  have  an   ongoing
relationship to provide services and products to the healthcare market place.
 
                                      F-15

                       STERICYCLE, INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

                                                                                          MARCH 31, 1996
                                                                                          --------------
                                                                                          (IN THOUSANDS)
                                                                                       
ASSETS
Current Assets:
  Cash and cash equivalents.............................................................    $      120
  Accounts receivable, less allowance for doubtful accounts of $146.....................         3,995
  Parts and supplies....................................................................           436
  Prepaid expenses......................................................................           153
  Other current assets..................................................................           458
                                                                                          --------------
    Total current assets................................................................         5,162
Property, Plant and Equipment:
  Land..................................................................................            90
  Buildings and improvements............................................................         5,406
  Machinery and equipment...............................................................         8,171
  Office equipment and furniture........................................................           408
  Construction in progress..............................................................           281
                                                                                          --------------
                                                                                                14,356
Less accumulated depreciation and amortization..........................................        (3,961)
                                                                                          --------------
    Property, plant and equipment -- Net................................................        10,395
Other Assets:
  Organization costs, net...............................................................            21
  Goodwill, less accumulated amortization of $496.......................................         7,797
  Other.................................................................................           501
                                                                                          --------------
    Total other assets..................................................................         8,319
                                                                                          --------------
      Total assets......................................................................    $   23,876
                                                                                          --------------
                                                                                          --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.....................................................    $      759
  Accounts payable......................................................................         1,703
  Accrued liabilities...................................................................         2,009
  Deferred revenue......................................................................           652
                                                                                          --------------
    Total current liabilities...........................................................         5,123
Long-Term Debt:
  Industrial development revenue bonds and other........................................         2,564
  Note payable to bank..................................................................           952
  Note payable..........................................................................         2,480
                                                                                          --------------
    Total long-term debt................................................................         5,996
Other Liabilities.......................................................................           529
Shareholders' Equity:
  Common stock (par value $.01 per share; 30,000,000 shares authorized, 5,616,651 issued
   and outstanding).....................................................................            56
  Additional paid-in capital............................................................        49,621
  Accumulated deficit...................................................................       (37,449)
                                                                                          --------------
    Total shareholders' equity..........................................................        12,228
                                                                                          --------------
      Total liabilities and shareholders' equity........................................    $   23,876
                                                                                          --------------
                                                                                          --------------

   The accompanying notes are an integral part of these financial statements.
 
                                      F-16

                       STERICYCLE, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                                                FOR THE QUARTER ENDED
                                                                                      MARCH 31,
                                                                              --------------------------
                                                                                  1995          1996
                                                                              ------------  ------------
                                                                                (IN THOUSANDS, EXCEPT
                                                                              SHARE AND PER SHARE DATA)
                                                                                      
Revenues....................................................................  $      5,446  $      5,578
 
Costs and expenses:
  Cost of revenues..........................................................         4,227         4,337
  Selling, general and administrative.......................................         2,762         1,505
                                                                              ------------  ------------
    Total costs and expenses................................................         6,989         5,842
                                                                              ------------  ------------
 
Loss from operations........................................................        (1,543)         (264)
 
Other income (expense):
  Interest income...........................................................             6            --
  Interest expense..........................................................           (54)          (83)
                                                                              ------------  ------------
    Total other income (expense)............................................           (48)          (83)
                                                                              ------------  ------------
Net loss....................................................................        (1,591)         (347)
Less cumulative preferred dividends.........................................        (1,573)           --
                                                                              ------------  ------------
Loss applicable to common stock.............................................  $     (3,164) $       (347)
                                                                              ------------  ------------
                                                                              ------------  ------------
Net loss per common share...................................................  $      (1.10) $      (0.05)
                                                                              ------------  ------------
                                                                              ------------  ------------
Weighted average number of common shares outstanding........................     2,864,292     6,577,287
                                                                              ------------  ------------
                                                                              ------------  ------------

   The accompanying notes are an integral part of these financial statements.
 
                                      F-17

                       STERICYCLE, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                                                         FOR THE QUARTER
                                                                                         ENDED MARCH 31,
                                                                                       --------------------
                                                                                         1995       1996
                                                                                       ---------  ---------
                                                                                          (IN THOUSANDS)
                                                                                            
OPERATING ACTIVITIES:
  Net loss...........................................................................  $  (1,591) $    (347)
  Adjustments to reconcile net loss to
   net cash (used in) provided by operating activities:
    Depreciation and amortization....................................................        443        479
    Asset write down.................................................................        503         --
  Change in net operating assets,
   net of effect of acquisitions and divestitures:
    Accounts receivable..............................................................         64        (81)
    Parts and supplies...............................................................         67         48
    Prepaid expenses and other.......................................................        128        245
    Other assets.....................................................................       (115)        32
    Accounts payable.................................................................        311       (165)
    Accrued liabilities..............................................................       (685)        63
    Deferred revenue and other liabilities...........................................        372          7
                                                                                       ---------  ---------
Net cash (used in) provided by operating activities..................................       (503)       281
                                                                                       ---------  ---------
INVESTING ACTIVITIES:
  Capital expenditures...............................................................         (9)      (169)
  Payments for acquisitions, net of cash acquired....................................         --       (100)
                                                                                       ---------  ---------
Net cash used in investing activities................................................         (9)      (269)
                                                                                       ---------  ---------
FINANCING ACTIVITIES:
  Repayment of long-term debt........................................................        (30)       (82)
  Net proceeds from note payable to bank.............................................         --         94
  Principal payments under capital lease obligations.................................       (136)       (42)
                                                                                       ---------  ---------
Net cash used in financing activities................................................       (166)       (30)
                                                                                       ---------  ---------
  Net decrease in cash and cash equivalents..........................................       (678)       (18)
Cash and cash equivalents at beginning of period.....................................      1,206        138
                                                                                       ---------  ---------
Cash and cash equivalents at end of period...........................................  $     528  $     120
                                                                                       ---------  ---------
                                                                                       ---------  ---------
Supplementary disclosure of cash flow information -- acquisition of machinery and
 equipment financed with a capital lease.............................................  $      --  $     364
                                                                                       ---------  ---------
                                                                                       ---------  ---------

   The accompanying notes are an integral part of these financial statements.
 
                                      F-18

                       STERICYCLE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 MARCH 31, 1996
 
NOTE 1 -- BASIS OF PRESENTATION
    The  accompanying  1995 and  1996  unaudited interim  consolidated financial
statements have  been prepared  pursuant to  the rules  and regulations  of  the
Securities and Exchange Commission. Certain information and footnote disclosures
normally  included  in  annual  consolidated  financial  statements  prepared in
accordance with generally accepted accounting principles have been condensed  or
omitted  pursuant to such  rules and regulations,  although the Company believes
these disclosures are adequate to make the information presented not misleading.
In the opinion of management, all adjustments necessary for a fair  presentation
for  the periods  presented have  been reflected and  are of  a normal recurring
nature. These  interim  consolidated  financial statements  should  be  read  in
conjunction with the consolidated financial statements and notes thereto for the
three  years  ended  December  31,  1995.  The  results  of  operations  for the
three-month period ended March  31, 1996 are not  necessarily indicative of  the
results that may be achieved for the entire year ending December 31, 1996.
 
NOTE 2 -- ACQUISITIONS
    On April 30, 1996, the Company purchased the customer list and certain other
assets, totaling approximately $200,000, of Sharps Incinerator of Fort, Inc. for
$757,000  in cash of which $562,000 was  payable at closing and the balance plus
interest (prime plus 1%) is  due on November 1,  1996. This transaction will  be
accounted for using the purchase method of accounting.
 
    On  May 1, 1996, the  Company purchased the customer  list and certain other
assets of Doctors  Environmental Control, Inc.  for $400,000 in  cash and  notes
payable  issued for $600,000, which are payable on May 1, 1998. In addition, the
Company assumed two vehicle  leases totaling $77,000  and delivered four  option
agreements to shareholders of the seller giving them an option to purchase up to
a  total  of 53,816  shares of  the Company's  common stock.  The price  for the
purchase of the common stock upon exercise  of each option is (i) the  surrender
and  cancellation of the  note payable, or  (ii) in the  event that any payments
have been made under  the notes payable, the  surrender and cancellation of  the
note  payable and payment of cash such that the cash payment and the outstanding
balance of principal and interest on the note payable together equal the balance
of the note as if no payments had been made on the note payable. The transaction
will be accounted for using the purchase method of accounting.
 
    These acquisitions are not significant to the 1996 first quarter results.
 
NOTE 3 -- BRIDGE LOAN
    In May 1996,  the Company  obtained a  $1,000,000 bridge  loan from  certain
shareholders,  directors and officers to provide  working capital and to finance
additional acquisitions.  The  notes are  subordinated  to bank  debt  and  bear
interest  at the rate of  7% per annum unless repaid  prior to January 1997. The
notes are due  in May  1997 or  within 30 days  after completion  of an  initial
public  offering in which the Company raises at least $20,000,000. In connection
with this loan, the Company issued warrants  to members of the lending group  to
purchase  an aggregate of 226,037 shares of common stock at $7.96 per share. The
warrants expire in May 2001.
 
NOTE 4 -- STOCK OPTIONS
    During the  quarter ended  March 31,  1996 the  Board of  Directors  granted
options  to purchase 49,073 shares of common stock to key employees. The options
will vest over 12 to 36 months at an exercise price of $0.53 per share.
 
    Additionally, during the  first quarter  the Board approved  the options  to
purchase  30,769 shares of  common stock by various  consultants to the Company.
The options carry an exercise price of $2.12 per share.
 
    In April 1996, the  Board of Directors granted  options to purchase  157,189
shares  of common stock to employees. The options will vest over 12 to 36 months
and carry an exercise price of $1.99 per share.
 
    In June 1996,  the Company's Board  of Directors adopted  a Directors  Stock
Option  Plan. The plan authorizes stock options for a total of 285,000 shares of
common  stock   to  be   granted   to  eligible   directors  of   the   Company.
 
                                      F-19

                       STERICYCLE, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)
                                 MARCH 31, 1996
 
NOTE 4 -- STOCK OPTIONS (CONTINUED)
Under  such plan, each director who is not an employee of the Company and who is
elected or  re-elected as  a director  at the  annual meeting  of the  Company's
stockholders,  beginning  with the  annual meeting  in 1997,  will automatically
receive an option on the date of the annual meeting. The option will be for  the
number  of shares of  common stock determined  by multiplying 7,000  shares by a
fraction, the numerator of which is $12.00  and the denominator of which is  the
exercise  price, subject to a maximum option grant of 9,500 shares and a minimum
option grant of 4,500 shares. The term of each option will be six years from the
date of  grant and  will vest  in 12  equal quarterly  installments and  may  be
exercised only when it is vested and only while the holder of the option remains
a director of the Company or during the 90-day period following the date that he
or  she ceases to serve as a director.  With the approval of the Company's Board
of Directors, the holder of an option  may pay the exercise price by  delivering
other  shares of common stock, or by directing the Company to withhold shares of
common stock otherwise issuable upon exercise of the option having a fair market
value on the date of exercise equal to the exercise price.
 
NOTE 5 -- INCOME TAXES
    The Company incurred a net operating loss in both the first quarter of  1995
and  1996. Any tax  benefit resulting from  these net operating  losses has been
offset by a valuation allowance.
 
NOTE 6 -- EMPLOYEE STOCK PURCHASE PLAN
    Under a plan approved by the Board of Directors, employees of Stericycle may
purchase shares of common stock  at a price of $2.12  per share. Under terms  of
the  plan employees are allowed to purchase  shares by December 31, 1995 and pay
for the  stock during  1996. Employees  elected to  purchase a  total of  30,232
shares of common stock.
 
NOTE 7 -- STOCK SPLIT
    STOCK SPLIT:
 
    In  June 1996,  the Company's Board  of Directors  authorized a 1-for-5.3089
reverse stock split, effective upon the closing of an initial public offering of
the Company's Common  Stock. Upon  the closing  of an  initial public  offering,
5,236,209  shares of Class A  common stock and 346,176  shares of Class B common
stock will be redesignated as a like  number of shares of common stock. In  June
1996, the Company's Board of Directors and shareholders authorized a decrease in
the  number  of authorized  shares  of common  stock  from 58,000,000  shares to
30,000,000 shares.  All  common  shares,  per  share,  weighted  average  shares
outstanding  and  stock option  data have  been adjusted  to reflect  this stock
split, the redesignation  of the  Class A  and Class  B common  stock as  common
stock, and the decrease in authorized common stock.
 
                                      F-20

- -------------------------------------------
                                     -------------------------------------------
- -------------------------------------------
                                     -------------------------------------------
 
    NO  DEALER,  SALESPERSON OR  OTHER PERSON  HAS BEEN  AUTHORIZED TO  GIVE ANY
INFORMATION OR TO  MAKE ANY  REPRESENTATIONS NOT CONTAINED  IN THIS  PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON
AS  HAVING BEEN  AUTHORIZED BY THE  COMPANY OR ANY  UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE  AN OFFER TO  SELL, OR A  SOLICITATION OF AN  OFFER TO  BUY,
SHARES  OF COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE ANY  SUCH OFFER OR  SOLICITATION IN  SUCH JURISDICTION OR  IN WHICH  THE
PERSON  MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE
DELIVERY OF  THIS  PROSPECTUS NOR  ANY  SALE  MADE HEREUNDER  SHALL,  UNDER  ANY
CIRCUMSTANCES,  CREATE  AN IMPLICATION  THAT  THERE HAS  BEEN  NO CHANGE  IN THE
AFFAIRS OF  THE  COMPANY  SINCE THE  DATE  OF  HEREOF OR  THAT  THE  INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
 
                              -------------------
 
                               TABLE OF CONTENTS

                                                              PAGE
                                                              ----
                                                           
PROSPECTUS SUMMARY..........................................    3
RISK FACTORS................................................    7
USE OF PROCEEDS.............................................   15
DIVIDEND POLICY.............................................   15
DILUTION....................................................   16
CAPITALIZATION..............................................   17
SELECTED CONSOLIDATED FINANCIAL DATA........................   18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS..................................   19
BUSINESS....................................................   25
MANAGEMENT..................................................   42
CERTAIN TRANSACTIONS........................................   50
PRINCIPAL STOCKHOLDERS......................................   51
DESCRIPTION OF CAPITAL STOCK................................   53
SHARES ELIGIBLE FOR FUTURE SALE.............................   56
UNDERWRITING................................................   57
LEGAL MATTERS...............................................   58
EXPERTS.....................................................   58
ADDITIONAL INFORMATION......................................   58
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..................  F-1

                              -------------------
 
    UNTIL                                  ,    1996   (25    DAYS   AFTER   THE
DATE OF THIS PROSPECTUS), ALL  DEALERS EFFECTING TRANSACTIONS IN THE  REGISTERED
SECURITIES,  WHETHER OR NOT PARTICIPATING IN  THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS.  THIS IS IN  ADDITION TO THE  OBLIGATION OF DEALERS  TO
DELIVER  A  PROSPECTUS WHEN  ACTING AS  UNDERWRITERS AND  WITH RESPECT  TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                                STERICYCLE, INC.
 
                                   ---------
 
                                3,000,000 SHARES
 
                                  COMMON STOCK
 
                                   PROSPECTUS
 
                                                 , 1996
 
                            ------------------------
 
                            DILLON, READ & CO. INC.
 
                              SALOMON BROTHERS INC
 
                            WILLIAM BLAIR & COMPANY
 
- -------------------------------------------
                                     -------------------------------------------
- -------------------------------------------
                                     -------------------------------------------

                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
    The  following table sets forth the  various expenses in connection with the
sale  and  distribution   of  the  securities   being  registered  (other   than
underwriting  discounts and commissions). All amounts shown are estimates except
the Securities and Exchange Commission registration fee, the NASD filing fee and
the Nasdaq National Market  application and listing fee.  All of these  expenses
will be paid by the Registrant.

                                                              
SEC registration fee...........................................  $15,465.00
NASD filing fee................................................    4,985.00
Nasdaq National Market application and listing fee.............   43,500.00
Legal fees and expenses........................................  250,000.00
Accounting fees and expenses...................................  160,000.00
Printing and engraving expenses................................   80,000.00
Blue sky fees and expenses.....................................   20,000.00
Transfer agent fees............................................   10,000.00
Directors' and officers' liability insurance...................  150,000.00
Miscellaneous..................................................   66,050.00
                                                                 ----------
    Total......................................................  $800,000.00
                                                                 ----------
                                                                 ----------

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
    Section  145 of the Delaware General Corporation Law provides generally that
a person sued as a director, officer, employee or agent of a corporation may  be
indemnified  by the corporation in  non-derivative suits for expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement if such person
acted in good faith and in a manner that he or she reasonably believed to be  in
or not opposed to the best interests of the corporation. In the case of criminal
actions  and proceedings, the person must also  not have had reasonable cause to
believe that his  or her conduct  was unlawful. Indemnification  of expenses  is
also  authorized in stockholder  derivative actions if the  person acted in good
faith and in a manner that he or she reasonably believed to be in or not opposed
to the best interests  of the corporation and  if he or she  has not been  found
liable to the corporation. Even in this latter instance, the court may determine
that in view of all the circumstances such person is entitled to indemnification
for  such  expenses as  the court  deems proper.  A person  sued as  a director,
officer, employee or agent of a  corporation who has been successful in  defense
of the action must be indemnified by the corporation against expenses.
 
    Article  Fifth of the Registrant's By-Laws requires the Company to indemnify
its directors, officers, employees and agents to the maximum extent permitted by
Delaware law.  Article  Fifth  also  requires  the  Registrant  to  advance  the
litigation  expenses of a director  or officer on receipt  of his or her written
undertaking to repay all amounts advanced if it is ultimately determined that he
or she is not entitled to indemnification.
 
    Section  102(b)(7)  of  the  Delaware  General  Corporation  Law  permits  a
corporation   to  include  a  provision  in  its  certificate  of  incorporation
eliminating or limiting the personal liability of a director to the  corporation
or  its  stockholders  for  monetary  damages for  a  breach  of  the director's
fiduciary duty  of  care.  Such a  provision  may  not eliminate  or  limit  the
liability of a director for breaching his or her duty of loyalty, failing to act
in  good faith, engaging in intentional misconduct or knowingly violating a law,
declaring an  illegal dividend  or  approving an  illegal stock  repurchase,  or
obtaining an improper personal benefit.
 
    Article  Ninth of  the Registrant's Certificate  of Incorporation eliminates
the personal  liability of  the  Registrant's directors  to the  fullest  extent
permitted by Section 102(b)(7).
 
    The   Registrant  intends  to  obtain  directors'  and  officers'  liability
insurance to insure the Registrant's directors and officers are insured  against
actual liabilities, including liabilities under the federal securities laws, for
acts or omissions related to the conduct of their duties.
 
                                      II-1

    The  Underwriting  Agreement,  filed  as Exhibit  1.1  to  this Registration
Statement, provides for  indemnification by the  Underwriters of the  Registrant
and  its  officers  and  directors  for  certain  liabilities  relating  to this
Offering.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
    In July  1993,  the Registrant  sold  2,000 shares  of  common stock  to  an
employee for $2,200.
 
    In October 1993, the Registrant 750.75 shares of Class B preferred stock and
23,450  shares  of  common  stock  to 27  employees  for  $235,953  and $23,595,
respectively.
 
    In October 1993,  the Registrant  sold 70,000  shares of  Class E  preferred
stock to one investor for $8,000,000.
 
    In  February 1994, the Registrant  issued 4,500 shares of  common stock to a
temporary employee for services rendered to the Registrant.
 
    In March 1994, the Registrant sold  9,350 shares of Class F preferred  stock
and  warrants to purchase 35,959  shares of the Registrant's  common stock to 10
investors, including Peter Vardy, a director of the Registrant, for $935,360.
 
    In March  1994, the  Registrant issued  5,000 shares  of Class  G  preferred
stock,  having a value of $500,000,  to Recovery Corporation of Illinois ("RCI")
in connection with the Registrant's purchase of certain of RCI's assets.
 
    In September  1994,  the  Registrant  issued 25,227.71  shares  of  Class  H
preferred  stock, having an aggregate value  of $2,522,700, and delivered a note
for $2,480,000,  payable, in  part, by  delivery  of 14,880  shares of  Class  H
preferred  Stock, to Safe Way Disposal  Systems, Inc. ("Safe Way") in connection
with the Registrant's purchase of certain of Safe Way's assets.
 
    In October 1994,  the Registrant  sold 25,225  shares of  Class I  preferred
stock for $2,522,500 to 26 investors, including Jack W. Schuler, Peter Vardy and
Mark  C. Miller,  directors of  the Registrant  (and in  Mr. Miller's  case, its
President and Chief Executive Officer).
 
    In July 1994, the Registrant issued  532 shares of common stock pursuant  to
the  exercise of an option granted to  a consultant for services rendered to the
Registrant.
 
    In July  1994,  the  Registrant issued  673  shares  of common  stock  to  a
consultant who rendered services to the Registrant.
 
    In  August 1994, the Registrant sold 604.5 shares of Class F preferred stock
for $60,450,  and  4,650  shares of  common  stock  for $6,045,  to  15  of  its
employees.
 
    In July 1995, the Registrant issued warrants to purchase 1,170,926 shares of
Class  A common stock, at an exercise price of $0.299 per share, to members of a
group of lenders,  including Jack  W. Schuler,  John Patience  and Peter  Vardy,
directors of the Registrant. In May 1996, Mr. Patience exercised his warrant and
acquired  133,088 shares  of Class  A common stock  and Mr.  Vardy exercised his
warrant and acquired 180,814 shares of Class A common stock.
 
    In September 1995, the  Registrant issued 22,000 shares  of common stock  in
connection with an agreement to settle a dispute with a consultant.
 
    In  November 1995, the Registrant issued 505  shares of Class A common stock
to a vendor for services rendered to the Registrant.
 
    In November 1995,  the Registrant issued  1,211.5 shares of  Class A  common
stock to a consultant for services rendered to the Registrant.
 
    In  December 1995, the Registrant sold 35,750 shares of Class A common stock
for $14,300 to seven employees.
 
    In January 1996, the Registrant sold 160,500 shares of Class A common  stock
for $64,200 to 11 of its employees.
 
                                      II-2

    In May 1966, the Registrant issued 102,400 shares of Class A common stock to
certain  consultants, including Peter Vardy, a director of the Company, pursuant
to the exercise of options exercisable at a price of $0.40 per share.
 
    In May 1996, the Registrant issued 2,239,435 shares of Class B common  stock
to  Mark  C. Miller,  the Registrant's  President  and Chief  Executive Officer,
pursuant to the exercise of an option exercisable at a price of $0.10 per share.
 
    In May 1996, the Registrant issued 18,900 shares of Class B common stock  to
Peter Vardy, a director of the Registrant, pursuant to the exercise of an option
exercisable at a price of $0.10 per share.
 
    In June 1996, the Registrant issued warrants to purchase 1,200,000 shares of
Class  A common stock, at an exercise price  of $1.50 per share, to members of a
group of lenders,  including Jack  W. Schuler,  John Patience  and Peter  Vardy,
directors  of  the Registrant,  and  Mark C.  Miller  and James  F.  Polark, the
Registrant's President  and  Chief Executive  Officer  and its  Vice  President,
Finance and Chief Financial Officer, respectively.
 
    The sales of these securities were considered to be exempt from registration
under  the Securities Act of  1933, as amended, in  reliance on Section 4(2), or
Regulation D thereunder,  as transactions by  an issuer not  involving a  public
offering.  The  recipients of  these securities  represented their  intention to
acquire the securities for investment  purposes only and not  with a view to  or
for  sale in connection  with any further  distribution, and appropriate legends
were affixed to the stock certificates and instruments issued to the recipients.
 
ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
    (a) Exhibits

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
        
   1.1*    Form of Underwriting Agreement.
   3.1     Certificate of Incorporation of the Registrant, as currently in effect.
   3.5     By-Laws of the Registrant, as currently in effect.
   4.1*    Specimen Common Stock Certificate.
   4.2     Form of Common Stock Purchase Warrant in connection with July 1995 line of credit.
   4.3*    Form of Common Stock Purchase Warrant in connection with May 1996 short-term loan.
   4.4     Amended and Restated Registration Agreement dated October 19, 1994 between the Registrant and certain
            of its stockholders, and related First Amendment dated September 30, 1995.
   5.1*    Opinion of Johnson and Colmar.
  10.1*    Incentive Compensation Plan and form of employee stock agreement.
  10.2*    Directors Stock Option Plan
  10.3*    Loan and Security Agreement dated October 31, 1995 between the Registrant and Silicon Valley Bank,
            and related Amendments dated March 12, 1996 and June 4, 1996.
  10.4*    Guaranty Agreement dated June 1, 1992 among the Registrant, Fleet National Bank, as Trustee, and
            Rhode Island Industrial-Recreational Building Authority, and related Regulatory Agreement dated June
            1, 1992 between the Registrant and the Rhode Island Industrial-Recreational Building Authority.
  10.5*+   Radio-Frequency Heating Technology License Agreement dated November 10, 1995 between the Registrant
            and IIT Research Institute.
  10.6*+   Alliance Agreement dated October 12, 1993 between the Registrant and Baxter Healthcare Corporation.
  10.7*+   Agreement dated May 6, 1994 between the Registrant and SAGE Products, Inc., and related letter
            agreement dated November 7, 1995.

                                      II-3

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
  10.8     Office Lease dated December 26, 1991 between the Registrant and American National Bank and Trust
            Company of Chicago, as Trustee under Trust No. 57661, relating to the Registrant's Deerfield,
            Illinois office space.
        
  10.9*    Standard Form Industrial Lease dated October 1, 1991 between the Registrant and General American Life
            Insurance Registrant, relating to the Registrant's Loma Linda, California treatment facility.
  10.10    Lease dated June 1, 1992 between the Registrant and Rhode Island Industrial Facilities Corporation,
            relating to the Registrant's Woonsocket, Rhode Island treatment facility.
  10.11*   Lease dated February 25, 1992 between the Registrant and EML Associates, relating to the Registrant's
            San Leandro, California transfer station.
  10.12*   Master Lease Agreement dated February 11, 1994 between the Registrant and Ziegler Leasing
            Corporation, relating to the machinery and equipment at the Registrant's Yorkville, Wisconsin
            treatment facility
  10.13*   Master Lease Agreement dated March 14, 1991 between the Registrant and LINC Venture Lease Partners
            II, L.P., and related Equipment Schedule dated January 1, 1996, relating to the machinery and
            equipment at the Registrant's West Memphis, Arkansas recycling and research development facility,
            its San Leandro, California transfer station, and its Morton, Washington treatment facility.
  10.14    State of Rhode Island and Providence Plantations Consent Agreement dated August 22, 1995 between the
            Registrant and the Rhode Island Department of Environmental Management.
  21.1     Subsidiaries.
  23.1     Consent of Ernst & Young LLP.
  23.2     Consent of Johnson and Colmar (filed as part of Exhibit 5.1).
  24.1     Power of Attorney (included under the caption "Power of Attorney" on page II-5).

- ------------------------
* To be filed by amendment.
+ Confidential treatment requested.
 
ITEM 17.  UNDERTAKINGS
 
    The Registrant  hereby undertakes  to  provide to  the underwriters  at  the
closing   specified  in   the  underwriting   agreement  certificates   in  such
denominations and registered in  such names as required  by the underwriters  to
permit prompt delivery to each purchaser.
 
    The Registrant hereby undertakes that:
 
    (1) For  purposes of determining  any liability under  the Securities Act of
        1933, the information omitted from the form of prospectus filed as  part
        of  this Registration Statement in reliance upon Rule 430A and contained
        in a  form  of prospectus  filed  by  the Registrant  pursuant  to  Rule
        424(b)(1)  or (4) or 497(h) under the  Securities Act shall be deemed to
        be part  of this  Registration Statement  as  of the  time that  it  was
        declared effective.
 
    (2) For the purpose of determining any liability under the Securities Act of
        1933,  each post-effective amendment that  contains a form of prospectus
        shall be  deemed to  be a  new registration  statement relating  to  the
        securities  offered therein, and the offering of such securities at that
        time shall be deemed to be the initial bona fide offering thereof.
 
    Insofar as indemnification for liabilities arising under the Securities  Act
of  1933 may be permitted to directors,  officers and controlling persons of the
Registrant pursuant to the  provisions described in Item  14, or otherwise,  the
Registrant  has been advised that in the  opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and  is,   therefore,   unenforceable.  In   the   event  that   a   claim   for
 
                                      II-4

indemnification  against  such  liabilities  (other  than  the  payment  by  the
Registrant of expenses incurred  or paid by a  director, officer or  controlling
person  of  the Registrant  in the  successful  defense of  any action,  suit or
proceeding) is  asserted by  such  director, officer  or controlling  person  in
connection  with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to  a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
 
                                      II-5

                                   SIGNATURES
 
    Pursuant  to the requirements of the  Securities Act of 1933, the Registrant
has duly caused this Registration  Statement to be signed  on its behalf by  the
undersigned,  thereunto duly authorized,  in the Village  of Deerfield, State of
Illinois, on June 11, 1996.
 
                                        STERICYCLE, INC.
 
                                        By:          /s/ MARK C. MILLER
                                           -------------------------------------
                                                      Mark C. Miller
                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
 
                               POWER OF ATTORNEY
 
    Each person whose signature appears below who is then an officer or director
of the Registrant authorizes Mark  C. Miller and James  F. Polark, or either  of
them,  with full power of substitution and resubstitution, to sign in his or her
name and  to  file any  amendments  to this  Registration  Statement  (including
post-effective  amendments), and all related documents necessary or advisable to
enable the registrant to  comply with the Securities  Act of 1933 in  connection
with  the  registration  of  the  securities  which  are  the  subject  of  this
Registration  Statement,  which  amendments  may  make  such  changes  in   this
Registration  Statement (as it may be so amended) as Mark C. Miller and James F.
Polark, or either of them, may deem appropriate, and to do and perform all other
related acts and things necessary to be done.
 
    Pursuant  to  the  requirements  of   the  Securities  Act  of  1933,   this
Registration  Statement has  been signed below  by the following  persons in the
capacities and on the dates indicated.

                                                                                            
                         NAME                                            TITLE                         DATE
- ------------------------------------------------------  ----------------------------------------  ---------------
 
                 /s/ JACK W. SCHULER
     -------------------------------------------        Chairman of the Board of Directors         June 11, 1996
                   Jack W. Schuler
 
                  /s/ MARK C. MILLER
     -------------------------------------------        President, Chief Executive Officer and a   June 11, 1996
                    Mark C. Miller                       Director (Principal Executive Officer)
 
                 /s/ JAMES F. POLARK                    Vice President, Finance and Chief
     -------------------------------------------         Financial Officer (Principal Financial    June 11, 1996
                   James F. Polark                       and Accounting Officer)
 
                /s/ PATRICK F. GRAHAM
     -------------------------------------------        Director                                   June 11, 1996
                  Patrick F. Graham
 
                  /s/ JOHN PATIENCE
     -------------------------------------------        Director                                   June 11, 1996
                    John Patience

                                      II-6

                                                                                            
                         NAME                                            TITLE                         DATE
- ------------------------------------------------------  ----------------------------------------  ---------------
 
                  /s/ LLOYD D. RUTH
     -------------------------------------------        Director                                   June 11, 1996
                    Lloyd D. Ruth
 
             /s/ L. JOHN WILKERSON, PH.D.
     -------------------------------------------        Director                                   June 11, 1996
               L. John Wilkerson, Ph.D.
 
                   /s/ PETER VARDY
     -------------------------------------------        Director                                   June 11, 1996
                     Peter Vardy

                                      II-7

                                 EXHIBIT INDEX

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
        
   1.1*    Form of Underwriting Agreement.
   3.1     Certificate of Incorporation of the Registrant, as currently in effect.
   3.5     By-Laws of the Registrant, as currently in effect.
   4.1*    Specimen Common Stock Certificate.
   4.2     Form of Common Stock Purchase Warrant in connection with July 1995 line of credit.
   4.3*    Form of Common Stock Purchase Warrant in connection with May 1996 short-term loan.
   4.4     Amended and Restated Registration Agreement dated October 19, 1994 between the Registrant and certain
            of its stockholders, and related First Amendment dated September 30, 1995.
   5.1*    Opinion of Johnson and Colmar.
  10.1*    Incentive Compensation Plan and form of employee stock agreement.
  10.2*    Directors Stock Option Plan
  10.3*    Loan and Security Agreement dated October 31, 1995 between the Registrant and Silicon Valley Bank,
            and related Amendments dated March 12, 1996 and June 4, 1996.
  10.4*    Guaranty Agreement dated June 1, 1992 among the Registrant, Fleet National Bank, as Trustee, and
            Rhode Island Industrial-Recreational Building Authority, and related Regulatory Agreement dated June
            1, 1992 between the Registrant and the Rhode Island Industrial-Recreational Building Authority.
  10.5*+   Radio-Frequency Heating Technology License Agreement dated November 10, 1995 between the Registrant
            and IIT Research Institute.
  10.6*+   Alliance Agreement dated October 12, 1993 between the Registrant and Baxter Healthcare Corporation.
  10.7*+   Agreement dated May 6, 1994 between the Registrant and SAGE Products, Inc., and related letter
            agreement dated November 7, 1995.
  10.8     Office Lease dated December 26, 1991 between the Registrant and American National Bank and Trust
            Company of Chicago, as Trustee under Trust No. 57661, relating to the Registrant's Deerfield,
            Illinois office space.
  10.9*    Standard Form Industrial Lease dated October 1, 1991 between the Registrant and General American Life
            Insurance Registrant, relating to the Registrant's Loma Linda, California treatment facility.
  10.10    Lease dated June 1, 1992 between the Registrant and Rhode Island Industrial Facilities Corporation,
            relating to the Registrant's Woonsocket, Rhode Island treatment facility.
  10.11*   Lease dated February 25, 1992 between the Registrant and EML Associates, relating to the Registrant's
            San Leandro, California transfer station.
  10.12*   Master Lease Agreement dated February 11, 1994 between the Registrant and Ziegler Leasing
            Corporation, relating to the machinery and equipment at the Registrant's Yorkville, Wisconsin
            treatment facility
  10.13*   Master Lease Agreement dated March 14, 1991 between the Registrant and LINC Venture Lease Partners
            II, L.P., and related Equipment Schedule dated January 1, 1996, relating to the machinery and
            equipment at the Registrant's West Memphis, Arkansas recycling and research development facility,
            its San Leandro, California transfer station, and its Morton, Washington treatment facility.
  10.14    State of Rhode Island and Providence Plantations Consent Agreement dated August 22, 1995 between the
            Registrant and the Rhode Island Department of Environmental Management.
  21.1     Subsidiaries.

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
  23.1     Consent of Ernst & Young LLP.
        
  23.2     Consent of Johnson and Colmar (filed as part of Exhibit 5.1).
  24.1     Power of Attorney (included under the caption "Power of Attorney" on page II-5).

- ------------------------
* To be filed by amendment.
+ Confidential treatment requested.

                                   AMENDMENT TO                     EXHIBIT A

                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                                STERICYCLE, INC.

     Article Fourth of the Corporation's Amended and Restated Certificate of
Incorporation shall be amended to read as follows:

                                 ARTICLE FOURTH

                                AUTHORIZED SHARES

     4.1  DEFINITIONS.  As used in this Article, the following terms have these 
meanings:

     (a)  APPROVED SALE means the sale of the Corporation (whether by (i)
          merger, (ii) consolidation, (iii) sale of all or substantially all of
          the Company's assets or (iv) sale of a majority of the Company's
          outstanding shares of Class A Common Stock, which is approved either
          by the Company's Board or Directors or by holders of a majority of the
          Company's issued and outstanding shares of Class A Common Stock.

     (b)  INCENTIVE COMPENSATION PLAN means the Incentive Compensation Plan
          which the Corporation adopted effective as of August 1, 1995 (subject
          to stockholder approval), as it may be amended.

     (c)  ORIGINAL PURCHASE PRICE means, in respect of a share of Class B Common
          Stock, the purchase price of the share which the first holder of the
          share paid to the Corporation.

     (d)  PERMITTED TRANSFEREE means, in respect of a holder of shares of Class
          B Common Stock, (i) a transferee pursuant to the applicable laws of
          descent and distribution upon the death of the holder, (ii) the
          holder's spouse, (iii) a lineal descendant of the holder (whether a
          natural descendant or a descendant by adoption), and (iv) a trust for
          the primary benefit of any one or more of the holder, the holder's
          spouse and the holder's lineal descendants.

     (e)  PUBLIC OFFERING means the sale of shares of Class A Common Stock in a
          firm commitment underwritten public offering registered under the
          Securities Act of 1933, as amended, in which the aggregate price paid
          by the public for the shares offered is at least $5,000,000.

                                        

     4.2  AUTHORIZED SHARES.  The Corporation shall have authority to issue a
total of 57,000,000 shares, divided into two classes as follows:

        CLASS OF STOCK                                  NUMBER AUTHORIZED

     Class A Common Stock, par value $0.01
     per share ("Class A Common Stock")                    50,000,000

     Class B Common Stock, par value $0.01
          per share ("Class B Common Stock")                7,000,000

     4.3  CLASS A AND CLASS B COMMON STOCK.  The respective powers, preferences,
rights, qualifications, limitations and restrictions and rights of the Class A
and Class B Common Stock are as follows:

     (a)  ISSUANCE.  Shares of Class B Common Stock may be issued only pursuant
          to (i) an award of restricted stock under the Incentive Compensation
          Plan or (ii) the exercise of a stock option granted under the
          Incentive Compensation Plan.

     (b)  DIVIDENDS.  The Corporation, in the discretion of its Board of
          Directors, may declare and pay dividends to holders of Class A and
          Class B Common Stock, out of funds legally available for payment,
          subject to the following limitations:

               (i)   Except as provided in Sections 4.3(b)(ii) and (iii), no
                     dividend shall be paid, or declared and set aside for
                     payment, to holders of Class A Common Stock unless the same
                     dividend is paid, or declared and set aside for payment, to
                     holders of Class B Common Stock, and no dividend shall be
                     paid, or declared and set aside for payment, to holders of
                     Class B Common Stock unless the same dividend is paid, or
                     declared and set aside for payment, to holders of Class A
                     Common Stock.

               (ii)  No dividend payable in shares of Class A Common Stock shall
                     be paid to holders of Class A Common Stock unless a 
                     dividend payable in the same number of shares of Class B 
                     Common Stock per share of Class B Common Stock is paid to 
                     holders of Class B Common Stock, and no dividend payable 
                     in shares of Class B Common Stock shall be paid to holders 
                     of Class B Common Stock unless a dividend payable in the 
                     same number of shares of Class A Common Stock per share of 
                     Class A Common Stock is paid to holders of Class A Common 
                     Stock.

               (iii) No dividend payable in shares of Class B Common Stock
                     (or in securities convertible into shares of Class B
                     Common Stock) shall be paid to holders of Class A
                     Common Stock, and no dividend payable in shares of
                     Class A Common Stock (or in securities convertible into
                     shares of Class A Common Stock) shall be paid to
                     holders of Class B Common Stock.

                                       -2-

     (c)  VOTING RIGHTS.  Holders of Class A and Class B Common Stock shall be
          entitled to one vote per share on each matter submitted to a vote of
          the Corporation's stockholders.

     (d)  CONVERSION OF CLASS B COMMON STOCK.  All of the issued and outstanding
          shares of Class B Common Stock shall be converted automatically into a
          like number of shares of Class A Common Stock at the time of and
          subject to the closing of a Public Offering or an Approved Sale.  In
          this event:

               (i)  The rights of each holder of converted shares of Class B
                    Common Stock shall cease in respect of the shares converted,
                    and each such holder shall become the holder of record of
                    the shares of Class A Common Stock to be issued by reason of
                    the conversion.

               (ii) Each certificate representing converted shares of Class B
                    Common Stock shall be considered to represent the same
                    number of shares of Class A Common Stock.  Upon a holder's
                    surrender to the Corporation of a certificate representing
                    converted shares of Class B Common Stock (or evidence of the
                    loss, theft or destruction of the certificate, together with
                    a satisfactory indemnity and bond), the Corporation shall
                    deliver to the holder a new certificate representing the
                    number of shares of Class A Common Stock issuable by reason
                    of the conversion.  The shares of Class A Common Stock
                    issued by reason of the conversion shall be fully paid and
                    non-assessable.

     (e)  FIRST REFUSAL RIGHTS.  If a holder of shares of Class B Common Stock
          proposes to sell or otherwise transfer any shares of shares of Class B
          Common Stock (other than to a Permitted Transferee), the holder shall
          first offer those shares for sale to the Corporation at least 45 days
          prior to the proposed sale or transfer.  This offer shall be made as
          follows:

               (i)   The offer shall identify the prospective transferee and
                     describe the terms of the proposed sale or transfer, and
                     shall be accompanied by copies of all relevant sale or
                     transfer documents.

               (ii)  The purchase price per share shall be the lower of (A) the
                     share's Original Purchase Price or (B) the proposed price
                     per share to be paid by the prospective transferee, and the
                     terms of payment shall be the same as the terms of payment
                     by the prospective transferee.

               (iii) The Corporation may accept the holder's offer in
                     respect of all or some of the shares offered for sale. 
                     The Corporation shall have 15 days from the date of
                     receipt of the offer in which to accept the offer (in
                     whole or in part) by giving written notice of
                     acceptance to the holder.

               (iv)  If the Corporation accepts the holder's offer (in whole or
                     in part), the 

                                       -3-

                     Corporation's notice of acceptance shall specify a date at
                     least seven days and not more than 15 days after the date 
                     of acceptance on which the closing of the Corporation's
                     purchase shall take place.  The closing shall take place at
                     the Corporation's principal office at 11:00 a.m. on the
                     closing date specified in the Corporation's notice of
                     acceptance.

               (v)   If the Corporation does not accept the holder's offer in
                     respect of all of the shares offered for sale, the holder
                     may sell or transfer the remaining shares to the 
                     prospective transferee identified in the holder's offer to 
                     the Corporation, but only (A) at a price and on terms no 
                     more favorable to the prospective transferee than the 
                     price and terms described in the holder's offer to the 
                     Corporation and (ii) only if the sale or transfer is 
                     completed no more than 60 days after the date of the 
                     holder's offer.

          Any shares of Class B Common Stock sold or transferred pursuant to
          this Section 4.3(e) shall remain subject to its restrictions (I.E.,
          the purchaser or transferee may not sell or transfer the shares
          acquired without first offering them for sale to the Corporation as
          provided in this Section 4.3(e).

     (f)  OTHERWISE IDENTICAL.  Except as provided in Sections 4.3(b), (d) and
          (e), and except as voting by classes is required by the Delaware
          General Corporation Law, shares of Class A and Class B Common Stock
          shall be identical in all respects.

     4.4  REGISTRATION OF TRANSFER.  The Corporation shall maintain a register
at its principal office (or any other place that the Corporation reasonably
designates) for the registration of shares of Class A and Class B Common Stock. 
Upon surrender at the register of a certificate representing shares of Class A
or Class B Common Stock, the Corporation shall, at the request of the registered
holder of the surrendered certificate, issue in exchange at the Corporation's
expense a new certificate or certificates representing in the aggregate the
number of shares of Class A or Class B Common Stock represented by the
surrendered certificate, and the Corporation shall cancel the surrendered
certificate.  Each new certificate shall be registered in the name or names and
shall represent the number of shares that the registered holder of the
surrendered certificate requests and shall be substantially identical in form to
the surrendered certificate.

     4.5  REPLACEMENT.  Upon receipt from the registered holder of evidence
reasonably satisfactory to the Corporation (for example, an affidavit from the
registered holder) of the loss, theft or destruction or mutilation of any
certificate representing one or more shares of Class A or Class B Common Stock,
and in the case of loss, theft or destruction, upon receipt of an indemnity and
bond reasonably satisfactory to the Corporation (with the exception that no bond
shall be required if the registered holder is an institutional investor), or in
the case of mutilation, upon surrender of the mutilated certificate, the
Corporation shall at its expense issue to the registered holder a new
certificate of like kind representing the number of shares of Class A or Class B
Common Stock represented by the lost, stolen, destroyed or mutilated certificate
and dated the same date as that certificate.

                                       -4-

                                                               STATE OF DELAWARE
                                                              SECRETARY OF STATE
                                                       DIVISION OF CORPORATIONS 
                                                       FILED 02:30 PM 09/27/1994
                                                             944183070 - 2191014

                             CERTIFICATE OF RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                                STERICYCLE, INC.

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

          Mark C. Miller and James F. Polark, being the duly elected President
and Secretary, respectively, of Stericycle, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), do hereby certify as follows:

          1.   That the Corporation filed its original Certificate of
Incorporation with the Delaware Secretary of State on March 21, 1989 (the
"Certificate").

          2.   That the board of directors of the Corporation, pursuant to
unanimous written consent, adopted resolutions authorizing the Corporation to
amend, integrate and restate the Corporation's Certificate in its entirety to
read as set forth in Exhibit A attached hereto and made a part hereof (the
"Restated Certificate").

          3.   That the majority stockholders of the Corporation entitled to
vote thereon, pursuant to written consent, approved and adopted the Restated
Certificate in accordance with Sections 228, 242, and 245 of the General
Corporation Law of the State of Delaware.

          IN WITNESS WHEREOF, the undersigned, being the President and Secretary
hereinabove named, for the purpose of amending and restating the Certificate of
Incorporation of the Corporation pursuant to the General Corporation Law of the
State of Delaware, under penalties of perjury do each hereby declare and certify
that this is the act and deed of the Corporation and the facts stated herein are
true, and accordingly have hereunto signed this Certificate of Restated
Certificate of Incorporation this 22nd day of September, 1994.

                                        By:   /s/ Mark C. Miller
                                              --------------------------------
                                               Mark C. Miller, President

ATTEST:

By:  /s/ James F. Polark
   --------------------------------
     James F. Polark, Secretary

                                                                       EXHIBIT A

                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                                STERICYCLE, INC.

                                  ARTICLE FIRST

                 The name of the Corporation is Stericycle, Inc.

                                 ARTICLE SECOND

     The address of the Corporation's registered office in the State of Delaware
is 32 Loockerman Square, Suite L-100, in the City of Dover, County of Kent
19901.  The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.

                                  ARTICLE THIRD

     The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.

                                 ARTICLE FOURTH

SECTION 1.     CAPITAL STOCK.

     The total number of shares of stock which the Corporation has authority 
to issue is 9,950,200 consisting of:

          (A)  68,550 shares of Class A Preferred Stock, par value $0.01 per
               share (the "Class A Preferred");

          (B)  22,150 shares of Class B Preferred Stock, par value $0.01 per
               share (the "Class B Preferred");

          (C)  102,500 shares of Class C Preferred Stock, par value $0.01 per
               share (the "Class C Preferred");

          (D)  170,000 shares of Class D Preferred Stock, par value $0.01 per
               share (the "Class D Preferred");

          (E)  70,000 shares of Class E Preferred Stock, par value $0.01 per
               share (the "Class E Preferred");

          (F)  15,000 shares of Class F Preferred Stock, par value $0.01 per
               share (the "Class F Preferred");

          (G)  5,000 shares of Class G Preferred Stock, par value $0.01 per
               share (the "Class G Preferred");

          (H)  62,000 shares of Class H Preferred Stock, par value $0.01 per
               share (the "Class H Preferred");

          (I)  35,000 shares of Class I Preferred Stock, par value $0.01 per
               share (the "Class I Preferred"); and

          (J)  9,400,000 shares of Common Stock, par value $0.01 per share.

The Class A Preferred, the Class B Preferred, the Class C Preferred, the Class D
Preferred, the Class E Preferred, the Class F Preferred, the Class G Preferred,
the Class H Preferred, and the Class I Preferred are collectively referred to
herein as the "Preferred Stock." Capitalized terms used and not otherwise
defined herein are defined in Part 10 below.

SECTION 2.     POWERS, PREFERENCES AND SPECIAL RIGHTS OF THE PREFERRED STOCK.

     Part 1.  DIVIDENDS.

     1A.  GENERAL OBLIGATION.  When and as declared by the Corporation's 
board of directors and to the extent permitted under the General Corporation 
Law of the State of Delaware, the Corporation will pay preferential 
cumulative dividends to the holders of the Preferred Stock as provided in 
this Part 1. Except as otherwise provided herein, dividends on each share of 
Preferred Stock will cumulate on a daily basis at the rate of 10% per annum 
of the Liquidation Value thereof plus accumulated and unpaid dividends 
thereon from and including the date of issuance of such share of Preferred 
Stock to and including the earlier of (i) the date on which the Liquidation 
Value of such share of Preferred Stock plus any accumulated and unpaid 
dividends thereon is paid upon any liquidation, dissolution or winding up of 
the Corporation, (ii) the date on which such share of Preferred Stock is 
converted into Common Stock or (iii) the date on which such share of 
Preferred Stock is redeemed in accordance with Part 3 hereof. Such dividends 
will accrue whether or not they have been declared and whether or not there 
are profits, surplus or other funds of the Corporation legally available for 
the payment of dividends. The date on which the Corporation initially issues 
any share of Preferred Stock will be deemed to be the "date of issuance" 
thereof regardless of the number of times transfer of such share of Preferred 
Stock is made on the stock records maintained by or for the Corporation and 
regardless of the number of certificates which may be issued to evidence such 
share of Preferred Stock.

                                       -2-

     1B.  DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS.  If at any time the 
Corporation pays less than the total amount of dividends then accumulated 
with respect to the Preferred Stock, such payment will be distributed ratably 
among the holders of the Preferred Stock on the basis of the number of shares 
of Preferred Stock owned by each such holder.

     1C.  PREFERENCE.  The Corporation shall not, without the prior written 
consent of the holders of at least 66 2/3% of the shares of Preferred Stock 
then outstanding, pay or declare any dividend or distribution on any Junior 
Securities at any time when accumulated dividends on the Preferred Stock have 
not been paid in full or any optional redemption pursuant to paragraph 3A has 
been requested. In the event that the Corporation declares a dividend or 
distribution on the Common Stock in accordance with the provisions of this 
paragraph 1C, the holders of the Preferred Stock and the holders of the 
Common Stock shall share pro rata (based, in the case of holders of Preferred 
Stock, on the number of shares of Common Stock which each holder of Preferred 
Stock would be entitled to receive upon conversion of its Preferred Stock 
into Common Stock) in such dividend or distribution.

     Part 2.  LIQUIDATION.

     Upon any liquidation, dissolution or winding up of the Corporation, each 
holder of Preferred Stock will be entitled to be paid, before any 
distribution or payment is made upon any Junior Securities, an amount in cash 
equal to the aggregate Liquidation Value of all of such holder's shares of 
Preferred Stock plus all accumulated and unpaid dividends thereon, and such 
holder will not be entitled to any further payment in respect of its shares 
of Preferred Stock. If upon any such liquidation, dissolution or winding up 
of the Corporation, the Corporation's assets available for distribution to 
its stockholders are insufficient to permit payment to the holders of the 
Preferred Stock of the aggregate Liquidation Value of the Preferred Stock 
plus all accumulated but unpaid dividends thereon, then the entire assets 
available for distribution will be distributed among the holders of the 
Preferred Stock pro rata based upon the amount of each such holder's 
aggregate investment in the Preferred Stock plus all accrued and unpaid 
dividends thereon. If the Corporation's assets available for distribution to 
its stockholders upon any such liquidation, dissolution or winding up exceed 
the aggregate Liquidation Value of the Preferred Stock plus all accumulated 
but unpaid dividends thereon, then, after payment shall have been made to the 
holders of the Preferred Stock of the aggregate Liquidation Value of the 
Preferred Stock plus all accumulated but unpaid dividends thereon, the 
holders of the Common Stock (including, without limitation, any holders of 
Common Stock who acquired such stock upon conversion of Preferred Stock at 
any time prior to such liquidation, dissolution or winding up) shall share 
pro rata in all remaining assets of the Corporation available for 
distribution. The Corporation will mail written notice of any liquidation, 
dissolution or winding up to

                                       -3-

each record holder of Preferred Stock not less than 30 days prior to the 
effective date thereof. For purposes of Parts 1 and 2, the consolidation or 
merger of the Corporation into or with any other corporation or corporations 
(other than a wholly-owned Subsidiary) in which the Corporation is not the 
surviving corporation and the sale or transfer by the Corporation of all or 
substantially all of its assets will be deemed to be a liquidation, 
dissolution or winding up of the Corporation.

     Part 3.  REDEMPTIONS.

     3A.  OPTIONAL REDEMPTION.  Each holder of Preferred Stock may require 
the Corporation to redeem all or part of its Preferred Stock at any time on 
or after June 25, 1997 in accordance with this Part 3 and at a price per 
share of Preferred Stock equal to the Redemption Price (the "Redemption 
Right"). Any holder of Preferred Stock may exercise the Redemption Right by 
delivering to the Corporation a written notice (a "Redemption Notice") 
stating such holder's intention to exercise the Redemption Right and the 
number of such holder's shares of Preferred Stock to be redeemed. The 
Corporation shall be obligated to redeem the total number of shares of 
Preferred Stock specified in any Redemption Notice in a series of eight equal 
quarterly redemptions, such redemptions to occur on the last day of each 
calendar quarter commencing with the first calendar quarter ending at least 
30 days following the Corporation's receipt of the Redemption Notice (each a 
"Redemption Date"). Within 5 days after receipt of a Redemption Notice from 
any holder of Preferred Stock, the Corporation shall notify all other holders 
of Preferred Stock that the Redemption Right has been exercised, and each 
other holder shall have the right, exercisable by written notice delivered to 
the Corporation within 10 days after receipt of such notice from the 
Corporation, to request that any or all of such other holder's shares of 
Preferred Stock be redeemed on the Redemption Dates together with the shares 
of Preferred Stock of the holder who delivered the Redemption Notice.

     3B.  REDEMPTION PRICE.  For each share of Preferred Stock which is to be 
redeemed on any Redemption Date, the Corporation will be obligated to pay to 
the holder thereof (upon surrender by such holder at the Corporation's 
principal office of the certificate representing such share of Preferred 
Stock) an amount in immediately available funds (the "Redemption Price") 
equal to the Liquidation Value thereof plus all accumulated but unpaid 
dividends thereon. If the funds of the Corporation legally available for 
redemption of Preferred Stock on any Redemption Date are insufficient to 
redeem the total number of shares of Preferred Stock to be redeemed on such 
date, those funds which are legally available will be used to redeem the 
maximum possible number of shares of Preferred Stock ratably among the 
holders of such shares to be redeemed based upon the number of such shares 
held by each such holder. Thereafter, when additional funds of the 
Corporation are legally available for the redemption of Preferred Stock, such 
funds will be used to redeem ratably based on the number of shares

                                       -4-

still to be redeemed the balance of the shares of Preferred Stock which the 
Corporation became obligated to redeem on such Redemption Date but which it 
has not redeemed (such redemptions to be made on a monthly basis).

     3C.  REISSUANCE OF CERTIFICATES.  In case fewer than the total number of 
shares of Preferred Stock represented by any certificate are redeemed upon 
any exercise of the Redemption Right, a new certificate representing the 
number of unredeemed shares of such of Preferred Stock will be issued to the 
holder thereof without cost to such holder promptly after surrender of the 
certificate representing the redeemed shares of Preferred Stock.

     3D.  REDEEMED OR OTHERWISE ACQUIRED SHARES.  Any shares of Preferred 
Stock which are redeemed or otherwise acquired by the Corporation will be 
cancelled and will not be reissued, sold or otherwise transferred; provided 
that the Corporation may reissue and sell any shares of Class B Preferred 
acquired pursuant to Paragraph 3E(iii) below.

     3E.  ACQUISITION OF SHARES.  Except for (i) individual acquisitions of 
up to 150 shares of Preferred Stock from an employee of the Corporation in 
connection with the termination of such employee's employment, (ii) in 
connection with the exercise of the Special Redemption Rights or the Call 
Rights (each as defined in the Alliance Agreement dated October 12, 1993 
between the Corporation and Baxter Healthcare Corporation) or (iii) the 
one-time repurchase in August 1994 of up to 162.75 shares of Class B 
Preferred from certain persons employed or formerly employed by the 
Corporation, the Corporation shall not redeem or otherwise acquire any shares 
of Preferred Stock unless it has offered to acquire or redeem shares of 
Preferred Stock from all holders thereof on or pursuant to identical terms 
and provisions on a pro rata basis.

     Part 4.  VOTING RIGHTS.

     4A.  VOTING RIGHTS.  Except as otherwise provided in this Part 4 and as 
otherwise required by law, the holders of the Preferred Stock will be 
entitled to vote with the holders of the Common Stock on each matter 
submitted to a vote of the Corporation's stockholders. For purposes of any 
such vote, and for all other provisions hereunder requiring a specified vote 
or consent of holders of Preferred Stock, each share of Preferred Stock shall 
have a number of votes equal to the number of votes possessed by the number 
of shares of Common Stock into which such share of Preferred Stock is 
convertible as of the record date for the determination of stockholders 
entitled to vote on such matter. Notwithstanding the foregoing, the holders 
of the Preferred Stock shall not have the right to vote together with the 
holders of Common Stock for the election or removal of directors at any time 
when the holders of Preferred Stock have the right to elect directors 
pursuant to Paragraph 4B hereof.

                                       -5-

     4B.  CLASS VOTING RIGHTS.  In addition to the rights specified in 
Paragraph 4A hereof, so long as at least 232,517 shares of Preferred Stock are 
outstanding (as appropriately adjusted for any stock dividends payable in 
shares of Preferred Stock and any combinations, subdivisions and split-ups of 
the shares of Preferred Stock), the holders of the Preferred Stock will have 
the special right, voting separately as a single class (with each share of 
Preferred Stock having a number of votes equal to the number of votes 
possessed by the number of shares of Common Stock into which such share of 
Preferred Stock is convertible as of the record date for the determination of 
stockholders entitled to vote on such matter) and to the exclusion of all 
other classes of the Corporation's stock, to elect six of the members of the 
board of directors of the Corporation. The holders of Preferred Stock shall 
also have the special right, voting separately as a single class and to the 
exclusion of all other classes of the Corporation's stock, to remove any 
individuals elected to such directorships. The special right of the holders 
of Preferred Stock to elect and remove directors contained in this Paragraph 4B 
may be exercised either at a special meeting of the holders of Preferred 
Stock called as provided below, at any annual or special meeting of the 
stockholders of the Corporation, or by written consent of the holders of 
Preferred Stock in lieu of a meeting. The directors to be elected by the 
holders of the Preferred Stock pursuant to this Paragraph 4B shall serve for 
terms extending from the date of their election and qualification until the 
time of the next succeeding annual meeting of stockholders (unless sooner 
removed) and until their successors have been elected and qualified.

     At any time when the holders of Preferred Stock have the special voting 
rights set forth in this Paragraph 4B, the Secretary of the Corporation 
shall, upon the written request of the holders of record of at least 10% of 
the shares of Preferred Stock then outstanding, call a special meeting of the 
holders of Preferred Stock for the purpose of electing or removing directors. 
Such meeting shall be held at the earliest practicable date at the 
Corporation's principal office or at such other place designated by the 
holders of at least 1[?]% of the shares of Preferred Stock then outstanding. 
If such meeting shall not be called by a proper officer of the Corporation 
within 10 days after personal service of said written request upon the 
secretary of the Corporation or within 20 days after mailing the same to the 
secretary of the Corporation at the Corporation's principal office, then the 
holders of record of at least 10% of the shares of Preferred Stock then 
outstanding may designate in writing one of their number to call such meeting 
at the expense of the Corporation, and such meeting may be called by such 
persons so designated upon the shortest legally permissible notice. Any 
holders of Preferred Stock so designated shall have access to the stock books 
of the Corporation for the purpose of calling a meeting of the stockholders 
pursuant to these provisions.

                                       -6-

     At any stockholders meeting at which the holders of Preferred Stock 
shall have the special right, voting separately as a single class, to elect 
or remove directors as provided in this Paragraph 4B, the presence, in person 
or by proxy, of the holders of record of a majority of the shares of 
Preferred Stock (with each share of Preferred Stock having a number of votes 
equal to the number of votes possessed by the number of shares of Common 
Stock into which such share of Preferred Stock is convertible as of the 
record date for the determination of stockholders entitled to vote on such 
matter) shall be required to constitute a quorum of the Preferred Stock for 
such election or removal. At any such meeting or adjournment thereof, the 
absence of such a quorum of the Preferred Stock shall not prevent the election 
of directors other than the directors to be elected by holders of the 
Preferred Stock pursuant to this Paragraph 4B, and in the absence of either or 
both such quorums, the holders of record of shares representing a majority of 
the voting power present in person or by proxy of the class or classes of 
stock which lack a quorum shall have power to adjourn the meeting for the 
election of directors which they are entitled to elect from time to time 
without notice other than announcement at the meeting. No meeting of 
stockholders may thereupon be reconvened unless any notice required 
hereunder, by the Corporation's bylaws or by applicable law is duly given or 
waived by the requisite number of stockholders.

     A vacancy in the directorships to be elected by the holders of the 
Preferred Stock pursuant to this Paragraph 4B may be filled only by vote or 
written consent in lieu of a meeting of (i) the holders of a majority of the 
Preferred Stock (with each share of Preferred Stock having a number of votes 
equal to the number of votes possessed by the number of shares of Common 
Stock into which such share of Preferred Stock is convertible as of the 
record date for the determination of stockholders entitled to vote on such 
matter) acting separately as a single class and to the exclusion of all other 
classes of the Corporation's stock, or (ii) the remaining directors elected 
by the holders of the Preferred Stock (or by directors so elected).

     The special voting right of the holders of Preferred Stock pursuant to 
this Paragraph 4B shall terminate at such time as less than 232,517 shares of 
Preferred Stock are outstanding (as appropriately adjusted for any stock 
dividends payable in shares of Preferred Stock and any combinations, 
subdivisions and split-ups of the shares of Preferred Stock).

     Part 5.  CONVERSION.

     5A.  CONVERSION PROCEDURE.

     (i)  At any time and from time to time, any holder of shares of Class A 
Preferred may convert all or any portion of such shares (including any 
fraction of a share) into the number of shares of the Corporation's Common 
Stock computed by multiplying

                                       -7-

the number of shares of Class A Preferred to be converted times $100 per 
share and dividing the result by the Class A Conversion Price (as defined in 
Paragraph 5B below). At any time and from time to time, any holder of shares 
of Class B Preferred may convert all or any portion of such shares (including 
any fraction of a share) into the number of shares of the Corporation's 
Common Stock computed by multiplying the number of shares of Class B 
Preferred to be converted times $100 per share and dividing the result by the 
Class B Conversion Price (as defined in Paragraph 5B below). At any time and 
from time to time, any holder of shares of Class C Preferred may convert all 
or any portion of such shares (including any fraction of a share) into the 
number of shares of the Corporation's Common Stock computed by multiplying 
the number of shares of Class C Preferred to be converted times $100 per 
share and dividing the result by the Class C Conversion Price (as defined in 
Paragraph 5B below). At any time and from time to time, any holder of shares 
of Class D Preferred may convert all or any portion of such shares (including 
any fraction of a share) into the number of shares of the Corporation's 
Common Stock computed by multiplying the number of shares of Class D 
Preferred to be converted times $100 per share and dividing the result by the 
Class D Conversion Price (as defined in Paragraph 5B below). At any time and 
from time to time, any holder of shares of Class E Preferred may convert all 
or any portion of such shares (including any fraction of a share) into the 
number of shares of the Corporation's Common Stock computed by multiplying 
the number of shares of Class E Preferred to be converted times $100 per 
share and dividing the result by the Class E Conversion Price (as defined in 
Paragraph 5B below). At any time and from time to time, any holder of shares 
of Class F Preferred may convert all or any portion of such shares (including 
any fraction of a share) into the number of shares of the Corporation's 
Common Stock computed by multiplying the number of shares of Class F 
Preferred to be converted times $100 per share and dividing the result by the 
Class F Conversion Price (as defined in Paragraph 5B below). At any time and 
from time to time, any holder of shares of Class G Preferred may convert all 
or any portion of such shares (including any fraction of a share) into the 
number of shares of the Corporation's Common Stock computed by multiplying 
the number of shares of Class G Preferred to be converted times $100 per 
share and dividing the result by the Class G Conversion Price (as defined in 
Paragraph 5B below). At any time and from time to time, any holder of shares 
of Class H Preferred may convert all or any portion of such shares (including 
any fraction of a share) into the number of shares of the Corporation's 
Common Stock computed by multiplying the number of shares of Class H 
Preferred to be converted times $100 per share and dividing the result by the 
Class H Conversion Price (as defined in Paragraph 5B below). At any time and 
from time to time, any holder of shares of Class I Preferred may convert all 
or any portion of such shares (including any fraction of a share) into the 
number of shares of the Corporation's Common Stock computed by multiplying 
the number of shares of Class I Preferred to be converted times $100 per 
share 

                                       -8-

and dividing the result by the Class H Conversion Price (as defined in 
Paragraph 5B below). 

     (ii)   Each conversion of Preferred Stock will be deemed to have been 
effected as of the close of business on the date on which the certificate or 
certificates representing the Preferred Stock to be converted have been 
surrendered at the principal office of the Corporation. At such time as such 
conversion has been effected, the rights of the holder of such Preferred 
Stock as such holder will cease and the Person or Persons in whose name or 
names any certificate or certificates for shares of Common Stock are to be 
issued upon such conversion will be deemed to have become the holder or 
holders of record of the shares of Common Stock represented thereby.

     (iii)  As soon as possible after a conversion has been effected and in 
no event later than ten (10) business days thereafter, the Corporation will 
deliver to the converting holder:

            (a)  a certificate or certificates representing the number of 
     shares of Common Stock issuable by reason of such conversion in such 
     name or names and such denomination or denominations as the converting 
     holder has specified;

            (b)  the amount payable under Subparagraph 5A(vi) below with 
     respect to such conversion; and

            (c)  a certificate representing any shares of Preferred Stock 
     which were represented by the certificate or certificates delivered to 
     the Corporation in connection with such conversion but which were not 
     converted.

     (iv)   The issuance of certificates for shares of Common Stock upon 
conversion of Preferred Stock will be made without charge to the holders of 
such Preferred Stock for any issuance tax in respect thereof or other cost 
incurred by the Corporation in connection with such conversion and the 
related issuance of shares of Common Stock. Upon conversion of any share of 
Preferred Stock, the Corporation will take all such actions as are necessary 
in order to insure that the Common Stock issued as a result of such 
conversion is validly issued, fully paid and nonassessable.

     (v)    The Corporation will not close its books against the transfer of 
Preferred Stock or of Common Stock issued or issuable upon conversion of 
Preferred Stock in any manner which interferes with the timely conversion of 
Preferred Stock.

     (vi)   If any fractional interest in a share of Common Stock would, 
except for the provisions of this Subparagraph 5A(vi), be deliverable upon 
any conversion of the Preferred Stock, the Corporation, in lieu of delivering 
the fractional share therefor,

                                       -9-

shall pay an amount to the holder thereof equal to the Market Price of such 
fractional interest as of the date of conversion.

     (vii)  Upon conversion of shares of Preferred Stock into Common Stock 
pursuant to this Paragraph 5A, the holder of such shares of Preferred Stock 
shall not be entitled to receive any accumulated but unpaid dividends on such 
shares.

     5B.  CONVERSION PRICE.

     (i)   The initial Class A Conversion Price will be $3.25. The initial 
Class B Conversion Price will be $3.50. The initial Class C Conversion Price 
will be $9.00. The initial Class D Conversion Price will be $11.00. The 
initial Class E Conversion Price will be $13.00. The initial Class F 
Conversion Price will be $13.00. The initial Class G Conversion Price will be 
$14.86. The initial Class H Conversion Price will be $13.00. The initial 
Class I Conversion Price will be $13.00. The Class A Conversion Price, the 
Class B Conversion Price, the Class C Conversion Price, the Class D 
Conversion Price, the Class E Conversion Price, the Class F Conversion Price, 
the Class G Conversion Price, the Class H Conversion Price and the Class I 
Conversion Price shall each be referred to herein as a Conversion Price. In 
order to prevent dilution of the conversion rights granted under this 
subdivision, the Class A Conversion Price, the Class B Conversion Price, the 
Class C Conversion Price, the Class D Conversion Price, the Class E 
Conversion Price, the Class F Conversion Price, the Class G Conversion Price, 
the Class H Conversion Price and the Class I Conversion Price will be subject 
to adjustment from time to time pursuant to this Part 5B; provided, however, 
that, notwithstanding anything to the contrary contained herein, there will 
be no adjustment of any Conversion Price as a result of (a) the issuance of 
shares of Common Stock upon the conversion of shares of the Class A 
Preferred, Class B Preferred, Class C Preferred, Class D Preferred, Class E 
Preferred, Class F Preferred, Class G Preferred, Class H Preferred or 
Class I Preferred or (b) issuances of Common Stock and Class B Preferred 
permitted pursuant to (1) clauses (a), (c) and (e) of the proviso in 
paragraph 4F(  )(vii) of the Class C Preferred Stock Purchase Agreement 
entered into by the Company and certain investors in July 1991, as amended in 
June 1992 (the "Class C Purchase Agreement") as in effect prior to amendment 
of such agreement in October 1993 and (2) clauses (a), (c) and (e) of the 
proviso in paragraph 4F(1)(vii) of the Class C Purchase Agreement, as amended 
in October 1993 and March 16, 1994, in each case for incentive or 
compensatory purposes to directors, officers, employees, consultants and 
scientific advisors of the Corporation which are from time to time approved 
by the Corporation's board of directors (including, without limitation, 
grants of stock options and the issuance of Common Stock upon the exercise 
thereof).

     (ii)  If and whenever on or after the original date of issuance of the 
Class C Preferred, the Corporation issues or sells, or in accordance with 
Paragraph 5C is deemed to have issued or

                                       -10-

sold, any shares of its Common Stock for a consideration per share less than 
any Conversion Price in effect immediately prior to the time of such 
issuance or sale, then immediately upon such issuance or sale such Conversion 
Price will be reduced to the conversion price determined by dividing (a) the 
sum of (1) the product derived by multiplying such Conversion Price in effect 
immediately prior to such issuance or sale times the number of shares of 
Underlying Common Stock outstanding immediately prior to such issuance or 
sale, plus (2) the consideration, if any, received by the Corporation upon 
such issuance or sale, by (b) the sum of (1) the number of shares of 
Underlying Common Stock outstanding immediately prior to such issuance or 
sale plus (2) the number of shares of Common Stock deemed to have been issued 
in such sale pursuant to this Part 5.

     (iii)  If and whenever on or after the original date of issuance of the 
Class C Preferred, the Corporation issues or sells, or in accordance with 
Paragraph 5C is deemed to have issued or sold, any shares of its Common Stock 
for a consideration per share less than the Market Price in effect 
immediately prior to the time of such issuance or sale, then immediately upon 
such issuance or sale such Conversion Price will be reduced to the conversion 
price determined by dividing (a) the sum of (1) the product derived by 
multiplying such Market Price in effect immediately prior to such issuance or 
sale times the number of shares of Underlying Common Stock outstanding 
immediately prior to such issuance or sale, plus (2) the consideration, if 
any, received by the Corporation upon such issuance or sale, by (b) the 
number of shares of Underlying Common Stock outstanding immediately prior to 
such issuance or sale plus the number of shares of Common Stock deemed to 
have been issued in such sale pursuant to this Part 5, and then multiplying 
such quotient by a fraction, the numerator of which is the Conversion Price 
and the denominator of which is the Market Price.

     (iv)   If such shares of Common Stock are issued at a price per share 
less than both the Conversion Price and the Market Price per share of Common 
Stock, the Conversion Price shall be adjusted in that manner which will 
result in the greatest decrease of the Conversion Price.

     5C.  EFFECT ON CONVERSION PRICES OF CERTAIN EVENTS.  For purposes of 
determining the adjusted Conversion Prices under Subparagraph 5B, the 
following will be applicable:

     (i)  ISSUANCE OF RIGHTS OR OPTIONS.  If the Corporation in any manner 
grants any rights or options to subscribe for or to purchase Common Stock 
(other than grants of stock options to directors, officers, employees, 
consultants and scientific advisors of the Corporation for incentive or 
compensatory purposes which are approved from time to time by the 
Corporation's board of directors) or any stock or other securities 
convertible into or exchangeable for Common Stock (such rights or options 
being herein called "Options" and such convertible or exchangeable stock or 
securities

                                       -11-

being herein called "Convertible Securities") and the price per share for 
which Common Stock is issuable upon the exercise of such Options or upon 
conversion or exchange of such Convertible Securities is (i) less than any 
Conversion Price in effect immediately prior to the time of the granting of 
such Options, or (ii) is less than the Market Price of such Common Stock in 
effect immediately prior to the granting of such Options, then the total 
maximum number of shares of Common Stock issuable upon the exercise of such 
Options or upon conversion or exchange of the total maximum amount of such 
Convertible Securities issuable upon the exercise of such Options will be 
deemed to have been issued and sold by the Corporation for such price per 
share, as the case may be. For purposes of this paragraph, the "price per 
share for which Common Stock is issuable" will be determined by dividing 
(a) the total amount, if any, received or receivable by the Corporation as 
consideration for the granting of such Options, plus the minimum aggregate 
amount of additional consideration payable to the Corporation upon exercise 
of all such Options, plus in the case of such Options which relate to 
Convertible Securities, the minimum aggregate amount of additional 
consideration, if any, payable to the Corporation upon the issuance or sale 
of such Convertible Securities and the conversion or exchange thereof, by (b) 
the total maximum number of shares of Common Stock issuable upon the exercise 
of such Options or upon the conversion or exchange of all such Convertible 
Securities issuable upon the exercise of such Options. No further adjustment 
of such Conversion Price will be made when Convertible Securities are 
actually issued upon the exercise of such Options or when Common Stock is 
actually issued upon the exercise of such Options or the conversion or 
exchange of such Convertible Securities (except as provided in Paragraphs 
5C(iii) and (iv) below).

     (ii)  ISSUANCE OF CONVERTIBLE SECURITIES.  If the Corporation in any 
manner issues or sells any Convertible Securities and the price per share for 
which Common Stock is issuable upon such conversion or exchange is (i) less 
than any Conversion Price in effect immediately prior to the time of such 
issue or sale, or (ii) is less than the Market Price of such Common Stock in 
effect immediately prior to such issue or sale, then the maximum number of 
shares of Common Stock issuable upon conversion or exchange of such 
Convertible Securities will be deemed to be outstanding and to have been 
issued and sold by the Corporation for such price per share, as the case may 
be. For the purposes of this paragraph, the "price per share for which Common 
Stock is issuable" will be determined by dividing (a) the total amount 
received or receivable by the Corporation as consideration for the issuance 
or sale of such Convertible Securities, plus the minimum aggregate amount of 
additional consideration, if any, payable to the Corporation upon the 
conversion or exchange thereof, by (b) the total maximum number of shares of 
Common Stock issuable upon the conversion or exchange of all such Convertible 
Securities. No further adjustment of such Conversion Price will be made when 
Common Stock is actually issued upon the conversion or exchange of

                                       -12-

such Convertible Securities, and if any such issuance or sale of such 
Convertible Securities is made upon exercise of any Options for which 
adjustments of such Conversion Price had been or are to be made pursuant to 
other provisions of this Part 5, no further adjustment of such Conversion 
Price will be made by reason of such issuance or sale.

     (iii)  CHANGE IN OPTION PRICE OR CONVERSION RATE.  If the purchase price 
provided for in any Options, the additional consideration, if any, payable 
upon the conversion or exchange of any Convertible Securities, or the rate at 
which any Convertible Securities are convertible into or exchangeable for 
Common Stock change at any time, any Conversion Price in effect at the time 
of such change will be readjusted, if necessary, to the Conversion
Price which would have been in effect at such time had such Options or 
Convertible Securities still outstanding provided for such changed purchase 
price, additional consideration or changed conversion rate, as the case may 
be, at the time initially granted, issued or sold; provided that if such 
adjustment would result in an increase of any Conversion Price then in 
effect, such adjustment will not be effective until 10 days after written 
notice thereof has been delivered by the Corporation to all holders of the 
Preferred Stock.

     (iv)   TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE 
SECURITIES.  Upon the expiration of any Option or the termination of any 
right to convert or exchange any Convertible Security without the exercise of 
any such Option or right, any Conversion Price then in effect hereunder will 
be adjusted to the Conversion Price which would have been in effect at the 
time of such expiration or termination had such Option or Convertible 
Security, to the extent outstanding immediately prior to such expiration or 
termination, never been issued.

     (v)    CALCULATION OF CONSIDERATION RECEIVED.  If any Common Stock, 
Option or Convertible Security is issued or sold or deemed to have been 
issued or sold for cash, the consideration received therefor will be deemed 
to be the gross amount received by the Corporation therefor. In case any 
Common Stock, Options or Convertible Securities are issued or sold for a 
consideration other than cash, the amount of the consideration other than 
cash received by the Corporation will be the fair value of such 
consideration, except where such consideration consists of securities, in 
which case the amount of consideration received by the Corporation will be 
the Market Price thereof as of the date of receipt. If any Common Stock, 
Option or Convertible Security is issued in connection with any merger in 
which the Corporation is the surviving corporation, the amount of 
consideration therefor will be deemed to be the fair value of such portion of 
the net assets and business of the non-surviving corporation as is 
attributable to such Common Stock, Options or Convertible Securities, as the 
case may be. The fair value of any consideration other than cash and 
securities will be determined jointly by the Corporation and the 

                                       -13-

holders of a majority of the outstanding Preferred Stock. If such parties are 
unable to reach agreement within 10 days after the occurrence of an event 
requiring valuation (the "Valuation Event"), the fair value of such 
consideration will be determined by an independent appraiser jointly selected 
by the Corporation and the holders of a majority of the outstanding Preferred 
Stock; provided, that, if such parties are unable to reach agreement upon the 
selection of an independent appraiser within 15 days after the Valuation 
Event, within 25 days after the Valuation Event, the Corporation and the 
holders of a majority of the Preferred Stock then outstanding will each 
choose a qualified independent appraiser reasonably acceptable to the other 
party and each such appraiser will deliver as soon as practicable in writing 
its determination of the fair value of such consideration. If the difference 
between the two appraisals is 10% or less of the lower amount, the fair value 
will be the average of such two appraisals. If the difference between the two 
appraisals is greater than 10% of the lower amount, the two appraisers will, 
within 35 days after the Valuation Event, jointly choose a third qualified 
independent appraiser. Within 45 days after the Valuation Event, the third 
appraiser will deliver its determination of fair value and the final 
determination of the fair value of such consideration will be equal to the 
average of the two appraisals which are nearest to each other. The expenses 
of the appraisers will be paid one-half by the Corporation and one-half by 
the holders of the Preferred Stock (pro rata based on the number of shares of 
Preferred Stock held).

     (vi)    INTEGRATED TRANSACTIONS.  In case any Option is issued in 
connection with the issue or sale of other securities of the Corporation, 
together comprising one integrated transaction in which no specific 
consideration is allocated to such Option by the parties thereto, the Option 
will be deemed to have been issued for a consideration of $.01.

     (vii)   TREASURY SHARES.  The number of shares of Common Stock 
outstanding at any given time does not include shares owned or held by or for 
the account of the Corporation or any Subsidiary, and the disposition of any 
shares so owned or held will be considered an issue or sale of Common Stock.

     (viii)  RECORD DATE.  If the Corporation takes a record of the holders 
of Common Stock for the purpose of entitling them (a) to receive a dividend 
or other distribution payable in Common Stock, Options or Convertible 
Securities or (b) to subscribe for or purchase Common Stock, Options or 
Convertible Securities, then such record date will be deemed to be the date 
of the issue or sale of the shares of Common Stock deemed to have been issued 
or sold upon the declaration of such dividend or upon the making of such 
other distribution or the date of the granting of such right of subscription 
or purchase, as the case may be.

                                       -14-

     5D. SUBDIVISION OR COMBINATION OF COMMON STOCK.  If the Corporation at 
any time subdivides (by any stock split, stock dividend, recapitalization or 
otherwise) one or more classes of its outstanding shares of Common Stock into 
a greater number of shares, each Conversion Price in effect immediately prior 
to such subdivision will be proportionately reduced, and if the Corporation 
at any time combines (by combination, reverse stock split or otherwise) one 
or more classes of its outstanding shares of Common Stock into a smaller 
number of shares, each Conversion Price in effect immediately prior to such 
combination will be proportionately increased.

     5E.  REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.  
Any capital reorganization, reclassification, consolidation, merger or sale 
of all or substantially all of the Corporation's assets to another Person 
which is effected in such a way that holders of Common Stock are entitled to 
receive (either directly or upon subsequent liquidation) stock, securities 
or assets with respect to or in exchange for Common Stock is referred to 
herein as an Organic Change. Prior to the consummation of any Organic Change, 
the Corporation will make appropriate provisions (in form and substance 
reasonably satisfactory to the holders of a majority of the Preferred Stock 
then outstanding) to insure that each of the holders of Preferred Stock will 
thereafter have the right to acquire and receive, in lieu of or (if 
additional consideration is received) in addition to the shares of Common 
Stock immediately theretofore acquirable and receivable upon the conversion 
of such holder's Preferred Stock, such shares of stock, securities or assets 
as such holder would have received in connection with such Organic Change if 
such holder had converted its Preferred Stock immediately prior to such 
Organic Change. In any such case, the Corporation will make appropriate 
provisions (in form and substance satisfactory to the holders of a majority 
of the Preferred Stock then outstanding) to insure that the provisions of 
this Part 5 and Parts 6 and 7 will thereafter be applicable to the Preferred 
Stock (including, without limitation, in the case of any such consolidation, 
merger or sale in which the successor corporation or purchasing corporation 
is other than the Corporation, an immediate adjustment of each Conversion 
Price to the value for the Common Stock reflected by the terms of such 
consolidation, merger or sale, if the value so reflected is less than such 
Conversion Price in effect immediately prior to such consolidation, merger or 
sale). The Corporation will not effect any such consolidation, merger or 
sale, unless prior to the consummation thereof, the successor corporation (if 
other than the Corporation) resulting from such consolidation or merger or 
the corporation purchasing such assets assumes by written instrument (in 
form and substance reasonably satisfactory to the holders of a majority of 
the Preferred Stock then outstanding), the obligation to deliver to each such 
holder such shares of stock, securities or assets as, in accordance with the 
foregoing provisions, such holder may be entitled to acquire.

                                       -15-

     5F.  CERTAIN EVENTS.  If any event occurs of the type contemplated by 
the provisions of this Part 5 but not expressly provided for by such 
provisions, then the Corporation's board of directors will make an 
appropriate adjustment in each Conversion Price so as to protect the rights 
of the holders of the Preferred Stock; provided, however, that no such 
adjustment will increase any Conversion Price as otherwise determined 
pursuant to this Part 5 or decrease the number of shares of Common Stock 
issuable upon conversion of each share of Preferred Stock.

     5G. NOTICES.

     (i)    Immediately upon any adjustment of the Conversion Price of any 
class of Preferred Sock, the Corporation will give written notice thereof to 
all holders of such class of Preferred Stock.

     (ii)   The Corporation will give written notice to all holders of 
Preferred Stock at least twenty (20) days prior to the date on which the 
Corporation closes its books or takes a record (a) with respect to any 
dividend or distribution upon Common Stock, (b) with respect to any pro rata 
subscription offer to holders of Common Stock or (c) for determining rights 
to vote with respect to any Organic Change, dissolution or liquidation.

     (iii)  The Corporation will also give written notice to the holders of 
Preferred Stock at least twenty (20) days prior to the date on which any 
Organic Change will take place.

     5H.  MANDATORY CONVERSION.

     (i)    The Corporation may require the conversion of all of the 
outstanding Preferred Stock upon the closing of a firm commitment 
underwritten Public Offering of shares of the Corporation's Common Stock in 
which (i) the aggregate price paid by the public for such shares will be at 
least $10,000,000 and (ii) the price per share paid by the public for such 
shares will be at least $11.00 (based on the Common Stock as constituted on 
the date of filing of this Amendment and appropriately adjusted for any stock 
dividend or stock split or in connection with any combination of shares, 
recapitalization, merger, consolidation or other reorganization). Any such 
mandatory conversion shall only be effected at the time of and subject to the 
closing of the sale of such shares pursuant to such Public Offering and upon 
written notice of such mandatory conversion delivered to all holders of 
Preferred Stock at least 20 but not more than 40 days prior to such closing.

     (ii)   Notwithstanding the foregoing provisions of this Part 5H, no 
mandatory conversion of the Preferred Stock shall be effected unless and 
until such conversion will not violate any laws, rules, regulations, orders 
or other legal requirements of any governing body (such as, without 
limitation, compliance with the

                                       -16-

Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and such 
conversion shall be held in abeyance pending compliance with any such 
requirements, provided that the holders of the Preferred Stock shall use 
their best efforts to comply with such requirements.

     Part 6.  LIQUIDATING DIVIDENDS.

     If the Corporation declares or pays a dividend upon the Common Stock 
payable otherwise than in cash out of earnings or earned surplus (determined 
in accordance with generally accepted accounting principles, consistently 
applied) except for a stock dividend payable in shares of Common Stock or a 
stock split (a "Liquidating Dividend"), then the Corporation shall pay to the 
holders of Preferred Stock at the time of payment thereof the Liquidating 
Dividends which would have been paid on the Common Stock had such Preferred 
Stock been converted into Common Stock immediately prior to the date on which 
a record is taken for such Liquidating Dividend, or, if no record is taken, 
the date as of which the record holders of Common Stock entitled to such 
dividends are to be determined.

     Part 7.  PURCHASE RIGHTS.

     If at any time the Corporation grants, issues or sells any Options, 
Convertible Securities or rights to purchase stock, warrants, securities or 
other property to the record holders of any class of Common Stock (the 
"Purchase Rights"), then each holder of Preferred Stock will be entitled to 
acquire, upon the terms applicable to such Purchase Rights, the aggregate 
Purchase Rights which such holder could have acquired if such holder had held 
the number of shares of Common Stock acquirable upon conversion of such 
holder's Preferred Stock immediately before the date on which a record is 
taken for the grant, issuance or sale of such Purchase Rights, or, if no such 
record is taken, the date as of which the record holders of Common Stock are 
to be determined for the grant, issue or sale of such Purchase Rights (the 
"Preferred Preemptive Rights"). Notwithstanding the foregoing, no holder of 
Preferred Stock shall be entitled to the Preferred Preemptive Rights 
described in the preceding sentence if the Purchase Rights granted, issued or 
sold by the Corporation were granted, issued or sold to employees of the 
Corporation or issued in connection with an employee stock option plan 
approved by the board of directors.

     Part 8.  REGISTRATION OF TRANSFER.

     The Corporation will keep at its principal office a register for the 
registration of the Preferred Stock. Upon the surrender of any certificate 
representing Preferred Stock at such place, the Corporation will, at the 
request of the record holder of such certificate, execute and deliver (at the 
Corporation's expense) a new certificate or certificates in exchange therefor 
representing in the aggregate the number of shares of Preferred

                                       -17-

Stock represented by the surrendered certificate. Each such new certificate 
will be registered in such name and will represent such number of shares of 
Preferred Stock as is requested by the holder of the surrendered certificate 
and will be substantially identical in form to the surrendered certificate; 
provided, however, that any transfer shall be subject to any applicable 
restrictions on the transfer of such shares and the payment of any applicable 
transfer taxes, if any, by the holder thereof.

     Part 9.   REPLACEMENT.

     Upon receipt of evidence reasonably satisfactory to the Corporation (an 
affidavit of the registered holder will be satisfactory) of the ownership and 
the loss, theft, destruction or mutilation of any certificate evidencing 
shares of Preferred Stock, and in the case of any such loss, theft or 
destruction, upon receipt of indemnity reasonably satisfactory to the 
Corporation (provided that if the holder is an institutional investor its own 
agreement will be satisfactory), or, in the case of any such mutilization, 
upon surrender of such certificate, the Corporation will (at its expense) 
execute and deliver in lieu of such certificate a new certificate of like 
kind representing the number of shares of Preferred Stock represented by such 
lost, stolen, destroyed or mutilated certificate and dated the date of such 
lost, stolen, destroyed or mutilated certificate.

     Part 10.  DEFINITIONS.

     "COMMON STOCK" means the Corporation's Common Stock, par value $0.01 per 
share, and any capital stock of any class of the Corporation hereafter 
authorized which is not limited to a fixed sum or percentage of par or stated 
value in respect to the rights of the holders thereof to participate in 
dividends or in the distribution of assets upon any liquidation, dissolution 
or winding up of the Corporation.

     "JUNIOR SECURITIES" means any of the Corporation's equity securities 
other than the Preferred Stock.

     "LIQUIDATION VALUE" of any share of Preferred Stock as of any particular 
date will be equal to $100.

     "MARKET PRICE" of any security means the average of the closing prices 
of such security's sales on all securities exchanges on which such security 
may at the time be listed, or, if there has been no sales on any such 
exchange on any day, the average of the highest bid and lowest asked prices 
on all such exchanges at the end of such day, or, if on any day such security 
is not so listed, the average of the representative bid and asked prices 
quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day 
such security is not quoted in the NASDAQ System, the average of the highest 
bid and lowest asked prices on such day in the domestic over-the-counter 
market as reported by the National Quotation

                                       -18-

Bureau, Incorporated, or any similar successor organization, in each such 
case averaged over a period of 21 days consisting of the day as of which 
"Market Price" is being determined and the 20 consecutive business days prior 
to such day. If at any time such security is not listed on any securities 
exchange or quoted in the NASDAQ System or the over-the-counter market, the 
"Market Price" will be the fair value thereof determined jointly by the 
Corporation and the holders of a majority of the Preferred Stock. If such 
parties are unable to reach agreement within a reasonable period of time, 
such fair value will be determined by an independent appraiser jointly 
selected by the Corporation and the holders of a majority of the Preferred 
Stock.

     "PERSON" means an individual, a partnership, a corporation, an 
association, a joint stock company, a trust, a joint venture, an 
unincorporated organization or a governmental entity or any department, 
agency or political subdivision thereof.

    "PUBLIC OFFERING" means any offering by the Corporation of its equity 
securities to the public pursuant to an effective registration statement 
(other than a registration statement on Form S-8) under the Securities Act of 
1933, as then in effect, or any comparable statement under any similar 
federal statute then in force; provided that a Public Offering will not 
include an offering made in connection with a business acquisition.

     "SUBSIDIARY" means any corporation of which the shares of stock having a 
majority of the general voting power in electing the board of directors are, 
at the time of which any determination is being made, owned by the 
Corporation either directly or indirectly through Subsidiaries.

     "UNDERLYING COMMON STOCK" means (i) the Common Stock issued or issuable 
upon conversion of the Preferred stock and (ii) any Common Stock issued or 
issuable with respect to the Common Stock referred to in clause (i) above by 
way of stock dividend or stock split or in connection with a combination or 
other reorganization. For purposes of determining the number of shares of 
Underlying Common Stock outstanding hereunder, all of the capital stock 
referred to in clauses (i) and (ii) above shall be deemed to be outstanding.

     Part 11.  AMENDMENT AND WAVIER.

     No amendment, modification or waiver will be binding or effective with 
respect to any provision of this Section 2 without the prior written consent 
of the holders of at least 66 2/3% of the shares of Preferred Stock 
outstanding at the time such action is taken. No change in the terms hereof 
may be accomplished by merger or consolidation of the Corporation with 
another corporation unless the Corporation has obtained the prior affirmative 
vote or written consent of the holders of at least a majority of the shares 
of Preferred Stock then outstanding. In no event shall any amendment,

                                       -19-

modification or waiver hereof be binding or effective which amendment or 
waiver materially and adversely affects the rights of any class of Preferred 
Stock without the prior written consent of a majority of the shares of each 
such class of Preferred Stock then outstanding.

     Part 12.  NOTICES.

     Except as otherwise expressly provided, all notices referred to herein 
shall be in writing and shall be delivered by registered or certified mail, 
return receipt requested, postage prepaid, or sent by reputable overnight 
express courier service, charges prepaid, and shall be deemed to have been 
delivered when so mailed or sent (i) to the Corporation, at its principal 
executive offices and (ii) to any stockholder, at such holder's address as it 
appears in the stock records of the Corporation (unless otherwise indicated 
in writing by any such holder).

     Part 13.  OTHER RESTRICTIONS.

     The Company is restricted from taking certain actions pursuant to the 
Class A Preferred Stock Purchase Agreement entered into by the Company and 
the purchasers of the outstanding Class A Preferred, the Class B Preferred 
Stock Purchase Agreement entered into by the Company and the holders of the 
outstanding Class B Preferred, the Class C Preferred Stock Purchase Agreement 
entered into by the Company and the holders of the outstanding Class C 
Preferred, the Class D Preferred Stock Purchase Agreement entered into by the 
Company and the holders of the outstanding Class D Preferred, the Class E 
Preferred Stock Purchase Agreement entered into by the Company and the 
holders of the outstanding Class E Preferred, the Class F Preferred Stock and 
Warrant Purchase Agreement entered into by the Company and the holders of the 
outstanding Class F Preferred, the Asset Purchase Agreement entered into by 
the Company and the holder of the outstanding Class G Preferred Stock, the 
Asset Purchase Agreement entered into by the Company and the holder of the 
outstanding Class H Preferred Stock, as such agreements may be amended from 
time to time in accordance with their terms, and the Class I Preferred Stock 
Purchase Agreement entered into by the Company and the holders of the 
outstanding Class I Preferred.

SECTION 3.  COMMON STOCK.

     Part 1.  VOTING RIGHTS.  Except as otherwise required by law, the 
holders of Common Stock will be entitled to one vote per share on all matters 
to be voted on by the Corporation's stockholders.

     Part 2.  DIVIDENDS.  Subject to the limitations contained in paragraph 1C 
of Section 2 of this Article Four, the holders of Common Stock will be 
entitled to dividends if, when, and as declared by the Corporation's board of 
directors, out of funds

                                       -20-

legally available therefor, whether payable in cash, property or securities 
of the Corporation.

     Part 3.  REGISTRATION OF TRANSFER.  The Corporation will keep at its 
principal office (or such other place as the Corporation reasonably 
designated) a register for the registration of shares of Common Stock. Upon 
the surrender of any certificate representing shares of Common Stock at such 
place, the Corporation will, at the request of the registered holder of such 
certificate, execute and deliver (at the Corporation's expense) a new 
certificate or certificates in exchange therefor representing in the 
aggregate the number of shares of Common Stock represented by the surrendered 
certificate, and the Corporation forthwith will cancel such surrendered 
certificate. Each such new certificate will be registered in such name and 
will represent such number of shares as is requested by the holder of the 
surrendered certificate and will be substantially identical in form to the 
surrendered certificate.

     Part 4.  REPLACEMENT.  Upon receipt of evidence reasonably satisfactory 
to the Corporation (it being understood that an affidavit of the registered 
holder will be deemed satisfactory to the Corporation) of the ownership and 
the loss, theft, destruction or mutilation of any certificate evidencing one 
or more shares of Common Stock, and in the case of any such loss, theft or 
destruction, upon receipt of indemnity reasonably satisfactory to the 
Corporation (provided that if the holder is an institutional investor its own 
agreement will be satisfactory), or, in the case of any such mutilation, upon 
surrender of such certificate, the Corporation will (at its expense) 
executive and deliver in lieu of such certificate a new certificate of like 
kind representing the number of shares represented by such lost, stolen, 
destroyed or mutilated certificate and dated the date of such lost, stolen, 
destroyed or mutilated certificate.

                                  ARTICLE FIFTH

     The Corporation is to have perpetual existence.

                                  ARTICLE SIXTH

     In furtherance and not in limitation of the powers conferred by statute, 
the board of directors of the Corporation is expressly authorized to make, 
alter or repeal the by-laws of the Corporation.

                                       -21-

                                 ARTICLE SEVENTH

     Meetings of stockholders may be held within or without the State of 
Delaware, as the by-laws of the Corporation may provide. The books of the 
Corporation may be kept outside the State of Delaware at such place or places 
as may be designated from time to time by the board of directors or in the 
by-laws of the Corporation. Election of directors need not be by written 
ballot unless the by-laws of the Corporation so provide.

                                  ARTICLE EIGHTH

     To the fullest extent permitted by the General Corporation Law of the 
State of Delaware as the same exists or may hereafter be amended, a director 
of the Corporation shall not be liable to the Corporation or its stockholders 
for monetary damages for a breach of fiduciary duty as a director. Any repeal 
or modification of this ARTICLE EIGHTH shall not adversely affect any right 
or protection of a director of the Corporation existing at the time of such 
repeal or modification.

                                  ARTICLE NINTH

     The Corporation expressly elects not to be governed by Section 203 of 
the General Corporation Law of the State of Delaware.

                                  ARTICLE TENTH

     The Corporation reserves the right to amend, alter, change or repeal any 
provision contained in this certificate of incorporation in the manner now or 
hereafter prescribed herein and by the laws of the State of Delaware, and all 
rights conferred upon stockholders herein are granted subject to this 
reservation.

                                       -22-

                                                                     EXHIBIT 3.5

                          AMENDED AND RESTATED BY-LAWS

                                       OF

                                STERICYCLE, INC.

                             A Delaware Corporation

                                    ARTICLE I

                                     OFFICES

     SECTION 1.  REGISTERED OFFICE.  The registered office of the corporation in
the State of Delaware shall be located at 32 Loockerman Square, Suite L-100,
Dover, Delaware, 19901, County of Kent.  The name of the corporation's
registered agent at such address shall be Prentice Hall Corporation System, Inc.
The registered office and/or registered agent of the corporation may be changed
from time to time by action of the board of directors.

     SECTION 2.  OTHER OFFICES.  The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.

                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

     SECTION 1.  PLACE AND TIME OF MEETINGS.  An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days 
after the close of the immediately preceding fiscal year of the corporation for
the purpose of electing directors and conducting such other proper business as
may come before the meeting.  The date, time and place of the annual meeting
shall be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall determine the date, time
and place of such meeting.

     SECTION  2.  SPECIAL MEETINGS. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof.  Except as otherwise provided in the
corporation's

certificate of incorporation, such meetings may be called at any time by the
board of directors, the president or the holders of shares entitled to cast not
less than twenty-five percent (25%) of the votes on any matter to be considered
at the meeting.

     SECTION 3.  PLACE OF MEETINGS.  The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors.  If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.

     SECTION 4.  NOTICE.  Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting.  All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the president or the secretary, and if mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the stockholder at his, her or its address as the
same appears on the records of the corporation.  Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.

     SECTION 5.  STOCKHOLDERS LIST.  The officer having charge of the stock
ledger of the corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder.  Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held.  The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

     SECTION 6. QUORUM.  The holders of shares representing a majority of the
voting power of the corporation, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders, except as
otherwise provided by statute or by

                                       -2-

the certificate of incorporation.  If a quorum is not present, the holders
shares representing a majority of the voting power present in person or
represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place.  When a quorum is once present
to commence a meeting of stockholders, it is not broken by the subsequent
withdrawal of any stockholders or their proxies.

     SECTION 7.  ADJOURNED MEETINGS.  When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken.  At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting.  If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.

     SECTION 8.  VOTE REQUIRED. When a quorum is present, the affirmative vote
of the holders of shares representing a majority of the voting power present in
person or represented by proxy at the meeting and entitled to vote on of shares
the subject matter shall be the act of the stockholders, unless the question is
one upon which by express provisions of an applicable law or of the certificate
of incorporation a different vote is required, in which case such express
provision shall govern and control the decision of such question.

     SECTION 9.  VOTING RIGHTS.  Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of 
Article VI hereof, every stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of common stock
held by such stockholder.

     SECTION 10.  PROXIES.  Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.  A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power.  A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.  Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an

                                       -3-

interest and the fact of the interest appears on the face of the proxy, the
agent named in the proxy shall have all voting and other rights referred to in
the proxy, notwithstanding the presence of the person executing the proxy.  At
each meeting of the stockholders, and before any voting commences, all proxies
filed at or before the meeting shall be submitted to and examined by the
secretary or a person designated by the secretary, and no shares may be
represented or voted under a proxy that has been found to be invalid or
irregular.

     SECTION 11.  ACTION BY WRITTEN CONSENT.  Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded.  Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.  All consents properly delivered in accordance
with this section shall be deemed to be recorded when so delivered.  No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered to the
corporation as required by this section, written consents signed by the holders
of a sufficient number of shares to take such corporate action are so recorded. 
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have
not consented in writing.  Any action taken pursuant to such written consent or
consents of the stockholders shall have the same force and effect as if taken by
the stockholders at a meeting thereof.

                                   ARTICLE III

                                    DIRECTORS

     SECTION 1.  GENERAL POWERS.  The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.

                                       -4-

     SECTION 2.  NUMBER, ELECTION AND TERM OF OFFICE.  The number of directors
which shall constitute the board shall be seven (7).  Thereafter, the number of
directors shall be established from time to time by resolution of the board
except as otherwise provided in the corporation's certificate of incorporation
or any contract among the corporation and the holders of its capital stock.  The
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote in the
election of directors.  Whenever the holders of any class or series are entitled
to elect one or more directors by the provisions of the corporation's
certificate of incorporation, the provisions of this section shall apply, in
respect to the election of one or more such directors, to the vote of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.  The directors shall be elected in this manner at
the annual meeting of the stockholders, except as provided in Section 4 of this
Article III.  Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.

     SECTION 3.  REMOVAL AND RESIGNATION.  Except as otherwise provided by the
corporation's certificate of incorporation, any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors. 
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole.  Any director may resign at any time upon written
notice to the corporation.

     SECTION 4.  VACANCIES.  Except as otherwise provided by the corporation's
certificate of incorporation, vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director.  Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.

     SECTION 5.  ANNUAL MEETINGS.  The annual meeting of each newly elected
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.

     SECTION 6.  OTHER MEETINGS AND NOTICE.  Regular meetings, other than the
annual meeting, of the board of directors shall be

                                       -5-

held at least four times during each fiscal year, with at least one such meeting
being held in each fiscal quarter of each fiscal year and shall be held without
notice at such time and at such place as shall from time to time be determined
by resolution of the board.  Special meetings of the board of directors may be
called by or at the request of the president or any director on at least 24
hours notice to each director, either personally, by telephone, by mail or by
telegraph.

     SECTION 7.  QUORUM, REQUIRED VOTE AND ADJOURNMENT.  A majority of the total
number of directors shall constitute a quorum for the transaction of business. 
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors.  If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.

     SECTION 8.  COMMITTEES.  The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law.  The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.  Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors.  Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.

     SECTION 9.  COMMITTEE RULES.  Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of 
directors designating such committee.  Unless otherwise provided in such a 
resolution, the presence of at least a majority of the members of the 
committee shall be necessary to constitute a quorum.  In the event that a 
member and that member's alternate, if alternates are designated by the board 
of directors as provided in Section 8 of this Article III, of such committee 
is or are absent or disqualified, the member or members thereof present at 
any meeting and not disqualified from voting, whether or not such member or 
members constitute a quorum, may unanimously appoint another member of the 
board of directors to act at the meeting in place of any such absent or 
disqualified member.

                                       -6-

     SECTION 10.  COMMUNICATIONS EQUIPMENT.  Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.

     SECTION 11.  WAIVER OF NOTICE AND PRESUMPTION OF ASSENT.  Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.  Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting.  Such right to
dissent shall not apply to any member who voted in favor of such action.

     SECTION 12.  ACTION BY WRITTEN CONSENT.  Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.

                                   ARTICLE IV

                                    OFFICERS

     SECTION 1.  NUMBER.  The officers of the corporation shall be elected by
the board of directors and shall consist of a president, one or more vice-
presidents, a chief financial officer, a secretary, a treasurer, and such other
officers and assistant officers as may be deemed necessary or desirable by the
board of directors.  Any number of offices may be held by the same person.  In
its discretion, the board of directors may choose not to fill any office for
any period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.

     SECTION 2.  ELECTION AND TERM OF OFFICE.  The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders

                                       -7-

or as soon thereafter as conveniently may be.  Vacancies may be filled or new
offices created and filled at any meeting of the board of directors.  Each
officer shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as hereinafter provided.

     SECTION 3.  REMOVAL.  Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.

     SECTION 4.  VACANCIES.  Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.

     SECTION 5.  COMPENSATION.  Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.

     SECTION 6. CHAIRMAN OF THE BOARD.  The chairman of the board shall have
such powers and perform such duties incident to that position.  He shall preside
at all meetings of the board of directors and stockholders and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or provided in these by-laws.  Whenever the president is unable to
serve, by reason of sickness, absence or otherwise, the chairman of the board
shall perform all the duties and responsibilities and exercise all the powers of
the president.

     SECTION 7.  THE PRESIDENT.  The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he or she is present; subject to the powers of
the board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect.  The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation.  The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these by-laws.

                                       -8-

     SECTION 8.  CHIEF FINANCIAL OFFICER.  The chief financial officer of the
corporation shall, under the direction of the president, be responsible for all
financial and accounting matters and for the direction of the offices of
treasurer and controller.  The chief financial officer shall have such other
powers and perform such other duties as may be prescribed by the president or
the board of directors or as may be provided in these by-laws.

     SECTION 9.  VICE-PRESIDENTS.  The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, act with all of the powers
and be subject to all the restrictions of the president.  The vice-presidents
shall also perform such other duties and have such other powers as the board of
directors, the president or these by-laws may, from time to time, prescribe.

     SECTION 10.  THE SECRETARY AND ASSISTANT SECRETARIES.  The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose.  Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these by-
laws may, from time to time, prescribe; and shall have custody of the corporate
seal of the corporation.  The secretary, or an assistant secretary, shall have
authority to affix the corporate seal to any instrument requiring it and when
so affixed, it may be attested by his or her signature or by the signature of
such assistant secretary.  The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his or her signature.  The assistant secretary, or if there be more
than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the president, or
secretary may, from time to time, prescribe.

     SECTION 11.  THE TREASURER AND ASSISTANT TREASURER.  The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation at may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and the board of directors, at its regular meeting
or when the board of directors

                                       -9-

so requires, an account of the corporation; shall have such powers and perform
such duties as the board of directors, the president or these by-laws may, from
time to time, prescribe.  If required by the board of directors, the treasurer
shall give the corporation a bond (which shall be rendered every six years) in
such sums and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of the office of
treasurer and for the restoration to the corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in the possession or under the
control of the treasurer belonging to the corporation.  The assistant treasurer,
or if there shall be more than one, the assistant treasurers in the order
determined by the board of directors, shall in the absence or disability of the
treasurer, perform the duties and exercise the powers of the treasurer.  The
assistant treasurers shall perform such other duties and have such other powers
as the board of directors, the president or treasurer may, from time to time,
prescribe.

     SECTION 12.  OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS.  Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.

     SECTION 13.  ABSENCE OR DISABILITY OF OFFICERS.  In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.

                                    ARTICLE V

                INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS

     SECTION 1.  NATURE OF INDEMNITY.  Each person who was or is made a party or
is threatened to be made a party to or is involved  in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so by the General Corporation Law of the State of Delaware, as the

                                      -10-

same exists or may hereafter be amended against all expense, liability and loss
(including attorneys' fees actually and reasonably incurred by such person in
connection with such proceeding and such indemnification shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in Section 2 hereof, the corporation shall indemnify
any such person seeking indemnification in connection with a proceeding
initiated by such person only if such proceeding was authorized by the board of
directors of the corporation.  The right to indemnification conferred in this
Article V shall be a contract right and, subject to Sections 2 and 5 hereof,
shall include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition.  The
corporation may, by action of its board of directors, provide indemnification to
employees and agents of the corporation with the same scope and effect as the
foregoing indemnification of directors and officers.

     SECTION 2.  PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS.  Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within 30 days, upon the written request of the
director or officer.  If a determination by the corporation the at the director
or officer is entitled to indemnification pursuant to this Article V is
required, and the corporation fails to respond within sixty days to a written
request for indemnity, the corporation shall be deemed to have approved the
request.  If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction.  Such person's costs and
expenses incurred in connection with successfully establishing his or her right
to indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation.  It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation. 
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct sot forth in the General Corporation Law of the State of Delaware, nor
an actual

                                      -11-

determination by the corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.

     SECTION 3.  ARTICLE NOT EXCLUSIVE.  The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.

     SECTION 4.  INSURANCE.  The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.

     SECTION 5.  EXPENSES.  Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation.  Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.

     SECTION 6.  EMPLOYEES AND AGENTS.  Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.

     SECTION 7.  CONTRACT RIGHTS.  The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obliga-

                                      -12-

tions then existing with respect to any state of facts or proceeding then
existing.

     SECTION 8.  MERGER OR CONSOLIDATION.  For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.

                                   ARTICLE VI

                              CERTIFICATES OF STOCK

     SECTION 1.  FORM.  Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares owned by such holder in the
corporation.  If such a certificate is countersigned (1) by a transfer agent or
an assistant transfer agent other than the corporation or its employee or (2) by
a registrar, other than the corporation or its employee, the signature of any
such president, vice-president, secretary, or assistant secretary may be
facsimiles.  In case any officer or officers who have signed, or whose facsimile
signature or signatures have been used on, any such certificate or certificates
shall cease to be such officer or officers of the corporation whether because of
death, resignation or otherwise before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation.  All certificates for shares shall be consecutively numbered or
otherwise identified.  The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation.  Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or

                                      -13-

certificates for such shares endorsed by the appropriate person or persons, with
such evidence of the authenticity of such endorsement, transfer, authorization,
and other matters as the corporation may reasonably require, and accompanied by
all necessary stock transfer stamps.  In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books. 
The board of directors may appoint a bank or trust company organized under he
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.

     SECTION 2. LOST CERTIFICATES.  The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.

     SECTION 3. FIXING A RECORD DATE FOR STOCKHOLDER MEETINGS. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting.  If no record date is fixed by the board of directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be the close of business on the next day preceding
the day on which notice is given, or if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held.  A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.

     SECTION 4. FIXING A RECORD DATE FOR ACTION BY WRITTEN CONSENT.  In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without

                                      -14-

a meeting, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors, and which date shall not be more than ten days after
the date upon which the resolution fixing the record date is adopted by the
board of directors.  If no record date has been fixed by the board of directors,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by statute, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.  Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested. 
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by statute, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action.

     SECTION 5.  FIXING A RECORD DATE FOR OTHER PURPOSES.  In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action.  If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.

     SECTION 6.  REGISTERED STOCKHOLDERS.  Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner.

     SECTION 7.  SUBSCRIPTIONS FOR STOCK.  Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors.  Any call made by the board of directors for payment on

                                      -15-

subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series.  In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.

                                   ARTICLE VII

                               GENERAL PROVISIONS

     SECTION 1.  DIVIDENDS.  Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law.  Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.  Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.

     SECTION 2.  CHECKS, DRAFTS OR ORDERS.  All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.

     SECTION 3.  CONTRACTS.  The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.

     SECTION 4.  LOANS.  No loans shall be made by the corporation to its
officers or directors, and no loans shall be made by the corporation secured by
its shares.  No loans shall be made or contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by resolution of the board of directors.  Such authority may be general or
confined to specific instances.

     SECTION 5.  FISCAL YEAR.  The fiscal year of the corporation shall be fixed
by resolution of the board of directors.

                                      -16-

     SECTION 6.  CORPORATE SEAL.  The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware". 
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.

     SECTION 7.  VOTING SECURITIES OWNED BY CORPORATION.  Voting securities in
any other corporation hold by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer.  Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.

     SECTION 8.  INSPECTION OF BOOKS AND RECORDS.  Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom.  A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder.  In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder.  The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.

     SECTION 9.  SECTION HEADINGS.  Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.

     SECTION 10.  INCONSISTENT PROVISIONS.  In the event that any provision of
those by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.

                                      -17-

                                  ARTICLE VIII

                                   AMENDMENTS

     These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote.  The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.

                                      -18-

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT
TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE
UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO STERICYCLE, INC., AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND STATE SECURITIES LAWS IS
AVAILABLE.

                                   STERICYCLE, INC.
                            COMMON STOCK PURCHASE WARRANT

                               VOID AFTER JULY 26, 2000

    Stericycle, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received,                ("Holder"), or assigns, is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time before 5:00 p.m. Central time on July 26, 2000 (the
"Expiration Date"), at the purchase price of $.299 per share, subject to
adjustment as set forth in Section 6,         shares of Class A Common Stock of
the Company;

    As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

         (a)  The term "Company" includes any corporation which shall succeed
    to or assume the obligations of the Company hereunder.

         (b)  The term "Stock" shall mean the Class A Common Stock, if and when
    authorized, and any other securities or property of the Company or of any
    other person (corporate or otherwise) which the Holders at any time shall
    be entitled to receive on the exercise hereof, in lieu of or in addition to
    the Class A Common Stock or which at any time shall be issuable in exchange
    for or in replacement of the Class A Common Stock.

    1.   INITIAL EXERCISE DATE; EXPIRATION.  This Warrant may be exercised at
any time or from time to time.  It shall expire 5:00 p.m. Central time on July
26, 2000.

    2.   [Intentionally Omitted]

    3.   EXERCISE OF WARRANT; PARTIAL EXERCISE.  This Warrant may be exercised
in full or in part by the Holders by surrender of this Warrant, with the form of
subscription attached hereto duly executed by the Holders, to the Company at its
principal office, accompanied by payment, in cash or by certified or official
bank check payable to the order of the Company, of the purchase price of the
shares of Stock to be purchased hereunder, the cancellation by the

Holder of indebtedness of the Company to the Holder in an amount equal to such
purchase price, or any combination thereof.  For any partial exercise hereof,
the Holders shall designate in the subscription the number of shares of Stock
that they wish to purchase.   On any such partial exercise, the Company at its
expense shall forthwith issue and deliver to the Holders a new warrant of like
tenor, in the name of the Holders, which shall be exercisable for such number of
shares of Stock represented by this Warrant which have not been purchased upon
such exercise.

    4.   WHEN EXERCISE IS EFFECTIVE.  The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant is surrendered to the Company as provided in
Section 3, and at such time the person in whose name any certificate for shares
of Stock are to be issued upon such exercise (as provided in Section 5) shall be
deemed to be the record holder of such Stock for all purposes.

    5.   DELIVERY ON EXERCISE.  As soon as practicable after the exercise of
this Warrant in full or in part, and in any event within five business days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the holder hereof, or as such holder may direct, a certificate or certificates
for the number of fully paid and nonassessable full shares of Stock to which
such holder shall be entitled on such exercise.

    6.   ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.  The character of
the shares of Stock issuable upon exercise of this Warrant (or any shares of
stock or other securities at the time issuable upon exercise of this Warrant)
and the purchase price therefor, are subject to adjustment upon the occurrence
of the following events:

         6.1  ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS, RECAPITALIZATION,
    ETC.  The exercise price of this Warrant and the number of shares of Stock
    issuable upon exercise of this Warrant (or any shares of stock or other
    securities at the time issuable upon exercise of this Warrant) shall be
    appropriately adjusted to reflect any stock dividend, stock split,
    combination of shares, reclassification, recapitalization or other similar
    event affecting the number of outstanding shares of Stock (or such other
    stock or securities).  For example, if there should be a 2-for-1 stock
    split, the exercise price would be divided by two and such number of shares
    would be doubled.

         6.2  ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS.  In case the
    Company shall make or issue, or shall fix a record date for the
    determination of eligible holders entitled to receive, a dividend or other
    distribution with respect to the Stock (or any shares of stock or other
    securities at the time issuable upon exercise of the Warrant) payable in
    (i) securities of the Company (other than shares of Common Stock) or (ii)
    assets (excluding cash dividends paid or payable solely out of retained
    earnings), then in each case, the Holders on exercise hereof at any time
    after the consummation, effective date or record date of such event shall
    receive, in addition to the Stock (or such other stock or securities)
    issuable on such exercise prior to such date, the securities or such

                                          2

    other assets of the Company to which Holders would have been entitled upon
    such date if Holders had exercised this Warrant immediately prior thereto
    (all subject to further adjustment as provided in this Warrant).

         6.3  ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.  In
    case of any consolidation or merger of the Company with or into any other
    corporation, entity or person, or any other corporate reorganization, in
    which the Company shall not be the continuing or surviving entity of such
    consolidation, merger or reorganization, or any transaction in which in
    excess of 50% of the Company's voting power is transferred, or any sale of
    all or substantially all of the assets of the Company (any such transaction
    being hereinafter referred to as a "Reorganization"), then, in each case,
    the Holders, on exercise hereof at any time after the consummation or
    effective date of such Reorganization (the "Effective Date"), shall
    receive, in lieu of the Stock issuable on such exercise prior to the
    Effective Date, the stock and other securities and property (including
    cash) to which Holders would have been entitled upon the Effective Date if
    Holders had exercised this Warrant immediately prior thereto (all subject
    to further adjustment as provided in this Warrant).

         6.4  ADJUSTMENT UPON SALE OF STOCK.  In the event of a sale by the
    Company of any of its Class A Common Stock in exchange for cash equity
    within one year of the date hereof for an aggregate purchase price of at
    least One Million Dollars ($1,000,000) (an "Equity Raise"), the exercise
    price for purchase of Stock pursuant to this Warrant shall be adjusted to
    an amount equal to 70% of the per share purchase price for the Class A
    Common Stock sold pursuant to such sale.  The adjustment described in this
    subparagraph shall be made only upon the first Equity Raise.

         6.5  CERTIFICATE AS TO ADJUSTMENTS.  In case of any adjustment or
    readjustment in the price or kind of securities issuable on the exercise of
    this Warrant pursuant to the provisions of this Section 6, the Company will
    promptly give written notice thereof to the Holders in the form of a
    certificate, certified and confirmed by the Board of Directors of the
    Company, setting forth such adjustment or readjustment and showing in
    reasonable detail the facts upon which such adjustment or readjustment is
    based.

    7.   ADDITIONAL OBLIGATIONS.   The Company (a) will not increase the par
value of any shares of stock receivable on the exercise of this Warrant above
the amount payable therefor on such exercise, (b) will at all times reserve and
keep available a number of its authorized shares of Stock, free from all
preemptive rights therein, which will be sufficient to permit the exercise of
this Warrant, and (c) shall take all such action as may be necessary or
appropriate in order that all shares of Stock as may be issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued, fully
paid and non-assessable and free from all taxes, liens and charges with respect
to the issue thereof.

    8.   NOTICES OF RECORD DATE, ETC.  In the event of:

         (a)  any taking by the Company of a record of the holders of any class
    of

                                          3

    securities for the purpose of determining the holders thereof who are
    entitled to receive any dividend or other distribution, or any right to
    subscribe for, purchase or otherwise acquire any shares of stock of any
    class or any other securities or property, or to receive any other right,
    or

         (b)  any capital reorganization of the Company, any reclassification
    or recapitalization of the capital stock of the Company, or any transfer of
    all or substantially all the assets of the Company to, or consolidation or
    merger of the Company with, or into, any other person, or

         (c)  any voluntary or involuntary dissolution, liquidation or winding-
    up of the Company, or

         (d)  any proposed issue or grant by the Company of any shares of stock
    of any class or any other securities, or any right or option to subscribe
    for, purchase or otherwise acquire any shares of stock of any class or any
    other securities. Then and in each such event the Company will mail to the
    Holders a notice specifying (i) the date on which any such record is to be
    taken for the purpose of such dividend, distribution or right, and stating
    the amount and character of such dividend, distribution or right, (ii) the
    date on which any such reorganization, reclassification, recapitalization,
    transfer, consolidation, merger, dissolution, liquidation or winding-up is
    to take place, and the time, if any is to be fixed, as of which the holders
    of record of Stock (or any shares of stock or other securities at the time
    issuable upon the exercise of this Warrant) shall be entitled to exchange
    their shares for securities or other property deliverable on such
    reorganization, reclassification, recapitalization, transfer,
    consolidation, merger, dissolution, liquidation or winding-up, and (iii)
    the amount and character of any stock or other securities, or rights or
    options which respect thereto, proposed to be issued or granted, the date
    of such proposed issue or grant and the persons or class of persons to whom
    such proposed issue or grant is to be offered or made.  Such notice shall
    be mailed at least 20 days prior to the date therein specified.

    9.   EXCHANGE OF WARRANTS.  On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the Holders a new Warrant of like tenor, in the
name of Holders or as Holders may direct, calling in the aggregate on the face
thereof for the number of shares of Stock called for on the face of the Warrant
so surrendered.

    10.  REPLACEMENT OF WARRANTS.  On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.

    11.  TRANSFER.  Subject to the transfer conditions referred to in the
legend endorsed

                                          4

hereon, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Holders upon surrender of this Warrant with a
properly executed assignment at the principal office of the Company.  Upon any
partial transfer, the Company will at its expense issue and deliver to the
Holders a new Warrant of like tenor, in the name of the Holders, which shall be
exercisable for such number of shares of Stock which were not so transferred.

    12.  NO RIGHTS OR LIABILITY AS A STOCKHOLDER.  This Warrant does not
entitle the Holders to any voting rights or other rights as a stockholder of the
Company.  No provisions hereof, in the absence of affirmative action by the
Holders to purchase Stock, and no enumeration herein of the rights or privileges
of the Holders shall give rise to any liability of Holders as a stockholder of
the Company.

    13.  DAMAGES.  The Company recognizes and agrees that the Holders will not
have an adequate remedy if the Company fails to comply with the terms of this
Warrant and that damages will not be readily ascertainable, and the Company
expressly agrees that, in the event of such failure, it shall not oppose an
application by the Holders or any other person entitled to the benefits of this
Warrant requiring specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such breach of the terms
hereof.

    14.  NOTICES.  All notices referred to in this Warrant shall be in writing
and shall be delivered personally or by certified or registered mail, return
receipt requested, postage prepaid and will be deemed to have been given when so
delivered or mailed (i) to the Company, at its principal executive offices and
(ii) to the Holders, at each Holders' address as it appears in the records of
the Company (unless otherwise indicated by such Holder).

    15.  PAYMENT OF TAXES.  All shares of Stock issued upon the exercise of
this Warrant shall be validly issued, fully paid and non-assessable.

    16.  MISCELLANEOUS.  This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.  This Warrant is being delivered in the State of Illinois and shall
be governed by and construed and enforced in accordance with the internal laws
of the State of Illinois (without reference to any principles of the conflicts
of laws).  The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.

Dated: As of July 26, 1995

                                  STERICYCLE, INC.

                                  By: /s/ James Polark
                                     ------------------------------------------
                                  Its: VP CFO
                                     ------------------------------------------

                                          5

                                 FORM OF SUBSCRIPTION

To:

    The undersigned, the Holders of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,                  shares of Class A Common Stock of
Stericycle, Inc., and herewith makes payment of $.299 per share therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to                         , whose address is                        .

                                  --------------------------------------------
                                  (Signature must conform in all respects to
                                  name of Holders as specified on the fact of
                                  the Warrant)

                                  --------------------------------------------
                                  --------------------------------------------
                                  (Address)

Dated:

                         FIRST AMENDMENT TO AMENDED AND
                        RESTATED REGISTRATION AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED REGISTRATION AGREEMENT
("Amendment") is made as of September 30, 1995, among Stericycle, Inc., a
Delaware corporation (the "Company"), and the investors listed on the signature
pages hereto (collectively, the "Investors").

                                    RECITALS

     A.   The Company and the Investors are parties to that certain Amended and
Restated Registration Agreement made as of October 19, 1994 (the "Registration
Agreement").

     B.   Pursuant to the terms of that certain Plan of Recapitalization, a copy
of which is attached hereto (the "Plan of Recapitalization"), the Company has
proposed to recapitalize the Company by reclassifying all of its outstanding
preferred stock of all classes into its Class A Common Stock.

     C.   The Company and the Investors desire to amend the Registration
Agreement to clarify that the registration rights granted in the Registration
Agreement will apply to the Class A Common Stock received by the Investors in
exchange for the Company's preferred shares pursuant to the Plan of
Recapitalization.

     NOW THEREFORE, the parties agree as follows:

     1.   Section 1(a) of the Registration Agreement is amended to read as
follows:

          (a)  REQUESTS FOR REGISTRATION.  At any time after the date of this
     Agreement, the holders of at least a majority of the Registrable Securities
     may request registration under the Securities Act of all or part of their
     Registrable Securities on Form S-1 or any similar long-form registration
     ("Long-Form Registrations"), and the holders of at least 25% of the
     Registrable Securities may request registration under the Securities Act of
     all or part of their Registrable Securities on Form S-2 or S-3 or any
     similar short-form registration (the "Short-Form Registrations") available.
     At any time after the first to occur of (i) an initial public distribution
     which would trigger periodic public reporting with respect to the Company,
     or (ii) July 10, 1996, State Farm Mutual Automobile Insurance Company
     ("State Farm"), as long as it, along with its affiliates, is the holder of
     at least 80 % of the Common Stock received by State Farm pursuant to the
     Plan of Recapitalization (other than shares subsequently repurchased by the
     Company or previously sold pursuant to a registration hereunder), may
     request registrations under the Securities Act of all or part of the shares
     of its Registrable Securities on Form S-1 or any similar long-form
     registration (a "Preferred Long-Form Registration").  At any time after an
     initial public distribution which would trigger periodic public reporting
     with respect

     to the Company, Baxter Healthcare Corporation ("Baxter"), as long as it,
     along with its affiliates, is the holder of at least 50% of the Common
     Stock received by Baxter pursuant to the Plan of Recapitalization may
     request registration under the Securities Act of all or part of the shares
     of its Registrable Securities on Form S-1 or any similar long-form
     registration (the "Baxter Long-Form Registration").  Within ten days after
     receipt of any such request, the Company will give written notice of such
     request to all other holders of Registrable Securities and, subject to
     paragraph 1(d) hereof, will include in such registration all Registrable
     Securities with respect to which the Company has received written requests
     for inclusion therein within 15 days after the receipt of the Company's
     notice.  All Registrations requested pursuant to this paragraph 1(a) are
     referred to herein as "Demand Registrations."

     2.   Section 1(c) of the Registration Agreement is hereby amended to read
as follows:

          (c)  SHORT-FORM REGISTRATIONS.  In addition to the rights provided
     pursuant to paragraph 1(b) above, the holders of at least 25% of the
     Registrable Securities will be entitled to request an unlimited number of
     Short-Form Registrations.  Demand Registrations will be Short-Form
     Registrations whenever the Company is permitted to use any applicable short
     form.  Once the Company has become subject to the reporting requirements of
     the Securities Exchange Act, the Company will use its best efforts to make
     Short-Form Registrations available for the sale of Registrable Securities.

     3.   Section 8 of the Registration Agreement is hereby amended to read as
follows:

          8.   DEFINITIONS.

          (a)  The term "Affiliate" of a specified Person means any other Person
     directly or indirectly controlling or controlled by or under direct or
     indirect common control with such specified Person and, in the case of a
     Person who is an individual, shall include members of such specified
     Person's immediate family and trusts, if the trustee and all beneficiaries
     of such trust are such specified Person or member of such Person's
     immediate family.

          (b)  The term "Common Stock" means the Company's Class A Common Stock,
     par value $0.01 per share.

          (c)  The term "Person" means an individual, a partnership, a
     corporation, an association, a joint stock company, a trust, a joint
     venture, an unincorporated organization and a governmental entity or any
     department, agency or political subdivision thereof.

          (d)  The term "Preferred Stock" means any of the Company's Class A
     Preferred, par value $0.01 per share, Class B Preferred, par value $0.01
     per share, Class C Preferred, par value $0.01 per share, Class D Preferred,
     par value $0.01 per share,

                                        2

     Class E Preferred, par value $0.01 per share, Class F Preferred, par value
     $0.01 per share, Class H Preferred, par value $0.01 per share or Class I
     Preferred, par value $0.01 per share held by any Investor prior to the
     reclassification of such shares pursuant to the Plan of Recapitalization.

          (e)  The term "Registrable Securities" means (i) any Common Stock
     issued to any Investor with respect to any of the Preferred Stock pursuant
     to the Plan of Recapitalization, (ii) any Common stock issued upon exercise
     of the Warrants, and (iii) any Common Stock issued or issuable with respect
     to the securities referred to in clauses (i) or (ii) by way of a stock
     dividend or stock split or in connection with A combination of shares,
     recapitalization, merger, consolidation or other reorganization.  As to any
     particular Registrable Securities such securities will cease to be
     Registrable Securities when they have been (i) effectively registered under
     the Securities Act and disposed of in accordance with the registration
     statement covering them or (H) sold to the public through a broker-dealer
     or market-maker in compliance with Rule 144 (or any similar rule then in
     force).

          (f)  The term "Securities Act" means the Security Act of 1933, as
     amended, or any similar federal law then in force.

          (g)  The term "Securities Exchange Act" means the Securities Exchange
     Act of 1934 as amended, or any similar federal law then in force.

          (h)  The term "Warrants" means the warrants exercisable for shares of
     Common Stock issued to the purchasers of the Company's Class F Preferred
     Stock pursuant to that certain Class F Preferred Stock and Warrant Purchase
     Agreement dated March 16, 1994 by and between the Company and the original
     purchasers of the Company's Class F Preferred Stock.

     4.   Section 9(g) of the Registration Agreement is hereby amended to read
as follows:

          (G)  NOTICES.  All notices, demands, or other communications to be
     given or delivered under or by reason of the provisions of this Agreement
     will be in writing and will be deemed to have been given to the recipient
     when delivered personally, mailed by certified or registered mail, return
     receipt requested and postage prepaid, or sent by reputable overnight
     express courier service, charges prepaid.  Such notices, demands and other
     communications will be sent to the Investors at the address indicated in
     the Company's stock records and to the Company at the address indicated
     below:

                    Stericycle, Inc.
                    1419 Lake Cook Road, Suite 410
                    Deerfield, Illinois 60015
                    Attention: President

                                        3

     or to such other address or to the attention of such other person as the
     recipient party has specified by prior written notice of the sending party.

     5.   Section 9(h) of the Registration Agreement is hereby deleted.

     6.   The following is hereby added as Sections 9(h) through (i) of the
Registration Agreement:

          (h)  SEVERABILITY.  Whenever possible, each provision of this
     Agreement will be interpreted in such manner as to be effective and valid
     under applicable law, but if any provision of this Agreement is held to be
     prohibited by or invalid under applicable law, such provision will be
     ineffective only to the extent of such prohibition or invalidity, without
     invalidating the remainder of this Agreement.

          (i)  DESCRIPTIVE HEADINGS.  The descriptive headings of this Agreement
     are inserted for convenience only and do not constitute a part of this
     Agreement.

          (j)  GOVERNING LAW.  All questions concerning the construction,
     validity, and interpretation of this Agreement and the exhibits and
     schedules hereto will be governed by the internal law, and not the law of
     conflicts, of the State of Delaware.

     7.   In all other respects the Registration Agreement, as amended hereby
shall remain in full force and effect.

     8.   The Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.

     9.   This Amendment shall be governed by and construed in accordance with
the internal laws (and not the laws of conflict) of the State of Delaware.

     10.  This Amendment may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
agreement.  The parties agree that the signature pages may be detached from the
counterparts and attached to a single copy of this Amendment to physically form
one document.

     IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.

                                        STERICYCLE, INC.

                                        By:  /s/ [Illegible]
                                             -----------------------------------
                                        Its: V.P. -- CFO
                                             -----------------------------------

                                        4

                      SIGNATURE PAGE TO FIRST AMENDMENT TO
                   AMENDED AND RESTATED REGISTRATION AGREEMENT

     The undersigned has read the First Amendment to Amended and Restated
Registration Agreement, dated as of September   , 1995, and hereby agrees to be
bound by its terms.

INVESTOR

JACK W. SCHULER

/s/ Jack W. Schuler
- -------------------------

                      SIGNATURE PAGE TO FIRST AMENDMENT TO
                   AMENDED AND RESTATED REGISTRATION AGREEMENT

     The undersigned has read the First Amendment to Amended and Restated
Registration Agreement, dated as of September 30, 1995, and hereby agrees to be
bound by its terms.

MISSNER VENTURE PARTNERS II, L.P.

By:  /s/ [Illegible]
     ---------------------
Its: General Partner

                      SIGNATURE PAGE TO FIRST AMENDMENT TO
                   AMENDED AND RESTATED REGISTRATION AGREEMENT

     The undersigned has read the First Amendment to Amended and Restated
Registration Agreement, dated as of September 30, 1995, and hereby agrees to be
bound by its terms.

SAFEWAY DISPOSAL SYSTEMS, INC.

By: /s/ Donald T. Pascal
    ---------------------
    Donald T. Pascal
    President

                      SIGNATURE PAGE TO FIRST AMENDMENT TO
                   AMENDED AND RESTATED REGISTRATION AGREEMENT

     The undersigned has read the First Amendment to Amended and Restated
Registration Agreement dated as of September 30, 1995, and hereby agrees to be
bound by its terms.

INVESTOR

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

By:   /s/ Kurt G. Moser
      ------------------------------
Its:  Kurt G. Moser
      Vice President - Investments

BY:   /s/ John S. Concklin
      ------------------------------
Its:  John S. Concklin
      VICE PRESIDENT - FIXED INCOME

                      SIGNATURE PAGE TO FIRST AMENDMENT TO
                   AMENDED AND RESTATED REGISTRATION AGREEMENT

     The undersigned have read the First Amendment to Amended and Restated
Registration Agreement, dated as of September 30, 1995, and hereby agree to be
bound by its terms.

GALEN PARTNERS, L.P.

By:  BGW Partners L.P., its General Partner

     By:  /s/ Bruce F. Wesson
          -----------------------------------
          Bruce F. Wesson, General Partner

GALEN PARTNERS INTERNATIONAL, L.P.

By:  BGW Partners L.P., its General Partner

     By:  /s/ Bruce F. Wesson
          -----------------------------------
          Bruce F. Wesson, General Partner

                      SIGNATURE PAGE TO FIRST AMENDMENT TO
                   AMENDED AND RESTATED REGISTRATION AGREEMENT

     The undersigned has read the First Amendment to Amended and Restated 
Registration Agreement, dated as of September 30, 1995, and hereby agrees to 
be bound by its terms.

BAXTER HEALTHCARE CORPORATION

By:  /s/ [Illegible]
     ---------------------
Its: Vice President

                 AMENDED AND RESTATED REGISTRATION AGREEMENT

     THIS AGREEMENT is made as of October 19, 1994, among Stericycle, Inc., a
Delaware corporation (the "COMPANY"), the Purchasers (as defined below) and the
investors listed on the signature pages hereto (collectively, the "INVESTORS").

                                  RECITALS

     This Agreement amends and restates that certain Amended and Restated 
Registration Agreement made as of September 29, 1994 (the "CLASS H 
REGISTRATION AGREEMENT") among the Company and certain holders of the 
Company's Preferred Stock.  Collectively, the undersigned Investors own at 
least a majority of the Registrable Securities, as such term is defined in 
the Class H Registration Agreement.  The undersigned Investors also hereby 
consent to the Company's granting of the rights contained herein to the 
holders of the Class I Preferred.

     The Company and certain investors (the "PURCHASERS") are parties to a 
Class I Preferred Stock Purchase Agreement, dated as of the date hereof (the 
"CLASS I PURCHASE AGREEMENT"), pursuant to which the Purchasers have agreed, 
subject to certain conditions, to purchase shares of Class I Preferred.  In 
order to induce the Purchasers to enter into the Class I Purchase Agreement, 
the Company has agreed to provide the Purchasers with the registration rights 
set forth in this Agreement.  The execution a delivery of this Agreement is 
a condition precedent to the consummation of the transactions contemplated by 
the Class I Purchase Agreement.

     Except as otherwise indicated, capitalized terms used herein are defined 
in Part 8 hereof.

     NOW THEREFORE, the parties agree as follows:

     1.   DEMAND REGISTRATIONS.

     (a)  REQUESTS FOR REGISTRATION.  At any time after the date of this 
Agreement, the holders of at least a majority of the Registrable Securities 
may request registration under the Securities Act of all or part of their 
Registrable Securities on Form S-1 or any similar long-form registration 
("LONG-FORM REGISTRATIONS"), and the holders of at least 25% of the Preferred 
Stock may request registration under the Securities Act of all or part of 
their Registrable Securities on Form S-2 or S-3 or any similar short-form 
registration ("SHORT-FORM REGISTRATIONS") if available.  At any time after 
the first to occur of (i) an initial public distribution which would trigger 
periodic public reporting with respect to the Company or (ii) July 10, 1996, 
State Farm Mutual Automobile Insurance Company ("STATE FARM"), as long as it, 
along with its affiliates, is the holder of at least 80% of the sum of the 
number of shares of the Class C Preferred which it purchased pursuant to the 
Class C Preferred Stock Purchase Agreement dated as of July 10, 1991 by and 
between the Company and State Farm plus the number of shares of Class D 
Preferred which it purchased pursuant to the Class D Preferred Stock Purchase 
Agreement dated as of June 25, 1992 by and between the Company and State Farm 
(other than shares subsequently repurchased by the Company or previously sold 
pursuant to a registration hereunder), may request registrations under the 
Securities Act of all or part of the shares of Common Stock into which their 
shares of Preferred Stock are convertible on Form S-1 or any similar 
long-form registration (a "PREFERRED LONG-FORM REGISTRATION).  At any time 
after an initial public distribution which would trigger periodic public 
reporting with respect to the Company, Baxter Healthcare Corporation 
("BAXTER"), as long as it, along with its affiliates, is the holder of at 
least 50% of the shares of Class E Preferred which Baxter purchased pursuant 
to the Class E Preferred Stock Purchase Agreement dated as of October 12, 
1993, may request registration under the Securities Act of all or part of the 
shares of Common Stock into which their shares of Class E Preferred are 
convertible on Form S-1 or any similar long-form registration (the "BAXTER 
LONG-FORM REGISTRATION"). Within ten days after receipt of any such request, 
the Company will give written notice of such request to all other holders of 
Registrable Securities and, subject to paragraph 1(d) hereof, will include in 
such registration all Registrable

                                     - 2 -

Securities with respect to which the Company has received written requests 
for inclusion therein within 15 days after the receipt of the Company's 
notice. All registrations requested pursuant to this paragraph 1(a) are 
referred to herein as "DEMAND REGISTRATIONS."

     (b)  LONG-FORM REGISTRATIONS.  The holders of Registrable Securities 
will be entitled to request two Long-Form Registrations hereunder, State Farm 
shall be entitled to request two Preferred Long-Form Registrations and Baxter 
shall be entitled to request one Baxter Long-Form Registration; provided that 
no registration initiated as a Long-Form Registration, a Preferred Long-Form 
Registration or a Baxter Long-Form Registration will count as a Long-Form 
Registration, a Preferred Long-Form Registration or a Baxter Long-Form 
Registration, as the case may be, unless it becomes effective under the 
Securities Act and unless and until the holders of Registrable Securities are 
able to register and sell at least 90% of the Registrable Securities 
requested to be included in such registration.

     (c)  SHORT-FORM REGISTRATIONS.  In addition to the rights provided 
pursuant to paragraph 1(b) above, the holders of at least 25% of the 
Preferred Stock will be entitled to request an unlimited number of Short-Form 
Registrations.  Demand Registrations will be Short-Form Registrations 
whenever the Company is permitted to use any applicable short form.  Once the 
Company has become subject to the reporting requirements of the Securities 
Exchange Act, the Company will use its best efforts to make Short-Form 
Registrations available for the sale of Registrable Securities.

     (d)  PRIORITY ON DEMAND REGISTRATIONS.  The Company will not include 
in any Demand Registration any securities which are not Registrable 
Securities without the written consent of the holders of at least a majority 
of the Registrable Securities requesting such registration.  If other 
securities are permitted to be included in a Demand Registration which is an 
underwritten offering and the managing underwriters advise the Company in 
writing that in their opinion the number of Registrable Securities and other 
securities requested to be included exceeds the number of Registrable 
Securities and other securities which can be sold in such offering, the 
Company will include in such registration, prior to the inclusion of any 
securities which are not Registrable

                                     - 3 -

Securities, the number of Registrable Securities requested to be included 
which, in the opinion of such underwriters, can be sold, pro rata among the 
respective holders on the basis of the amount of Registrable Securities owned.

     (e)  RESTRICTIONS ON LONG-FORM REGISTRATIONS.  The Company will not be 
obligated to effect any Long-Form Registration within six months after the 
effective date of a previous Long-Form Registration.

     (f)  SELECTION OF UNDERWRITERS.  The holders of a majority of the 
Registrable Securities included in any Demand Registration will have the 
right to select the investment banker(s) and manager(s) to administer the 
offering.  The holders of Registrable Securities shall consult with the 
Company's board of directors regarding the selection of investment banker(s) 
and manager(s) prior to the time when the holders of Registrable Securities 
exercise their right to make such selection; provided, however, that the 
Company's board of directors shall be bound by the decision of the holders of 
Registrable Securities regarding their choice of investment bankers And 
managers.

     (g)  OTHER REGISTRATION RIGHTS.  The Company will not grant to any 
Person the right to request the Company to register any equity securities of 
the Company, or any securities convertible or exchangeable into or 
exercisable for such securities, without the written consent of the holders 
of at least a majority of the Registrable Securities.

     (h)  DEMAND REGISTRATION EXPENSES.  The Registration Expenses of the 
holders of Registrable Securities in all Demand Registrations will be paid by 
the Company in accordance with paragraph 5 hereof.

     2.   PIGGYBACK REGISTRATIONS.

     (a)  RIGHT TO PIGGYBACK.  Whenever the Company proposes to register any 
of its securities under the Securities Act (other than pursuant to a Demand 
Registration) and the registration form to be used may be used for the 
registration of Registrable Securities (a "PIGGYBACK REGISTRATION"), the 
Company will give

                                     - 4 -

prompt written notice to all holders of Registrable Securities of its 
intention to effect such a registration and will include in such registration 
(subject to the priorities set forth in paragraphs 2(c) and 2(d) below) all 
Registrable Securities with respect to which the Company has received written 
requests for inclusion therein within 20 business days after the receipt of 
the Company's notice.

     (b)  PIGGYBACK EXPENSES.  The Registration Expenses of the holders of 
Registrable Securities in all Piggyback Registrations will be paid by the 
Company in accordance with paragraph 5 hereof.

     (c)  PRIORITY ON PRIMARY REGISTRATIONS.  If a Piggyback Registration is 
an underwritten primary registration on behalf of the Company, and the 
managing underwriters advise the Company in writing that in their opinion the 
number of securities requested to be included in such registration exceeds 
the number which can be sold in such offering, the Company will include in 
such registration (i) first, the securities the Company proposes to sell, 
(ii) second, the Registrable Securities requested to be included in such 
registration, pro rata among the holders of such Registrable Securities on 
the basis of the number of shares of Registrable Securities owned by such 
holders, and (iii) third, other securities requested or permitted to be 
included in such registration.

     (d)  PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is 
an underwritten secondary registration on behalf of holders of the Company's 
securities (other than a Demand Registration), and the managing underwriters 
advise the Company in writing that in their opinion the number of securities 
requested to be included in such registration exceeds the number which can be 
sold in such offering, the Company will include in such registration (i) 
first, the securities requested to be included therein by the holders 
requesting such registration, (ii) second, the Registrable Securities 
requested to be included in such registration, pro rata among the holders of 
such Registrable Securities on the basis of the number of shares of 
Registrable Securities offered for sale by such holders and (iii) third, other

                                     - 5 -

securities requested or permitted to be included in such registration.

     (e)  SELECTION OF UNDERWRITERS.  The Company shall select the investment 
banker(s) and manager(s) for any Piggyback Registration which is an 
underwritten offering, subject to the approval of the holders of a majority 
of the Registrable Securities (which approval shall not be unreasonably 
withheld).

     (f)  OTHER REGISTRATIONS.  If the Company has previously filed a 
registration statement with respect to Registrable Securities pursuant to 
paragraph 1 or pursuant to this paragraph 2, and if such previous 
registration has not been withdrawn or abandoned, the Company will not file 
or cause to be effected any other registration of any of its equity 
securities or securities convertible or exchangeable into or exercisable for 
its equity securities under the Securities Act (except on Form S-8 or any 
successor form) , whether on its own behalf or at the request of any holder 
or holders of such securities, until a period of at least six months has 
elapsed from the effective date of such previous registration.

     3.   HOLDBACK AGREEMENTS.

     (a)  Each holder of Registrable Securities agrees not to effect any 
public sale or distribution of equity securities of the Company, or any 
securities convertible into or exchangeable or exercisable for such 
securities, during the seven days prior to and the 120-day period beginning 
on the effective date of any underwritten public offering of equity 
securities of the Company (except as part of such underwritten registration), 
unless the underwriters managing the registered public offering otherwise 
agree.

     (b)  The Company agrees (i) not to effect any public sale or 
distribution of its equity securities, or any securities convertible into or 
exchangeable or exercisable for such securities, during the seven days prior 
to and during the 120-day period beginning on the effective date of any 
underwritten Demand Registration or any underwritten Piggyback Registration 
(except as part of such underwritten registration or pursuant to registrations

                                     - 6 -

on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree, and (ii) to cause each holder of its
equity securities (or any securities convertible into or exchangeable or
exercisable for such securities) in any purchase from the Company consummated at
any time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.

     4.    REGISTRATION PROCEDURES.  Whenever the holders of Registrable 
Securities have requested that any Registrable Securities be registered 
pursuant to this Agreement, the Company will use its best efforts to effect 
the registration and the sale of such Registrable Securities in accordance 
with the intended method of disposition thereof, and pursuant thereto the 
Company will as expeditiously as possible:

     (a)    prepare and file with the Securities and Exchange Commission a 
registration statement with respect to such Registrable Securities and use 
its best efforts to cause such registration statement to become effective 
(provided that before filing a registration statement or prospectus or any 
amendments or supplements thereto, the Company will furnish to the counsel 
selected by the holders of a majority of the Registrable Securities covered 
by such registration statement copies of all such documents proposed to be 
filed, which documents will be subject to the review of such counsel);

     (b)    prepare and file with the Securities and Exchange Commission such 
amendments and supplements to such registration statement and the prospectus 
used in connection therewith as may be necessary to keep such registration 
statement effective for a period of not less than nine months and comply with 
the provisions of the Securities Act with respect to the disposition of all 
securities covered by such registration statement during such period in 
accordance with the intended methods of disposition by the sellers thereof 
set forth in such registration statement;

                                      - 7 -

     (c)    furnish to each seller of Registrable Securities such number of 
copies of such registration statement, each amendment and supplement thereto, 
the prospectus included in such registration statement (including each 
preliminary prospectus) and such other documents as such seller may 
reasonably request in order to facilitate the disposition of the Registrable 
Securities owned by such seller;

     (d)    use its best efforts to register or qualify such Registrable 
Securities under such other securities or blue sky laws of such jurisdictions 
as any seller reasonably requests and do any and all other acts and things 
which may be reasonably necessary or advisable to enable such seller to 
consummate the disposition in such jurisdictions of the Registrable 
Securities owned by such seller (provided that the Company will not be 
required to (i) subject itself to taxation in any jurisdiction in which it 
would not otherwise be subject to taxation but for this subparagraph or (ii) 
consent to general service of process in any jurisdiction);

     (e)    notify each seller of such Registrable Securities, at any time 
when a prospectus relating thereto is required to be delivered under the 
Securities Act, of the happening of any event as a result of which the 
prospectus included in such registration statement contains an untrue 
statement of a material fact or omits any fact necessary to make the 
statements therein not misleading, and, at the request of any such seller, 
the Company will prepare a supplement or amendment to such prospectus so 
that, as thereafter delivered to the purchasers of such Registrable 
Securities, such prospectus will not contain an untrue statement of a 
material fact or omit to state any fact necessary to make the statements 
therein not misleading;

     (f)    cause all such Registrable Securities to be listed on each 
securities exchange on which similar securities issued by the Company are 
then listed;

     (g)    provide a transfer agent and registrar for all such Registrable 
Securities not later than the effective date of such registration statement;

                                    - 8 -

     (h)    enter into such customary agreements (including underwriting 
agreements in customary form) and take all such other actions as the holders 
of a majority of the Registrable Securities being sold or the underwriters, 
if any, reasonably request in order to expedite or facilitate the disposition 
of such Registrable Securities (including, without limitation, effecting a 
stock split or a combination of shares);

    (i)    make available for inspection by any seller of Registrable 
Securities, any underwriter participating in any disposition pursuant to such 
registration statement, and any attorney, accountant or other agent retained 
by any such seller or underwriter, all financial and other records, pertinent 
corporate documents and properties of the Company, and cause the Company's 
officers, directors, employees and independent accountants to supply all 
information reasonably requested by any such seller, underwriter, attorney, 
accountant or agent in connection with such registration statement;

     (j)    use its best efforts to cause such Registrable Securities covered 
by such registration statement to be registered with or approved by such 
other governmental agencies or authorities as may be necessary to enable the 
sellers thereof to consummate the disposition of such Registrable Securities;

     (k)    obtain a cold comfort letter from the Company's independent 
public accountants in customary form and covering such matters of the type 
customarily covered by cold comfort letters as the holders of a majority of 
the Registrable Securities being sold reasonably request (provided that such 
Registrable Securities constitute at least lot of the securities covered by 
such registration statement); and

     (l)    make generally available to its security holders an earnings 
statement satisfying the provisions of Section 11(a) of the Securities Act no 
later than 90 days after the end of the 12-month period beginning with the 
first-month of the Company's first fiscal quarter commencing after the 
effective date of the registration statement, which statements shall cover 
said 12-month period.

                                     - 9 -

     5.    REGISTRATION EXPENSES.

     (a)    All expenses incident to the Company's performance of or 
compliance with this Agreement, including without limitation all registration 
and filing fees, fees and expenses of compliance with securities or blue sky 
laws, printing expenses, messenger and delivery expenses, and fees and 
disbursements of counsel for the company and all independent certified public 
accountants underwriters (excluding discounts and commissions as set forth in 
paragraph 5(c) below) and other Persons retained by the Company (all such 
expenses being herein called "REGISTRATION EXPENSES"), will be borne by the 
Company.  Registration Expenses shall also include the Company's internal 
expenses (including, without limitation, all salaries and expenses of its 
officers and employees performing legal or accounting duties), the expense of 
any annual audit or quarterly review, the expense of hiring any experts, the 
expense of obtaining a "cold comfort" letter from the Company's outside 
auditors, the expense of any liability insurance and the expenses and fees 
for listing the securities to be registered on each securities exchange on 
which similar securities issued by the Company are then listed.

     (b)    In connection with each Demand Registration, other than a 
Preferred Long-Form Registration hereunder, and each Piggyback Registration, 
the Company will reimburse the holders of Registrable Securities covered by 
such registration for out of pocket expenses of such holders and the 
reasonable fees and disbursements of one counsel chosen by the holders of a 
majority of such Registrable Securities.  In connection with one Preferred 
Long-Form Registration commenced after such time as the Company has had an 
effective Registration Statement on Form S-1 on file with the Securities and 
Exchange Commission, the Company will reimburse the holders of Registrable 
Securities covered by such registration for out of pocket expenses and the 
reasonable fees and disbursements of one counsel chosen by the holders of a 
majority of such Registrable Securities.

     (c)    Each holder of securities included in any registration hereunder 
will pay any discounts and commissions attributable to the registration and 
sale of such holder's securities incurred upon the sale of such securities.

                                    - 10 -

     6.    INDEMNIFICATION.

     (a)    The Company agrees to indemnify, to the extent permitted by law, 
each holder of Registrable Securities, its officers and directors and each 
Person who controls such holder (within the meaning of the Securities Act) 
against all losses, claims, damages, liabilities and expenses caused by any 
untrue or alleged untrue statement of material fact contained in any 
registration statement, prospectus or preliminary prospectus or any amendment 
thereof or supplement thereto or any omission or alleged omission of a 
material fact required to be stated therein or necessary to make the 
statements therein not misleading, except insofar as the same are caused by 
or contained in any information furnished in writing to the Company by such 
holder expressly for use therein or by such holder's failure to deliver a 
copy of the registration statement or prospectus or any amendments or 
supplements thereto after the Company has furnished such holder with a 
sufficient number of copies of the same.  In connection with an underwritten 
offering, the Company will indemnify such underwriters, their officers and 
directors and each Person who controls such underwriters (within the meaning 
of the Securities Act) to the same extent as provided above with respect to 
the indemnification of the holders of Registrable Securities.

     (b)    In connection with any registration statement in which a holder 
of Registrable Securities is participating, each such holder will furnish to 
the Company in writing such information and affidavits as the Company 
reasonably requests for use in connection with any such registration 
statement or prospectus and, to the extent permitted by law, will indemnify 
the Company, its directors and officers and each Person who controls the 
Company (within the meaning of the Securities Act) against any losses, 
claims, damages, liabilities and expenses resulting from any untrue or 
alleged untrue statement of material fact contained in the registration 
statement, prospectus or preliminary prospectus or any amendment thereof or 
supplement thereto or any omission or alleged omission of a material fact 
required to be stated therein or necessary to make the statements therein not 
misleading, but only to the extent that such untrue statement or omission is 
contained in any information or affidavit so furnished in writing by such 
holder; provided that the obligation to indemnify will be several,

                                    - 11 -

not joint and several, among such holders of Registrable Securities and the
liability of each such holder of Registrable Securities will be in proportion to
and limited to the net amount received by such holder from the sale of
Registrable Securities pursuant to such registration statement.

     (c)    Any Person entitled to indemnification hereunder will (i) give 
prompt written notice to the indemnifying party of any claim with respect to 
which it seeks indemnification; provided, however, that failure to give such 
notice will not prejudice such Person's right to indemnification from the 
indemnifying party, except as to any losses suffered by such Person which are 
attributable to such Person's failure to promptly give such notice to such 
indemnifying party and (ii) unless in such indemnified party's reasonable 
judgment a conflict of interest between such indemnified and indemnifying 
parties may exist with respect to such claim, permit such indemnifying party 
to assume the defense of such claim with counsel reasonably satisfactory to 
the indemnified party.  If such defense is assumed, the indemnifying party 
will not be subject to any liability for any settlement made by the 
indemnified party without its consent (but such consent will not be 
unreasonably withheld).  An indemnifying party who is not entitled to, or 
elects not to, assume the defense of a claim will not be obligated to pay the 
fees and expenses of more than one counsel for all parties indemnified by 
such indemnifying party with respect to such claim, unless in the reasonable 
judgment of any indemnified party a conflict of interest may exist between 
such indemnified party and any other of such indemnified parties with respect 
to such claim.

     (d)    The indemnification provided for under this Agreement will remain 
in full force and effect regardless of any investigation made by or on behalf 
of the indemnified party or any officer, director or controlling Person of 
such,indemnified party and will survive the transfer of securities and the 
termination of this Agreement.  The Company also agrees to make such 
provisions, as are reasonably requested by any indemnified party, for 
contribution to such party in the event the Company's indemnification is 
unavailable for any reason.

                                    - 12 -

     7.    PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may 
participate in any registration hereunder which is underwritten unless such 
Person (a) agrees to sell such Person's securities on the basis provided in 
any underwriting arrangements approved by the Person or Persons entitled 
hereunder to approve such arrangements and (b) completes and executes all 
questionnaires, powers of attorney, indemnities, underwriting agreements and 
other documents required under the terms of such underwriting arrangements.

     8.    DEFINITIONS.

     (a)    The term "AFFILIATE" of a specified Person means any other Person 
directly or indirectly controlling or controlled by or under direct or 
indirect common control with such specified Person and, in the case of a 
Person who is an individual, shall include members of such specified Person's 
immediate family and trusts, if the trustee and all beneficiaries of such 
trust are such specified Person or member of such Person's immediate family.

     (b)    The term "CLASS A PREFERRED" means the Company's Class A 
Preferred Stock, par value $0.01 per share.

     (c)    The term "CLASS B PREFERRED" means the Company's Class B 
Preferred Stock, par value $0.01 per share.

     (d)    The term "CLASS C PREFERRED" means the Company's Class C 
Preferred Stock, par value $0.01 per share.

     (e)    The term "CLASS D PREFERRED" means the Company's Class D 
Preferred Stock, par value $0.01 per share.

     (f)    The term "CLASS E PREFERRED" means the Company's Class E 
Preferred Stock, par value $0.01 per share.

     (g)    The term "CLASS F PREFERRED" means the Company S Class F 
Preferred Stock, par value $0.01 per share.

     (h)    The term "CLASS H PREFERRED" means the Company S Class H 
Preferred Stock, par value $0.01 per share.

                                    - 13 -

     (i)    The term "CLASS I PREFERRED" means the Company's Class I 
Preferred Stock, par value $0.01 per share.

     (j)    The term "COMMON STOCK" means the Company's Common Stock, par 
value $0.01 per share.

     (k)    The term "REGISTRABLE SECURITIES" means (i) any Common Stock 
issued upon conversion of the Preferred Stock or exercise of the Warrants, 
and (ii) any Common Stock issued or issuable with respect to the securities 
referred to in clause (i) by way of a stock dividend or stock split or in 
connection with a combination of shares, recapitalization, merger, 
consolidation or other reorganization.  As to any particular Registrable 
Securities, such securities will cease to be Registrable Securities when they 
have been W effectively registered under the Securities Act and disposed of 
in accordance with the registration statement covering them or (ii) sold to 
the public through a broker-dealer or market-maker in compliance with Rule 
144 (or any similar rule then in force).  For purposes of this Agreement, any 
Person who holds Preferred Stock will be deemed to be the holder of the 
Registrable Securities obtainable upon conversion of the Preferred Stock 
regardless of any restriction on the conversion of the Preferred Stock then 
in effect.

     (1)    The term "PREFERRED STOCK" means the Class A Preferred, the Class 
B Preferred, the Class C Preferred, the Class D Preferred, the Class E 
Preferred, the Class F Preferred, the Class H Preferred, and the Class I 
Preferred.

     (m)    The term "WARRANTS" means the warrants exercisable for shares of 
Common Stock issued to the purchasers of the Class F Preferred pursuant to 
the Class F Purchase Agreement.

     (n)    Unless otherwise expressly stated herein, all other capitalized 
terms used contained herein have the meanings set forth in the Asset Purchase 
Agreement.

                                    - 14 -

     9.    MISCELLANEOUS.

     (a)    NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter 
into any agreement with respect to its securities which is inconsistent with 
the rights granted to the holders of Registrable Securities in this Agreement.

     (b)    ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES.  The Company will 
not take any action, or permit any change to occur, with respect to its 
securities which would adversely affect the ability of the holders of 
Registrable Securities to include such Registrable Securities in a 
registration undertaken pursuant to this Agreement or which would adversely 
affect the marketability of such Registrable Securities in any such 
registration (including, without limitation, effecting a stock split or a 
combination of shares).

     (c)    REMEDIES.  Any Person having rights under any provision of this 
Agreement will be entitled to enforce such rights specifically, to recover 
damages caused by reason of any breach of any provision of this Agreement and 
to exercise all other rights granted by law.

     (d)    AMENDMENTS AND WAIVERS.  The provisions of this Agreement may be 
amended and the Company may take any action herein prohibited, or omit to 
perform any act herein required to be performed by it, only if the Company 
has obtained the written consent of holders of at least a majority of the 
Registrable Securities, except that any amendment to or waiver of any 
provision hereof which would (i) otherwise affect the right of State Farm to 
effect a Preferred Long-Form Registration hereunder shall not be effective 
unless the Company has obtained the written consent of State Farm, (ii) 
otherwise affect the right of Baxter to effect the Baxter Long-form 
Registration hereunder shall not be effective unless the Company has obtained 
the written consent of Baxter and (iii) materially and adversely affect any 
class of Preferred Stock in a manner which is not substantially similar to 
the effect on all classes of Preferred Stock shall not be effective unless 
the Company has obtained the written consent of the holders of a majority of 
each such class.

                                    - 15 -

     (e)    SUCCESSORS AND ASSIGNS.  All covenants and agreements in this 
Agreement by or on behalf of any of the parties hereto will bind and inure to 
the benefit of the respective successors and assigns of the parties hereto 
whether so expressed or not.  In addition, whether or not any express 
assignment has been made, the provisions of this Agreement which are for the 
benefit of purchasers or holders of Registrable Securities are also for the 
benefit of, and enforceable by, any subsequent holder of Registrable 
Securities.

     (f)    AMENDMENT OF PRIOR AGREEMENTS.  This Agreement amends and 
restates in its entirety the Class H Registration Agreement.

     (g)    NOTICES.  The paragraph entitled "NOTICES" is hereby incorporated 
by reference from (i) the Stock Purchase Agreement dated December 18, 1989 
between the Company and the holders of the Class A Preferred, as amended, 
(ii) the Class B Purchase Agreement between the Company and the holders of 
the Class B Preferred dated November 14, 1990, as amended, (iii) the several 
Class C Purchase Agreements between the Company and the holders of the Class 
C Preferred dated July 10, 1991 and August 21, 1991, as amended, (iv) the 
Class D Purchase Agreement between the Company and the holders of the Class D 
Preferred dated June 25, 1992, as amended, (v) the Class E Preferred Stock 
Purchase Agreement dated as of October 12, 1993 between the Company and 
Baxter, as amended, (vi) the Class F Purchase Agreement between the Company 
and the holders of the Class F Preferred dated March 16, 1994, as amended, 
(vii) the Asset Purchase Agreement between, inter alia, the Company and the 
holders of the Class H Preferred, dated September 29, 1994, and (viii) the 
Class I Purchase Agreement between the Company and the holders of the Class I 
Preferred dated as of the date hereof.

     (h)    INCORPORATION OF PURCHASE AGREEMENT PROVISIONS.  The paragraphs 
entitled "SEVERABILITY," "COUNTERPARTS," "DESCRIPTIVE HEADINGS," and 
"GOVERNING LAW" of the Class F Purchase Agreement are hereby incorporated in 
this Agreement by reference and made a part hereof.

                             *    *    *    *    *

                                    - 16 -

     IN WITNESS WHEREOF, the parties have executed this Amended and Restated 
Registration Agreement as of the date first written above.

                                       STERICYCLE, INC.
                                       By:   [ILLEGIBLE]
                                       Its:  V.P. CFO

                          SIGNATURE PAGE TO AMENDED AND RESTATED
                                 REGISTRATION AGREEMENT

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Investor

BAXTER HEALTHCARE CORPORATION

By:      MICHAEL A. MUSSALLEN
         Michael A. Mussallen
Its:     Group Vice President

                     SIGNATURE PAGE TO AMENDED AND RESTATED
                            REGISTRATION AGREEMENT

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Investor

MARQUETTE VENTURE PARTNERS, L.P.

     By:  MARQUETTE VENTURE ASSOCIATES, L.P.
     Its  General Partner
     By:  MARQUETTE MANAGEMENT PARTNERS
     Its  General Partner

By:  JOHN PATRINIE
     Its General Partner

     Corporate 500 Centre
     520 Lake Cook Road, Suite 450
     Deerfield, Illinois 60015

     with A copy to:

     Kirkland & Ellis

     200 E. Randolph Drive
     Chicago, Illinois 60601
     Attn: Willard G. Fraumann, P.C.

                        SIGNATURE PAGE TO AMENDED AND RESTATED
                                REGISTRATION AGREEMENT

     The undersigned has read the AMended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by 
its terms.

Investor

JACK W. SCHULER

JACK W. SHULER
Crab Tree Farm - P.O. Box 529
Lake Bluff, IL 60044

                       SIGNATURE PAGE TO AMENDED AND RESTATED
                                REGISTRATION AGREEMENT

                    SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

PETER VARDY
(Signature)

PETER VARDY
(Print or type name)

                      SIGNATURE PAGE TO AMENDED AND RESTATED
                              REGISTRATION AGREEMENT

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Investor

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY

By:  JOHN S. CONCKLIN
Its: John S. Concklin, Investment Officer

By:  WILLIAM J. HESS
Its: William J. Hess, Assistant Secretary

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

          SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS OR PARTNERSHIPS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Investor

Name of
Entity:  Galen Partners, L.P.

By:  /s/ Bruce F. Wesson
     ----------------------------------
     Bruce F. Wesson

Its: General Partner of BGW
     ----------------------------------
     Partners, L.P., a General Partner

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION AGREEMENT

          SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS OR PARTNERSHIPS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Invest of

Name of
Entity:  Galen Partners International, L.P.

By:  /s/ Bruce F. Wesson
     ----------------------------------
     Bruce F. Wesson

Its: General Partner of BGW
     ----------------------------------
     Partners, L.P., a General Partner

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                        TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

Name of
Entity:  PBB CO for Rex James Botes IRA

By:  /s/ [illegible]
     ----------------------------------

Its: Trust Officer
     ----------------------------------

Address

PBB CO for Rex James Botes IRA
- ---------------------------------------
P.O. Box 68
- ---------------------------------------
Bloomington, IL  61702-0068
- ---------------------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS OR PARTNERSHIPS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Investor

Name of
Entity:  Baird Capital Partners, L.P.

By:  /s/ [illegible]
     ----------------------------------
Its: Vice President
     ----------------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

          SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS OR PARTNERSHIPS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Investor

Name of
Entity:   RWBCO II, L.P.

By:  /s/ Jon E. Coulten
     ----------------------------------

Its: Vice President
     ----------------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                         REGISTRATION AGREEMENT

              SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ Ralph M. Segall
- ---------------------------------------
(Signature)

Ralph M. Segall
- ---------------------------------------
(Print or type name)

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

              SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ G. F. Kasten, Jr.
- ---------------------------------------
(Signature)

G. F. Kasten Jr.
- ---------------------------------------
(Print or type name)

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                       REGISTRATION AGREEMENT

              SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ James D. Bell
- ---------------------------------------
(Signature)

James D. Bell
- ---------------------------------------
(Print or type name)

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

              SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ William H. Schield Jr.
- ---------------------------------------
(Signature)

William H. Schield Jr.
- ---------------------------------------
(Print or type name)

                    SIGNATURE PAGE TO AMENDED AND RESTATED
                            REGISTRATION AGREEMENT

               SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ Robert M. Reardon
- ---------------------------------------
(Signature)

Robert M. Reardon
- ---------------------------------------
(Print or type name)

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

               SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ [Illegible]
- ---------------------------------------
(Signature)

- ---------------------------------------
(Print or type name)

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

              SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ Irwin W. Horwitch
- ---------------------------------------
(Signature)

Irwin W. Horwitch
Linda Horwitch
- ---------------------------------------
(Print or type name)

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

               SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser

/s/ Herbert A. P. Doree
- ---------------------------------------
(Signature)

Herbert A. P. Doree
- ---------------------------------------
(Print or type name)

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                          REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                        TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its 
terms.

Purchaser     Davis U. Merwin

Name of
Entity:  The Northern Trust Company, as custodian

By:  /s/ Kathleen M. Sullivan
     ----------------------------------

Its: Trust Officer
     ----------------------------------

Address

50 South LaSalle Street
- ---------------------------------------
Chicago, IL 60675
- ---------------------------------------

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

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                         TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its
terms.

PURCHASER

Name of   SUSAN STEIN ELMENDORF
Entity:

By: [Illegible]
    -------------------------

Its: AS CUSTODIAN
     ------------------------

Address

FIDUCIARY TRUST CO. INTL
- -----------------------------

TWO WORLD TRADE CENTER
- -----------------------------

NEW YORK, N.Y. 10048
- -----------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                         TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its
terms.

PURCHASER

Name of  SYDNEY STEIN TRUST U/A/D 9/9/81
Entity:

By: [Illegible]
    -------------------------

Its: AS CUSTODIAN
     ------------------------

Address

FIDUCIARY TRUST CO. INTL
- -----------------------------

TWO WORLD TRADE CENTER
- -----------------------------

NEW YORK, N.Y. 10048
- -----------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                         TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its
terms.

PURCHASER

Name of:   THE MARGARET E. EARLY MEDICAL
Entity:    RESEARCH TRUST

By: [Illegible]
    -------------------------

Its: TRUSTEE
     ------------------------

Address

ELI R. DUBROW
- ----------------------------------

611 WEST SIXTH STREET - 30th FLOOR
- ----------------------------------

LOS ANGELES, CALIFORNIA 90017
- ----------------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                         TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its
terms.

PURCHASER

Name of   SHIRLEY M. WINTER LIVING TRUST dated 3/27/83
Entity:

By: SHIRLEY M. WINTER, [Illegible]
    ------------------------------

Its: CO-TRUSTEES
     -----------------------------

Address

F.H. WINTER
- ----------------------------------

114 SEAGULL LN
- ----------------------------------

SARASOTA FL 34236
- ----------------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                         TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its
terms.

PURCHASER

Name of
Entity:   JASTLA & CO.

By: [Illegible]
    ------------------------------

Its: PARTNER
     -----------------------------

Address

c/o NationsBank Trust Company, N.A.
- -----------------------------------------

Attn: Mrs. L. Christensen (DCl-703-01-03)
- -----------------------------------------

730-15th STREET, N.W.
- -----------------------------------------

Washington, D.C. 20005
- -----------------------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

         SIGNATURE PAGE FOR EXECUTION BY CORPORATIONS, PARTNERSHIPS,
                         TRUSTS, AND OTHER ENTITIES

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its
terms.

PURCHASER

Name of
Entity:   MODEL CHARITABLE LEND TRUST

By: PETE MODEL
    ------------------------------

Its: TRUSTEE
     -----------------------------

Address

c/o PETE MODEL
- ----------------------------------

500 EAST 63 ST. 24K
- ----------------------------------

NEW YORK, NY 10021
- ----------------------------------

                   SIGNATURE PAGE TO AMENDED AND RESTATED
                           REGISTRATION AGREEMENT

               SIGNATURE PAGE FOR EXECUTION BY NATURAL PERSONS

     The undersigned has read the Amended and Restated Registration 
Agreement, dated as of October 19, 1994, and hereby agrees to be bound by its
terms.

PURCHASER

[Illegible]
- -----------------------------
(Signature)

FRED RAPP
- -----------------------------
(Print or type name)

                              LAKE COOK OFFICE CENTRE IV
                                 1419 LAKE COOK ROAD
                                 DEERFIELD, ILLINOIS

                                     OFFICE LEASE

                                       BETWEEN

                 AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
                          AS TRUSTEE UNDER TRUST NO.  57661
                                                     -------

                                      Landlord,

                                         and

                       Stericycle, Inc., a Delaware corporation
                   ------------------------------------------------
                                        Tenant

                             DATED    December 26, 1991
                                   ------------------------

                                  TABLE OF CONTENTS

Section                                                                    Page
- -------                                                                    ----
  1.    Base Rent. . . . . . . . . . . . . . . . . . . . . . . . . . .       1
  2.    Additional Rent. . . . . . . . . . . . . . . . . . . . . . . .       1
  3.    Use of Premises. . . . . . . . . . . . . . . . . . . . . . . .       6
  4.    Prior Occupancy. . . . . . . . . . . . . . . . . . . . . . . .       6
  5.    Services . . . . . . . . . . . . . . . . . . . . . . . . . . .       6
  6.    Condition and Care of Premises . . . . . . . . . . . . . . . .       7
  7.    Return of Premises . . . . . . . . . . . . . . . . . . . . . .       7
  8.    Holding Over . . . . . . . . . . . . . . . . . . . . . . . . .       8
  9.    Rules and Regulations. . . . . . . . . . . . . . . . . . . . .       8
 10.    Rights Reserved to Landlord. . . . . . . . . . . . . . . . . .       8
 11.    Alterations. . . . . . . . . . . . . . . . . . . . . . . . . .       9
 12.    Assignment and Subletting. . . . . . . . . . . . . . . . . . .      10
 13.    Waiver of Certain Claims; Indemnity by Tenant. . . . . . . . .      11
 14.    Damage or Destruction by Casualty. . . . . . . . . . . . . . .      11
 15.    Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . .      12
 16.    Default: Landlord's Rights and Remedies. . . . . . . . . . . .      12
 17.    Subordination. . . . . . . . . . . . . . . . . . . . . . . . .      14
 18.    Mortgagee Protection . . . . . . . . . . . . . . . . . . . . .      14
 19.    Default Under Other Leases . . . . . . . . . . . . . . . . . .      15
 20.    Subrogation and Insurance. . . . . . . . . . . . . . . . . . .      15
 21.    Nonwaiver. . . . . . . . . . . . . . . . . . . . . . . . . . .      15
 22.    Estoppel Certificate . . . . . . . . . . . . . . . . . . . . .      15
 23.    Tenant--Corporation or Partnership. . . . . . . . . . . . . . .     16
 24.    Real Estate Brokers. . . . . . . . . . . . . . . . . . . . . .      16
 25.    Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .      16
 26.    Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . .      16
 27.    Delivery of Possession . . . . . . . . . . . . . . . . . . . .      17
 28.    Security Deposit . . . . . . . . . . . . . . . . . . . . . . .      17
 29.    Relocation of Tenant . . . . . . . . . . . . . . . . . . . . .      17
 30.    Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . .      18
 31.    Title and Covenant Against Liens . . . . . . . . . . . . . . .      18
 32.    Exculpatory Provisions . . . . . . . . . . . . . . . . . . . .      18

                                     ATTACHMENTS

Exhibit A--Floor Plan of Premises

Exhibit B--Rules and Regulations

Exhibit C--Workletter

                              LAKE COOK OFFICE CENTRE IV
                                 1419 LAKE COOK ROAD
                                 DEERFIELD, ILLINOIS

                                     OFFICE LEASE

    THIS LEASE, made as of the __________ day of December, 1991, WITNESSETH: M
& J Wilkow Management Corporation, as agent for the beneficiary of the AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not personally out solely as Trustee
under Trust Agreement dated May 15, 1983 and known as Trust No. 57661 (herein
called "Landlord"), hereby leases to Stericycle, Inc., a Delaware corporation
(herein called "Tenant"), and Tenant hereby accepts the premises as outlined on
the floor plan attached hereto as Exhibit A known as Suite No. 410 (herein
called "Premises") on the fourth (4th) floor of the building commonly known as
1419 Lake Cook Road, Deerfield, Illinois, (herein called "Building") and located
in the LAKE COOK OFFICE CENTRE IV (herein called "Center"), for a term (herein
called "Term") of seven (7) years and zero (0) months commencing on February 1,
1992 and ending on January 31, 1999, unless sooner terminated as provided
herein, paying as rent therefor the sums hereinafter provided, without any
setoff, abatement, counterclaim or deduction whatsoever.

IN CONSIDERATION THEREOF, THE PARTIES HERETO COVENANT AND AGREE:

    1.  BASE RENT.  Subject to periodic adjustment as hereinafter provided. 
Tenant shall pay an annual base rent (herein called "Base Rent") to Landlord for
the Premises of See Schedule on page 1(a) hereof Dollars ($______________),
payable in equal monthly installments (herein called "Monthly Base Rent") of See
Schedule on page 1(a) hereof Dollars ($______________), in advance on the first
day of the first full calendar month and on the first day of each calendar month
thereafter of the Term, and at the same rate for fractions of a month if the
Term shall begin on any date except the first day, or shall end on any day
except the last day of a calendar month.

    Base Rent, Additional Rent (as hereinafter defined), Additional Rent 
Progress Payment (as hereinafter defined) and all other amounts however 
occurring or described becoming due from Tenant to Landlord hereunder (herein 
collectively called the "Rent") shall be paid in lawful money of the United 
States to Landlord at the office of Landlord, or as otherwise designated from 
time to time by written notice from Landlord to Tenant. Concurrently with the 
execution hereof, Tenant shall pay Landlord Monthly Base Rent for the first 
calendar month of the Term together with the Security Deposit pursuant to 
Section 28 hereof.

    2.  ADDITIONAL RENT.  In addition to paying the Base Rent specified in
Section 1 hereof, Tenant shall also pay as additional rent the amounts
determined in accordance with this Section 2 ("Additional Rent"):

         (a)  DEFINITIONS.  As used in this Lease,

              (i)    "Adjustment Date" shall mean the first day of the Term and
         each January 1 thereafter falling within the Term.

              (ii)   "Adjustment Year" shall mean each calendar year during
         which an Adjustment Date falls.

              (iii)  "Expenses" shall mean and include those reasonable costs
         and expenses paid or incurred by or on behalf of the Landlord of every
         kind and nature for owning, managing, operating, maintaining and
         repairing the Building, the land upon which the Building stands
         (herein called "Land") and the personal property used in conjunction
         therewith (said Building, Land and personalty being herein
         collectively called the "Project"), including (without limitation) the
         cost of electricity, steam, water, fuel, heating, lighting, plumbing,
         air conditioning, window cleaning, janitorial service, insurance,
         including but not limited to, fire, extended coverage, liability,
         workmen's compensation, elevator, or any other insurance carried in
         good faith by the Landlord and applicable to the Project, painting,
         uniforms, customary management fees, supplies, sundries, sales or use
         taxes on supplies or services, cost of wages and salaries of all
         persons engaged in the operation, maintenance and repair of the
         Project, and so-called fringe benefits, including social security
         taxes, unemployment insurance taxes, cost for providing coverage for
         disability benefits, cost of any pensions, hospitalization, welfare
         or retirement plans, or any other similar or like expenses incurred
         under the provisions of any collective bargaining agreement, or any
         other cost or expense which Landlord pays or incurs to provide
         benefits for employees engaged in the operation, maintenance and
         repair of the Project, the charges of any independent contractor who,
         under contract with the Landlord or its representatives, does any of
         the work of operating, maintaining or repairing of the Project, legal
         and accounting expenses, including, but not to be limited to, such
         expenses as relate to seeking or obtaining reductions in and

                                  Base Rent Schedule

The following schedule represents the Base Rent payable throughout the lease
term:

                                          Annual             Monthly
   Period                               Base Rent           Base Rent
   ------                                ---------           ---------

2/1/92-1/31/93                         $104,000.04         $ 8,666.67
2/1/93-1/31/94                         $107,120.04         $ 8,926,67
2/1/94-1/31/95                         $114,281.76         $ 9,523.48
2/1/95-1/31/96                         $123,351.96         $10,279.33
2/1/96-1/31/97                         $127,052.52         $10,587.71
2/1/97-1/31/98                         $130,898.28         $10,908.19
2/1/98-1/31/99                         $132,276.84         $11,023.07

                                         1(a)

         refunds of real estate taxes the cost of providing rubbish and snow
         removal services, the cost of landscaping maintenance, including, but
         not limited to, grass cutting, trimming, replanting and replacement
         costs, expenses applicable and chargeable to the Project under any
         reciprocal easement or other agreements relating to any frontage road,
         common parking and ingress and egress areas and other common
         facilities appurtenant to the Project and other office buildings in
         the Center including the Conference Center in the Center located
         between the buildings 1415 and 1417 Lake Cook Road or any other
         expense or charge, whether or not hereinbefore mentioned, which in
         accordance with generally accepted accounting and management
         principles respecting non-institutional first-class office buildings
         in the Chicago metropolitan area, would be considered as an expense of
         owning, managing, operating, maintaining or repairing the Project. 
         Expenses shall not include costs or other items included within the
         meaning of the term "Taxes" (as hereinafter defined), costs of 
         alterations of the premises of tenants of the Building, costs of 
         capital improvements to the Project, depreciation charges, interest 
         and principal payments on mortgages, ground rental payments, real 
         estate brokerage and leasing commissions and any expenditures for 
         which Landlord has been reimbursed (other than pursuant to rent 
         adjustment provisions in leases), except as hereinafter provided.

              Notwithstanding anything contained in this clause (iii) of
         Section 2(a) to the contrary.

                     (B)  If the Building is not ninety-five percent (95%)
              occupied by tenants during all or a portion of any Adjustment
              Year, then Landlord shall make an appropriate adjustment for such
              year of the components of Expenses which may vary depending upon
              the occupancy level of the Building, employing generally accepted
              accounting and management principles.  Any such adjustments shall
              also be deemed expenses paid or incurred by Landlord and included
              in Expenses for such year, as if the Building had been ninety-five
              percent (95%) occupied and the Landlord had paid or incurred
              such expenses, to the end that the actual amounts of such variable
              components of Expenses be fairly borne by the tenants occupying
              the Building.

                     (C)  If any item of Expenses, though paid or incurred in
              one year, relates to more than one calendar year, at the option
              of Landlord such item may be proportionately allocated among such
              related calendar years.

              (iv)   "Taxes" shall mean real estate taxes, assessments (whether
         they be general or special), sewer rents, rates and charges, transit
         taxes, taxes based upon the receipt of rent, and any other federal,
         state or local governmental charge, general, special, ordinary or
         extraordinary (but not including income or franchise taxes (other than
         personal property replacement income taxes) or any other taxes imposed
         upon or measured by the Landlord's income or profits, except as
         provided herein), which may now or hereafter be levied, assessed, or
         imposed against, or in connection with the ownership, leasing or
         operation of the Building or the Land, or both.  For purposes of this
         Section, the Building and the Land are herein collectively called the
         "Real Property."

              Notwithstanding the foregoing,

                     (B)  Notwithstanding the year for which any such taxes or
              assessments are levied, (i) in the case of special taxes or
              assessments which may be payable in installments, the amount of
              each installment, plus any interest payable thereon, paid during
              a calendar year shall be included in Taxes for that year, (ii) if
              any taxes or assessments payable during any calendar year shall
              be computed with respect to a period in excess of twelve calendar
              months, then taxes or assessments applicable to the excess period
              shall be included in Taxes for the year in which payable, and
              (iii) except as otherwise provided in the preceding clauses (i)
              and (ii), all reference to taxes for a particular year shall be
              deemed to refer to all taxes levied, assessed or imposed for such
              year without regard to when such taxes are due and payable.

                     (C)  Taxes shall also include any personal property taxes
              (attributable to the calendar year in which paid) imposed upon
              the furniture, fixtures, machinery, equipment, apparatus,
              systems and appurtenances used in connection with the Real
              Property or Project or the operation thereof.

                                          2

                     (D)  If the Building is not ninety-five (95%) occupied by
              tenants during all or a portion of any Adjustment Year, then
              Landlord shall make an appropriate adjustment for such year of
              the components of Taxes which may vary depending upon the
              occupancy level of the Building, employing generally accepted
              accounting and management principles.  Any such adjustments shall
              also be deemed taxes levied, assessed or imposed against the
              Building and included in Taxes for such year, as if the Building
              had been ninety-five percent (95%) occupied and such taxes were
              levied or assessed for such year, to the end that the actual
              amounts of such Taxes be fairly borne by the tenants occupying
              the Building.

              (v)    "Rentable Area of the Building" shall mean the sum of the
         areas on all floors of the Building computed by measuring to the
         inside face of the exterior glass on each entire floor, plus
         mechanical space, common service areas available for use by all
         tenants in the Building, reception and lobby areas, vending machine
         and commissary areas and loading docks and excluding only public
         stairs, elevator shafts, flues, stacks, pipe shafts and vertical ducts
         measured from the outside wall surface of such spaces ("vertical
         penetrations").  No deduction shall be made for columns or projections
         necessary to the Building.  Rentable Area of the Building shall be
         deemed to be 101,775 square feet.

              (vi)    "Rentable Area of the Premises" shall mean (A) if this 
         lease is for an entire floor, the area of the entire floor measured to 
         the inside finished surface of the exterior glass, excluding vertical 
         penetrations, plus a proportionate share of building mechanical space 
         and common service areas in the Building, or (B) if this lease if for 
         less than an entire floor, the area measured from the inside finished 
         surface of the exterior glass to the center line of all demising 
         partitions and to the inside finished surface of the office side of 
         corridor and other permanent walls, plus (a) a proportionate share of 
         public areas (including corridors, elevator lobbies, toilets, 
         mechanical spaces and janitor, electrical and telephone closets) on 
         the floor housing the Premises and (b) a proportionate share of 
         mechanical space and common service areas in the Building, in maxing 
         the calculations pursuant to (A) or (B) above, no deduction shall be 
         made for columns or projections necessary to the Building. Rentable 
         Area of the Premises shall be deemed to be 7,256 square feet.

              (vii)   "Tenant's Proportionate Share" shall mean seven and
         13/100th (7.13%) percent (subject to modification as hereinafter
         provided), which is the percentage obtained by dividing the Rentable
         Area of the Premises by the Rentable Area of the Building.  Tenant's
         Proportionate Share shall be modified in the event the final design of
         the Building is hereafter modified such that Rentable Area of the
         Premises or Rentable Area of the Building, or both, differs from the
         square footage set forth in Sections 2(a)(v) and 2(a)(vi) above.  In
         such event, Landlord shall recalculate Tenant's Proportionate Share
         based upon such modification or change for the balance of such
         Adjustment Year and the remainder of the Term and shall notify Tenant
         of such recomputed Tenant's Proportionate Share.  Tenant's
         Proportionate Share shall not be modified in the event the Rentable
         Area of the Premises or the Rentable Area of the Building is more or
         less than the square footage set forth in Sections 2(a)(v) and
         2(a)(vi) due to minor variations resulting from actual construction
         provided such variations does not exceed three percent (3%) in either
         case.  In the event any item of Expense is included as a part of the
         Rent Adjustment for tenants of the Building and a tenant of the 
         Building is responsible for the total amount of such Expense item with
         respect to said tenant's premises (e.g. if Landlord shall have no
         obligation to furnish cleaning and janitorial service for said
         tenant's premises and the Landlord includes the cost of such service
         for all other Tenants' premises as an item of Expense as a part of
         Rent Adjustment), the Rentable Area of such tenant's premises shall be
         deducted form the Rentable Area of the Building (for purposes of
         calculating the remaining tenants' Proportionate Share with respect
         only to such item of expense) and such item of Expense shall be
         allocated only among said remaining tenants.

                                          3

              (xi)   "Additional Rent" shall mean all amounts determined
         pursuant to this Section 2, including any amounts payable by Tenant to
         Landlord on account thereof.

         (b)  COMPUTATION OF ADDITIONAL RENT.

         Tenant shall pay Additional Rent for each Adjustment Year determined
    as hereinafter set forth.  Additional Rent payable by Tenant with respect
    to each Adjustment Year during which an Adjustment Date falls shall include
    the following amounts:

              (i)    Except as hereinafter provided in (c)(i)(D) below, the
         product of the Tenant's Proportionate Share, multiplied by the amount
         of Taxes in excess of $356,212.50 and Expenses in excess of
         $534,318.75 for such Adjustment Year (said product being called the
         "Tax and Expense Adjustment"); (Notwithstanding the foregoing, Tenant 
         shall have no obligation to pay any additional rent in respect of 
         Expenses attributable to calendar year 1992.)

         (c)  PAYMENTS OF ADDITIONAL RENT; PROJECTIONS.

         Tenant shall pay Additional Rent to Landlord in the manner hereinafter
    provided.

              (i)    TAX AND EXPENSE ADJUSTMENT.  Tenant shall make payments on
         account of the Tax and Expense Adjustment (any such payment with
         respect to any Adjustment Year being also called "Additional Rent
         Progress Payment") effective as of the Adjustment Date for each
         Adjustment Year as follows:

                     (A)  Landlord may, prior to each Adjustment Date or from
              time to time during the Adjustment Year in which such Adjustment
              Date falls, deliver to Tenant a written notice or notices
              ("Projection Notice") setting forth (1) Landlord's reasonable
              estimates, forecasts or projections (collectively, the
              "Projections") of Taxes and Expenses for such Adjustment Year
              based on Landlord's budgets of Expenses and estimate of Taxes,
              and (2) Tenant's Additional Rent Progress Payment for such
              Adjustment Year based upon the Projections.  Landlord's budgets
              of Expenses and the Projections based thereon shall assume full
              occupancy and use of the Building and may be revised by Landlord
              from time to time based on changes in rates and other criteria
              which are components of budget items.

                     (B)  Until such time as Landlord furnishes a Projection
              Notice for an Adjustment Year.  Tenant shall pay to Landlord a
              monthly installment of Additional Rent Progress Payment at the 
              time of each payment of Monthly Base Rent equal to the greater 
              of the latest monthly installment of Additional Rent Progress 
              Payment or one-twelfth (1/12) of Tenant's latest determined Tax 
              and Expense Adjustment.  On or before the first day of the next 
              calendar month following Landlord's service of a Projection 
              Notice, and on or before the first day of each month thereafter, 
              Tenant shall pay to Landlord one-twelfth (1/12) of the Additional 
              Rent Progress Payment shown in the Projection Notice.  Within 
              fifteen (15) days following Landlord's service of a Projection 
              Notice, Tenant shall also pay Landlord a lump sum equal to the 
              Additional Rent Progress Payment shown in the Projection Notice 
              less (1) any previous payments on account of Additional Rent 
              Progress Payment made during such Adjustment Year and (2) monthly 
              installments on account of Additional Rent Progress Payment due 
              for the remainder of such Adjustment Year.

                     (C)  Tenant agrees to pay monthly installments of
              Additional Rent Progress Payment at a rate set forth in an
              initial Projection Notice from and after the commencement date of
              the Term hereof until either or both components thereof are
              changed pursuant to a Projection Notice from Landlord as provided
              above.

                     (D)  The Tax and Expense Adjustment shall be prorated for
              the portion of the Term falling within the Adjustment Year in
              which the first Adjustment Date during the Term shall fall, based
              on the number of days of the Term falling within said Adjustment
              Year, and shall be similarly prorated for the portion of the Term
              falling within the Adjustment Year in which the last Adjustment
              Date during the Term, as the Term may be

                                          4

              extended shall fall.  Tenant agrees and acknowledges that
              Landlord has made no representation, warranty or guaranty
              relating to the amount of the Tax and Expense Adjustment.  The
              Tenant has had an opportunity to consult with the Landlord with
              respect to the Taxes and Expenses projected for the operation of
              the Building and has not relied upon any statements or
              representations of Landlord in regard thereto in executing this
              Lease and agreeing to perform the terms and covenants hereof.

         (d)  TAX AND EXPENSE READJUSTMENTS.

         The following readjustments with regard to the Tax Adjustment and
    Expense Adjustment shall be made by Landlord and Tenant:

              (i)    Following the end of each Adjustment Year and after
         Landlord shall have determined the amounts of Taxes and Expenses to be
         used in calculating the Tax and Expense Adjustment for such Adjustment
         Year (whether actual or based on Landlord's budgets).  Landlord shall
         notify Tenant in writing ("Landlord's Statement") of such Taxes and
         Expenses for such Adjustment Year.  If the Tax and Expense Adjustment
         owed for such Adjustment Year exceeds the Additional Rent Progress
         Payment paid by Tenant during such Adjustment Year, then Tenant shall,
         within thirty (30) days after the date of Landlord's Statement, pay to
         Landlord an amount equal to the excess of the Tax and Expense
         Adjustment over the Additional Rent Progress Payment paid by Tenant
         during such Adjustment Year.  If the Additional Rent Progress Payment
         paid by Tenant during such Adjustment Year exceeds the Tax and 
         Expense Adjustment owed for such Adjustment Year, then Landlord shall 
         credit such excess to Rent payable after the date of Landlord's 
         Statement, or may, at its option, credit such excess to any Rent then 
         due and owing, until such excess has been exhausted.  If this lease 
         shall expire prior to full application of such excess, Landlord shall 
         pay to Tenant the balance thereof not theretofore applied against Rent 
         and not reasonably required for payment of Additional Rent for the 
         Adjustment Year in which the lease expires.

              (ii)   No interest or penalties shall accrue on any amounts which
         Landlord is obligated to credit or pay to Tenant by reason of this
         Section 2(d).

         (e)  BOOKS AND RECORDS

         Landlord shall maintain books and records and records showing Expenses
         and Taxes in accordance with sound accounting and management practices
         and at the request and expense of Tenant, Landlord shall have same
         certified by an independent public accounting firm as being fairly
         rated.  If such audit by the accounting firm shows an error in
         Landlord's calculation whereby Tenant has been charged 4% in excess of
         what Tenant should have been charged the Landlord shall reimburse
         Tenant for the audit expenses.  Tenant or its representative, at the
         sole cost and expense of Tenant, shall have the right to examine
         Landlord's books and records showing Expenses and Taxes upon
         reasonable prior notice and during normal business hours at any time
         within forty-five (45) days following the furnishing by the Landlord
         to the Tenant of Landlord's Statement provided for in Section 2(d). 
         Unless the Tenant shall take written exception to any item within
         sixty (60) days after the furnishing of the Landlord's Statement
         containing said item, such Landlord's Statement shall be considered as
         final and accepted by the Tenant.

         (f)  PRORATION AND SURVIVAL.  With respect to any adjustment Year
         which does not fall entirely within the Term, Tenant shall be obligated
         to pay as Rent Adjustment for such Adjustment Year only a prorata share
         of Rent Adjustment as hereinabove determined, based upon the number of 
         days of the Term falling within the Adjustment Year.  Following 
         expiration or termination of this lease, Tenant shall pay any Rent 
         Adjustment due to the Landlord within fifteen (15) days after the date 
         of Landlord's Statement sent to Tenant.  Without limitation on other 
         obligations of Tenant which shall survive the expiration of the Term, 
         the obligations of Tenant to pay Rent Adjustment provided for in this 
         Section 2 shall survive the expiration or termination of this lease.

                                          5

         (g)  NO DECREASE IN BASE RENT.  In no event shall any Rent Adjustment
    result in a decrease of the Base Rent payable hereunder as set forth in
    Section 1 hereof.

         (h)  ADDITIONAL RENT.  All amounts payable by Tenant as or on account
    of Rent Adjustment shall be deemed to be additional rent becoming due under
    this lease.

    3.   USE OF PREMISES.  Tenant shall use and occupy the Premises for general
office purposes for general administrative purposes and for no other use or
purpose.

    4.   PRIOR OCCUPANCY.  Landlord may authorize Tenant to take possession of
all or any part of the Premises prior to the beginning of the Term.  If Tenant
does take possession pursuant to authority so given, all of the covenants and
conditions of this lease shall apply to and shall control such pre-Term
occupancy.  Rent for such pre-Term occupancy shall be paid upon occupancy and on
the first day of each calendar month thereafter at the rate set forth in Section
1 and Section 2 hereof.  If the Premises are occupied for a fractional month,
Rent shall be prorated on a per diem basis.

    5.   SERVICES.  The Landlord, as long as the Tenant is not in default under
any of the covenants of this lease, shall furnish:

         (a)  Air-cooling and heating when necessary to provide a temperature
    condition required, in Landlord's judgment, for comfortable occupancy of
    the Premises under normal business operations, daily from 8:00 A.M. to 6:00
    P.M. (Saturdays 8:00 A.M. to 1:00 P.M.)  Sundays and holidays excepted. 
    Wherever heat generating machines or equipment are used by Tenant in the
    Premises, including, without limitation extra lighting and electrical
    fixtures in excess of Building Standard work described in the Work Letter
    attached hereto (hereinafter described), which affect the temperature
    otherwise maintained by the air-cooling system,  Landlord reserves the
    right to install supplementary air conditioning units in the premises to
    the extent Tenant's machines or equipment are generating heat in excess of
    that which would be generated by ordinary or standard office equipment and
    machines, and cost of such units and the expense of installation shall be
    paid by Tenant within ten days after Landlord's demand.  The expense
    resulting from the operation and maintenance of any such supplementary air
    conditioning system shall be paid by the Tenant to the Landlord as
    additional rent at rates established by Landlord.  In addition, Tenant
    shall pay for all air-cooling and heating requested and furnished prior to
    or following the aforesaid hours at rates established by Landlord. 
    Landlord's agreements hereunder are subject to Presidential and
    governmental restrictions, regulations and guidelines on energy use;

         (b)  Cold water in common with other tenants from Village of Deerfield
    mains for drinking, lavatory and toilet purposes drawn through fixtures
    installed by the Landlord, or by Tenant in the Premises with Landlord's
    written consent, and hot water in common with other tenants for lavatory
    purposes from regular Building supply.  Tenant shall pay Landlord as
    additional rent on demand from time to time at rates fixed by Landlord for
    water furnished for any other purpose.  The Tenant shall not waste or
    permit the waste of water;

         (c)  Janitor service and customary cleaning in and about the Building
    and Premises, Saturdays, Sundays and holidays excepted.  The Tenant shall
    not provide any janitor services or cleaning without the Landlord's written
    consent and then only subject to supervision of Landlord and at Tenant's
    sole responsibility and by a janitor or cleaning contractor or employees at
    all times satisfactory to Landlord;

         (d)  Passenger elevator service in common with Landlord and other
    tenants, daily from 8:00 A.M. to 6:00 P.M. (Saturdays from 8:00 A.M. to
    1:00 P.M.), Sundays and holidays excepted, and freight elevator service, in
    common with Landlord and other tenants, at such time or times as may be
    established by Landlord.  Normal elevator service, if furnished at times
    other than as set forth above, shall be optional with Landlord and shall
    never be deemed a continuing obligation.  The Landlord, however, shall
    provide limited passenger elevator service daily at all times such normal
    passenger service is not furnished.  Operatorless automatic elevator
    service shall be deemed "elevator service" within the meaning of this
    paragraph;

         (e)  Electricity shall not be furnished by Landlord, but shall be
    furnished by an approved electric utility company serving the area. 
    Landlord shall permit the Tenant to receive such service direct from such
    utility company at Tenant's cost, and shall permit Landlord's wire and
    conduits, to the extent available, suitable and safety capable, to be used
    for such purposes.  Tenant shall make all necessary arrangements with the 
    utility company for metering and paying for electric current furnished 
    by it to Tenant and Tenant shall pay for all charges for electric 
    current consumed on the Premises during Tenant's occupancy thereof.  
    The electricity used during the performance of janitor service, the 
    making of alterations or repairs in the Premises, and for the operation 
    of the Building's air conditioning system at times other than as provided
    in paragraph 5(a) hereof when requested by Tenant, or the operation of 
    any special air conditioning systems which may be required for data 
    processing equipment or for other special equipment or machinery installed 
    by Tenant or otherwise as provided in paragraph 5(a) hereof, shall be paid 
    for by Tenant.  Tenant shall make no alterations or additions to the 
    electric equipment or appliances serving or used within the Premises without
    the prior written consent of the Landlord in each instance.  Tenant also 
    agrees to purchase from the Landlord or its agent all lamps, bulbs, ballasts
    and starters used in the Premises during the Term  hereof.  Tenant covenants
    and agrees that at all times its use of electric current shall never exceed 
    the capacity of the feeders to the Building or the risers or wiring 
    installed therein;

                                          6

         (f)  Window washing of all exterior windows in the Premises, both
    inside and out, weather permitting, at intervals to be determined by
    Landlord;

         (g)  Tenant and its employees and visitors may use the unsupervised
    outdoor uncovered parking area for passenger vehicles allocated from time
    to time for the Building in common on a "first come, first served" basis
    with Landlord and other tenants of space in the Building and their
    employees and visitors, all subject to such reasonable rules and
    regulations as from time to time may be imposed by Landlord including,
    without limitation, the right to allocate specific parking spaces to
    certain tenants in the Building;

         (h)  Landlord shall provide such extra or additional services as it is
    reasonably possible for the Landlord to provide, and as the Tenant may from
    time to time request, within a reasonable period after the time such extra
    or additional services are requested.  Tenant shall, for such extra or
    additional services, pay 120% of Landlord's actual cost reasonably incurred
    in providing them, such amount to be considered additional rent hereunder. 
    All charges for such extra or additional services shall be due and payable
    at the same time as the installment of Base Rent with which they are
    billed, or if billed separately, shall be due and payable within ten (10)
    days after such billing.  Any such billings for extra or additional
    services shall include an itemization of the extra or additional services
    rendered, and the charge for each such service.

    Tenant agrees that Landlord and its beneficiary and their agents shall not
be liable in damages, by abatement of rent or otherwise, for failure to furnish
or delay in furnishing any service when such failure or delay is occasioned, in
whole or in part, by repairs, renewals or improvements, by any strike, lockout
or other labor trouble, by inability to secure electricity, gas, water, or other
fuel at the Building after reasonable effort so to do, by any accident or
casualty whatsoever, by the act or default of Tenant or other parties, or by any
cause beyond the reasonable control of Landlord; and such failures or delays
shall never be deemed to constitute an eviction or disturbance of the Tenant's
use and possession of the Premises or relieve the Tenant from paying Rent or
performing any of its obligations under this lease, unless such failures or
delays prevent Tenant form reasonably conducting its business activities for a
period exceeding 45 consecutive days and in such event Tenant shall have the
right to pursue the appropriate remedy.

    6.   CONDITION AND CARE OF PREMISES.  Tenant shall have sixty (60) days
from Tenant's taking possession of the Premises or any portion thereof to
provide Landlord with a punchlist of reasonable items to be corrected and once
those items are corrected by Landlord it shall be conclusive evidence against
Tenant that the portion of the Premises taken possession of was then in good
order and satisfactory condition.  No promises of the Landlord to alter,
remodel, improve, repair, decorate or clean the Premises or any part thereof
have been made, and no representation respecting the condition of the Premises,
the Building or the Land, has been made to Tenant by or on behalf of Landlord
except to the extent expressly set forth herein, or in a workletter
("Workletter") attached hereto and made a part hereof.  Tenant shall not place
or allow to be placed any furniture, office equipment or any other article of
personal property in the Premises near the glass of any door, partition, wall or
window which may be viewed from the atrium outside of the Premises without the
prior written consent of the Landlord in each instance.  This lease does not
grant any rights to light or air over or about the property of Landlord.  Except
for any damage resulting from any act of Landlord or its employees and agents,
and subject to the provisions of Section 14 hereof, Tenant shall at its own
expense keep the Premises in good repair and tenantable condition and shall
promptly and adequately repair all damage to the Premises caused by Tenant or
any of its employees, agents, or invitees, including replacing or repairing all
damaged or broken glass, fixtures and appurtenances resulting from any such
damage, under the supervision and with the approval of Landlord and within any
reasonable period of time specified by Landlord.  If Tenant does not do so
promptly and adequately, Landlord may, but need not, make such repairs and
replacements and Tenant shall pay Landlord the cost thereof on demand.

    7.   RETURN OF PREMISES.  At the termination of this lease by lapse of time
or otherwise or upon termination of Tenant's right of possession without
terminating this lease.  Tenant shall surrender possession of the Premises to
Landlord and deliver all keys to the Premises to Landlord and make known to the
Landlord the combination of all locks or vaults then remaining in the Premises,
and shall return the Premises and all equipment and fixtures of the Landlord
therein to Landlord in as good condition as when Tenant originally took
possession, ordinary wear, loss or damage by fire or other insured casualty,
damage resulting from the act of Landlord or its employees and agents, and
(except as provided in this Section 7) alterations made with Landlord's consent
excepted, failing which Landlord may restore the Premises and such equipment and
fixtures to such condition and Tenant shall pay the reasonable cost thereof to
Landlord on demand.

    All installations, additions, partitions, hardware, light fixtures,
non-trade fixtures and improvements, temporary or permanent, except movable
furniture and equipment belonging to Tenant, in or upon the Premises whether
placed there by Tenant or Landlord, may be offered to Landlord by Tenant all
without compensation, allowance or credit to Tenant; provided, however, that if
prior to such termination or within ten (10) days thereafter landlord so directs
by notice, Tenant, at Tenant's sole cost and expense, shall promptly remove such
of the installations, additions, partitions, hardware, light fixtures, non-trade
fixtures and improvements placed in the Premises by tenant as are designated in
such notice excluding any additions currently existing upon Tenant's taking
possession and repair any damage to the Premises caused by such removal, failing
which Landlord may remove the same and repair the Premises and Tenant shall pay
the cost thereof to Landlord on demand.

                                          7

    At the sole option of Landlord, Tenant shall leave in place any floor
covering without compensation to Tenant.  Tenant shall remove Tenant's
furniture, machinery, safes, trade fixtures and other items of movable personal
property of every kind and description from the Premises prior to the end of the
term or ten (10) days following termination of this lease or Tenant's right of
possession, whichever might be earlier, failing which Landlord may do so and
thereupon the provisions of Section 16(f) shall apply.

    All obligations of Tenant hereunder shall survive the expiration of the
Term or sooner termination of this lease.

    8.   HOLDING OVER.  The Tenant shall pay Landlord for each day Tenant
retains possession of the Premises or any part thereof after termination of this
lease, by lapse of time or otherwise, and amount which is 150% the amount of
Rent for a day (computed on a year of 360 days) based on the annual rate of Base
Rent and Additional Rent applicable under Sections 1 and 2 to the period in
which such possession occurs, and Tenant shall also pay all damages,
consequential as well as direct, sustained by Landlord by reason of such
retention, but acceptance by Landlord of Rent after such termination shall not
of itself constitute a renewal.  Nothing in this Section contained, however,
shall be construed or operate as a waiver of Landlord's right of re-entry or any
other right of Landlord.

    9.   RULES AND REGULATIONS.  Tenant agrees to observe the rights reserved
to Landlord contained in Section 10 hereof and agrees, for itself, its
employees, agents, clients, customers, invitees and guests, to comply with the
rules and regulations sat forth in Exhibit B attached to this lease and made a
part hereof and such other rules and regulations as shall be adopted by Landlord
pursuant to Section 10(o) of this lease.

    Any violation by Tenant of any of the rules and regulations contained in
Exhibit B attached to this lease or other Section of this lease, or as may
hereafter be adopted by Landlord pursuant to Section 10(o) of this lease, may be
restrained; but whether or not so restrained, Tenant acknowledges and agrees
that it shall be and remain liable for all damages, loss, costs and expense
resulting from any violation by the Tenant of any of said rules and regulations.
Nothing in this lease contained shall construed to impose upon Landlord any duty
or obligation to enforce said rules and regulations, or the terms, covenants and
conditions of any other lease against any other tenant or any other persons, and
Landlord and its beneficiary shall not be liable to Tenant for violation of the
same by any other tenant its employees, agents, invitees, or by any other 
person.

    10.  RIGHTS RESERVED TO LANDLORD.  Landlord reserves the following rights,
exercisable without notice and without liability to Tenant for damage or injury
to property, person or business and without effecting an eviction or disturbance
of Tenant's use or possession or giving rise to any claim for setoff or
abatement of Rent or affecting any of Tenant's obligations under this lease:

         (a)  To change the name or street address of the Project.

         (b)  To install and maintain signs on the exterior and interior of the
    Building.

         (c)  To prescribe the location and style of the suite number and
    identification sign or lettering for the Premises occupied by the Tenant.

         (d)  To retain at all times, and to use in appropriate instances, pass
    keys to the Premises.

         (e)  To grant to anyone the right to conduct any business or render
    any service in the Building, whether or not it is the same as or similar to
    the use expressly permitted to Tenant by Section 3 hereof.

         (f)  To exhibit the Premises at reasonable hours, and to decorate,
    remodel, repair, alter or otherwise prepare the Premises for reoccupancy at
    any time after Tenant vacates or abandons the Premises.

         (g)  To have access for Landlord and other tenants or occupants of the
    Building to any mail chutes according to the rules of the United States
    Postal Service.

         (h)  To enter the Premises at reasonable hours for reasonable
    purposes, including inspection and supplying janitor service or other
    service to be provided to Tenant hereunder.

         (i)  To require all persons entering or leaving the Building during
    such hours as Landlord may from time to time reasonably determine to
    identify themselves to watchmen by registration or otherwise, and to
    establish their right to enter or leave in accordance with the provisions
    of paragraphs (1) and (10) of Exhibit B attached to this lease.  Landlord
    shall have the right to establish and change from time to time a security
    control and locking system with respect to entry to and exit from the
    Building.  Landlord shall not be liable in damages for any error with
    respect to admission to or eviction or exclusion from the Building of any
    person.  In case of fire, invasion, insurrection, mob, riot, civil
    disorder, public excitement or other commotion, or threat thereof, Landlord
    reserves the right to limit or prevent access to the Building during the
    continuance of the same, shut down elevator service, activate elevator
    emergency controls, or otherwise take such action or preventive measures
    deemed necessary by Landlord for the safety of the tenants or other
    occupants of the Building or the protection of the Building and the
    property in the Building.  Tenant agrees to cooperate in any reasonable
    safety program developed by Landlord.

                                          8

         (j)  To control and prevent access to common areas and other
    non-general public areas pursuant to paragraphs (1) and (10) of Exhibit B
    attached to this lease.

         (k)  Provided that reasonable access to the Premises shall be
    maintained and the business of Tenant shall not be interfered with
    unreasonably, to rearrange, relocate, enlarge, reduce or change corridors,
    exits, entrances in or to the Building and the Land and to decorate and to
    make, repairs, alterations, additions, and improvements, structural or
    otherwise, in or to the Building, the Land or any part thereof, and any
    adjacent building, land, street or alley, including for the purpose of
    connection with or entrance into or use of the Building and the Land in
    conjunction with any adjoining or adjacent building or buildings, now
    existing or hereafter constructed, and may for such purposes erect
    scaffolding and other structures reasonably required by the character of
    the work to be performed, and during such operations may enter upon the
    Premises and take into and upon or through any part of the Building,
    including the Premises, all materials that may be required to make such
    repairs, alterations, improvements, or additions, and in that connection
    Landlord may  temporarily close public entry ways, other public spaces,
    stairways or corridors and interrupt or temporarily suspend any services
    or facilities agreed to be furnished by the Landlord for a period of time
    not to exceed thirty (30) days to the extent such activity materially
    interfaces with Tenant's business activities all without the same
    constituting an eviction of Tenant in whole or in part and without
    abatement of rent by reason of loss or interruption of the business of
    Tenant or otherwise and without in any manner rendering Landlord liable for
    damages or relieving Tenant from performance of Tenant's obligation under
    this lease.  Landlord may at its option make any repairs, alterations,
    improvements and additions in and about the Building and the Premises
    during ordinary business hours and, if Tenant desires to have such work
    done during other than business hours, Tenant shall pay all overtime and
    additional expenses resulting therefrom.

         (l)  To designate certain parking spaces and parking areas on the Land
    or on adjacent land for the exclusive use of one or more tenants in the
    Building or any adjoining or adjacent building or buildings now existing or
    hereafter constructed, provided Tenant's usual and customary parking usage
    is not materially interfered with, to install gates, traffic regulating
    devices, security systems, and directional signage, make, prescribe and
    adopt such reasonable rules and regulations, in addition to or other than
    or by way of amendment or modification of the rules and regulations
    contained in Exhibit B attached to this lease, relating to use of parking
    spaces and parking areas including, but not limited to, vehicle size,
    direction of traffic, loading and unloading of vehicles and the like.

         (m)  To designate and select agents, employees and contractors to
    perform services in the Building and on the Land, whether or not affiliated
    with Landlord.

         (n)  To install and designate areas for installation of vending
    machines and collect all revenue derived from the use thereof.

         (o)  From time to time to prescribe, make and adopt such reasonable
    rules and regulations, in addition to or other than or by way of amendment
    or modification of the rules and regulations contained in Rider A attached
    to this lease or other Sections of this lease, for the protection and
    welfare  of the Building and its tenants and occupants, as the Landlord may
    determine, and the Tenant agrees to abide by all such rules and regulations.

    11.  ALTERATIONS.  Tenant shall not make alterations in or additions or 
improvements to the Premises without Landlord's advance written consent in 
each instance which shall not.  All work of the nature herein contemplated 
shall be at Tenant's expense and done by contractors employed by or on behalf 
of Landlord which contractors shall have been selected by Landlord after 
securing competitive bid pricing and shall comply with all insurance 
requirements and with all ordinances and regulations of the Village of 
Deerfield or any department or agency thereof, and with the requirements of 
all statutes and regulations of the State of Illinois or of any department or 
agency thereof. All required working drawings for Landlord's contractor and 
specifications shall be prepared by Landlord's architect or engineers at 
Tenant's expense.  In addition, Tenant may utilize its own contractors, 
architects or engineers only with Landlord's prior written consent withheld 
and subject to such additional requirements and regulations as Landlord may 
from time to time reasonably impose.  All additions and alterations shall be 
installed by Tenant in a good and workmanlike manner and only new, high grade 
materials shall be used.  If Tenant shall be permitted to utilize its own 
contractors, architects or engineers, Tenant shall furnish Landlord with 
security satisfactory to Landlord for payment of all costs to be incurred in 
connection with such work.

    Subject to obtaining Landlord's prior written approval of its selection 
and compliance with the further provisions of this paragraph.  Tenant may 
elect to use an architect, at Tenant's sole cost, for the preparation of 
floor plan layout(s) and other necessary information relating to the desired 
alterations in or additions or improvements to the Premises, it may do so 
provided (i) the resulting information shall be sufficiently detailed so 
that, after written approval by Tenant and Landlord of such floor plan 
layout(s) and information, Landlord's architect can transfer such detailed 
information to the working drawings and specifications, (ii) Landlord's 
building standards are used in all details, and (iii) such floor plan 
layout(s) and information shall be furnished to Landlord in sufficient time 
to provide thirty (30) days for Landlord's architect to prepare said working 
drawings and specifications.  Before proceeding with the work of the nature 
herein contemplated, Landlord shall (i) submit to Tenant the estimate of the 
Landlord's contractor of the cost of such work based on said working drawings 
and specifications, (ii) obtain Tenant's approval to the working drawings and 
specifications and (iii) obtain Tenant's written request that said work be 
done.

         The costs of such work shall include all labor and materials, general
    conditions (including but not limited to, demolition and the removal of
    rubbish and construction debris from the property and the transportation
    thereof to a dump, building permit fee, (paid supervision, outside hoisting,
    if any and the like); premium cost of workmen's compensation, public
    liability

                                          9

and property damage insurance earned by Landlord's contractors; overhead
charges and fees of Landlord's contractors; the charges of Landlord's architect
or engineer (i) for preparation and printing of working drawings and
specifications and (ii) for supervision of construction; together with ten
percent (10%) of all of the costs of such work for overhead and construction
management services by Landlord; and reimbursement to Landlord of any other
expenses incurred in connection with the work performed for the Tenant.

    Landlord or its beneficiary may, at its election, act as general 
contractor and as one or more of the subcontractors.  If Landlord or its 
beneficiary shall elect to act as general contractor or a subcontractor, the 
costs of the work performed by the Landlord or its beneficiary in such 
capacity shall be determined in accordance with the paragraph immediately 
above.

    In the event Landlord shall perform the work for Tenant as aforesaid,
Landlord shall not be obligated to proceed with such work until the estimate of
the cost of such work is approved in writing by Tenant and the entire cost of
such work is paid by Tenant to Landlord in payment for such work as the work
progresses.  Any deficit shall be paid to Landlord after completion of the work
and after Landlord shall have assembled and submitted to Tenant the complete
costs thereof.

    Prior to commencing any work in connection with alterations or additions,
Tenant shall, if it performs such work using its own contractors, furnish
Landlord with certificates of insurance evidencing such insurance coverage as
required by Landlord from all contractors performing labor and furnishing
materials insuring Landlord and its employees, agents and beneficiary against
loss, cost, damage or liability arising from or incurred in connection with any
such additions or alterations.

    12.  ASSIGNMENT AND SUBLETTING.  Tenant shall not, without the prior 
written consent of Landlord in each instance which shall not be unreasonably 
withheld (i) assign, transfer, mortgage, pledge, hypothecate or encumber or 
subject to or permit to exist upon or be subjected to any lien or charge, 
this lease or any interest under it, (ii) allow to exist or occur any 
transfer of or lien upon this lease or the Tenant's interest herein by 
operation of law, (iii) sublet the Premises or any part thereof, or (iv) 
permit the use or occupancy of the Premises or any part thereof for any 
purpose not provided for under Section 3 of this lease or by anyone other 
than the Tenant and Tenant's employees.  In no event shall this lease be 
assigned or assignable by voluntary or involuntary bankruptcy proceedings or 
otherwise, and in no event shall this lease or any rights or privileges 
hereunder be an asset of Tenant under any bankruptcy, insolvency or 
reorganization proceedings.

    Without the prior written approval of Landlord, which shall not be 
unreasonably withheld Tenant expressly covenants and agrees not to enter into 
any lease, sublease, license, concession or other agreement for use, 
occupancy or utilization of the Premises which provides for rental or other 
payment for such use, occupancy or utilization based in whole or in part on 
the net income or profits derived by any person from the property leased, 
used, occupied or utilized (other than an amount based on a fixed percentage 
or percentages of receipts or sales), and that any such purported lease, 
sublease, license, concession or other agreement shall be absolutely void and 
ineffective as a conveyance of any right or interest in the possession, use, 
occupancy or utilization of any part of the Premises.

    Landlord shall not unreasonably withhold or delay its consent to a 
proposed assignment or sublease except that such consent need not be granted 
if (a) in the reasonable judgment of Landlord the proposed subtenant or 
assignee is of a character or engaged in a business which is not in keeping 
with the standards of Landlord for the Building; (b) in the reasonable 
judgment of Landlord the purpose for which the proposed subtenant or assignee 
intends to use the Premises are not in keeping with the standards of Landlord 
for the Building, or are in violation of the terms of any other leases in the 
Building, it being understood that the purpose for which the proposed 
subtenant or assignee intends to use the Premises may not be in violation of 
this Lease; (c) a subletting will result in there being more than two 
occupants within the Premises, including Tenant and all subtenants; (d) the 
premises is not regular in shape with appropriate means of ingress and egress 
and suitable for normal renting purposes; (e) the proposed subtenant or 
assignee is either a government (or subdivision or agency thereof) or an 
occupant of the Building; (f) an assignment is desired and the Premises are 
less than the entire Premises or less than the remaining Term is being 
assigned; (g) the assignee or sublessee is not, in the judgment of Landlord, 
sufficiently financially responsible to perform its obligations under the 
proposed sublease or assignment; or (h) Tenant is in default under this 
Lease.  The foregoing are merely examples of reasons for which Landlord may 
reasonably withhold it consent and shall not be deemed exclusive of any 
permitted reasons for withholding consent, whether similar or dissimilar to 
the foregoing examples.  Any assignment or subletting without the consent of 
Landlord shall be void and shall, at the option of Landlord, constitute a 
default under this Lease.

    Consent by Landlord to any assignment, subletting, use or occupancy, or
transfer shall not operate to relieve the Tenant from any covenant or obligation
hereunder except to the extent, if any, expressly provided for in such consent,
or be deemed to be a consent to or relieve Tenant, or any such assignee,
sublessee, or transferee form obtaining Landlord's consent to any subsequent
assignment, transfer, lien, charge, subletting, use or occupancy.

    Tenant shall, by notice in writing, advise Landlord of its desire from, on
and after a stated date (which shall not be less than thirty (30) days after the
date of Tenant's notice) to assign this lease or sublet any part or all of the
Premises for the balance or any part of the Term, and, in such event, Landlord
shall have the right, to be exercised by giving written notice to Tenant within
fifteen (15) days after receipt of Tenant's notice, to recapture the space
described in Tenant's notice and such recapture notice shall, if given,
terminate this lease with respect to the space therein described as of the date
stated in Tenant's notice.  Tenant's said notice shall state the name and
address of the proposed subtenant or assignee and a true and complete copy of
the proposed sublease or assignment shall be delivered to Landlord with said
notice.  If Tenant's notice shall cover all of the space hereby demised, and if
Landlord shall give the aforesaid recapture notice with respect thereto, the
Term of this lease shall expire and end on the date stated in Tenant's notice as
fully and completely as if that date had been herein definitely fixed for the
expiration of the Term.  If Tenant's notice shall cover less than the entire
Premises, the space proposed to be sublet and the retained space must be a
leasable unit in compliance with all applicable codes and ordinances.  If,
however, this lease be terminated pursuant to the foregoing with respect to less
than the entire Premises, the Rent and the Tenant's Proportionate Share as
defined herein shall be adjusted on the basis of the number of rentable square
feet retained by Tenant, and this lease as so amended shall continue thereafter
in full force and effect.

                                          10

     13. WAIVER OF CERTAIN CLAIMS: INDEMNITY BY TENANT. To the extent not
expressly prohibited by law, Tenant releases Landlord and its beneficiaries, and
their agents, servants and employees, from and waives all claims for damages to
person or property sustained by the Tenant or by any occupant of the Premises,
the Building or the Center, or by any other person, resulting directly or
indirectly from fire or other casualty, cause or any existing or future
condition, defect, matter or thing in or about the Premises, the Building, the
Land, the Center or any part thereof, or from any equipment or appurtenance
therein, or from any accident in or about the Building or the Land, or from any
act or neglect of any tenant or other occupant of the Building or any part
thereof or of any other person, including Landlord's agents and servants. This
Section 13 shall apply especially, but not exclusively, to damage caused by
water, snow, frost, steam, excessive heat or cold, sewerage, gas, odors or 
noise, or the bursting or leaking of pipes or plumbing fixtures, broken 
glass, sprinkling or air conditioning devices or equipment, or flooding of 
basements, and shall apply without distinction as to the person whose act or 
neglect was responsible for the damage and whether the damage was due to any 
of the acts specifically enumerated above, or from any other thing or 
circumstance, whether of a like nature or of a wholly different nature, if 
any damage to the Premises or the Building or any equipment or appurtenance 
therein, whether belonging to Landlord or to other tenants or occupants of 
the Building, results from any act or neglect of the Tenant, its employees, 
agents or invitees. Tenant shall be liable therefor and Landlord may at its 
option repair such damage and Tenant shall upon demand by Landlord reimburse 
Landlord for all costs of such repairs and damages in excess of amounts, if 
any, paid to Landlord under insurance covering such damages. All personal 
property belonging to the Tenant or any occupant of the Premises that is in 
the Building, on the Land or in the Premises shall be there at the risk of 
the Tenant or other person only and Landlord shall not be liable for damage 
thereto or theft or misappropriation thereof.

     To the extent not expressly prohibited by law, Tenant agrees to hold
Landlord and its beneficiaries, and their agents, servants and employees,
harmless and to indemnify each of them against claims and liabilities, including
reasonable attorneys' fees, for injuries to all persons and damage to or then or
misappropriation or loss of property occurring in or about the Premises arising
from Tenant's occupancy of the Premises or the conduct of its business or from
any activity, work, or thing done, permitted or suffered by Tenant in or about
the Premises or from any breach or default on the part of Tenant in the
performance of any covenant or agreement on the part of Tenant to be performed
pursuant to the terms of this lease or due to any other act or omission of the
Tenant, its agents or employees, but only to the extent of Landlord's liability,
if any, in excess of amounts, if any, paid to Landlord under insurance covering
such claims or liabilities.

     14. DAMAGE OR DESTRUCTION BY CASUALTY. If the Premises or any part of the
Building shall be damaged by fire or other casualty and if such damage does not
render the Premises or Building materially unfit for Tenant's intended use 
and enjoyment of the Premises, then Landlord shall proceed to repair and 
restore with reasonable promptness the same to its prior existing condition, 
subject to reasonable delays for insurance adjustments and delays caused by 
matters beyond Landlord's control. If any such damage render the Premises or 
Building materially unfit for Tenant's intended use and enjoyment of the 
Premises, Landlord shall, with reasonable promptness after the occurrence of 
such damage, estimate the lengths of time that will be required to 
substantially complete the repair and restoration of such damage and shall by 
notice advise Tenant of such estimate, if it is so estimated that the amount 
of time required to substantially complete such repair and restoration will 
exceed one hundred eighty (180) days from the date such damage occurred, then 
either Landlord or Tenant shall have the right to terminate this lease as of 
the date of such damage upon giving notice to the other at any time within 
twenty (20) days after Landlord gives Tenant the notice containing said 
estimate (it being understood that Landlord may, if it elects to do so, also 
give such notice of termination together with the notice containing said 
estimates. Unless this lease is terminated as provided in the preceding 
sentence, Landlord shall proceed with reasonable promptness to repair and 
restore the Premises, subject to reasonable delays for insurance adjustments 
and delays caused by matters beyond Landlord's control, and also subject to 
zoning laws and building codes then in effect. Landlord shall have no 
liability to Tenant, and Tenant shall not be entitled to terminate the lease 
(except as hereinafter provided) if such repairs and restoration are not in 
fact completed within the time period estimated by Landlord, as aforesaid, 
unless the repairs are restoration are still not completed within sixty (60) 
days after the time period estimated by Landlord.

                                       11

INSERT (1)

To the extent not expressly prohibited by law, the Landlord releases the Tenant,
and its agents and employees, from and waives all claims for damage to person or
property sustained by the Landlord and its beneficiaries resulting directly or
indirectly from fire or other casualty, cause or any existing or future
condition, defect, matter or thing in or about the Premises or the Building or
any part thereof, or from any equipment or appurtenance therein, or from any
accident in or about the Building, or from any act or neglect of any other
tenant or other occupant of the Building or any part thereof to the extent of
insurance proceeds received by Landlord for such damage.

To the extent not expressly prohibited by law, Landlord agrees to indemnify and
save Tenant, its agents and employees, harmless against any and all claims,
liabilities, demands, costs and expenses including reasonable attorneys' fees
for the defense thereof for injuries to persons and damage to property occurring
in or about the Building other than the Premises arising from Landlord's
ownership, use or operation of the Building or from any breach or default on the
part of Landlord to be performed pursuant to the terms of this Lease or due to
any other act or omission of Landlord, its agents, contractors or employees,
except where due to the negligence or intentional wrongful act of Tenant, its
employees, agents, contractors, licensees or invitees.

                                      11(a)

Tenant shall not have the right to terminate this lease pursuant to this Section
14 if the damage or destruction was caused by the gross neglect of Tenant, its
agents or employees.

     In the event any such fire or casualty damage not caused by the gross
neglect of Tenant, its agents or employees, renders the Premises untenantable
and if this Lease shall not be terminated pursuant to the foregoing provisions
of this Section 14 by reason of such damage, then Rent shall abate during the
period beginning with the date of such damage and ending with the date when
Landlord tenders the Premises to Tenant as being ready for occupancy. Such
abatement shall be in an amount bearing the same ratio to the total amount of
Rent for such period as the portion of the Premises to this Section 14. Rent
shall be apportioned on a per diem basis and be paid to the date of the fire or
casualty.

     15. EMINENT DOMAIN. If all or a substantial part of the Building or
Premises rendering the Premises materially unfit for Tenant's intended use and
enjoyment of the Premises shall be taken or condemned by any competent authority
for any public or quasi-public use or purpose, the Term of this lease shall end
upon and not before the date when the possession of the part so taken shall be
required for such use or purpose, and without apportionment of the award to or
for the benefit of Tenant. If any condemnation proceeding shall be instituted in
which it is sought to take or damage any part of the Building or the Land, the
taking of which would, in Landlord's opinion, prevent the economical operation
of the Building, or if the grade of any street, or alley adjacent to the
Building is changed by any competent authority, and such taking, damage or
change of grade makes it necessary or desirable to remodel the Building to
conform to the taking, damage or changed grade, Landlord shall have the right to
terminate this lease upon not less than ninety (90) days' notice prior to the
date of termination designated in the notice, in either of the events above
referred to. Rent at the then current rate shall be apportioned as of the date
of the termination. No money or other consideration shall be payable by the
Landlord to the Tenant for the right of termination, and the Tenant shall have
no right to share in the condemnation award unless a portion of the award is for
fixtures, improvements, or alterations to the Premises paid for by Tenant,
whether for a partial or total taking, or in any judgment for damages caused by
the change of grade. Upon the occurrence of any other taking or condemnation,
the term of this lease shall not terminate.

     16. DEFAULT: LANDLORD'S RIGHTS AND REMEDIES.

          (a)  The occurrence of any one or more of the following matters
     constitutes a Default by Tenant under this lease:

               (i)  Failure by Tenant to pay Rent, or any installment thereof,
          within 5 days after notice that same is due;

               (ii)  Failure by Tenant to pay, within 15 days after notice
          thereof from Landlord to Tenant, any other moneys due and payable from
          Tenant under this lease including amounts payable under the Workletter
          attached hereto;

               (iii)  Failure by Tenant to observe or perform any of the
          covenants in respect of assignment and subletting set forth in Section
          12;

               (iv)  Failure by Tenant to cure forthwith, immediately after
          receipt of notice from Landlord, any hazardous condition which Tenant
          has created in violation of law or of this lease;

               (v)  Failure by Tenant to observe or perform any other covenant,
          agreement, condition or provision of this lease, if such failure shall
          continue for thirty (30) days after notice thereof from Landlord to
          Tenant;

               (vi)  The levy upon, under execution or the attachment by legal
          process, of the leasehold interest of Tenant, or the filing or
          creation of a lien in respect of such leasehold interest;

               (vii)  The Tenant vacates or abandons the Premises or fails to
          take possession of the Premises when available for occupancy
          reasonably promptly, whether or not Tenant thereafter continues to pay
          the Rent due under this lease;

               (viii)  The Tenant becomes insolvent or bankrupt or admits in
          writing its inability to pay its debts as they mature, and is unable
          to pay rent hereunder, or makes an assignment for the benefit of
          creditors, or applies for or consents to the appointment of a trustee
          or receiver for the Tenant or for the major part of its property;

               (ix)  A trustee or receiver is appointed for the Tenant or for
          the major part of its property and is not discharged within thirty
          (30) days after such appointment;

               (x)  Bankruptcy, reorganization, arrangement, insolvency or
          liquidation proceedings, or other proceedings for relief under any
          bankruptcy law, or similar law for the relief of debtors, are
          instituted by or against the Tenant, and, if instituted against the
          Tenant, are allowed against it or are consented to by it or are not
          dismissed within sixty (60) days after such institution, and tenant is
          unable to pay rent hereunder; or

               (xi)  The misrepresentation by Tenant of a material fact in any
          document, financial statement, leasing application or other instrument
          delivered or disclosed to Landlord in connection with this Lease.

                                       12

          (b)  If a Default occurs and is not cured within the appropriate
     grace period as provided under this Lease, Landlord shall have the rights
     and remedies hereinafter set forth, which shall be distinct, separate and
     cumulative and shall not operate to exclude or deprive the Landlord of any
     other right or remedy allowed it by law:

               (i)  Landlord may terminate this lease by giving to Tenant notice
\         of the Landlord's election to do so, in which event the Term of this
          lease shall end, and all right, title and interest of the Tenant
          hereunder shall expire, on the date stated in such notice;

               (ii)  Landlord may terminate the right of the Tenant to
          possession of the Premises without terminating this lease by giving
          notice to Tenant that Tenant's right of possession shall end on the
          date stated in such notice, whereupon the right of the Tenant to
          possession of the Premises or any part thereof shall cease on the date
          stated in such notice unless otherwise prohibited by law; and

               (iii)  Landlord may enforce the provisions of this lease and may
          enforce and protect the rights of the Landlord hereunder by a suit or
          suits in equity or at law for the specific performance of any covenant
          or agreement contained herein, or for the enforcement of any other
          appropriate legal or equitable remedy, including recovery of all
          moneys due or to become due from the Tenant under any of the
          provisions of this lease.

          (c)  If Landlord exercises either the remedies provided for in
     subparagraphs (i) and (ii) of the foregoing Section 16(b), Tenant shall
     surrender possession and vacate the Premises within forty-five (45) days of
     the event of default, subject to court order, and deliver possession
     thereof to the Landlord, and Landlord may then or at any time thereafter
     re-enter and take complete and peaceful possession of the Premises, with
     process of law, and Landlord may remove all property therefrom, using such
     force as may be necessary, without being deemed in any manner guilty of
     trespass, eviction or forcible entry and detainer and without relinquishing
     Landlord's right to Rent or any other right given to Landlord hereunder or
     by operation of law.

          (d)  If Landlord terminates the right of the Tenant to possession of
     the Premises without terminating this lease, such termination of possession
     shall not release Tenant, in whole or in part, from Tenant's obligation to
     pay the Rent hereunder for the full Term. In addition, Landlord shall have
     the right, from time to time, to recover from the Tenant, and the Tenant
     shall remain liable for, all Additional Rent and any other sums thereafter
     accruing as they become due under this lease during the period from the
     date of termination of possession stating in such notice to the stated end
     of the Term. In any such case, the Landlord shall use its best efforts to,
     relet the Premises or any part thereof for the account of the Tenant for
     such rent, for such time (which may be for a term extending beyond the Term
     of this lease) and upon such terms as the Landlord shall reasonably
     determine and the Landlord shall not be required to accept any tenant
     offered by the Tenant or to observe any instructions given by the Tenant
     relative to such reletting. Also in any such case the Landlord may make
     repairs, alterations and additions in or to the Premises and redecorate the
     same as is reasonably deemed by the Landlord necessary or desirable to
     relet the Premises and in connection therewith change the locks to the 
     Premises, and the Tenant shall upon demand pay the cost thereof together 
     with the Landlord's expenses of reletting. Landlord may collect the 
     Rents from any such reletting and apply the same first to the payment of 
     the expenses of reentry, redecoration, repair and alterations and the 
     expenses of reletting and second to the payment of rent herein provided 
     to be paid by the Tenant, and any excess or residue shall operate only 
     as an offsetting credit against the amount of rent as the same 
     thereafter becomes due and payable hereunder, but the use of such 
     offsetting credit to reduce the amount of rent due Landlord, if any, 
     shall not be deemed to give Tenant any right, title or interest in or to 
     such excess or residue and any such excess or residue shall belong to 
     Landlord solely; provided that in no event shall Tenant be entitled to a 
     credit on its indebtedness to Landlord in excess of the aggregate sum 
     (including Base Rent and Additional Rent) which would have been paid by 
     Tenant for the period for which the credit to Tenant is being 
     determined, had no Default occurred. No such re-entry or repossession, 
     repairs, alterations and additions, or reletting shall be construed as 
     an eviction or ouster of the Tenant or as an election on Landlord's part 
     to terminate this lease unless a written notice of such intention be 
     given to Tenant or shall operate to release the Tenant in whole or in 
     part from any of the Tenant's obligations hereunder and the Landlord 
     may, at any time and from time to time, sue and recover judgment for any 
     deficiencies from time to time remaining after the application from time 
     to time of the proceeds of any such reletting.

          (e)  In the event of the termination of this lease by Landlord as
     provided for by subparagraph (c) of Section 16(b) Landlord shall be
     entitled to recover from Tenant all the fixed dollar amounts of rentals
     accrued and unpaid for the period up to and including such termination
     date, as well as all other additional sums payable by the Tenant, or for
     which Tenant is liable or in respect of which Tenant has agreed to
     indemnify Landlord under any of the provisions of this lease, which may be
     then owing and unpaid, and all costs and expenses, including court costs
     and reasonable attorneys fees incurred by Landlord in the enforcement of
     its rights and remedies hereunder, and, in addition, Landlord shall be
     entitled to recover as damages for loss of the bargain and not as a penalty
     (x) the unamortized cost to the Landlord, computed and determined in
     accordance with generally accepted accounting principles, or the tenant
     improvements and alterations, if any, paid for and installed by Landlord
     pursuant to this Lease, and (y) the aggregate sum which

                                       13

     at the time of such termination represents the excess, if any, of the
     present value of the aggregate Rents at the same annual rate for the
     remainder of the Term as then in effect pursuant to the applicable
     provisions of Sections 1 and 2 of this lease, over the then present value
     of the then aggregate fair rental value of the Premises for the balance of
     the Term, such present worth to be computed in each case on the basis of a
     three percent (3%) per annum discount from the respective dates upon which
     such rentals would have been payable hereunder had this lease not been
     terminated, and (z) any damages in addition thereto, including reasonable
     attorneys' fees and court costs, which Landlord shall have sustained by
     reason of the breach of any of the covenants of this lease other than for
     the payment of Rent.

          (f)  All property removed from the Premises by Landlord pursuant to
     any provisions of this lease or of law may be handled, removed or stored by
     the Landlord at the cost and expense of the Tenant, and the Landlord shall
     in no event be responsible for the value, preservation or safekeeping
     thereof, provided reasonable care by Landlord is evident. Tenant shall pay
     Landlord for any expenses incurred by Landlord in such removal and storage
     charges against such property so long as the same shall be in Landlord's
     possession or under Landlord's control. All property not removed from the
     Premises or retaken from storage by Tenant within thirty (30) days after
     the end of the Term, however terminated, shall be conclusively deemed to
     have been conveyed by Tenant to Landlord as by bill of sale without further
     payment or credit by Landlord to Tenant.

          (g)  Tenant shall pay all of Landlord's costs, charges and expenses,
     including court costs and reasonable attorney's fees, incurred in enforcing
     Tenant's obligations under this lease or incurred by Landlord in any
     litigation, negotiation or transactions in which Tenant causes the
     Landlord, without Landlord's fault, to become involved or concerned.

     17.  SUBORDINATION.  Landlord has heretofore and may hereafter from time to
time execute and deliver a first mortgage or first trust deed in the nature of a
mortgage, both referred to herein as "First Mortgage," against the Land and
Building, or any interest therein, and may sell and lease back the Land. In
addition, Landlord may hereafter from time to time execute and deliver one or
more mortgages or deeds of trust junior to the First Mortgage or may subordinate
the ___ of a First Mortgage to another mortgage or deed of trust, collectively
referred to herein as "Second Mortgage".  The First Mortgage and Second 
Mortgage are herein collectively called "Mortgage".  If requested by the 
mortgagee or trustee under any Mortgage, or the lessor or any ground or 
underlying lease ("ground lessor"). Tenant will either (a) subordinate its 
interest in this lease to said Mortgage, and to any and all advances made 
thereunder and to the interest thereon, and to all renewals, replacements, 
supplements, amendments, modifications and extensions thereof, or to said 
ground or underlying lease, or to both, or (b) make Tenant's interest in this 
lease superior thereto; and Tenant will promptly execute and deliver such 
agreement or agreements as may be reasonably required by such mortgagee or 
trustee under any Mortgage. Notwithstanding the foregoing, Tenant covenants 
it will not subordinate this lease to any mortgage or trust deed other than a 
First Mortgage (as defined in this Section 17) without the prior written 
consent of the holder of the First Mortgage.

     It is further agreed that (a) if any Mortgage shall be foreclosed, or if
any ground or underlying lease be terminated, (i) the liability of the mortgagee
or trustee hereunder or purchaser of such foreclosure sale or the liability of a
subsequent owner designated as Landlord under this lease shall exist only so
long as such trustee, mortgagee, purchaser or owner is the owner of the Building
or Land and such liability shall not continue or survive after further transfer
of ownership; and (ii) upon request of the mortgagee or trustee, if the Mortgage
shall be foreclosed. Tenant will attorn, as Tenant under this lease, to the
purchaser at any foreclosure sale under any Mortgage or upon request of the
ground lessor, if any ground or underlying lease shall be terminated. Tenant
will attorn as Tenant under this lease to the ground lessor, and Tenant will
execute such instruments as may be necessary or appropriate to evidence such
attornment provided; however, that Tenant shall not attorn to the purchaser at
any foreclosure sale under any Mortgage other than a First Mortgage without the
prior written consent of the holder of the First Mortgage; and (b) this lease
may not be modified or amended so as to reduce the Rent or shorten the Term
provided hereunder, or so as to adversely affect in any other respect the rights
of the Landlord, nor shall this lease be cancelled or surrendered, without the
prior written consent, in each instance, of the mortgagee or trustee under any
Mortgage and of any ground lessor.

     Should any prospective mortgagee or ground lessor require a modification or
modifications of this lease, which modification or modifications will not cause
an increased cost or expense to Tenant or in any other way adversely change the
rights and obligations of Tenant hereunder in the reasonable judgment of Tenant,
then and in such event, Tenant agrees that this lease may be so modified and
agrees to promptly execute whatever documents are required therefor and deliver
same to Landlord within ten (10) days following the request therefor. Should any
prospective mortgagee or ground lessor require execution of a short term of
lease for recording (containing the names of the parties, a description of the
Premises, and the term of this lease) or a certification from the Tenant
concerning this lease in such form as may be required by a prospective mortgagee
or ground lessor.  Tenant agrees to promptly execute such short term of lease or
certificate and deliver the same to Landlord within ten (10) days following the
request therefor.

     18.  MORTGAGEE PROTECTION.  Tenant agrees to give any notice of any
Mortgage (as defined in Section 17 hereof), by registered or certified mail, a
copy of any notice of default served upon the Landlord by Tenant, provided that
prior to such notice Tenant has been notified in writing (by way of service on
Tenant of a copy of Assignment of Rents and Leases, or otherwise) of the address
of such Mortgage holder. Tenant further agrees that if Landlord shall have
failed to date such default within twenty (20) days after such notice to
Landlord (or if such default cannot be cured or corrected within that time, then
such additional time as may be necessary if Landlord has commenced within such
twenty (20) days

                                       14

and is diligently pursuing the remedies or steps necessary to cure or correct
such default), then the holder of any Mortgage shall have an additional thirty
(30) days within which to cure or correct such default (or if such default
cannot be cured or corrected within that time, then such additional time as may
be necessary if such holder of any Mortgage has commenced within such thirty
(30) days and is diligently pursuing the remedies or steps necessary to cure or
correct such default). Until the time allowed, as aforesaid, for the holder of
any Mortgage to cure such default has expired without cure, Tenant shall have
no right to, and shall not, exercise any right it may have to terminate this
lease on account of Landlord's default.

     19.  DEFAULT UNDER OTHER LEASES.  If the term of any lease, other than this
lease, heretofore or hereafter made by Tenant for any space in the Building
shall be terminated or terminable after the making of this lease because of any
default by Tenant under such other lease, such fact shall empower Landlord, at
Landlord's sole option, to terminate this lease by notice to Tenant or to
exercise any of the rights or remedies set forth in Section 16.

     20.  SUBROGATION AND INSURANCE.

          (a)  Landlord and Tenant agree to have all fire and extended coverage
     and material damage insurance which may be carried by either of them
     endorsed with a clause providing that any release from liability of or
     waiver of claim for recovery from the other party entered into in writing
     by the insured thereunder prior to any loss or damage shall not affect the
     validity of said policy or the right of the insured to recover thereunder.
     Without limiting any release or waiver of liability or recovery contained
     in any other Section of this lease but rather in confirmation and
     furtherance thereof, each of the parties hereto waives all claims for
     recovery from the other party for any loss or damage to any of its property
     insured under valid and collectible insurance policies to the extent of any
     recovery collected under such insurance policies.

          (b)  Tenant shall carry insurance during the entire Term hereof
     insuring Tenant and Landlord and Landlord's agents and beneficiaries, as
     their interest may appear, with companies reasonably satisfactory to
     Landlord and with such increases in limits as Landlord may from time to
     time request, but initially Tenant shall maintain the following coverages
     in the following amounts:

               (1)  Comprehensive general public liability insurance in an
          amount not less than $1,000,000.00 combined single limit per
          occurrence.

               (2)  Insurance against fire, sprinkler leakage, vandalism, and
          the extended coverage perils for the full replacement cost of all
          additions, improvements and alterations to the Premises and of all
          office furniture, trade fixtures, office equipment, merchandise and
          all other items of Tenant's property on the Premises.

          Tenant shall, prior to the commencement of the Term, furnish to
     Landlord policies or certificates evidencing such coverage, which policies
     or certificates shall state that such insurance coverage may not be
     changed, cancelled or not renewed without at least thirty (30) days prior
     written notice to Landlord and Tenant, except in the case of cancellation
     for nonpayment of premiums which cancellation cannot occur without at least
     ten (10) days prior written notice to Landlord and Tenant.

          (c)  Tenant shall comply with all applicable laws and ordinances, all
     orders and decrees of court and all requirements of other governmental
     authority, and shall not directly or indirectly make any use of the
     Premises which may thereby be prohibited or be dangerous to person or
     property or which may jeopardize any insurance coverage, or may increase
     the cost of insurance or require additional insurance coverage.

     21.  NONWAIVER.  No waiver of any condition expressed in this lease shall
be implied by any neglect of Landlord to enforce any remedy on account of the
violation of such condition whether or not such violation be continued or
repeated subsequently, and no express waiver shall affect any condition other
than the one specified in such waiver and that one only for the time and in the
manner specifically stated. Without limiting the provisions of Section 8, it is
agreed that no receipt of moneys by Landlord from Tenant after the termination
in any way of the Term or of Tenant's right of possession hereunder or after the
giving of any notice shall reinstate, continue or extend the Term or affect any
notice given to Tenant prior to the receipt of such moneys. It is also agreed
that after the service of notice or the commencement of a suit or after final
judgment for possession of the Premises, Landlord may receive and collect any
moneys due, and the payment of said moneys shall not waive or affect said
notice, suit or judgment.

     22.  ESTOPPEL CERTIFICATE.  The Tenant agrees that from time to time upon
not less than ten (10) days prior request by Landlord, or the holder of any
Mortgage or any ground lessor, the Tenant (or any permitted assignee, subtenant,
licensee, concessionaire or other occupant of the Premises claiming by, through
or under Tenant) will deliver to Landlord or to the holder of any Mortgage or
ground lessor, a statement in writing signed by Tenant certifying (a) that this
lease is unmodified and in full force and effect (or if there have been
modifications, that this lease as modified is in full force and effect and 
identifying the modifications); (b) the date upon which Tenant began taking 
Rent, the dates to which the Rent and other charges have been paid and the 
dates upon which the Term commenced and shall end; (c) that the Landlord is 
not in default under any provision of this lease, or, if in default, the 
nature thereof in detail; (d) that the Premises have been completed in 
accordance with the terms hereof and Tenant is in occupancy and paying Rent 
on a current basis with no rental offsets or claims; (e) that there has been 
no prepayment of Rent other than that provided for in this lease; (f) that 
there are no actions, whether voluntary or otherwise, pending against Tenant 
under the bankruptcy laws of the United States or any State thereof, and (g) 
such other matters as may be required by the Landlord, holder of any 
Mortgage, or ground lessor.

                                       15

     23.  TENANT-CORPORATION OR PARTNERSHIP. In case Tenant is a corporation,
Tenant (a) represents and warrants that this lease has been duly authorized,
executed and delivered by and on behalf of the Tenant and constitutes the valid
and binding agreement of the Tenant in accordance with the terms hereof and (b)
if Landlord so requests, it shall deliver to Landlord or its agent, concurrently
with the delivery of this lease executed by Tenant, certified resolutions of the
board of directors (and shareholders, if required) authorizing Tenant's
execution and delivery of this lease and the performance of Tenant's obligations
hereunder.

     24.  REAL ESTATE BROKERS. Tenant represents that Tenant has directly dealt
with and only with Stein & Co. Real Estate Services (Tenant's Agent) and Baird &
Warner (Landlord's Agent) (whose commission, if any, shall be paid by Landlord
pursuant to separate agreement) as broker in connection with this lease and
agrees to indemnify and hold Landlord harmless from all damages, liability and
expense (including reasonable attorneys' fees) arising from any claims or
demands of any other broker or brokers of finders (for any commission alleged to
be due such broker or brokers or finders in connection with its participating
with Tenant in the negotiation of this lease. Tenant shall deal with no other
broker in connection with any assignment, subletting or transfer of the rights
of Tenant hereunder without the prior consent of Landlord thereto. In addition,
Tenant shall not without the prior approval of Landlord thereto canvass or
solicit lessees in the Building or any building now or hereafter constructed
in the Center with respect to the potential assignment, subletting or transfer
of this lease.

     25.  NOTICES.  In every instance where it shall be necessary or desirable
for Landlord to serve any notice or demand upon Tenant, it shall be sufficient
(a) to deliver or cause to be delivered to Tenant or its agent a written or
printed copy of such notice or demand, or (b) to send a written or printed copy
of such notice or demand by United States registered or certified mail, postage
prepaid, addressed to Tenant at the Premises, in which event the notice or
demand shall be deemed to have been served at the time the same was posted. Any
such notice or demand to be given by Tenant to Landlord shall, until further
notice, be served personally or sent by United States registered or certified
mail, postage prepaid, to c/o M & J Wilkow Management Corporation, 180 North
Michigan Avenue, Suite 2000, Chicago, Illinois 60601 and a copy to the office
of the Building. Mailed communications to Landlord shall be deemed to have been
served at the time the same was posted.

     26.  MISCELLANEOUS.

          (a)  Each provision of this lease shall extend to and shall bind and
     inure to the benefit not only of Landlord and Tenant, but also their
     respective heirs, legal representatives, successors and assigns, but this
     provision shall not operate to permit any transfer, assignment, mortgage,
     encumbrance, lien, charge, or subletting contrary to the provisions of
     Section 12.

          (b)  All of the agreements of Landlord and Tenant with respect to the
     Premises are contained in this lease; and no modification, waiver or
     amendment of this lease or of any of its conditions or provisions shall be
     binding upon Landlord unless in writing signed by Landlord.

          (c)  Submission of this instrument for examination shall not
     constitute a reservation of or option for the Premises or in any manner
     bind Landlord and no lease or obligation on Landlord shall arise until this
     instrument is signed and delivered by Landlord and Tenant; provided,
     however, the execution and delivery by Tenant of this lease to Landlord or
     the agent of Landlord's beneficiary shall constitute an irrevocable offer
     by Tenant to lease the Premises on the terms and conditions herein
     contained, which offer may not be revoked for thirty (30) days after such
     delivery.

          (d)  The word "Tenant" whenever used herein shall be construed to mean
     Tenants or any one or more of them in all cases where there is more than
     one Tenant; and the necessary grammatical changes required to make the
     provisions hereof apply either to corporations or other organizations,
     partnerships or other entities, or individuals, shall in all cases be
     assumed as though in each case fully expressed.

          (e)  Clauses, plats, and riders, if any, signed or initialed by
     Landlord and Tenant and endorsed on or affixed to this lease are part
     hereof and in the event of variation or discrepancy, the duplicate original
     hereof, including such clauses, plats and riders, if any, held by Landlord
     shall control.

          (f)  The headings of Sections are for convenience only and do not
     limit, expand or construe the contents of the Sections.

          (g)  The Landlord's title is and always shall be paramount to the
     title of Tenant, and nothing in this lease contained shall empower Tenant
     to do any act which can, shall or may encumber the title of Landlord or
     enable Tenant to deny the title of Landlord.

                                       16

          (h)  Time is of the essence of this lease and of each and all
     provisions thereof.

          (i)  All amounts (including, without limitation, Base Rent and Rent
     Adjustment) owed by Tenant to Landlord pursuant to any provision of this
     lease shall bear interest at the annual rate of one percent (1%) in excess
     of prime rate then in effect at Continental Illinois National Bank and
     Trust Company of Chicago from the date due until paid, unless a lesser rate
     shall then be the maximum rate permissible by law with respect thereto, in
     which event said lesser rate shall be charged.

          (j)  The invalidity of any provision of this lease shall not impair or
     affect in any manner the validity, enforceability or effect of the rest of
     this lease.

          (k)  All understandings and agreements, oral or written, heretofore
     made between the parties hereto are merged in this lease, which alone fully
     and completely expresses the agreement between Landlord (and its
     beneficiary and their agents) and Tenant.

          (l)  In the event that this lease shall be executed by more than one
     person, firm, corporation or entity as Tenant, the obligations of said
     persons, firms, corporations or entities shall be joint and several.

     27.  DELIVERY OF POSSESSION.  If the Landlord shall be unable to give
possession of the Premises on the date of the commencement of the Term by reason
of any of the following: (i) the Landlord has not completed its preparation of
Premises; (ii) the Landlord is unable to give possession of the Premises by
reason of the holding over or retention of possession of any tenant, tenants or
occupants, or (iii) for any other reason. Landlord shall not be subject to any
liability for failure to give possession. Notwithstanding any provision in 
this Section 27 to the contrary, if the Premises are not delivered on or 
before February 21, 1991, Tenant may provide Landlord with a ten (10) day 
prior notice of its intent to charge Landlord a $200.00 a day penalty for 
non-delivery of the Premises and if the Premises are not delivered within 
said ten (10) day period then such $200.00 a day penalty shall thereupon 
become effective and Landlord shall pay a penalty to Tenant equal to $200.00 
per day for each day after such ten (10) day period until the date said 
Premises are delivered to Tenant. The foregoing right is subject to the 
provisions of paragraph 4 of the Workletter attached to this Lease and should 
delivery of possession be delayed as a result of actions or circumstances 
described in subparagraphs 4(a) - 4(f) then such right of termination shall 
be null and void. Under such circumstances the Rent reserved and covenanted 
to be paid herein shall not commence until the Premises are available for 
occupancy, and no such failure to give possession on the date of commencement 
of the Term shall affect the validity of this lease or the obligations of the 
Tenant hereunder, nor shall the same be construed to extend the Term.

     The Premises shall not be deemed to be unready or unavailable for Tenant's
occupancy or incomplete if only minor or insubstantial details of construction,
decoration or mechanical adjustments which do not prevent Tenant's use of the
Premises for its intended purposes remain to be done in the Premises or any part
thereof, or if the delay in the availability of the Premises for occupancy shall
be due to special work, changes, alterations or additions required or made by
Tenant in the layout or finish of the Premises or any part thereof, or shall be
caused in whole or in part by Tenant through the delay of Tenant in submitting
plans, supplying information, approving plans, specifications or estimates,
giving authorizations or otherwise, or shall be caused in whole or in part by
delay or default on the part of Tenant or its subtenants.

     28.  SECURITY DEPOSIT.  Tenant has deposited with Landlord the sum of
thirteen thousand and 00/100 dollars ($13,000.00) as security for the full and
faithful performance of every provision of this lease to be performed by Tenant.
If Tenant defaults with respect to any provision of this lease, including but
not limited to the provisions relating to the payment of Rent, Landlord may use,
apply or retain all or any part of this security deposit for the payment of any
Rent and any other sum in default, or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default or
to compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of said deposit is to be used or
applied, Tenant shall, within five (5) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the security
deposit to its original amount and Tenant's failure to do so shall be a material
breach of this lease. Landlord shall not be required to keep this security
deposit separate from its general funds and Tenant shall not be entitled to
interest on such deposit. If Tenant shall fully and faithfully perform every
provision of this lease to be performed by it, the security deposit or any
balance thereof shall be returned to Tenant within twenty (20) days after the
expiration of the lease Term and Tenant's vacation of the Premises.

     Tenant hereby agrees not to look to any mortgagee as mortgagee, mortgagee
in possession, or successor in title to the Building for accountability for any
security deposit required by the Landlord hereunder, unless said sums have
actually been received by said mortgagee as security for the Tenant's
performance of this lease. The Landlord may deliver the funds deposited
hereunder by Tenant to the purchaser of Landlord's interest in the Building, in
the event that such interest is sold, and thereupon Landlord shall be discharged
from any further liability with respect to such security deposit.

     29.  RELOCATION OF TENANT.  Notwithstanding any provision herein to the
contrary Landlord shall exercise this relocation right only in the event such
replacement tenant is leasing in excess of 13,000 square feet of space. At any
time hereafter, Landlord may substitute for the Premises other premises (herein
referred to as "the new premises") provided:

          (a)  the new premises shall be similar to the Premises in area and use
     for Tenant's purposes and shall be located in the Building;

and if Tenant is already in occupancy of the Premises, then in addition:

          (b)  Landlord shall pay the expense of Tenant for moving (inclusive of
     the reasonable cost of replacing business cards & stationary and all other
     reasonable costs incurred by Tenant as a direct result of such relocation)
     from the Premises to the new premises and for improving the new premises so
     that they are substantially similar to the Premises;

                                       17

          (c)  Such move shall be made during evenings, weekends, or otherwise
     so as to incur the least inconvenience to Tenant; and

          (d)  Landlord shall first give Tenant at least thirty (30) days notice
     before making such change. If Landlord shall exercise its right hereunder,
     the new premises shall thereafter be deemed for the purposes of this lease
     as the Premises.

     30.  LANDLORD.  The term "Landlord" as used in this lease means only the
owner or owners at the time being of the Building and the Land so that in the
event of any assignment or sale, once or successively, of said Land and
Building, or any assignment of this lease by Landlord, said Landlord named
herein shall be and hereby is entirely freed and relieved of all covenants and
obligations of Landlord hereunder accruing after such sale or assignment, and
Tenant agrees to look solely to such purchaser or assignee with respect thereto.
This lease shall not be affected by any such assignment or sale, and Tenant
agrees to attorn to the purchaser or assignee. Tenant is hereby advised, and
Tenant acknowledges, that the Landlord's interest in the Building and the Land
is presently held by American National Bank and Trust Company of Chicago, not
personally but as Trustee under Trust No. 57661.

     31.  TITLE AND COVENANT AGAINST LIENS.  The Landlord's title is and always
shall be paramount to the title of the Tenant and nothing contained in this
lease shall empower the Tenant to do any act which can, shall or may encumber 
the title of the Landlord. Tenant covenants and agrees not to suffer or 
permit any lien of mechanics or materialmen to be placed upon or against the 
Land, the Building, or the Premises or against the Tenant's leasehold 
interest in the Premises and, in case of any such lien attaching, to 
immediately pay and remove same or post a security bond on Landlord's behalf 
in order to contest the validity of the lien in such amount as is reasonably 
required by the Landlord but no larger than twice the amount of the lien. 
Tenant has no authority or power to cause or permit any lien or encumbrance 
of any kind whatsoever, whether created by act of Tenant, operation of law or 
otherwise, to attach to or be placed upon the Land, Building or Premises, and 
any and all liens and encumbrances created by Tenant shall attach only to 
Tenant's interest in the Premises. If any such liens so attach and Tenant 
fails to pay and remove same within ten (10) days after the date any such 
lien attaches, Landlord, at its election, may pay and satisfy the same 
without any obligation to investigate or determine the validity or merits of 
any such lien and encumbrance and in such event the sums so paid by Landlord, 
with interest from the date of payment at the rate set forth in Section 25(i) 
hereof for amounts owed Landlord by Tenant, shall be deemed to be additional 
rent due and payable by Tenant at once without notice or demand.

     32.  It is expressly understood and agreed that nothing in this Lease shall
be construed as creating any liability against Landlord, its beneficiaries or
agents or their successors and assigns, personally, and in particular without
limiting the generality of the foregoing, there shall be no personal liability
to pay any indebtedness accruing hereunder or to perform any covenant, either
express or implied, herein contained, and that all personal liability of
Landlord, its beneficiaries or agents or their successors and assigns, of every
sort, if any, is hereby expressly waived by Tenant, and that so far as Landlord,
its beneficiaries or agents or their successors and assigns is concerned Tenant
shall look solely to the equity in the Building and the rents, issues and
profits therefrom for the satisfaction of the remedies of the Tenant in the
event of a breach by the Landlord. It is mutually agreed that this clause is and
shall be considered an integral part of the Lease. Such exculpation of personal
liability is absolute and without any exception whatsoever.

                                       18

     IN WITNESS WHEREOF, the parties have caused this lease to be executed on
the date first above written.

                         M & J WILKOW MANAGEMENT CORPORATION,
                         as agent for the beneficiary of the
                         AMERICAN NATIONAL BANK AND TRUST
                         COMPANY OF CHICAGO, not personally
                         but as Trustee aforesaid

                         By /s/ [illegible]
                            -------------------------------------

                         Stericycle, Inc.

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

                         By /s/ Vernon J. Nagel
                            -------------------------------------
                            Name:  VERNON J. NAGEL
                            Title:  V.P.

ATTEST:

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

                                       19

                                      RIDER

     This Rider dated this 26th day of December, 1991 is to the Lease by and
between M & J Wilkow Management Corporation, as agent for the beneficiary of
American National Bank and Trust Company of Chicago, not personally, but as
Trustee under Trust No. 57661 dated May 15, 1983 ("Landlord") and Stericycle,
Inc., a Delaware corporation ("Tenant").

     R-1. EXTENSION OPTION.

          (a)  The Landlord hereby grants to the Tenant an option to extend the
Term of this Lease ("Extension Option") for one (1) consecutive period of five
(5) years commencing immediately after the expiration of the Term on the same
terms, covenants and conditions contained in this Lease, except as provided
herein. Tenant shall exercise the Extension Option on or before July 1, 1998,
time being of the essence.

          (b)  Tenant may only exercise its Extension Option, and an exercise
thereof shall only be effective, if at the time of Tenant's exercise and on the
commencement date of the extension period: (i) the Lease is in full force and
effect; (ii) there is no material Default by Tenant under any terms, covenants
or conditions of the Lease and (iii) Tenant has not assigned the Lease or
subleased the Premises. If the Extension Option is not exercised by July 1,
1998, the Extension Option shall thereupon expire and be of no further force or
effect.

          (c)  Such Extension Option can only be exercised in respect of the
entire Premises and Tenant shall have no right to exercise the Extension Option
as to less than the entire Premises.

          (d)  The Base Rent payable during the extension option period with
respect to the Premises shall be equal to the then "current market rental rate"
(hereinafter defined) per square foot of rentable area, for lease terms of five
(5) year duration commencing on or about the commencement date of the extension
option period, multiplied by the rentable area of the Premises. For purposes of
this Paragraph R-1, the "current market rental rate" shall be the then
prevailing rental rate as determined in good faith by Landlord, for improved
space in the Building comparable to the Premises in area and location (to the
extent that quoted rental rates in the Building vary with regard to location).
The prevailing rental rate shall include the prevailing provisions for periodic
adjustments to Base Rent and in respect of Taxes and Expenses. In no event,
however, shall the Base Rent be less than the adjusted Base Rent payable for the
last year of the original Term.

          (e)  No additional options to extend the Term shall be construed to be
created by the Extension Option or the exercise thereof and no other
inapplicable provisions such as, but not limited to, any obligation to construct
improvements to make any contribution toward the construction of improvements
shall be construed to govern the extension period.

          (f)  Prior to the commencement date of the extension period at
Landlord's request Tenant shall enter into a written supplement to the Lease
confirming the terms, covenants and conditions applicable to that extension
period as determined in accordance herewith, with such revisions to the rental
provisions of this Lease as may be necessary to conform such provisions to the
rental provisions applicable to the extension period.

     R-2.  RIGHT OF FIRST OPPORTUNITY.

     (a)  After August 1, 1992, Landlord shall not enter into any lease of the
adjacent space to the Premises, commonly known as Suite 400 consisting of 5,765
rentable square feet ("First Opportunity Space") unless (i) Landlord shall have
first given Tenant written notice ("First Opportunity Notice") describing the
First Opportunity Space and setting forth, INTER ALIA, a term, net annual rent
for such term, and any work to be performed by Landlord in the space and/or any
improvement allowance, and (ii) Tenant does not by written notice to Landlord
given not later than five (5) business days after the date of Landlord's First
Opportunity Notice elect to lease the First Opportunity Space on the terms
outlined in the First Opportunity Notice. If Tenant does not so elect to lease
the First Opportunity Space, then Landlord at any time within one hundred eighty
(180) days after the expiration of Tenant's five (5) business day period, may
lease the First Opportunity

Space to any third party upon terms not more favorable then as set forth in
Landlord's First Opportunity Notice, and Tenant agrees upon request from
Landlord to confirm in writing its waiver of its right of first opportunity as
to the First Opportunity Space. If Landlord does not lease such space on such
basis within said one hundred eighty (180) day period, then Landlord may not
lease such space (if this Section R-2 still applies) unless Landlord again gives
notice to Tenant under this Section R-2. Tenant's right under this Lease shall
not apply to space leased to a tenant pursuant to an expansion, renewal,
extension, or other right (which expansion, renewal, extension, or other right
shall be referred to as an "Excluded Right") contained in such tenant's lease,
but only if the Excluded Right was in a tenant lease executed prior to the date
hereof or in a Landlord's First Opportunity Notice to Tenant with respect to
such lease given under this Section R-2.

     (b)  If Tenant exercises its right to lease the First Opportunity Space in
the manner therein provided, then, not later than forty-five (45) days after the
date of Tenant's notice of exercise, Landlord and Tenant shall enter into an
amendment to this Lease incorporating such First Opportunity Space into the
Premises for, INTER ALIA, the term, net annual rent and the improvements to be
performed by Landlord and/or improvement allowance. In addition, Tenant's
Proportionate Share shall be recalculated on the basis of increased Rentable
Area of the Premises. For the Adjustment year which includes the commencement
date relating to such space, the Tax and Expense Adjustments shall be computed
separately so that Tenant shall be obligated to pay only a pro rata share of the
Adjustments allocable to such space. For subsequent Adjustment Years, the Tax
and Expense Adjustments shall be calculated for the Premises as a whole on the
basis of the increased Rentable Area of the Premises including such space. It is
understood that if the term for any First Opportunity Space extends or would
extend beyond the Term, then the provisions of this Lease shall remain in effect
with respect to such First Opportunity Space for such term even though the Term
expires by lapse of time with respect to other portions of the Premises.

     R-3.  EXPANSION OF PREMISES/CANCELLATION OPTION.

     Tenant shall have the one time right to advise Landlord in writing (the
"Tenant Expansion Notice") with respect to and by no later than each "Applicable
Outside Date" (as hereinafter defined) that it requires "Expansion Space" (as
hereinafter defined) by the "Corresponding Effective Date" (as hereinafter
defined). If Landlord is able to accommodate Tenant's need for Expansion Space,
the Expansion Space will be leased to Tenant on an "as is" basis, it being
expressly understood that Landlord shall have no responsibility or obligation to
perform any work with respect to the shell, floor, walls, ceilings, light
fixtures, HVAC system, utility systems or otherwise. If Landlord fails to notify
the Tenant within thirty (30) days of its receipt of any such Tenant Expansion
Notice that Landlord will be able to accommodate Tenant's request, Tenant shall
have the option, exercisable within sixty (60) days of Landlord's receipt of the
Tenant Expansion Notice, to cancel the Lease as of the Corresponding Effective
Date by advising Landlord in writing (the "Cancellation Notice") of its
intention to cancel the Lease and delivering to Landlord an amount equal to the
"Applicable Termination Payment" (as hereinafter defined) concurrently with the
issuance of the Cancellation Notice.

     The capitalized terms used herein shall have the following meanings:

APPLICABLE OUTSIDE            CORRESPONDING EFFECTIVE      APPLICABLE TERMINATION
DATE shall be the first       DATE shall be the first      PAYMENT shall be the unamortized
of the:                       day of the:                  costs of leasing commissions,
                                                           concessions and tenant improvement
                                                           work, plus an amount equal to:
                                                     
28th month                    37th month                   twelve (12) months gross rent
39th month                    48th month                   eight (8) months gross rent
45nd month                    54th month                   two (2) months gross rent

     For the purpose of satisfying Tenant's request for additional space, as
evidenced by the delivery of a Tenant Expansion Notice, "Expansion Space" shall
be space anywhere in the Building which is designated by Landlord and is
comprised in each case of not less than 1,000 square feet and not more than
4,000 square feet.

                                        2

     The Base Rent payable with respect to the Expansion Space shall be equal to
the then "current market rental rate" (hereinafter defined) per square foot of
area, multiplied by the rentable area of the Expansion Space. For purposes of
this Paragraph R-3, the "current market rental rate" shall be the then
prevailing rental rate as determined in good faith by Landlord, for improved
space in the Building comparable to the Expansion Space in area and location (to
the extent that quoted rental rates in the Building vary with regard to
location). The prevailing rental rate shall include the prevailing provisions
for periodic adjustments to Base Rent and in respect of Taxes and Expenses. In
no event, however, shall the Base Rent be less than the Base Rent applicable to
the remainder of the Premises.

     R-4.  CONSTRUCTION ALLOWANCE.  For the terms and conditions relating to the
construction allowance, please refer to the Workletter attached to this Lease.

     IN WITNESS WHEREOF, the parties hereto have executed this Rider as of the
date first above written.

                         LANDLORD:

                         M & J WILKOW MANAGEMENT CORPORATION,
                         as agent for the beneficiary of American National Bank
                         and Trust Company of Chicago, not personally but as
                         Trustee as aforesaid

                         By: /s/ Marc R. Wilkow
                             -------------------------------------------
                                  Marc R. Wilkow
                                  Executive Vice President

                         TENANT:

                         Stericycle, Inc.,
                         a Delaware corporation

                         By: /s/ Vernon J. Nagel
                             -------------------------------------------
                             Name:  Vernon J. Nagel
                             Title:  V.P.

                                        3

EXHIBIT "A"
Floor Plan of Premises

[GRAPHICS]

                                      EXHIBIT B

                                RULES AND REGULATIONS

    (1)  ACCESS TO BUILDING:  On Saturdays (except from 8:00 A.M. to 1:00
P.M.), Sundays and legal holidays and on other days between the hours of 6:00
P.M. and 8:00 A.M. the following day, access to the building and/or to the
halls, corridors, elevators or stairways in the building may be restricted and
access shall be gained by use of a key or security card to the outside doors of
the building.  Landlord may from time to time establish security controls for
the purpose of regulating access to the building.  The Tenant shall abide by all
such security regulations so established.

    (2)  PROTECTING PREMISES:  Before leaving the Premises unattended, Tenant
shall close and securely lock all doors or other means of entry to the Premises
and shut off all utilities in the Premises.

    (3)  BUILDING TENANT DIRECTORIES:  The directories of the Building shall be
used exclusively for the display of the name and location of the tenants only
and will be provided at the expense of the Landlord.  Any additional names
requested by Tenant to be displayed in the directories must be approved by the
Landlord, and, if approved, will be provided at the sole expense of the Tenant.

    (4)  LARGE ARTICLES:  Furniture, freight and other large or heavy articles
may be brought into the Building (a) only after Tenant has contacted Landlord
for prior approval, (b) at times and in the manner designated by Landlord, and
(c) always at the Tenant's sole responsibility.  All damage done to the Building
by moving or maintaining such furniture, freight or articles shall be repaired
at the expense of Tenant.  All furniture, equipment, cartons and similar
articles desired to be removed from the Premises or the Building shall be listed
by the Tenant with the Landlord and a removal permit therefor shall first be
obtained from the Landlord.

    (5)  SIGNS:  Tenant shall not paint, display, inscribe, maintain or affix
any sign, placard, picture, advertisement, name, notice lettering or direction
on any part of the outside or inside of the Building, or on any part of the
inside of the Premises which can be seen from the outside of the Premises,
without the written consent of Landlord, and then only such name or names or
matter and in such color, size, style, character and material as may be first
approved by Landlord in writing.  Landlord reserves the right to remove at
Tenant's expense all matter other than that above provided for without notice to
Tenant.

    (6)  ADVERTISING:   Tenant shall not in any manner use the name of the
Building for any purpose or use any picture or likeness of the Building, or the
name "Lake Cook Office Centre" in any letterheads, envelopes, circulars,
notices, advertisements, containers or wrapping material without Landlord's
express consent in writing.

    (7)  COMPLIANCE WITH LAWS:  Tenant shall comply with all applicable laws,
ordinances, governmental order or regulations and applicable orders or
directions from any public office or body having jurisdiction. with respect to
the Premises and the use of occupancy thereof.  Tenant shall not make or permit
any use of the Premises which directly or indirectly if forbidden by law,
ordinance, governmental regulation or order or direction of applicable public
authority, or which may be dangerous to person or property.

    (8)  HAZARDOUS MATERIALS:  Tenant shall not use or permit to be brought
into the Premises or the Building any flammable oils or fluids, or any other
explosive or other articles deemed hazardous to persons or property, or do or
permit to be done anything in or upon the Premises, or bring or keep anything
therein, which shall not comply with all rules, orders, regulations or
requirements or any organization, bureau, department or body having jurisdiction
with respect thereto (and Tenant shall at all times comply with all such rules,
orders, regulations or requirements), or which shall increase the rate of
insurance on the Building, its appurtenances, contents or operation.

    (9)  DEFACING PREMISES AND OVERLOADING:  Tenant shall not place anything
or allow anything to be placed in the Premises near the glass of any door,
partition, wall or window which may be unsightly from outside the Premises, and
Tenant shall not place or permit to be placed any article of any kind on any
window ledge or on the exterior walls.  Blinds, shades, awnings or other forms
of inside or outside window ventilators or similar devices, shall not be placed
in or about the outside windows in the Premises except to the extent, if any,
that the character, shape, color, material and make thereof is approved by the
Landlord, and Tenant shall not do any painting or decorating in the Premises or
install any floor coverings in the Premises or make, paint, cut or drill into,
drive nails, screws or other fasteners into or in any way deface any part of the
Premises or Building without in each instance containing the prior written
consent of the Landlord.  Tenant shall not overload any floor or part thereof in
the Premises, or any facility in the Building or any public corridors or
elevators therein in connection with bringing in or removing any large or heavy
articles or otherwise in excess of the design loads set forth on page 3 of this
Exhibit 3, and the Landlord may direct and control the location of sales and all
other heavy articles and, if considered necessary by Landlord, require
supplementary supports at the expense of the Tenant of such material and
dimensions as Landlord may deem necessary to properly distribute the weight.

    (10)  OBSTRUCTION OF PUBLIC AREAS:  Tenant shall not take or permit to be
taken in or out of other entrances of the Building, or take or permit on other
elevators, any item normally taken in or out service doors or in or on freight
elevators; and Tenant shall not, whether temporarily, accidentally or otherwise,
allow anything to remain in place or store anything, in, or obstruct in any way,
any sidewalk, court, passageway, entrance, or shipping area corridor or other
tenants entry door.  Tenant shall lend its full cooperation to keep such areas
free from all obstruction and in a clean and sightly condition, and move all
supplies, furniture and equipment as soon as received directly to the Premises,
and shall move all such items and waste (other than waste customarily removed by
Building employees) that are at any time being taken from the Premises directly
to the areas designated for disposal.  All courts, passageways, entrances,
exits, elevators, escalators, stairways, corridors, halls and roofs are not 
for the use of general public and Landlord shall in all cases retain the 
right to control and prevent access thereto by all persons whose presence in 
the judgment of Landlord shall be prejudicial to the safety, character, 
reputation and interests of the Building and its tenants provided, however, 
that nothing herein contained shall be construed to prevent such access to 
persons with whom Tenant deals within the normal course of Tenant's business 
unless such persons are engaged in illegal activities.  No Tenant and no 
employee or invitee of Tenant shall enter into areas reserved for the 
exclusive use of Landlord, its employees or invitees.

    (11)  ADDITIONAL LOCKS:  Tenant shall not attach or permit to be attached
additional locks or similar devices to any door or window, change existing locks
or the mechanism thereof, or make or permit to be made any keys for any door
other than those provided by Landlord.  If more than two keys for one lock 
are desired, Landlord will provide them upon payment therefor by Tenant. Upon 
termination of this lease or of the Tenant's right to possession, the Tenant 
shall surrender all keys to the Premises.

    (12)  COMMUNICATION OR UTILITY CONNECTIONS:  If Tenant desires signal,
communication, alarm or other utility or similar service connections installed
or changed, Tenant shall not install or change the same without the approval of
Landlord, and then only under direction of Landlord and at Tenant's expense. 
Tenant shall not install in the Premises any equipment which requires a
substantial amount of electrical current without the advance written consent 
of the Landlord, and the Tenant shall ascertain from the Landlord the maximum 
amount of load or demand for or use of electrical current which can safely be 
permitted in the Premises, taking into account the capacity of the electric 
wiring in the Building and the Premises and the needs or other tenants of the 
Building, and shall not in any event connect a greater load other than such 
safe capacity.

    (13)  MANAGEMENT OFFICE:  Service requirements of Tenant will be attended
to only upon application at the management office for the Building.  Employees
of Landlord shall not perform any work or do anything outside of their duties
unless under special instructions from the Landlord.

    (14)  OUTSIDE SERVICES:  No Tenant shall obtain for use upon the premises
ice, drinking water, towel, messenger deliveries, newspapers and other similar
services on the Premises, except from persons authorized by the Landlord and at
the hours and under certain regulations fixed by the Landlord.

    (15)  TOILET ROOMS:  The toilet rooms, urinals, wash bowls and other
apparatus shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose employees or
invitees, shall have caused.

    (16)  INTOXICATION:  Landlord reserves the right to exclude or expel from
the Building any person who, in the judgment of Landlord, is intoxicated or
under the influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the rules and regulations of the Building.

    (17)  VENDING MACHINES:  No vending machines of any description shall be
installed, maintained or operated without the written consent of Landlord.

    (18)  NUISANCES AND CERTAIN OTHER PROHIBITED USES:  Tenant shall not (i)
install or operate any internal combustion engine, boiler, machinery,
refrigerating, heating or air conditioning apparatus in or about the Premises,
(ii) carry on any business in or about the Premises or Building or engage in any
transactions involving any article, thing or service except those ordinarily
embraced within the permitted use of the Premises specified in Section 3, (iv)
use the Premises for housing, lodging or sleeping purposes, (vi) place any radio
or television antennae on the roof or on or in any part of the inside or outside
of the Building other than the inside of the Premises, (vii) operate or permit
to be operated any musical sound producing instrument or device inside or
outside the Premises which may be heard outside the premises, (viii) use any
illumination or power for the operation of any equipment or device other than
electricity, (ix) operate any electrical device from which may emanate
electrical waves which may interfere with or impair radio or television
broadcasting or reception from or in the Building or elsewhere, (x) bring or
permit to be in the Building any bicycle or other vehicle, or dog (except in the
company of a blind person) or other animal or bird, (xi) make or permit any
objectionable noise or odor to emanate from the Premises, (xii) disturb, solicit
or canvass any occupant of the Building, (xiii) do anything in or about the
Premises tending to create or maintain a nuisance or do any act tending to
injure the reputation of the Building, or (xiv) throw or permit to be thrown or
dropped any article from any window or other opening in the Building.

                                          2

    (19)  ROOM TO ROOM CANVASS:  The Tenant shall not make any room-to-room
canvass to solicit business from other tenants or occupants of the Building and
shall not exhibit, sell or offer to sell, use, rent or exchange any products or
services in or from the Premises unless ordinarily embraced within the Tenant's
use of the Premises specified herein.

    (20)  WASTE:  The Tenant shall not waste electricity, water, heat or air
conditioning and agrees to cooperate fully with Landlord to assure the most
effective and energy efficient operation of the Building's heating and air
conditioning, and shall not allow the adjustment (except by Landlord's
authorized building personnel) of any controls.  The Tenant shall keep corridor
doors closed and shall not open any windows, except that if the air circulation
shall not be in operation, windows which are openable may be opened with
Landlord's consent.

    (21)  KEYS:  The Tenant, upon termination of its tenancy, shall deliver to
the Landlord all the keys of offices, rooms and toilet rooms which have been
furnished the Tenant or which the Tenant shall have had made, and in the event
of loss of any keys so furnished shall pay Landlord therefor.

    (22)  REMOVAL OF ITEMS:  Prior to removing furniture, equipment or other
items from the Building, Tenant must submit a written list of such items and
obtain approval thereof from the management office of the Building.

    (23)  PARKING AREAS:  Tenant shall observe all parking area regulations and
restrictions, directional signs, speed limits and security devices and shall not
park in any area or spaces reserved for specific Tenants.

         The structural design live loads for the Building are as follows:

         1.  Ground Floor - 100 pounds per square foot.
         2.  Typical office floor - 50 pounds per square foot plus 20 pounds
               per square foot for partitions.
         3.  Elevator lobbies - 100 pounds per square foot.

    (24)  LOITERING:  Tenant shall not allow its employees to loiter in the
common areas of the Building.

                                          3

                                     EXHIBIT "C"

                                 W O R K L E T T E R

    This is the Workletter referred to in the lease to which Exhibit "C" is
attached (the "Lease") wherein the Tenant is leasing certain office space (the
"Premises") from the Landlord at the property known as 1419 Lake Cook Road and
located in Lake Cook Office Centre IV, Deerfield, Illinois (the "Building"). 
Capitalized terms used herein, unless otherwise defined in this Workletter,
shall have the respective meaning assigned to them in the Lease.

    1.   Work.  Landlord, at Landlord's sole cost and expense, shall provide
the construction material, hardware and equipment of the type and in the
quantities listed in Attachment "A" hereto as "Building Standards" and the labor
to construct and install such Building Standard items as improvements (the
"Work") to the Premises in accordance with a Construction Plan to be prepared by
Landlord in a manner consistent with the space plan attached hereto as
Attachment "B".  Landlord shall cause the Construction Plan to be prepared as
soon as practicable following the execution of this Lease and shall promptly
thereafter deliver a copy of the Construction Plan to Tenant.  Tenant shall have
three (3) business days to approve the Construction Plan as presented and shall
evidence its approval by signing off on a copy of the Construction Plan and
returning same to Landlord.  If the Construction Plan is not approved as
aforesaid by Tenant, Landlord shall have the right to terminate this Lease by
written notice to Tenant whereupon this Lease shall become null and void and of
no further force and effect.  Once the Construction Plan has been approved by
Tenant in the event of a conflict between the Construction Plan and this
Workletter, the Construction Plan shall govern and control.  Subject to the
provisions of this Workletter, Landlord shall proceed diligently to cause the
Work to be substantially completed in accordance with the terms and conditions
of the Lease.  Notwithstanding any provision herein to the contrary, in the
event Landlord's construction costs relating to the Work exceed fifty-four
thousand four hundred twenty and 00/100 ($54,420.00) dollars Tenant shall pay 
Landlord for such excess amount and in the event Landlord's construction 
costs relating to the Work are less than fifty-four thousand four hundred 
twenty and 00/100 ($54,420.00) dollars the Tenant will receive a rent abatement
to the extent of such deficiency.

    Landlord agrees to pay all fees in connection with the Construction Plan
(the "Plans").

    2.   Additional Work.  If Tenant wishes Landlord, prior to the commencement
of the Term, to employ labor and to use items of material, hardware, equipment
or decorating that exceed Landlord's obligation hereunder as limited by the term
"Work" (such excess

items are herein referred to collectively as "Additional Work"), Tenant 
shall, at its expense, cause drawings and specifications ("Additional Plans") 
for the Additional Work to be completed and submit such Additional Plans to 
Landlord for its approval.  Landlord shall not withhold its approval 
unreasonably if the Additional Work does not affect the structure or safety 
or the exterior appearance of the Building or the heating, ventilating, air 
conditioning, plumbing or other mechanical systems of the Building.  If 
Landlord approves the Additional Work as reflected in the Additional Plans, 
Landlord shall obtain and submit to Tenant estimates of the cost of the 
Additional Work.  Tenant shall approve such cost within five (5) days after 
Landlord submits such estimates to Tenant or Tenant shall be deemed to have 
abandoned its request for such Additional Work.  The cost of such Additional 
Work shall include the direct costs thereof, plus general conditions 
(including rubbish removal, hoisting, permits, field supervision and the 
like) plus the contractor's charges for overhead and fees, together with 
fifteen percent (15%) of all such costs for overhead and construction 
management services, which fee shall be paid to Landlord, or its agent, as 
Landlord shall direct.  Landlord shall not be obligated to proceed with such 
Additional Work until the cost set forth in such estimate is paid by Tenant 
to Landlord for deposit in Landlord's trust account for payment of the 
Additional Work as work progresses.  Any deficit shall be paid to Landlord 
upon completion of such Additional Work and within seven (7) days after 
Landlord shall have furnished Tenant with bills for the complete costs 
thereof.

    Any Additional Work or alterations to the Premises desired by Tenant after
the commencement of the Term shall be subject to the provisions of Section 11 of
the Lease.

    3.   Substitutions and Credits.  Unless already contracted for, 
prepurchased or stocked by Landlord, Tenant may select other available items 
in place of Building Standard items referred to in Attachment A hereof, 
provided that such selection is requested in writing and made on the Plans 
when they are delivered to Landlord as aforesaid and that such other 
materials constitute a "substitution in kind" as hereinafter described.  In 
no event shall Tenant be entitled or permitted to substitute for Building 
Standard any portion of the ceiling and lighting system.  Tenant agrees to 
pay Landlord within fifteen days after receipt of bills therefor (which bills 
may be rendered by Landlord from time to time during the course of the Work 
or at any time thereafter) an amount equal to the excess of the Landlord's 
cost of acquiring and installing such substituted items over the cost which 
Landlord would have incurred in acquiring and installing the Building 
Standard items that were replaced thereby, plus 20% of such costs for 
Landlord's overhead.  Landlord's bill for such costs (so long as the amount 
of such bill is not arbitrarily determined) shall be final and binding upon 
Tenant.  No credit shall be granted to Tenant for the omission of Building 
Standard items where no substitution on kind is made.  Such credit shall be 
granted only to the extent of substitution in kind.  For example, an interior 
door credit may

be applied only against the cost of another interior door and an electrical
outlet credit may not be applied against the cost of an interior door.  The
amount of the credits for substituted items shall be determined by Landlord and
furnished to Tenant from time to time.

    4.   Delays in Tenant Work.  Notwithstanding the date provided in the Lease
for the commencement of the Term thereof and the provisions of Section 27 of the
Lease to the contrary, Tenant's obligations to pay Rent thereunder shall not
commence until Landlord shall have substantially completed all Work to be
performed by Landlord, as set forth in Paragraph 1 hereof; provided, however, if
Landlord shall be delayed in substantially completing the work for any reason
set forth in the following subparagraphs (a) through (f) of this Paragraph 4,
then the Term of the Lease shall commence on the date otherwise provided therein
and the payment of Rent thereunder shall not be affected or deferred on account
of such delay:

    (a)  Tenant's failure to furnish any information required for the
preparation of the Plans as and when requested by Landlord; or

    (b)  Any reason relating to the request by Tenant for, or the completion by
landlord of, the Additional Work;

    (c)  Tenant's changes in the work or the Plans after initial approval by
Landlord and Tenant (notwithstanding Landlord's further approval of any such
changes);

    (d)  Any other act, omission or delay by Tenant, its agencies, contractors,
interior space planner (due to actions or inactions of Tenant) or persons
employed by any of such persons delaying the substantial completion of the Work,
including actions by or on behalf of Tenant pursuant to Paragraph 5 hereof;

    (e)  Tenant's request for materials, finishes or installations other than
or in substitution for the Building Standard items as listed in Attachment A
hereto; or

    (f)  Any matter set forth in the second paragraph of Section 27 of the
Lease.

    5.   Access by Tenant Prior to Commencement of Term.  Landlord will permit
Tenant and Tenant's agents, suppliers, contractors and workmen to enter the
Premises prior to the commencement of the Term to enable Tenant to do such
things as may be required by Tenant to make the Premises ready for Tenant's
occupancy, provided that Tenant and its agents, contractors, workmen and
suppliers and their activities in the Premises and Building will not interfere
with or delay the completion of the Work or Additional Work to be done by
Landlord and will not interfere with other activities of Landlord or occupants
of the Building.  Landlord shall have the right, on notice of Tenant, to cause
Tenant or any such agent, contractor, workman or supplier to leave the Premises
and the Building if

Landlord determines that any such interference or delay has been or may be
caused.  Tenant agrees that any such entry into the Premises shall be at
Tenant's own risk and Landlord shall not be liable in any way for any injury,
loss or damage which may occur to any of Tenant's property or Tenant's
installations made in the Premises and Tenant agrees to protect, defend,
indemnify and save harmless Landlord, its partners and their respective agents
from all liabilities, costs, damages, fees and expenses arising out of or
connected with the activities of Tenant or its agents, contractors, suppliers or
workmen in or about the Premises or Building.  In addition, prior to the initial
entry to the Building or the Premises by Tenant and by each contractor or
subcontractor for Tenant, Tenant shall furnish Landlord with policies of
insurance covering Landlord as an insured party with such coverages and such
amounts as Landlord may then require in order to insure Landlord against
liability for injury or death or damage to property of Landlord or its tenants
by reason of such entry and any activity or work carried on, in or about the
Building or the Premises.

    6.   Miscellaneous.

    (a)  The Work shall be done by Landlord, or its designees, contractors or
subcontractors, in accordance with the terms, conditions and provisions herein
contained.

    (b)  Except as herein expressly set forth or in the Lease, landlord has no
agreement with Tenant and has no obligation to do any other work with respect to
the Premises.  Any other work in the Premises which Tenant may be permitted by
Landlord to perform prior  to commencement of the Term shall be done at Tenant's
sole cost and expense and in accordance with the terms and conditions of the
Lease, including, without limitation, Section 11, the terms and provisions of
Paragraph 5 of this Workletter and such other requirements as Landlord deems
necessary or desirable.  Any additional work or alterations to the Premises
desired by Tenant after the commencement of the Term shall be subject to the
provisions of Section 11 of the Lease.

    (c)  Time is of the essence under this Workletter.

    (d)  Any person signing this Workletter on behalf of the Landlord Tenant
warrants and represents he has authority to do so.

    (e)  This Workletter shall not be deemed applicable to any additional
office space added to the original Premises at any time or from time to time,
whether by any options under the Lease of otherwise, or to any portion of the
original Premises or any additions thereto in the event of a renewal or
extension of the original Term of this Lease, whether by options under the Lease
or otherwise, unless expressly so provided in the Lease or any amendment or
supplement thereto.

    (f)  With respect to any amount owed by Tenant hereunder and not paid when
due or Tenant's failure to perform its obligation hereunder, Landlord shall have
all the rights and remedies granted to Landlord under the Lease for nonpayment
by Tenant of any amounts owed thereunder or failure by Tenant to perform its
obligations thereunder.

                                       LANDLORD:

                                       M & J WILKOW MANAGEMENT CORPORATION,
                                       as Agent for the beneficiary of
                                       American National Bank and Trust
                                       Company of Chicago, not personally
                                       but as Trustee aforesaid

                                       By:  /s/ Marc R. Wilkow
                                          ------------------------------------
                                              Vice President

                                       TENANT:

                                       STERICYCLE, INC.

                                       By:  /s/ Vernon J. Nagel
                                          ------------------------------------
                                       Title:  V.P.
                                             ---------------------------------

Date:     12/23/91
    ------------------------------

                                      WORKLETTER

                                    Attachment "A"
                                     Office Lease
                              LAKE COOK OFFICE CENTER IV
                                 1419 Lake Cook Road
                                 Deerfield, Illinois

         The items listed below are "Building Standard" items which shall be
    supplied and installed at Landlord's expense in the Premises.  As used
    herein, the term "Rentable Area of the Premises" shall have the same
    meaning as set forth in Section 2(a)(vi) of The Lease.

A. DRYWALL PARTITIONS

    1. DEMISING AND CORRIDOR PARTITIONS

        2 1/2" metal studs at 24 inches O.C., one layer of 5/8 inch thick
    gypsum board each side, two inch mineral fibre sound insulation batt; (all
    to underside of concrete deck).

    2. TENANT INTERIOR PARTITIONS

        2 1/2" metal studs at 24 inches O.C., one layer of 5/8 inch thick
    gypsum board each side, all to underside of finished ceiling.

    3. QUANTITY

        Tenant Interior Partitions--One (1) lineal foot per 18 square feet of
    Rentable Area of the Premises.

B. ACOUSTIC TILE CEILINGS

    20" x 60" regressed lay-in acoustic tile in tenant areas; matte white metal
    grid.

C. DOORS AND HARDWARE--(Tenant entry and interior doors)

    1. TENANT INTERIOR DOOR FRAMES

        Metal frame for nominal 3'0" x 8'4" door prefinished.

    2. TENANT INTERIOR DOORS

        Nominal 3'0" x 8'4" solid core wood veneer door prefinished.

    3. TENANT ENTRY & EXIT DOOR & FRAMES

        Nominal 3'0" x 8'4" solid core wood veneer door prefinished with
    prefinished metal 3'0" x 8'4" door frame.

    4. ENTRY & EXIT DOOR HARDWARE

        a. Lockset:

            Polished bronze, lever type

        b. Door Closer:

            Paint to match door frame

        c. Door Butts

            2 pair per leaf--polished bronze to match lockset

        d. Door Stop:

            Floor mounted as required, polished bronze

    5. TENANT INTERIOR DOOR HARDWARE

        a. Passage Set:

            Polished bronze, lever type

        b. Door Stop:

            Floor mounted as required, polished bronze

        c. Door Butts:

            2 pair per leaf--polished bronze

    6. QUANTITY

        a. Tenant Entry & Exit Doors

            Subject to applicable codes and ordinances, one (1) single leaf
        door per tenant space (if total area is less than 2,500 square feet).
        Two (2) single leaf doors per tenant space (if total area is 2,500
        square feet or larger).

        b. Tenant Interior Doors

            One (1) opening per 435 square feet of Rentable Area of the
        Premises.

D. PAINTING AND DECORATING

    Demising, Interior Tenant Walls, Interior Side of Corridor Walls

    One (1) coat flat latex finish over one (1) coat primer, one (1) color per
individual room; two colors in large office areas; color from building
standard chart.

E. CARPET AND FLOOR COVERINGS

    30 ounce nylon cut pile over one-half inch padding, one color selection per
tenant space from Building Standard Color Selection.

F. BASE

    2 1/2" high straight edge vinyl base, for all corridor, tenant, interior,
demising and core walls exposed to tenant rental areas.

G. ELECTRICAL

    1. LIGHTING

        a. Fixtures

            20" x 48" flourescent lay-in fixture with return air troffer, three
        (3) warm white lamps per fixture.

        b. Light Switches

            Bi-level toggle type switch.

        c. Emergency Lighting

            In accordance with code.

        d. Exit Lights

            In accordance with code.

        e. Quantity
            (1) Fixture: One (1) per 103 square feet of Rentable Area of
                the Premises.
            (2) Switches: One (1) per 480 square feet of Rentable Area of
                the Premises.
            (3) Emergency Lighting Wiring: In accordance with code.
            (4) Exit Lights: In accordance with code.

    2. POWER WIRING

        a. Duplex Receptacles

            110 volt standard receptacle on common 20 ampere circuit. (Separate
        circuits provided at additional cost).

        b. Quantity

            One (1) wall mounted duplex receptacle per 240 square feet of
        Rentable Area of the Premises.

    3. TENANT SERVICES

        Individual tenant metering and distribution panels provided by Landlord
    are included in workletter pricing for workletter quantities and loads. 
    Additional quantities and loads causing increased switchgear sizes or
    equipment shall be provided at Tenant's cost.

    4. TELEPHONE

        a. Junction Boxes

            Standard telephone junction boxes with conduit to plenum space to
        tenant's terminal board area.  Cover plates to be furnished and
        installed by telephone installer.

        b. Quantity

            One (1) wall mounted telephone junction box per 300 square feet of
        Rentable Area of the Premises.

                                          2

        c. Empty standard conduit and terminal strip backboards required for
    installation of telephone equipment, interconnection of Building telephone
    closets and connection of Building telephone closets with tenant's
    switchboard and equipment room shall be installed or be performed at
    Tenant's cost.

H. HEATING, VENTILATION AND AIR CONDITIONING

    1. DESCRIPTION

        Tenant air distribution shall be a variable air volume system
    consisting of slot diffusers with diffuser mounted control zones.  The
    maximum size of a perimeter zone shall be 15 feet deep by 60 perimeter
    lineal feet.  The maximum size of an interior zone shall be 1,200 square
    feet.  Control thermostats shall be located at the diffusers in the
    ceiling.  (Wall mounted thermostats available at additional cost).

    2. CRITERIA
        Maintain during the normal heating season, indoor dry bulb temperatures
    not less than 72F minus 2, whenever outdoor temperature is 2F.  Maintain by
    comfort cooling indoor dry bulb temperature of 78F plus 2, and a relative
    humidity not in excess of 50% plus 5 whenever the outside dry bulb is 91F,
    and the wet bulb temperature is 76F.  The foregoing is based upon occupancy
    density of not more than one person per one hundred (100) square feet of
    floor area and a maximum electrical lighting load of two (2) watts per
    square foot of floor area and power load of 0.5 watts per square foot in
    any given area within the Premises.

    3. The cost of all individual tenant's exhaust fans and other particular
tenant requirements above and beyond the building's "typical" H.V.A.C. system
shall be charged to Tenant.

I. WINDOW TREATMENT

    Horizontal, narrow-slat blinds shall be installed by Landlord on all
exterior windows.

J. FIRE PROTECTION SYSTEM

    Sprinkler heads as required by code have been installed on all Tenant
floors and are included in Shell and Core Work.  If existing location is not
compatible with Tenant partition arrangement, costs to move, relocate or add
sprinkler heads will be at Tenant's cost.

                                          3

                                LEASE AGREEMENT
                                    between
                RHODE ISLAND INDUSTRIAL FACILITIES CORPORATION
                                      and
                                STERICYCLE, INC.

                            Dated as of June 1, 1992

                                  $2,030,000
                Rhode Island Industrial Facilities Corporation
                     Industrial Development Revenue Bonds
             (Industrial-Recreational Building Authority Program
                   Stericycle, Inc.  Project - 1992 Series)

                                       This instrument was prepared by:

                                       EDWARDS & ANGELL
                                       2700 Hospital Trust Tower
                                       Providence, Rhode Island 02903
                                       Telephone:  (401) 274-9200

                                LEASE AGREEMENT

     THIS LEASE AGREEMENT (the "Lease") is entered into as of June 1, 1992, 
by and between the RHODE ISLAND INDUSTRIAL FACILITIES CORPORATION (the 
"Issuer"), a public corporation and governmental agency of the State of Rhode 
Island and Providence Plantations (the "State"), and STERICYCLE, INC. (the 
"Obligor"), a corporation duly organized and validly existing under the laws 
of the State of Delaware:

                              W I T N E S S E T H:

     In consideration of the respective representations and agreements herein 
contained, the Issuer and the Obligor do hereby agree, as follows (provided, 
that in the performance of the agreements of the Issuer herein contained, any 
obligation it may thereby incur for the payment of money shall not be a debt 
of the State or any political subdivision thereof and neither the State nor 
any political subdivision thereof shall be liable on such obligation, except 
as contemplated in the Mortgage Insurance Agreements, hereinafter defined, 
and such obligation shall be payable solely out of the Pledged Revenues, 
hereinafter defined):

                                LEASE AGREEMENT

                               TABLE OF CONTENTS

(The Table of Contents for this Lease Agreement is for convenience of 
reference only and is not intended to define, limit or describe the scope or 
intent of any provisions of this Lease Agreement.)

                                                                          PAGE
                                   ARTICLE I

                DEFINITIONS AND CERTAIN RULES OF INTERPRETATION

Section 1.1     Definitions . . . . . . . . . . . . . . . . . . . . . .      2

Section 1.2     Certain Rules of Interpretation . . . . . . . . . . . .     10

                                  ARTICLE II

                                REPRESENTATIONS

Section 2.1     Representations by Issuer . . . . . . . . . . . . . . .     11

Section 2.2     Representations and Covenants of Obligor  . . . . . . .     14

                                  ARTICLE III

                                LEASE OF PROJECT

Section 3.1     Lease of Project  . . . . . . . . . . . . . . . . . . .     19

                                  ARTICLE IV

                   COMMENCEMENT AND COMPLETION OF PROJECT;
                              ISSUANCE OF BONDS

Section 4.1     Agreement to Acquire, Construct and/or
                  Install the Project . . . . . . . . . . . . . . . . .     20

Section 4.2     Agreement to Issue Bonds;
                  Application of Bond Proceeds  . . . . . . . . . . . .     21

Section 4.3     Disbursements from Project Fund . . . . . . . . . . . .     21

Section 4.4     Obligation of Parties to Cooperate in
                  Furnishing Documents to Trustee . . . . . . . . . . .     24

                                                                          PAGE

Section 4.5     Establishment of Completion Date  . . . . . . . . . . .     24

Section 4.6     Obligor Required to Pay Project
                  Costs If Project Fund Insufficient  . . . . . . . . .     25

Section 4.7     Investment of Bond Fund, Project
                  Fund, Rebate Fund and Tax
                  Escrow Fund Moneys  . . . . . . . . . . . . . . . . .     25

Section 4.8     Obligor to Pursue Remedies Against
                  Suppliers, Contractors and
                  Subcontractors and Their Sureties . . . . . . . . . .     25

Section 4.9     Application of Certain Moneys . . . . . . . . . . . . .     26

                                   ARTICLE V

                 EFFECTIVE DATE OF THIS LEASE; DURATION OF
             LEASE TERM; RENTAL PAYMENTS AND ADDITIONAL PAYMENTS

Section 5.1     Effective Date of This Lease;
                  Duration of Lease Term  . . . . . . . . . . . . . . .     27

Section 5.2     Covenant of Quiet Enjoyment . . . . . . . . . . . . . .     27

Section 5.3     Rental Payments . . . . . . . . . . . . . . . . . . . .     27

Section 5.4     Administrative Expenses . . . . . . . . . . . . . . . .     29

Section 5.5     Obligations of Obligor Hereunder
                  Absolute and Unconditional  . . . . . . . . . . . . .     29

Section 5.6     Obligor Consent to Assignment of
                  Lease and Execution of Indenture  . . . . . . . . . .     30

Section 5.7     Obligor's Performance Under Indenture . . . . . . . . .     31

Section 5.8     Rebate Payments . . . . . . . . . . . . . . . . . . . .     31

Section 5.9     Mortgage Insurance Agreements . . . . . . . . . . . . .     31

                                  ARTICLE VI

              MAINTENANCE, MODIFICATION, TAXES AND INSURANCE

Section 6.1     Compliance with Legal and Insurance
                  Requirements  . . . . . . . . . . . . . . . . . . . .     32

                                     -ii-

                                                                          PAGE

Section 6.2     Maintenance and Use of Project  . . . . . . . . . . . .     32

Section 6.3     Additions, Modifications and
                  Improvements  . . . . . . . . . . . . . . . . . . . .     32

Section 6.4     Substitutions and Removals  . . . . . . . . . . . . . .     33

Section 6.5     Payment of Taxes and Other
                  Governmental Charges  . . . . . . . . . . . . . . . .     34

Section 6.6     Mechanics' and Other Liens  . . . . . . . . . . . . . .     35

Section 6.7     Insurance . . . . . . . . . . . . . . . . . . . . . . .     35

Section 6.8     Workers, Compensation Coverage  . . . . . . . . . . . .     37

Section 6.9     Title Insurance . . . . . . . . . . . . . . . . . . . .     37

                                  ARTICLE VII

                     DAMAGE, DESTRUCTION AND CONDEMNATION

Section 7.1     Damage to or Destruction of Project . . . . . . . . . .     38

Section 7.2     Use of Insurance Proceeds . . . . . . . . . . . . . . .     38

Section 7.3     Eminent Domain  . . . . . . . . . . . . . . . . . . . .     39

Section 7.4     Investment and Disbursement of
                  Insurance and Condemnation Proceeds . . . . . . . . .     40

                                 ARTICLE VIII

                              SPECIAL AGREEMENT

Section 8.1     No Warranty of Condition or
                  Suitability by the Issuer . . . . . . . . . . . . . .     41

Section 8.2     Inspection of the Project . . . . . . . . . . . . . . .     41

Section 8.3     Obligor Not to Adversely Affect Tax
                  Exempt Status of Interest . . . . . . . . . . . . . .     41

Section 8.4     Information as to Employment  . . . . . . . . . . . . .     42

Section 8.5     Financial Information . . . . . . . . . . . . . . . . .     42

Section 8.6     Covenant Against Discrimination . . . . . . . . . . . .     42

                                     -iii-

                                                                          PAGE

Section 8.7     Indemnification . . . . . . . . . . . . . . . . . . . .     43

Section 8.8     Obligor to Maintain its Existence;
                  Sale of Assets, Stock or Mergers  . . . . . . . . . .     44

Section 8.9     Confidentiality of Certain Information  . . . . . . . .     44

Section 8.10    Tax Payments into Tax Escrow Fund . . . . . . . . . . .     45

                                  ARTICLE IX

                   LEASE, SUBLEASE AND RELEASE OF PROJECT

Section 9.1     Lease or Sublease by Obligor  . . . . . . . . . . . . .     47

Section 9.2     Restrictions on Issuer  . . . . . . . . . . . . . . . .     47

Section 9.3     Retention of Title to Project; Grant
                  of Easements, Release of Equipment and
                  Certain Land  . . . . . . . . . . . . . . . . . . . .     47

                                  ARTICLE X

                       EVENTS OF DEFAULT AND REMEDIES

Section 10.1    Events of Default Defined . . . . . . . . . . . . . . .     50

Section 10.2    Remedies  . . . . . . . . . . . . . . . . . . . . . . .     52

Section 10.3    No Remedy Exclusive . . . . . . . . . . . . . . . . . .     53

Section 10.4    Agreement to Pay Counsel Fees and
                  Expenses  . . . . . . . . . . . . . . . . . . . . . .     53

Section 10.5    No Additional Waiver Implied
                  by One Waiver . . . . . . . . . . . . . . . . . . . .     53

Section 10.6    Notice of Event of Default  . . . . . . . . . . . . . .     53

                                 ARTICLE XI

                      PREPAYMENT OF THE RENTAL PAYMENTS

Section 11.1    Options to Prepay Rental Payments . . . . . . . . . . .     54

Section 11.2    Obligation to Prepay Rental Payments
                  Upon Determination of Taxability  . . . . . . . . . .     56

                                     -iv-

                                                                          PAGE

Section 11.3    Mandatory Prepayment  . . . . . . . . . . . . . . . . .     57

Section 11.4    Purchase of Project . . . . . . . . . . . . . . . . . .     57

Section 11.5    Conveyance Upon Purchase  . . . . . . . . . . . . . . .     58

Section 11.6    Relative Position of Options and
                  Indenture   . . . . . . . . . . . . . . . . . . . . .     58

                                  ARTICLE XII

                                 MISCELLANEOUS

Section 12.1    Notices . . . . . . . . . . . . . . . . . . . . . . . .     59

Section 12.2    Binding Effect  . . . . . . . . . . . . . . . . . . . .     59

Section 12.3    Severability  . . . . . . . . . . . . . . . . . . . . .     59

Section 12.4    Amounts Remaining in Project Fund,
                  Bond Fund and Rebate Fund . . . . . . . . . . . . . .     59

Section 12.5    Grant of Security Interest  . . . . . . . . . . . . . .     59

Section 12.6    Assignment of Leases and Rents  . . . . . . . . . . . .     60

Section 12.7    Recording . . . . . . . . . . . . . . . . . . . . . . .     62

Section 12.8    Delegation of Duties by Issuer  . . . . . . . . . . . .     62

Section 12.9    Extent of Covenants of the Issuer;
                  No Personal Liability . . . . . . . . . . . . . . . .     62

Section 12.10   Amendments, Changes and Modifications . . . . . . . . .     63

Section 12.11   Counterparts  . . . . . . . . . . . . . . . . . . . . .     63

Section 12.12   Captions  . . . . . . . . . . . . . . . . . . . . . . .     63

Section 12.13   Law Governing Construction of
                  Lease . . . . . . . . . . . . . . . . . . . . . . . .     63

Section 12.14   Indenture Governs . . . . . . . . . . . . . . . . . . .     63

EXHIBIT "A" -- Description of Premises
EXHIBIT "B" -- Description of Equipment
EXHIBIT "C" -- Form of Requisition

                                      -v-

                                    ARTICLE I.

                 DEFINITIONS AND CERTAIN RULES OF INTERPRETATION

     Section 1.1  Definitions.  In addition to the words and terms elsewhere 
defined herein, the following words and terms as used herein shall have the 
following meanings unless the context or use clearly indicates another or 
different meaning or intent, and any other words and terms defined in the 
Indenture and the Tax Regulatory Agreement, hereinafter defined, shall have 
the same meanings when used herein as assigned them in the Indenture and the 
Tax Regulatory Agreement unless the context or use clearly indicates another 
or different meaning or intent:

     "Act" means Chapter 37.1 of Title 45 of the Rhode Island General Laws 
(1956), as amended;

     "Administrative Expenses" means (i) a percentage administrative -fee, if 
any, set by vote of the Board of Directors of the Issuer, in no case to 
exceed one-eighth of one percent per year of the principal amount of the 
Bonds outstanding and (ii) the reasonable and necessary expenses incurred by 
the Issuer in connection with the issuance of the Bonds and the performance 
of the Issuer's obligations under this Lease and the Indenture;

     "Authorized Obligor Representative" means the person at the time 
designated to act on behalf of the Obligor by written certificate furnished 
to the Issuer and the Trustee containing the specimen signature of such 
person and signed on behalf of the Obligor by its President or any Vice 
President.  Such certificate may designate an alternate or alternates;

     "Authorized Issuer Representative" means the person at the time 
designated to act on behalf of the Issuer by written certificate furnished to 
the Obligor and the Trustee containing the specimen signature of such person 
and signed on behalf of the Issuer by its Chairman, Vice Chairman, Executive 
Director, Deputy Director or Treasurer.  Such certificate may designate an 
alternate or alternates;

     "Bond" or "Bonds" means the Rhode Island Industrial Facilities 
Corporation Industrial Development Revenue Bonds (Industrial-Recreational 
Building Authority Program Stericycle, Inc.  Project - 1992 Series) in the 
aggregate principal amount of $2,030,000, issued by the Issuer under the 
Indenture;

     "Bond Counsel" means a firm of nationally recognized attorneys 
acceptable to the Issuer experienced in the financing

                                      -2-

of facilities through the issuance of tax-exempt revenue bonds under Section 
103 of the Code;

     "Bond Fund" means the Bond Fund created by Section 501 of the Indenture;

     "Bond Purchase Agreement" means the Bond Purchase Agreement, dated June 
30, 1992, by and among the Purchaser, the Issuer and the obligor, including 
any amendments thereto;

     "Bond Registrar" means the Bond Registrar as defined in the Indenture;

     "Bondholders", "bondholders", "holders" or "holders of the Bonds" means 
the registered owners of the Bonds as shown on the registration books 
maintained by the Bond Registrar;

     "Closing" means the date on which the Bonds are issued.

     "Code" means the Internal Revenue Code of 1986, as amendedf or any 
successor thereto.  Any references to sections of the Internal Revenue Code 
of 1986, as amended, shall be understood to refer to any successor provisions 
thereto;

     "Collateral Account" means the account in the Bond Fund so designated 
which is established pursuant to Section 5.1 of the Indenture;

     "Collateral Account Requirement" means (a) the amount, if any, by which 
the aggregate principal amount of Bonds outstanding plus interest payable on 
the next succeeding Interest Payment Date exceeds the sum of (i) amounts on 
deposit in the Bond Fund that constitute Eligible Funds and (ii) one hundred 
percent (100%) of amounts on deposit in the Project Fund to the extent that 
such amounts are invested in Permitted Investments of the type described in 
(vi) and (vii) of the definition of Permitted Investments in the Indenture or 
ninety-six percent (96%) of the amounts on deposit in the Project Fund to the 
extent that such amounts are invested in Permitted Investments of the type 
described in other than (vi) and (vii) of such definition of Permitted 
Investments plus one hundred percent (100%) of any interest accrued on 
Permitted Investments, all as calculated'as by the Trustee of the first day 
of each month while the Mortgage Insurance Agreements are not in effect or 
(b) until August 31, 1993, an amount equal to all interest of and principal 
on the Bonds payable through August 30, 1993 less any accrued interest 
deposited in the Bond Fund;

     "Commitment Agreement" means the Commitment Agreement, dated as of June 
1, 1992 by and among the IRBA, the Issuer, the obligor and the Trustee;

                                      -3- 

     "Completion Date" means the date of completion of the Project evidenced 
in compliance with Section 4.5 herein;

     "Construction Period" means the period between the beginning of 
acquisition, construction and/or installation of the Project or the date of 
issuance and delivery of the Bonds, whichever is earlier, and the Completion 
Date;

     "Counsel" means an attorney, or firm of attorneys, admitted to practice 
law before the highest court of any state in the United States of America or 
the District of Columbia;

     "Determination of Taxability" means a Determination of Taxability as 
defined in the Indenture;

     "Equipment" means the equipment described in Exhibit "B" hereto and by 
this reference made a part hereof;

     "Event of Default" means one of the events so denominated and described 
in Section 10.1 herein;

     "Event of Taxability" mean's an Event of Taxability as defined in the 
Indenture;

     "Facilities" means any facilities and improvements located on or to be 
constructed on the Premises, including but not limited to an existing 
building of approximately 23,000 square feet to be used by the Obligor in the 
treatment and conversion of medical waste into recyclable raw material;

     "Financing Statements" means any and all financing statements (including 
continuation statements) filed for record from time to time to perfect the 
security interests created by or assigned in the Indenture;

     "Hazardous Materials" (i) the term "Hazardous Materials" as used in this 
Lease shall mean any flammable explosives, radon, radioactive materials, 
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, 
petroleum, petroleum-based products, methane, hazardous materials, hazardous 
wastes, hazardous or toxic substances or related materials as set forth in 
the Comprehensive Environmental Response, Compensation and Liability Act of 
1980, as amended (42 U.S.C. Sections 9601, ET SEQ.), the Hazardous Materials 
Transportation Act, as amended (49 U.S.C. Sections 1801, ET SEQ.), the 
Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, 
ET SEQ.), the Toxic Substances Control Act, as amended (15 U.S.C. Sections 
2601, ET SEQ.) or any other applicable Environmental Law and the regulations 
promulgated thereunder.

                                      -4- 

     (ii) the term "Environmental Laws" as used in this Lease shall-mean all 
federal, state and local environmental, land use, zoning, health, chemical 
use, safety and sanitation laws, statutes, ordinances and codes relating to 
the protection of the environment or governing the use, storage, treatment, 
generation, transportation, processing, handling, production or policies, 
guidelines, interpretations, decisions, orders and directives of federal, 
state and local governmental agencies and authorities with respect thereto.

     "IRBA" means the Rhode Island Industrial-Recreational Building 
Authority, a body corporate and politic and a public instrumentality of the 
State.,

     "IREA Resolutions" means Resolutions Numbered 271A and 271B adopted on 
June 3, 1992, as amended, approving and authorizing the insurance of the 
Mortgage and the Security Agreement relating to the Project subject to the 
conditions stated therein;

     "Indenture" means the Trust Indenture, dated as of June 1, 1992, by and 
between the Issuer and the Trustee, including any indentures supplemental 
thereto;

     "Insurance Requirements" means all provisions of any insurance policy 
covering or applicable to the Project or any part thereof, all requirements 
of the issuer of any such policy, and all orders, rules, regulations and 
other requirements of the National Board of Fire Underwriters (or any other 
body exercising similar functions) applicable to or affecting the Project or 
any part thereof;

     "Interest Payment Date" means December 1 and June 1 of each year that 
the Bonds are outstanding;

     "Issuer" means the Rhode Island Industrial Facilities Corporation, a 
public corporation and governmental agency of the State, duly organized and 
existing under the laws of the State, and any body, board, authority, agency 
or other political subdivision or instrumentality of the State which shall 
succeed to the powers, duties and functions 'thereof;

     "Issuer Documents" means this Lease, the Indenture, the Bonds, the Bond 
Purchase Agreement, the Mortgage, the Security Agreement, the Mortgage 
Insurance Agreements, the Tax Regulatory Agreement and any other agreements, 
instruments or certifications executed and delivered by the Issuer in 
connection with the issuance of the Bonds;

     "Lease" means this Lease Agreement, dated as of June 1, 1992, by and 
between the Issuer and the Obligor, including any amendments hereto;

                                      -5- 

     "Lease Term" means the duration of this Lease as specified in Section 
5.1 herein;

     "Legal Requirements" means all laws, statutes, codes, acts, ordinances, 
resolutions, orders, judgments, decrees, injunctions, rules, regulations, 
permits, licenses, authorizations, directions and requirements of all 
governmental entities, departments, commissions, boards, courts, authorities, 
agencies, officials and officers, foreseen or unforeseen, ordinary or 
extraordinary, which now or at any time hereafter may be applicable to the 
Project or any part thereof, any use, anticipated use or condition of the 
Project or any part thereof the violation of which would have a material 
adverse effect on the Project;

     "Letter of Credit" means an irrevocable letter of credit issued by a 
Qualified Banking Institution to the Trustee at the request and for the 
account of the Obligor;

     "Letter of Credit Bank" means the issuer of the Letter of Credit.

     "Mortgage" means the Mortgage dated as of June 1, 1992 from the Issuer 
to the Trustee relating to the Facilities and the Premises;

     "Mortgage Insurance Agreement (Real Estate)" and "Mortgage Insurance 
Agreement (Equipment)" (collectively the "Mortgage Insurance Agreements") 
means the Mortgage Insurance Agreements to be entered into subsequent to the 
issuance of the Bonds and upon the completion of the Project among the IRBA, 
the Trustee and the Issuer, pursuant to which the IRBA will insure the 
mortgage payments required to be made to the Trustee for the benefit of the 
holders of the Bonds;

     "Net Proceeds" means Net Proceeds as defined in Section 1.1 of the Tax 
Regulatory Agreement;

     "Notice Address" means

          (a)  As to the Issuer:

               Rhode Island Industrial Facilities Corporation
               Seven Jackson Walkway
               Providence, Rhode Island  02903
                  Attention:  Treasurer

                                      -6- 

          (b)  As to the Obligor:

               Stericycle, Inc.
               1419 Lake Cook Road, Suite 410
               Deerfield, Illinois  60015
                  Attention:  Chief Financial Officer

          (c)  As to the Trustee, Bond Registrar
               and Paying Agent:

               Fleet National Bank
               111 Westminster Street 
               Providence, Rhode Island  02903
                  Attention:  Corporate Trust Department

          (d)  As to the IRBA:

               Rhode Island Industrial-Recreational Building
                  Authority
               Seven Jackson Walkway
               Providence, Rhode Island  02903
                  Attention:  Manager

     "Obligor" means Stericycle, Inc. and any successors and assigns, to the 
extent permitted by this Lease;

     "Obligor Documents" means this Lease, the Tax Regulatory Agreement, the 
Bond Purchase Agreement, the Commitment Agreement and any other agreements, 
instruments or certifications executed and delivered by the Obligor in 
connection with the issuance of the Bonds;

     "Obligor Payment Date" means the first day of each month of each year, 
commencing as to interest and Administrative Expenses on August 1, 1992, and 
commencing as to principal on the first day of the month in which the 
Mortgage Insurance Agreements are delivered or, if the Mortgage Insurance 
Agreements are delivered after the first of the month, the first day of the 
next succeeding month but in no event later than May 1, 1993;

     "Paying Agent" and "Co-Paying Agent" means the Paying Agent and the 
Co-Paying Agent as defined in the Indenture;

     "Payment in Full of the Bonds" means the situations referred to in 
Section 8.2 of the Indenture;

     "Permitted Encumbrances" means as of any particular time,

          (a)  liens for ad valorem taxes or payments in lieu of taxes and
     special assessments not then delinquent or permitted to exist as provided
     herein;

                                      -7-  

          (b)  the rights of the Issuer or the Trustee under this Lease, the
     Mortgage, the Security Agreement and the Indenture;

          (c)  purchase money security interests on the Equipment so long as
     such security interests are discharged upon execution and delivery of the
     Mortgage Insurance Agreement (Equipment);

          (d)  such other defects, irregularities, encumbrances, easements,
     rights-of-way and clouds on title as are set forth in Schedule B of the 
     title insurance policy required by Section 6.9 herein; and

          (e)  such other liens on the Equipment and the Facilities as shall be
     given prior approval in writing by the Issuer and the IRBA.

     "Person" means any natural person, individual, corporation, cooperative, 
joint venture, partnership, trust, unincorporated organization, government, 
governmental body, agency, political subdivision or other legal entity as in 
the context may be appropriate;

     "Personal Property" as used herein means all equipment, machinery and 
furniture and other tangible personal property located at or in the Project 
and utilized as a part of or in conjunction with the Obligor's business 
operations other than (a) equipment, machinery and furniture and other 
tangible personal property acquired with the proceeds of the Bonds or in 
replacement or restoration of, substitution for, or as an addition, 
modification or improvement to the Project or (b) equipment, machinery and 
furniture and other tangible personal property subject to security interests 
arising from any of the Obligor Documents or the Issuer Documents;

     "Pledged Revenues" means and shall include:

          (a)  the rental payments and other payments required to be made by 
      the Obligor under this Lease except for payments to be made for services 
      rendered by the Trustee, the Bond Registrar, the Paying Agent and any 
      Co-Paying Agent and except for expenses, indemnification and other 
      payments required to be made pursuant to Sections 5.4, 8.7 and 10.4 
      herein and payments required to be made into the Rebate Fund;

          (b)  all amounts on deposit from time to time in the Bond Fund and 
      the Project Fund, subject to provisions of this Lease and the Indenture 
      permitting the application thereof for the purposes and on the terms and 
      conditions set forth herein and therein;

                                      -8- 

          (c)  any proceeds which arise upon any disposition of the Trust 
     Estate; and

          (d)  any other revenues arising out of or in connection with the
     Issuer's interest in the Project;

     "Premises" means the property described in Exhibit "A" hereto and by 
this reference made a part hereof;

     "Prime Rate" means the rate of interest announced from time to time by 
the Trustee at its principal office as its "Prime Rate".  Changes in the 
Prime Rate shall take effect on the day announced, unless otherwise specified 
in the announcement;

     "Principal Payment Date" means the June 1 of each year during which the 
Bonds are outstanding, commencing June 1, 1993;

     "Project" means the Equipment, the Facilities and the Premises;

     "Project Fund" means the Project Fund created by Section 6.1 of the 
Indenture;

     "Project Supervisor" means a representative of the bondholders 
acceptable to the IRBA who is appointed by the Obligor and who may be an 
independent qualified engineer or architect or firm of engineers or 
architects whose duties shall include analysis of plans and specifications 
for the Project and purchase orders submitted by the Obligor; monitoring 
progress on the Project, including on-site inspections; review of all 
requests for advances by the Obligor and other suppliers; furnishing progress 
reports to the Trustee and the Issuer; reviewing and certifying the 
completion of the Project; and other customary services incidental to the 
foregoing;

     "Purchaser" means Carolan & Co., Inc., the purchaser of the Bonds;

     "Qualified Banking Institution" means a bank, trust company, national 
banking association or a corporation subject to registration with the Board 
of Governors of the Federal Reserve System under the Bank Holding Company Act 
of 1956, whose unsecured obligations or uncollateralized long term debt 
obligations have been assigned a rating by S & P or Moody's, or which has 
issued a letter of credit, contract, agreement or surety bond in support of 
debt obligations which have been rated by S & P or Moody's in one of their 
three (3) highest rating categories or, if unrated, with unimpaired capital 
and surplus of not less than fifty million dollars ($50,000,000) any of such 
conditions to be satisfied at the time of such determination;

                                      -9- 

     "Rebate Fund" means the Rebate Fund created by Section 6.5 of the 
Indenture;

     "Regulatory Agreement" means the Regulatory Agreement to be entered into 
subsequent to the issuance of the Bonds and upon completion of the Project 
and execution of the Mortgage Insurance Agreements between the Obligor and 
the IRBA;

     "Security Agreement" means the Security Agreement dated as of June 1, 
1992, from the Issuer to the Trustee relating to the Equipment;

     "State" means the State of Rhode Island and Providence Plantations;

     "Tax Escrow Fund" means the Tax Escrow Fund created by Section 6.8 of 
the Indenture;

     "Tax Regulatory Agreement" means the Tax Regulatory Agreement by and 
among the Issuer, the Obligor and the Trustee dated and delivered the date of 
the issuance of the Bonds;

     "Taxing Authorities" means the City of Woonsocket, Rhode Island and any 
other political subdivision or political unit having taxing authority where 
the Project is located;

     "Trustee" means Fleet National Bank, a national banking association duly 
organized and existing under the laws of the United States of America, as 
trustee under the Indenture, or any co-trustee or any successor trustee under 
the Indenture; and

     "U.C.C." means the Uniform Commercial Code of the State, as now or 
hereafter amended.

     Section 1.2  Certain Rules of Interpretation.  The definitions set forth 
in Section 1.1 herein shall be equally applicable to both the singular and 
plural forms of the terms therein defined and shall cover all genders.

     "Herein", "hereby", "hereunder", "hereof", "hereinbefore", "hereinafter" 
and other equivalent words refer to this Lease and not solely to the 
particular Article, Section or subdivision hereof in which such word is used.

     Reference herein to an Article number (e.g., Article IV) or a Section 
number (e.g., Section 6.2) shall be construed to be a reference to the 
designated Article number or Section number hereof unless the context or use 
clearly indicates another or different meaning or intent.

                                     -10- 

                                   ARTICLE II.

                                 REPRESENTATIONS

     Section 2.1  Representations by Issuer.  The Issuer makes the following 
representations as the basis for the undertakings on its part herein 
contained:

          (a)  organization and Authority.  The Issuer is a public corporation
     and governmental agency of the State, created as a non-business corporation
     under and pursuant to Chapter 6 of Title 7 of the Rhode Island General Laws
     (1956), as amended, and constituted and established as a public body 
     corporate and agency of the State by the Act.  Under the provisions of the 
     Act and its Articles of Association the Issuer has the power to enter into 
     the transactions contemplated by the Issuer Documents and to carry out its 
     obligations thereunder.  Based upon representations made by the Obligor, 
     the Project constitutes and will constitute a "project" within the meaning 
     of the Act.  The Issuer is not in default under its Articles of Association
     or under any obligation or indenture by which it is bound.

          (b)  Pending or Threatened Litigation.  There are no actions, suits, 
     proceedings, inquiries or investigations pending, or to the knowledge of 
     the Issuer, threatened, against or affecting the Issuer in any court or 
     before any governmental authority or arbitration board or tribunal, which 
     involve the possibility of materially and adversely affecting the 
     transactions contemplated by the Issuer Documents or which, in any way, 
     would adversely affect the validity or enforceability of the Issuer 
     Documents or any other agreement or instrument to which the Issuer is a 
     party and which is used or contemplated for use in the consummation of 
     the transactions contemplated hereby or thereby.

          (c)  Issue, Sale and Other Transactions Are Legal and Authorized.  The
     issuance and sale of the Bonds and the execution and delivery by the Issuer
     of the Issuer Documents and the compliance by the Issuer with all of the 
     provisions thereof (i) are within the purposes, powers and authority of the
     Issuer, (ii) have been done in full compliance with the provisions of the 
     Act, are legal and will not conflict with or constitute on the part of the 
     Issuer a violation of or a breach of or default under, or result in the 
     creation of any lien, charge or encumbrance upon any

                                     -11-

     property of the Issuer (other than as contemplated by the Issuer
     Documents) under the provisions of any charter instrument, by-law,
     indenture, mortgage, deed of trust, note agreement or other agreement
     or instrument to which the Issuer is a party or by which the Issuer is
     bound, or any license, judgment, decree, law, statute, order, rule or
     regulation of any court or governmental agency or body having
     jurisdiction over the Issuer or any of its activities or properties
     and (iii) have been duly authorized by all necessary corporate action
     on the part of the Issuer.

          (d)  No Defaults.  To the knowledge of the Issuer, no event has
     occurred and no condition exists with respect to the Issuer which would
     constitute an event of default under the Issuer Documents or which, with 
     the lapse of time or with the giving of notice or both, would become an 
     event of default under the Issuer Documents.

          (e)  No Prior Pledge.  Neither this Lease nor any of the Pledged
     Revenues have been pledged or hypothecated in any manner or for any purpose
     other than as provided in the Indenture as security for the payment of the
     Bonds.

          (f)  Disclosure.  The representations of the Issuer contained in the
     Issuer Documents do not contain any untrue statement of a material fact or 
     omit to state a material fact necessary in order to make the statements 
     contained therein, in light of the circumstances under which they were 
     made, not misleading.

          (g)  Nature and Location of the Project.  The financing of the Project
     is in furtherance of the public purpose for which the Issuer was created.  
     The Project will be located within the City of Woonsocket, Rhode Island.

          (h)  Special Obligations.  Notwithstanding anything herein contained
     to the contrary, and except as contemplated in the Mortgage Insurance
     Agreements, any obligation the Issuer may hereby incur for the payment of 
     money shall not constitute an indebtedness of the State or of any political
     subdivision thereof within the meaning of any State constitutional 
     provision or statutory limitation and shall not give rise to a pecuniary 
     liability of the State or a political subdivision thereof, or constitute a 
     charge 

                                     -12- 

     against the general credit or taxing power of the State or a political
     subdivision thereof, but shall be a special obligation of the Issuer
     payable solely from the Pledged Revenues, subject to the provisions of
     this Lease and the Indenture permitting the application thereof for
     the purposes and on the terms and conditions set forth herein and
     therein.

          (i)  Pending Legislation.  To the knowledge of the Issuer, no
     legislation, ordinance, rule or regulation has been enacted or introduced 
     or favorably reported for passage by any governmental body, department or 
     agency of the State or a decision by any court of competent jurisdiction 
     of the State rendered which would adversely affect the exemption from all 
     taxation (except for estate taxation in the State) of the interest on bonds
     and obligations of the general character of the Bonds issued by it.

          (j)  Certificates Deemed a Representation.  Any certificate signed by
     any Authorized Issuer Representative shall be deemed a representation and
     warranty by the Issuer as to the statement made therein.

          (k)  All Necessary Consents.  All consents, approvals, authorizations 
     and orders of governmental or regulatory'authorities including but not 
     limited to environmental approvals which are required for the consummation 
     of the transactions contemplated to be performed by the Issuer for this 
     Lease have been obtained.

          (l)  The Project.  The Issuer has acquired, or will have acquired by
     the Closing, good and marketable title to the Premises and proposes to 
     acquire, construct and/or install the Project or cause the Project to be 
     acquired, constructed and/or installed and to lease the Project to the 
     Obligor and to sell the Project to the Obligor upon the Obligor's exercise 
     of the Obligor's option to purchase the Project, all for the purpose of 
     promoting and furthering the public purposes of the Issuer as set forth in 
     the Act.

     It is specifically understood and agreed that the liability of the 
Issuer for the inaccuracy or nonfulfillment of any of the foregoing 
representations and warranties shall not constitute nor give rise to any 
pecuniary liability or charge against the general credit of the Issuer.

                                     -13- 

     Section 2.2  Representations and Covenants of Obligor.  The Obligor 
represents and covenants that:

          (a)  Corporate Organization and Power.  The Obligor (i) is a
     corporation duly organized, validly existing and in good standing under 
     the laws of the State of Delaware and (ii) has all requisite power and 
     authority and all necessary licenses and permits (which can be obtained 
     as of this date) to own and operate the properties and to carry on the 
     business of the Obligor as now being conducted and as presently proposed 
     to be conducted by the Obligor.

          (b)  Pending or Threatened Litigation.  There are no actions, suits,
     proceedings, inquiries or investigations pending, or to the knowledge of 
     the Obligor threatened, against or affecting the Obligor in any court or 
     before any governmental authority or arbitration board or tribunal which 
     involve the likelihood of materially and adversely affecting the 
     properties, business, profits or condition (financial or otherwise) of 
     the Obligor, or the ability of the Obligor to perform in all material 
     respects the Obligor's obligations under the Obligor Documents.

          (c)  The Obligor Documents Are Legal and Binding.  The execution and
     delivery by the Obligor of the Obligor Documents and the compliance by the
     Obligor with all of the provisions of each of the Obligor Documents (i) are
     within the power of the Obligor, (ii) will not conflict with or result in 
     any breach of any of the provisions of or constitute a default under, or 
     result in the creation of any lien, charge or encumbrance (other than 
     Permitted Encumbrances) upon any property of the Obligor under the 
     provisions of any agreement, charter document, by-law or other instrument 
     to which the Obligor is a party or by which the Obligor may be bound or 
     any applicable license, judgment, decree, law, statute, order, rule or 
     regulation of any court or governmental agency or body having jurisdiction 
     over the Obligor or any of the Obligor's activities or properties and 
     (iii) have been duly authorized by all necessary corporate action of the 
     part of the Obligor.

          (d)  Governmental Consent.  Neither the Obligor nor any of the
     Obligor's business or properties, nor any relationship between the Obligor 
     and any other person, nor any circumstances in connection with the 
     execution, delivery and performance by the Obligor of

                                     -14- 

     the Obligor Documents or to the best of Obligor's knowledge, the offer, 
     issue, sale or delivery by the Issuer of the Bonds, is such as to require 
     the consent, approval or authorization of, or the filing, registration or 
     qualification with, any governmental authority by the Obligor other than 
     those already obtained or which by the Closing will have been obtained, 
     except that the Obligor makes no representations with respect to compliance
     with blue sky or federal or state securities laws or approvals by the 
     Issuer or the IRBA, except as provided in the Bond Purchase Agreement.

          (e)  No Defaults.  No event has occurred and no condition exists with
     respect to the Obligor that would constitute an Event of Default under this
     Lease or an event of default under any of the other Obligor Documents or 
     the Indenture or which, with the lapse of time or with the giving of notice
     or both, would become an Event of Default under this Lease or an event of 
     default under any of the other Obligor Documents or the Indenture.  The 
     Obligor is not in default with respect to an order of any court, 
     governmental authority or arbitration board or tribunal or in violation in 
     any material respect of any agreement, charter document, by-law or other 
     instrument to which the Obligor is a party or by which the Obligor may be 
     bound, the effect of which default or violation is materially adverse to 
     the properties, business, profits or condition (financial or otherwise) of 
     the Obligor.

          (f)  Compliance with Law.  The Obligor is not in violation of any
     laws, ordinances, governmental rules or regulations to which the Obligor 
     is subject and has not failed to obtain any licenses, permits, consents, 
     franchises or other governmental authorizations necessary to the 
     ownership of the Obligor's properties or to the conduct of the Obligor's 
     business, which violation or failure to obtain might materially and 
     adversely affect the properties, business, profits or conditions 
     (financial or otherwise) of the Obligor.

          (g)  Disclosure.  The representations of the Obligor contained in the
     Obligor Documents do not contain any untrue statement of a material fact 
     or omit to state a material fact necessary in order to make the statements 
     contained therein, in light of the circumstances under which they were 
     made, not misleading.

                                     -15- 

          (h)  Certificates Deemed a Representation.  Any certificate signed 
     by any Authorized Obligor Representative shall be deemed a representation 
     and warranty by the Obligor as to the statement made therein.

          (i)  Inducement.  The issuance of the Bonds by the Issuer and the 
     loan by the Issuer to the Obligor of the proceeds of the Bonds have 
     induced the Obligor to locate the Project in the City of Woonsocket, 
     Rhode Island.

          (j)  Financial Information.  The financial statements of the Obligor
     given to the Issuer and the IRBA in connection with the issuance of the 
     Bonds present fairly the financial position and results of operations of 
     the Obligor at the dates and for the periods indicated and disclosed all 
     liabilities, including contingent liabilities, of the Obligor required 
     by generally accepted accounting principles to be disclosed in financial 
     statements, and there has been no material adverse change since such date 
     with respect to the net worth of the Obligor or any other matters 
     contained or referred to therein and no additional material liabilities, 
     including contingent liabilities, of the Obligor have arisen or been 
     incurred since such date except as expressly contemplated by this Lease.

          (k)  The Project.  (i)  The Obligor intends to operate the Project or
     cause the Project to be operated from the Completion Date to the expiration
     or sooner termination of this Lease as provided herein as a "project" 
     within the meaning of the Act;

               (ii)   The plans and specifications for the Project have been 
     filed or will be filed by the Closing with all governmental authorities 
     having jurisdiction over the Project; the Obligor has obtained or will 
     obtain by the Closing all necessary approvals and building permits from 
     said authorities; and construction in accordance with the plans and 
     specifications and operation of the Project for the purposes intended by 
     the Obligor will not violate (A) any zoning, building code, subdivision, 
     planning or land use ordinance, regulation or law promulgated by any 
     governmental agency, department or subdivision or (B) any restrictions of 
     any kind affecting the Premises, in each case the violation of which would 
     have a material adverse effect on the Obligor or the Project;

                                     -16- 

               (iii)  All utilities and services necessary for the operation of
     the Project for its intended purpose (including, without limitation, water,
     gas, electricity, telephone, storm and sanitary sewer facilities) are 
     available at the boundary of the Premises, can be tapped into by the 
     Obligor, and are of sufficient capacity to adequately meet all needs and 
     requirements necessary for the operation of the Project for its intended 
     purposes;

               (iv)   there is unrestricted access for the passage of motor
     vehicles to and from the Premises and to and from the main road upon which 
     the Premises front and all required curb cut or access permits (if any) 
     have been obtained;

               (v)    no part of the Premises is located in a designated flood
     hazard area (as defined in the Flood Disaster Protection Act of 1973);

               (vi)   at the Closing there will be no easements, restrictions 
     or encumbrances across or affecting the Premises which will have any 
     material adverse effect upon the operation of the Project for its intended 
     purpose, nor which will in any way materially interfere with the 
     construction of the Project; and

               (vii)  neither the Obligor nor, to the best of Obligor's
     knowledge, any other person: (a) has ever caused, permitted or suffered 
     any Hazardous Material to be spilled, placed, held, located or disposed 
     of on, nor is any Hazardous Material presently existing on, the Premises, 
     or into the atmosphere, any body of water, any wetlands, or on any other 
     real property legally or beneficially owned by the Obligor in violation of 
     Environmental Laws, (b) has ever used in violation of Environmental Laws 
     the Premises or any other real property legally or beneficially owned by 
     the Obligor as a treatment, storage or disposal (whether permanent or 
     temporary) site in violation of Environmental Laws for any Hazardous 
     Material, and (c) has any knowledge, after due inquiry, of any notice of 
     violation, liens or other notices issued by any governmental agency with 
     respect to the environmental condition of the Premises.

          (l)  Tax Representations.  The Obligor has not taken and will not
     take any action and knows of no action that any other Person has taken or
     intends to take, which would cause interest on the Bonds to be

                                     -17- 

     includable in the gross income of the holders thereof for Federal income 
     tax purposes.  The representations, certifications and statements of 
     reasonable expectation made by the Obligor in its Tax Regulatory Agreement 
     relating to Project description, composite issues, bond maturity, average 
     asset economic life, use of Bond proceeds, capital expenditures, arbitrage 
     and related matters are hereby incorporated by this reference as though 
     fully set forth herein.

                                     -18- 

                                  ARTICLE III.

                                LEASE OF PROJECT

     Section 3.1  Lease of Project.  The Issuer hereby leases the Project to 
the Obligor and the Obligor hereby leases the Project from the Issuer for and 
during the Lease Term subject to the terms and conditions herein set forth.  
The Issuer has delivered to the Obligor and the Obligor has accepted sole and 
exclusive possession of the Premises.  The Issuer shall deliver to the 
Obligor sole and exclusive possession of the balance of the Project upon 
completion thereof and the Obligor shall accept possession thereof at such 
time.  The Obligor shall be permitted such possession of the Project prior to 
such date for delivery of sole and exclusive possession as shall be necessary 
for the acquisition, construction and/or installation of the Project.

                                     -19- 

                                  ARTICLE IV.

                   COMMENCEMENT AND COMPLETION OF PROJECT;
                               ISSUANCE OF BONDS

     Section 4.1  Agreement to Acquire, Construct and/or Install the Project. 
 Concurrently herewith, title to the Premises and any improvements 
constituting the Project have been conveyed to the Issuer by quitclaim deed, 
free and clear from all claims, liens, charges, servitudes and encumbrances 
except Permitted Encumbrances.  The Obligor shall bear all costs and expenses 
in connection with the preparation of the deed and any related instruments 
and documents, the delivery of any of said instruments and documents and 
their filing and recording, if required, and all taxes and charges payable in 
connection with any of the foregoing or the conveyance and transfer of such 
real property.  All taxes, assessments and other charges and impositions in 
connection with the Premises which shall be attributable to periods prior 
to the conveyance thereof as provided in this Section 4.1 shall be also paid 
by the Obligor.

     As promptly as possible after receipt of the proceeds of the Bonds, the 
Obligor agrees to cause, on behalf of Issuer, the Project to be acquired, 
constructed and/or installed in accordance with the plans and specifications 
therefor prepared by or on behalf of the Obligor and on file with the 
Trustee, as the same may be amended from time to time.  In connection 
therewith, the Obligor shall retain a Project Supervisor and pay all expenses 
in connection with the retention and performance by the Project Supervisor of 
its obligations set forth herein.

     The Obligor may cause such changes to be made to the plans and 
specifications for the Project prior to the Completion Date as it may desire, 
provided that (i) such changes shall not result in the Project not being a 
"project" within the meaning of the Act, (ii) such changes shall not result 
in less than all of the Net Proceeds of the sale of the Bonds being used to 
pay the costs of land or property of a character subject to the allowance for 
depreciation under Section 167 of the Code, (iii) such changes shall not 
result in a violation of the limitation on maturity of the Bonds under 
Section 147(b) of the Code, and (iv) the IRBA has given its approval in 
writing to such changes.

     The Obligor agrees to acquire, construct and/or install the Project with 
all reasonable dispatch and to use best efforts to cause said acquisition and 
construction to be completed as soon as practicable, delays incident to 
strikes, riots, acts of God or the public enemy beyond the reasonable control 
of the Obligor only excepted, but if said acquisition, construction

                                     -20- 

and/or installation is not completed within the time herein contemplated 
there shall be no resulting liability on the part of the Obligor and no 
diminution in or postponement or abatement of the payments required in 
Section 5.3 to be paid by the Obligor.

     The Project Supervisor shall certify that the acquisition, construction 
and/or installation of the Project is in accordance with the aforementioned 
plans and specifications.  The cost of such acquisition, construction and/or 
installation shall be paid from the Project Fund established under the 
Indenture.

     The Obligor covenants to take such action and institute such proceedings 
as shall be necessary to cause and require all contractors and material 
suppliers, if any be so engaged, to complete their contracts diligently in 
accordance with the terms of said contracts, including, without limitation, 
the correcting of any defective work.

     In addition, the Obligor agrees to obtain or cause to be obtained, prior 
to the commencement of the construction of the Project, payment and 
performance bonds from each contractor in the amount of said contractor's 
contract price.  Said bonds shall contain dual obligee riders naming the 
Issuer, the Trustee and the IRBA as additional insureds and shall be 
evidenced to the Issuer and the Trustee as soon as it is available.

     Section 4.2  Agreement to Issue Bonds; Application of Bond Proceeds.  In 
order to provide funds for disbursement of funds referred to in Section 4.3 
herein, the Issuer agrees that as soon as possible it will authorize, sell 
and qause to be delivered to the Purchaser the Bonds, bearing interest and 
maturing as set forth in Article II of the Indenture, at a price to be 
approved by the Obligor plus accrued interest (if any) to the date of 
issuance and delivery of the Bonds, and it will thereupon deposit all accrued 
interest (if any) received upon the sale of the Bonds in the Bond Fund and 
will deposit the balance of the proceeds from said sale in the Project Fund.

     Section 4.3  Disbursements from the Project Fund.  The Issuer will in 
the Indenture authorize and direct the Trustee to use the moneys in the 
Project Fund for payment of the following Project costs incurred after May 
18, 1992, subject to the provisions of Section 4.7 herein, and for no other 
purposes:

          (a)  Costs incurred directly or indirectly for or in connection with
     the acquisition, construction and/or installation of the Project, including
     costs

                                     -21- 

     incurred in respect of the Project for preliminary planning and studies; 
     architectural, legal, engineering, accounting, consulting, supervisory 
     and other services; labor, services and materials; and recording of 
     documents and title work.

          (b)  Premiums attributable to payment and performance bonds and
     insurance required to be taken out and maintained during the Construction 
     Period with respect to the Project.

          (c)  Taxes (other than State sales taxes for which the Obligor will 
     be reimbursed), assessments and other governmental charges in respect of 
     the Project that may become due and payable during the Construction 
     Period.

          (d)  Costs incurred directly or indirectly in seeking to enforce any
     remedy against any contractor or subcontractor in respect of any actual or
     claimed default under any contract relating to the Project.

          (e)  Financial, legal, accounting, printing and engraving fees, 
     charges and expenses, and all other such fees, charges and expenses 
     incurred in connection with the authorization, sale, issuance and delivery 
     of the Bonds, including, without limitation, the fees and expenses of the 
     Trustee, the Bond Registrar, the Paying Agent and any Co-Paying Agent 
     properly incurred under the Indenture that may become due and payable 
     during the Construction Period.

          (f)  Any other costs, expenses, fees and charges properly chargeable 
     to the cost of acquisition, construction and/or installation of the 
     Project.

          (g)  Interest on the Bonds during the Construction Period to be paid
     into the Bond Fund.

          (h)  Amounts to be transferred to the Rebate Fund representing 
     investment earnings on moneys in the Project Fund.

All moneys remaining in the Project Fund (including moneys earned on 
investments made pursuant to the provisions of Section 4.7 herein) after the 
Completion Date and payment in full of the costs of the acquisition, 
construction and/or installation of the Project, and after payment of all 
other items provided for in the preceding subsections of this Section then 
due and payable, shall at the written direction of the

                                     -22- 

Obligor with the consent of the IRBA be (i) used to acquire, construct and/or 
install additions, extensions and improvements to the Project in accordance 
with amended plans and specifications therefor duly filed with the Trustee, 
(ii) used by the Trustee, to the maximum extent practicable, for the partial 
redemption of Bonds at the earliest date permitted by the Indenture or the 
purchase of Bonds for the purpose of cancellation at any time prior to the 
earliest date permitted by the Indenture for the redemption of Bonds or (iii) 
used in a combination of (i) and/or (ii) as is provided in such direction, 
provided that amounts approved by the Authorized Obligor Representative shall 
be retained by the Trustee in the Project Fund for payment of costs not then 
due and payable.  Any balance remaining of such retained moneys after full 
payment of all such Project costs shall be used by the Trustee as directed by 
the Obligor in the manner specified in clauses (i), (ii) or (iii) of this 
subsection.  Amounts directed by the Obligor to be used by the Trustee to 
redeem Bonds or to purchase Bonds for the purpose of cancellation shall not, 
pending such use, be invested at a yield which exceeds the yield on the 
Bonds.  Such amounts shall not be directed by the Obligor to be used for the 
purposes described in clauses (i), (ii) or (iii) without providing the 
Trustee with an opinion of Bond Counsel stating that such use will not impair 
the exemption of the interest on the Bonds from Federal income taxation 
pursuant to Section 103(a) of the Code.

     The payments specified in subsections (a) through (g) of this Section 
shall be made by the Trustee only upon receipt of a written requisition for 
such payment signed by the Authorized Obligor Representative, reviewed and 
approved by the Project Supervisor (except as to disbursements for costs of 
issuance of the Bonds and acquisition of the Premises and reimbursement of 
Trustee expenses), and acknowledged by an Authorized Issuer Representative.  
Such payments (except as to disbursements for costs of issuance of the Bonds) 
shall be made only upon prior receipt by the Issuer and the Trustee of 
approval of the Project by the State Planning Council.  All requisitions must 
also be approved in writing by the IRBA.  In addition, each requisition 
(other than a requisition for costs of issuance of the Bonds) shall be 
accompanied by an endorsement to the title insurance policy required under 
Section 6.9 of this Lease by an agent of the title company rendering such 
title insurance policy.  Such requisition shall be in substantially the form 
attached hereto as Exhibit "C" and by this reference thereto made a part 
hereof.

     Each such requisition shall have attached, for each item for which 
payment or reimbursement is sought, evidence of payment (e.g. paid invoices 
or cancelled checks) or evidence

                                     -23- 

that payment is due to a party other than the Obligor, in either case 
satisfactory to the Trustee.  A duplicate copy of each such requisition shall 
be furnished to the Issuer and the IRBA simultaneously with the filing of the 
original with the Trustee.

     In making any such payment from the Project Fund, the Trustee may rely 
on any such requisition and any such certificates delivered to it pursuant to 
this Section and the Trustee shall be relieved of all liability with respect 
to making such payments in accordance with such requisitions and such 
supporting certificate or certificates without inspection of the Project or 
any other investigation.

     The Obligor agrees and convenants for the benefit of the Trustee and the 
holders of the Bonds that the proceeds of the Bonds and any investments 
directed by the Obligor to be made will not be used or invested in any manner 
which would cause the interest on the Bonds to be included in the gross 
income of the holders for Federal income tax purposes.

     Section 4.4  Obligation of the Parties to Cooperate in Furnishing 
Documents to Trustee.  The Issuer and the Obligor agree to cooperate with 
each other in furnishing to the Trustee the documents referred to in Section 
4.3 herein that are required to effect payments out of the Project Fund and 
to cause such requisitions and certificates to be directed by the Authorized 
Obligor Representative and the Authorized Issuer Representative to the 
Trustee as may be necessary to effect such payments.  Such obligation of the 
Issuer and the Obligor is subject to any provisions hereof or of the 
Indenture requiring additional documentation with respect to payments and 
shall not extend beyond the moneys in the Project Fund available for payment 
under the terms of the Indenture.

     Section 4.5  Establishment of Completion Date.  The Completion Date 
shall be evidenced to the Trustee by a certificate signed by the Project 
Supervisor stating that, except for amounts retained by the Trustee for 
Project costs not then due and payable as provided in Section 4.3 herein, the 
acquisition, construction and/or installation of the Project have been 
completed substantially in accordance with the plans and specifications 
therefor and charges for all labor, services, materials, supplies and/or 
equipment used in such acquisition, construction and/or installation have 
been paid.  Such certificate by the Project Supervisor shall state that it is 
given without prejudice to any rights against third parties which exist on 
the date of such certificate or which may subsequently come into being.

                                     -24- 

     Section 4.6  Obligor Required to Pay Project Costs If Project Fund 
Insufficient.  If the moneys in the Project Fund available for payment of the 
costs of the Project should not be sufficient to pay the costs thereof in 
full, the Obligor agrees to complete the Project and to pay that portion of 
the costs of the Project as may be in excess of the moneys available therefor 
in the Project Fund.  The Issuer does not make any warranty, either express 
or implied, that the moneys which will be paid into the Project Fund and 
which, under the provisions hereof, will be available for payment of the 
costs of the Project, will be sufficient to pay all the costs which will be 
incurred in that connection.  The Obligor agrees that if after exhaustion of 
the moneys in the Project Fund the Obligor should pay any portion of the 
costs of the Project pursuant to the provisions of this Section, the Obligor 
shall not be entitled to any reimbursement therefor from the Issuer or from 
the Trustee or from the holders of any of the Bonds, nor shall the Obligor be 
entitled to any diminution in or postponement or abatement of the payments 
required to be made by the Obligor under Section 5.3 herein.

     Section 4.7  Investment of Bond Fund, Project Fund, Rebate Fund and Tax 
Escrow Fund Moneys.  While the Mortgage Insurance Agreements are not in 
effect, any moneys held in the Project Fund shall be invested or reinvested 
by the Trustee upon the written request and direction of the Obligor 
exclusively in obligations which constitute Permitted Investments at a yield 
not in excess of the yield on the Bonds to the extent permitted by the laws 
of the State in the manner provided in Article VII of the Indenture.  While 
the Mortgage Insurance Agreements are not in effect, any moneys held in the 
Rebate Fund, the Bond Fund (excluding the Collateral Account) and the Tax 
Escrow Fund and while the Mortgage Insurance Agreements are in effect, any 
moneys held in the Project Fund, the Rebate Fund, the Bond Fund and the Tax 
Escrow Fund shall be invested or reinvested by the Trustee, upon the request 
and direction of the Obligor, in Permitted Investments, to the extent 
permitted by the laws of the State in the manner provided in Article VII of 
the Indenture.

     Section 4.8  Obligor to Pursue Remedies Against Suppliers, Contractors 
and Subcontractors and Their Sureties.  The Obligor shall be entitled to 
proceed, either separately or in conjunction with others, against any 
defaulting supplier, contractor or subcontractor and against any surety 
therefor, for the performance of any contract made in connection with the 
Project and shall be entitled to prosecute or defend any action or proceeding 
or take any other action involving any such supplier, contractor, 
subcontractor or surety which the Obligor deems reasonably necessary.

                                     -25- 

     Section 4.9  Application of Certain Moneys.  Any amount deposited in the 
Bond Fund pursuant to Sections 6.4, 6.9, 7.2, 7.3 or 9.3 herein shall be 
used, to the extent practicable in the opinion of the Trustee with the 
consent of the Obligor, for the purchase of Bonds in the open market for 
purposes of cancellation or for the redemption of Bonds within one year of 
receipt of that amount, if permitted pursuant to the optional redemption 
provisions of the Indenture.  If, in the opinion of the Trustee, that is not 
practicable or there is any balance remaining after that application, the 
remaining amount shall be credited against the portion of the next succeeding 
rental payment as represents the payment of principal of the Bonds to become 
due and payable on the next Principal Payment Date.

                                     -26- 

                                   ARTICLE V.

                  EFFECTIVE DATE OF THIS LEASE; DURATION OF
             LEASE TERM; RENTAL PAYMENTS AND ADDITIONAL PAYMENTS

     Section 5.1  Effective Date of This Lease; Duration of Lease Term. This 
Lease shall become effective upon its execution and delivery and the rights 
and obligations created hereby shall then begin, and, subject to the other 
provisions hereof, this Lease shall expire as of June 1, [last date on Bonds] 
or the date that all the Bonds have been fully paid or provision made for 
such payment, whichever is later.

     Section 5.2  Covenant of Quiet Enjoyment.  The Issuer agrees that so 
long as the Obligor shall pay the rent and all other sums payable by it under 
this Lease and shall duly observe all the covenants, stipulations and 
agreements herein contained, the Obligor shall have, hold and enjoy, during 
the Lease Term, peaceful, quiet and undisputed possession of the Project, and 
the Issuer shall from time to time take all necessary action to that end to 
the extent that any third parties claim an interest in the Project adverse to 
the Obligor's interest under or through the Issuer.

     Section 5.3  Rental Payments.

     (a)  As rental payments, the Obligor agrees to pay to the Trustee, as 
assignee and pledgee of and for the account of the Issuer, for deposit in the 
Bond Fund, (i) not later than each Obligor Payment Date the amounts set forth 
in the next paragraph hereof; and (ii) in the case of an optional redemption, 
not later than the 151st day before each date on which premium on the Bonds 
shall become due, (or such other date as shall be satisfactory to the Issuer 
pursuant to a written opinion as to the status of such funds issued by 
nationally recognized bankruptcy counsel selected by the Obligor and 
satisfactory to the Issuer) such amounts sufficient, together with any moneys 
then held by the Trustee in the Bond Fund and available for such purpose 
under Section 5.3 of the Indenture, to pay, as applicable, the principal of, 
premium (if any) and the interest on, the Bonds as the same become due on 
such date, whether at maturity, upon redemption or by acceleration or 
otherwise.

     The amount to be paid on each Obligor Payment Date pursuant to (a)(i) 
above shall equal (i) one-sixth the interest on the Bonds payable on the next 
Interest Payment Date except that for the Obligor Payment Dates through and 
including, November 1, 1992, the Obligor shall pay 1/4 of the amount of 
interest coming due on December 1, 1992 plus (ii) one-twelfth the

                                     -27- 

principal of the Bonds payable on the next Principal Payment Date; except 
with respect to the principal payment due June 1, 1993, the Obligor shall pay 
a sum derived by multiplying the principal payable on such date by a fraction 
of the numerator of which is one (1) and the denominator of which is the 
number of months from the delivery of the Mortgage Insurance Agreements up to 
and including June 1, 1993.  In the event that the Mortgage Insurance 
Agreements have not been executed and delivered by May 1, 1993, the amount 
payable on that date shall be the amount payable as principal on the Bonds on 
June 1, 1993.

     Notwithstanding anything herein to the contrary, if on any date on which 
principal of, or premium (if any) or interest on the Bonds is due, the amount 
theretofore paid by or on behalf of the Obligor hereunder is, for any reason, 
insufficient to make the required payment on the Bonds on such date, the 
Obligor hereby agrees to immediately pay an amount equal to such deficiency 
to the Trustee.  All such payments shall be made to the Trustee at its 
principal corporate office in lawful money of the United States of America 
which will be immediately available on the date each such payment is due.

     (b)  On the date of issuance of the Bonds, an amount equal to the 
Collateral Account Requirement shall be deposited by the Obligor in the 
Collateral Account in the Bond Fund in the form of a Letter of Credit.  While 
the Mortgage Insurance Agreements are not in effect, the Obligor agrees to 
maintain the Collateral Account Requirement and in furtherance thereof, to 
pay the Trustee on demand for deposit in the Collateral Account in the Bond 
Fund, an amount equal to the difference, if any, between the Collateral 
Account Requirement and the amount in the Collateral Account as of that date. 
Such payment shall be in the form of a Letter of Credit.  Such Collateral 
Account is to be drawn upon by the Trustee while the Mortgage Insurance 
Agreements are not in effect in the case of an acceleration of the 
indebtedness evidenced by the Bonds pursuant to Section 9.2 of the Indenture 
to the extent that funds in the Project Fund plus Eligible Funds in the 
Obligor Payments Account are insufficient to pay principal of, and interest 
on, the Bonds.

     (c)  Anything herein, in the Indenture or in the Bonds to the contrary 
notwithstanding, the obligations of the Obligor hereunder shall be subject to 
the limitation that payments constituting interest under this Section shall 
not be required to the extent that the receipt of such payments by the holder 
of any Bond would be contrary to the provisions of law applicable to such 
holder which limit the maximum rate of interest which may be charged or 
collected by such holder.  If, from any circumstance whatsoever, such holder 
should ever

                                     -28- 

receive as interest an amount which would exceed the maximum rate of interest 
which may be charged or collected by such holder, such amount which would be 
excessive interest shall be applied to the reduction of the principal of the 
Bonds and not to the payment of interest.

     Section 5.4  Administrative Expenses.  So long as any portion of the 
principal amount of the Bonds remains outstanding, the Obligor covenants and 
agrees to pay monthly on each Obligor Payment Date one-twelfth of the 
Issuer's annual Administrative Expenses.

     The Obligor shall pay, or cause to be paid either out of its own funds 
or, with respect to obligations incurred prior to the Completion Date, out of 
the Project Fund (i) the reasonable fees and charges of the Issuer, as and 
when the same become due, including the reasonable fees of its Counsel, (ii) 
the reasonable fees and expenses of the Trustee for acting as Trustee under 
the Indenture, as and when the same becomes due, including the reasonable 
fees of their Counsel, (iii) the reasonable fees and expenses of the Paying 
Agent and any Co-Paying Agent for acting as Paying Agent and Co-Paying Agent, 
respectively, for the Bonds, as and when the same become due, including the 
reasonable fees of their Counsel and (iv) the reasonable fees and expenses of 
the Bond Registrar for acting as Bond Registrar, as and when the same become 
due, including the reasonable fees of its Counsel.

     Except as otherwise provided in the Indenture, the Trustee shall have a 
lien on the Project Fund and the Bond Fund held by the Trustee under the 
Indenture as security for the payment of any fees and expenses due to the 
Trustee pursuant to this Section.

     If the Obligor should fail to make any of the payments required in this 
Section, the payment which the Obligor has failed to make shall continue as 
an obligation of the Obligor until the same shall have been fully paid, and 
the Obligor agrees to pay the same with interest thereon at the rate per 
annum equal to the Prime Rate until paid in full.

     Section 5.5  Obligations of Obligor Hereunder Absolute and 
Unconditional.  The obligations of the Obligor to make the payments required 
to be made in Section 5.3 herein and to perform and observe the other 
agreements on the Obligor's part contained herein shall be absolute and 
unconditional and shall not be subject to diminution by set-off, 
counterclaim, abatement or otherwise.  Until such time as the principal of, 
the redemption premium (if any) and the interest on, the Bonds shall have 
been paid in full, the Obligor (a) will not suspend

                                     -29- 

or discontinue any payments required to be made under Section 5.3 herein 
except to the extent the same have been prepaid, (b) will perform and observe 
all of the other agreements contained herein and (c) except as provided in 
Article XI herein, will not terminate the Lease Term for any cause, 
including, without limiting the generality of the foregoing, failure of the 
Obligor to complete the Project, any acts or circumstances that may 
constitute failure of consideration, sale, loss, eviction or constructive 
eviction, destruction of or damage to the Project, commercial frustration of 
purpose, any change in the tax or other laws of the United States of America 
or of the State or any political subdivision of either or any failure of the 
Issuer to perform and observe any agreement, whether express or implied, or 
any duty, liability or obligation arising out of or in connection herewith or 
with the Indenture.  Nothing contained in this Section shall be construed to 
release the Issuer from the performance of any of the agreements on its part 
herein contained.  The Obligor may, however, at the Obligor's own cost and 
expense and in the Obligor's own name or in the name of the Issuer, prosecute 
or defend any action or proceeding or take any other action involving third 
persons which the Obligor deems reasonably necessary in order to insure the 
acquisition, construction and/or installation of the Project or to secure or 
protect the Obligor's right of possession, occupancy and use thereof, and in 
such event the Issuer hereby agrees to cooperate fully with the Obligor.

     Nothing contained herein shall be construed as a waiver of any rights 
which the Obligor may have against the Issuer under this Lease, or against 
any person under this Lease, the Indenture or otherwise, or under any 
provision of law.

     Section 5.6  Obligor Consent to Assignment of Lease and Execution of 
Indenture.  The Obligor understands that the Issuer, as security for the 
payment of the principal of, the premium (if any) and the interest on the 
Bonds, will assign and pledge to, and create a security interest in favor of, 
the Trustee pursuant to the Indenture in certain of its rights, title and 
interest in and to this Lease including all Pledged Revenues, reserving, 
however, certain of its rights as set forth in the Indenture.  The Obligor 
hereby agrees and consents to such assignment and pledge, acknowledges 
receipt of a copy of the Indenture and consents to the execution of the 
Indenture by the Issuer.

     The Issuer and the Obligor recognize and agree that the assignment and 
pledge by the Issuer of its rights in this Lease to the Trustee pursuant to 
the Indenture shall not extinguish any of the rights or protections of the 
Issuer under this Lease, including, but not limited to, the provisions 
relating to indemnification and insurance protection.

                                     -30- 

     Section 5.7  Obligor's Performance Under Indenture.  The Obligor
agrees, for the benefit of the holders of the Bonds, to do and perform all acts
and things contemplated in the Indenture to be done or performed by the Obligor.

     Section 5.8  Rebate Payments.  The Obligor hereby agrees to comply with
the provisions of the Code and the Tax Regulatory Agreement with respect to the
rebate requirement set forth therein, including the timely payment of the Rebate
Amount to the Trustee for deposit in the Rebate Fund.

     Section 5.9  Mortgage Insurance Agreements.  The Obligor may deliver to
the Trustee at any time on or before February 5, 1993 or, if the IRBA's
commitment to issue the Mortgage Insurance Agreements is extended, on or before
such later date to which the IRBA's commitment to issue the Mortgage Insurance
Agreements is extended, fully executed and effective Mortgage Insurance
Agreements in form satisfactory to the Trustee, accompanied by an opinion of
counsel to the IRBA that the Mortgage Insurance Agreements have been duly
authorized, executed and delivered by the IRBA and constitute legal, valid and
binding obligations of the IRBA, enforceable in accordance with their terms.

                                     -31- 

                                  ARTICLE VI.

               MAINTENANCE, MODIFICATION, TAXES AND INSURANCE

     Section 6.1  Compliance with Legal and Insurance Requirements.  The
Obligor, at the Obligor's expense, shall promptly comply with all Legal
Requirements and Insurance Requirements, and shall procure, maintain and comply
with all permits, licenses and other authorizations required for any use being
made of the Project or any part thereof then being made or anticipated to be
made, and for the proper construction, installation, operation and maintenance
of the Project or any part thereof, and will comply with any instruments of
record at the time in force burdening the Project or any part thereof.  The
Obligor may, at the Obligor's expense and after prior written notice to the
Trustee and the IRBA, by any appropriate proceedings diligently prosecuted,
contest in good faith any Legal Requirement and postpone compliance therewith
pending the resolution or settlement of such contest provided that such
postponement does not, in the opinion of counsel to the Obligor satisfactory to
the Trustee and the IRBA, materially affect the lien or security interests
created or contemplated by the Indenture as to any part of the Project or
subject the Project, or any part thereof, to imminent loss or forfeiture.

     Section 6.2  Maintenance and Use of Project.  The Obligor, at the
Obligor's expense, will keep or cause to be kept the Project in good order and
condition (ordinary wear and tear excepted) and will make all necessary or
appropriate repairs, replacements and renewals thereof, interior, exterior,
structural and non-structural, ordinary and extraordinary, foreseen and
unforeseen.  The Obligor will not do, or permit to be done, any act or thing
which might materially impair the value or usefulness of the Project or any
part thereof, will not commit or permit any material waste of the Project or any
part thereof, and will not permit any unlawful occupation, business or trade to
be conducted on the Project or any part thereof.  The Obligor shall also, at the
Obligor's expense, promptly comply with all rights of way or use, privileges,
franchises, servitudes, licenses, easements, tenements, hereditaments and
appurtenances forming a part of the Project and all instruments creating or
evidencing the same, in each case, to the extent compliance therewith is
required of the Obligor under the terms thereof.

     Section 6.3  Additions, Modifications and Improvements.  The Obligor
may, in the Obligor's discretion and at the Obligor's expense, make from time to
time any additions, modifications or improvements to the Project which the
Obligor may deem desirable for business purposes provided that no such

                                     -32- 

additions, modifications or improvements shall, (a) in the opinion of the 
Project Supervisor, or, if the Project Supervisor is no longer retained by 
the Obligor, in the opinion of the IRBA or the IRBA's designee, adversely 
affect the structural integrity or strength of any improvements constituting 
a part of the Project or materially interfere with the usd and operation 
thereof, or (b) in the opinion of the Trustee, have a materially adverse 
effect on the value of the Project.  All additions, modifications and 
improvements so made by the Obligor shall become or be deemed to constitute a 
part of the Project, except as hereinafter provided.

     The Obligor may from time to time install Personal Property, as herein 
defined, in or upon the Project.  All such Personal Property shall remain the 
sole property of the Obligor and shall not be deemed part of the Project.  
The Personal Property may be removed at any time by the Obligor provided if 
any such removal will cause damage to any part of the Project, the Obligor 
shall repair such damage at the Obligor's expense.

     Section 6.4  Substitutions and Removals.  If the Obligor, in the 
Obligor's reasonable discretion, determines that any part of the Project 
shall have been inadequate, obsolete, worn-out, unsuitable, undesirable or 
unnecessary or should be replaced, the Obligor may remove such items with the 
written consent of the IRBA provided that such removal (taking into account 
any substitutions) shall not impair the operation of the Project and 
providing that the Obligor shall:

          (a)  substitute and install as part of the Project property of equal
     or greater utility and value, as determined by the Obligor (but not 
     necessarily fulfilling the same function in the operation of the Project) 
     as the removed property, which such substituted property shall be free 
     from all liens and encumbrances (other than Permitted Encumbrances) and 
     shall become part of the Project; or

          (b)  in the case of removal of property without substitution, promptly
     pay to the Trustee for deposit in the Bond Fund and application as provided
     in Section 4.9 herein an amount equal to (i) if the removed property is 
     sold or scrapped, the proceeds of such sale or the scrap value thereof, 
     (ii) if the removed property is used as a trade-in for property not to be 
     installed as part of the Project, the trade-in credit received by the 
     Obligor or (iii) in the case of the retention of such removed property by 
     the Obligor for other purposes, the fair market value of such property, 
     as determined by the Project

                                     -33- 

     Supervisor or, if the Project Supervisor is no longer retained by the 
     Obligor, in the opinion of the Trustee or the Trustee's designee and 
     the IRBA.

     If, prior to any such removal, the Obligor shall have acquired and 
installed personal property with the Obligor's own funds which have become a 
part of the Project, the Obligor may credit the amount so spent against the 
requirement that it either substitute other property or make payment under 
this Section on account of such removal, provided that such previously 
acquired and installed property meets the requirements for substituted 
property under this Section.

     The Obligor shall promptly report to the Trustee and the IRBA in writing 
each such removal, substitution, sale or other disposition and shall pay for 
deposit in the Bond Fund to the Trustee such amounts as are required by the 
provisions of the preceding subsection (b) of this Section promptly after the 
sale, trade-in or other disposition requiring such payment; provided, 
however, that no such payment need be made until the amount to be paid to the 
Trustee on account of all such sales, trade-ins or other dispositions not 
previously paid aggregates at least $50,000.

     At the request of the Trustee or the IRBA, the Obligor shall deliver to 
the Trustee and the IRBA such instruments, including Financing Statements and 
amendments thereof, that are necessary or advisable to perfect the Trustee's 
and/or the IRBA's lien upon any security interest in any personal property 
installed in substitution for any property removed pursuant to this Section. 
Upon the request of the Obligor, the Trustee shall execute and deliver to the 
Obligor appropriate instruments releasing any property removed pursuant to 
this Section from any liens and security interests.

     Section 6.5  Payment of Taxes and Other Governmental Charges.  Subject 
to Section 8.10, the Obligor shall pay, promptly when due and before penalty 
or interest accrue thereon, all taxes, payments in lieu of taxes, 
assessments, whether general or special, and other governmental charges of 
any kind whatsoever, foreseen or unforeseen, ordinary or extraordinary, that 
now or may at any time hereafter be assessed or levied against or with 
respect to the Project or any part thereof (including, without limitation, 
any taxes levied upon or with respect to the revenues, income or profits of 
the Obligor from the Project) which, if not paid, may become or be made a 
lien on the Project, or any part thereof, or a charge on such revenues, 
income or profits.

                                     -34- 

     Notwithstanding the preceding paragraph, the Obligor may, at the
Obligor's expense and after prior written notice to the Trustee, by appropriate
proceedings diligently prosecuted, contest in good faith the validity or amount
of any such taxes, payments in lieu of taxes, assessments or other charges and
during the period of contest, need not pay the items so contested.  However, if
at any time the Trustee or the IRBA shall deliver to the Obligor an opinion of
Counsel to the effect that by nonpayment of any such items, any lien or security
interest as to any part of the Project will be materially affected or the
Project or any part thereof will be subject to imminent loss or forfeiture, the
Obligor shall promptly pay such taxes, payments in lieu of taxes, assessments or
charges.  During the period when the taxes, payments in lieu of taxes,
assessments or other charges so contested remain unpaid, the Obligor shall set
aside on the Obligor's books adequate reserves with respect thereto.

     Section 6.6  Mechanics' and Other Liens.  The Obligor shall not permit
any mechanics' or other liens to be filed or to exist against the Project by
reason of work, labor, services or materials supplied or claimed to have been
supplied to, for or in connection with the Project or to the Obligor or anyone
holding the Project or any part thereof through or under the Obligor.  If any
such lien shall at any time be filed, the Obligor shall, within thirty days
after notice of the filing thereof but subject to the right to contest as set
forth herein, cause the same to be discharged of record by payment, deposit,
bond, order of a court of competent jurisdiction or otherwise.  Notwithstanding
the foregoing, the Obligor shall have the right, at the Obligor's expense and
after prior written notice to the Trustee and the IRBA, by appropriate
proceedings duly instituted and diligently prosecuted, to contest in good faith
the validity or the amount of any such lien.  However, if the Trustee or the
IRBA shall deliver to the Obligor an opinion of Counsel to the effect that by
nonpayment of any such items, any lien or security interests will be materially
affected or the Project or any part thereof will be subject to imminent loss or
forfeiture, the Obligor shall promptly cause such lien to be discharged of
record.

     Section 6.7  Insurance.  The Obligor shall keep the Project
continuously insured against loss or damage by fire, lightning, vandalism and
malicious mischief and all other perils covered by standard "extended coverage"
or "all risks" policies in the State, and against such other perils as the
Issuer and the IRBA may reasonably require for projects of the type of the
Project in the Woonsocket area, in an amount equal to the lesser of (a)
outstanding principal amount of Bonds plus interest thereon or
(b) 100% of the replacement cost of the

                                     -35-

Facilities and Equipment, without deduction for depreciation, and containing 
a replacement cost endorsement, in either case with a deductible, if any, 
satisfactory to the IRBA and the Issuer.  In no event shall the amount of 
insurance required hereunder be less than the amount necessary to avoid 
co-insurance.  For purposes of establishing the amount of the insurance 
coverage, replacement cost of the Facilities shall be determined not more 
frequently than at bi-annual intervals upon written request of the IRBA by a 
competent appraiser, appraisal company or one of the insurers acceptable to 
the Trustee and the IRBA.

     The Obligor shall keep and maintain comprehensive general accident and
public liability insurance in the minimum amounts of $2,000,000 in the aggregate
and $1,000,000 per occurrence for death or bodily injury resulting from each
occurrence in connection with the Project and other property and operations of
the Obligor and $1,000,000 for property damages for any occurrence in connection
with the Project and other properties and operations of the Obligor, without a
loss deductible.  Liability insurance coverage shall be increased to such larger
amounts as the Issuer and the IRBA may reasonably determine to be appropriate in
light of inflationary increases, the operations conducted by the Obligor and the
insurance coverage carried by other entities conducting similar operations.

     All insurance shall be obtained and maintained either by means of
policies with generally recognized, responsible insurance companies or in
conjunction with other companies through an insurance trust or other
arrangements satisfactory to the Trustee, the Issuer and the IRBA but in any
event with an insurance company or companies with a Best rating of "A XII" or
better, and all such companies are to be qualified to do business in the State. 
The insurance to be provided may be by blanket policies.  Each policy of
insurance shall be written so as not to be subject to cancellation or
substantial modification upon less than thirty days' advance written notice to
the Trustee, the Issuer and the IRBA.  The Obligor shall deposit with the
Trustee, the Issuer and the IRBA certificates or other evidence satisfactory to
the Trustee, the Issuer and the IRBA that (i) the insurance required hereby has
been obtained and is in full force and effect and (ii) all premiums thereon have
been paid in full. Prior to the expiration of any such insurance, the Obligor
shall furnish the Trustee, the Issuer and the IRBA with evidence satisfactory to
the Trustee, the Issuer and the IRBA that such insurance has been renewed or
replaced and that all premiums thereon have been paid in full and all insurance
policies required hereby are in full force and effect.  The Obligor shall file
with the Trustee, the Issuer and the IRBA a copy of any claim it may make under
the property insurance coverage which claim is in excess of $25,000.

                                     -36-

     All policies providing the property insurance coverage shall contain
standard mortgage clauses requiring all proceeds resulting from any claim for
loss or damage to be paid to the Trustee and the IRBA, as their interests may
appear, and any net proceeds of such insurance shall be paid and applied as
provided in Section 7.2 hereof.  Any proceeds of policies providing liability
insurance coverage shall be applied toward the extinguishment or satisfaction of
the liability with respect to which such insurance proceeds have been paid and
shall name the Trustee, the Issuer and the IRBA as additional insureds.

     Section 6.8  Workers' Compensation Coverage.  The Obligor shall maintain 
or cause to be maintained in connection with the Project any workers' 
compensation coverage required by the applicable laws of the State.

     Section 6.9  Title Insurance.  The Obligor covenants that the Obligor 
will obtain and deliver simultaneously with the execution of this Lease a 
title insurance policy satisfactory to the Issuer, the Trustee and the IRBA 
insuring the Issuer's interest in the Premises, the priority of the Mortgage 
and naming the IRBA as an additional insured as its interest may appear.  Any 
proceeds of such title insurance shall be paid to the Trustee for deposit in 
the Bond Fund in accordance with Section 4.9 herein, except that, if so 
requested by the Obligor, such proceeds shall be applied to remedy the defect 
in title.

                                     -37-

                                 ARTICLE VII.

                      DAMAGE, DESTRUCTION AND CONDEMNATION

     Section 7.1  Damage to or Destruction of Project.  Subject to the 
insurance provisions of the Mortgage, in case of any material damage to or 
destruction of the Project or any part thereof, the Obligor will promptly 
give or cause to be given written notice thereof to the Trustee and the IRBA 
generally describing the nature and extent of such damage or destruction. 
Unless in lieu thereof all outstanding Bonds are to be redeemed pursuant to 
this Lease and the Indenture, the Obligor shall, whether or not the net 
proceeds of insurance, if any, received on account of such damage or 
destruction shall be sufficient for such purpose, promptly commence and 
complete, or cause to be commenced and completed, the repair or restoration 
of the Project as nearly as practicable to the value, condition and character 
thereof existing immediately prior to such damage or destruction, with such 
changes or alterations, however, as the Obligor may deem necessary for proper 
operation of the Project.

     The Issuer, the Trustee, the IRBA and the Obligor shall cooperate and 
consult with each other in all matters pertaining to the settlement, 
compromise or arbitration of any material claim on account of any damage or 
destruction to the Project.  In no event prior to default will the Issuer 
voluntarily settle, or consent to the settlement of, any proceeding arising 
out of any material damage or destruction of the Project without the written 
consent of the Obligor.

     Section 7.2  Use of Insurance Proceeds.  In connection with the repair 
or restoration of the Project pursuant to Section 7.1 hereof, net proceeds of 
property insurance coverage shall be paid to and held by the Trustee in a 
separate insurance loss account of the Bond Fund, for application of as much 
as may be necessary for the payment of the costs of repair or restoration, 
either on completion thereof or as the work progresses, as directed by the 
Obligor. The Trustee may, prior to making payment from such loss account, 
require the Obligor to provide evidence that, or deposit with the Trustee 
moneys to be placed in such account so that, there will be adequate moneys 
available for such repair and restoration.  The Trustee shall not be 
obligated to make any payment from such account if there exists an Event of 
Default.  Any balance of the net proceeds of insurance (together with any 
investment income therefrom) held by the Trustee remaining after payment of 
all costs of such repair or restoration shall be paid to the Trustee for 
deposit into the Bond Fund for application as provided in Section 4.9 herein.

                                     -38-

     If, in lieu of repair or restoration, all outstanding Bonds are to be 
redeemed pursuant to this Lease, an amount equal to any net proceeds of 
insurance received by the Trustee prior to such redemption shall (together 
with any investment income therefrom) be applied by the Trustee to the 
redemption of the Bonds pursuant to this Lease and the Indenture.

     Section 7.3  Eminent Domain.  If title to or the temporary use of the 
Project, or any part thereof, shall be taken under the exercise of the power 
of eminent domain by any governmental body or by any person, firm or 
corporation acting under governmental authority, the Obligor will promptly 
give written notice thereof to the Trustee and the IRBA describing the nature 
and extent of such taking.  Any net proceeds received from any award made in 
such eminent domain proceedings shall, if received prior to the termination 
of this Lease, be paid to and held by the Trustee in a separate condemnation 
award account of the Bond Fund for application to one or more of the 
following purposes:

          (a) The restoration of the Project as nearly as practicable to the
     same condition or character thereof existing immediately prior to the
     exercise of the power of eminent domain with such changes or alterations,
     however, as the Obligor may deem necessary for proper operation of the
     Project.

          (b) The acquisition, construction and/or installation by the Obligor
     of other improvements suitable for the Obligor's operations on the
     Premises (which improvements shall be deemed a part of the Project);
     provided, that such improvements shall be subject to no liens or
     encumbrances (other than Permitted Encumbrances) and shall become part of
     the Project.

          (c) Payment into the Bond Fund and used for the redemption of Bonds,
     in the manner and to the extent permitted by this Lease and the Indenture.

Within ninety days from the date of entry of a final order in any eminent domain
proceeding, the Obligor shall direct the Trustee in writing to which purpose or
combination of purposes above specified the net proceeds of the condemnation
award (together with any investment income therefrom) shall be applied.  Any
balance of the net proceeds of the condemnation award (together with any
investment income therefrom) not required for the purpose or purposes so
directed shall be applied by the Trustee pursuant to Section 4.9 hereof.

                                     -39-

     The Issuer, the Trustee, the IRBA and the Obligor shall cooperate and 
consult with each other in all matters, including expenses, pertaining to the 
litigation, arbitration, settlement or adjustment of any and all claims and 
demands for damages on account of any taking or condemnation of the Project 
and the settlement or adjustment of any such claim shall be subject to the 
approval of the Obligor.

     Section 7.4  Investment and Disbursement of Insurance and Condemnation 
Proceeds.  All moneys received by the Trustee or its designee constituting 
net proceeds of insurance or a condemnation award shall, pending 
application, be invested in Permitted Investments at the written direction of 
the Obligor (for the account of and at the risk of the Obligor) and shall 
(together with any investment income therefrom) to the extent to be used for 
repair, rebuilding, restoration, acquisition or construction, be disbursed 
for such purpose, as provided in this Lease and the Indenture for the 
investment and disbursement of moneys in the Project Fund and, to the extent 
held in the Bond Fund for the redemption of Bonds, as provided in this Lease 
and the Indenture for the investment and disbursement of moneys in the Bond 
Fund.  Any balance of net proceeds of insurance or of a condemnation award 
(together with any investment income therefrom) held by the Trustee or its 
designee upon expiration of the Lease Term, or any net proceeds thereafter 
received by the Trustee, shall be paid to the IRBA to the extent of any 
amounts due to the IRBA to the extent of any amounts paid by the IRBA 
pursuant to the Mortgage Insurance Agreements and any balance shall be paid 
to the Obligor.

                                     -40-

                                 ARTICLE VIII.

                              SPECIAL AGREEMENTS

     Section 8.1  No Warranty of Condition or Suitability by the Issuer.  The 
Issuer makes no warranty, either express or implied, as to the condition of 
the Project or that it will be suitable for the Obligor's purposes or needs.

     Section 8.2  Inspection of the Project.  The Obligor agrees that the 
Issuer, the Trustee and the IRBA and their duly authorized agents who 
are reasonably acceptable to the Obligor shall have the right (but are under 
no obligation) at reasonable times during business hours and during the 
period of construction and/or installation of the Project, subject to the 
Obligor's usual safety and security requirements for persons on the Project, 
to enter upon the Project and to examine and inspect the Project without 
interference or prejudice to the Obligor's operations; provided, however, 
that any such right of inspection shall be solely (a) in the case of the 
Issuer, for the purpose of determining the Obligor's compliance with this 
Lease and (b) in the case of the Trustee, for the purpose of (i) determining 
the Obligor's compliance with this Lease and (ii) enforcing the rights of the 
bondholders pursuant to the Trustee's responsibilities under the Indenture 
and (iii) the IRBA to verify the condition of the collateral.  Before 
exercising any such right of inspection, the Issuer, the Trustee or the IRBA, 
as the case may he, shall first give notice to the Obligor at least 
twenty-four (24) hours prior to making the requested inspection of the 
Project.

     From and after default, the Obligor further agrees that the Issuer, the 
Trustee and the IRBA and their duly authorized agents who are reasonably 
acceptable to the Obligor shall have such rights of access to the Project as 
may be reasonably necessary to cause to be completed the acquisition, 
construction and/or installation of the Project.

     Section 8.3  Obligor Not to Adversely Affect Tax Exempt Status of 
Interest.  The Obligor hereby represents that the Obligor has not taken or 
omitted to take, or permitted to be taken on the Obligor's behalf, and agrees 
not to take or omit to take, or permit to be taken on the Obligor's behalf, 
any action which, if taken or omitted, would adversely affect the 
excludability from the gross income of the bondholders of the interest paid 
on the Bonds for Federal income tax purposes, and that the Obligor shall 
take, or require to be taken, such acts as may be required of the Obligor 
from time to time under applicable law or regulation to continue that 
exclusion.  The representations, warranties, covenants and statements of

                                     -41-

expectation of the Obligor set forth in the Tax Regulatory Agreement are by 
this reference incorporated in this Lease as though fully set forth herein.

     Section 8.4  Information as to Employment.  The Obligor agrees to 
provide such periodic reports with respect to employment levels and wage 
levels at the Project, including subtenants of the Project or portions 
thereof as may be requested by the Issuer from time to time.  In furtherance 
of the foregoing, the Obligor shall include covenants in any subleases of the 
Project, or any portion thereof, requiring subtenants to provide such 
information.

     Section 8.5 Financial Information.  The Obligor agrees to provide to
the Issuer as soon as available and in any event within ninety (90) days after
the last day of each fiscal year, an audit report, certified by a firm of
independent certified public accountants of recognized standing selected by the
Obligor, covering the operations of the Obligor for such year and containing a
balance sheet and statements of earnings and changes in financial position for
such year, such statements to be on a comparative basis with corresponding
statements for the preceding fiscal year.

     The Obligor further agrees to provide the Issuer with (i) such 
additional financial information and at such times as the Obligor is required 
to give to the IRBA under Sections l(e) and (f) of the Regulatory Agreement 
and (ii) notice of any amendment to, or modification or waiver of, such 
Sections of the Regulatory Agreement, all of which amendments, modifications 
or waivers shall be equally applicable to the Obligor's obligations to 
provide financial information to the Issuer under the immediately preceding 
paragraph and clause (i) above.

     Section 8.6 Covenant Against Discrimination.  The Obligor agrees and 
warrants that in the performance of this Lease the Obligor will not 
discriminate or permit discrimination against any person or group of persons 
on the grounds of race, color, religion, sex or national origin in any manner 
prohibited by the laws of the United States of America or the State.  To the 
extent required by Chapter 5.1 of Title 28 of the Rhode Island General Laws 
(1956), as amended, the Equal Opportunity and Affirmative Action Law, the 
Obligor shall adopt an affirmative action program designed to eliminate 
patterns and practices of discrimination.  The Obligor shall provide such 
information concerning the covenants in this Section 8.6 as the Issuer may 
require from time to time.

                                     -42-

     Section 8.7  Indemnification.  To the extent not prohibited by 
applicable law and in addition to all other indemnification hereunder and 
under the Obligor Documents except in the case of willful misconduct, fraud 
or gross negligence of the Issuer or the IRBA, the Obligor releases the 
Issuer and the IRBA from, agrees that the Issuer and the IRBA shall not be 
liable for, and indemnifies the Issuer and the IRBA against, all liabilities, 
claims, costs and expenses imposed upon or asserted against the Issuer or the 
IRBA on account of: (a) any loss or damage to property or injury to or death 
of or loss by any person that may be occasioned by any cause whatsoever 
pertaining to the construction, maintenance, operation and use of the 
Project; (b) any breach or default on the part of the Obligor in the 
performance of any covenant or agreement of the Obligor under the Obligor 
Documents or any related document, or arising from any act or failure to act 
by the Obligor, or any of its agents, contractors, servants, employees or 
licensees; (c) the authorization, issuance and sale of the Bonds, and the 
provision of any information furnished by the Obligor in connection therewith 
concerning the Project or the Obligor (including, without limitation, any 
information furnished by the Obligor for inclusion in any certifications made 
by the Issuer or for inclusion in, or as a basis for preparation of, the 
information statements filed by the Issuer or the IRBA); and (d) any claim, 
action or proceeding with respect to the matters set forth in (a), (b) and 
(c) above brought thereon.

     To the extent not prohibited by applicable law, the Obligor agrees to 
indemnify the Trustee, the Paying Agent, any Co-Paying Agent and the Bond 
Registrar for and to hold them harmless against all liabilities, claims, 
fees, costs and expenses incurred without gross negligence or willful 
misconduct on their part, on account of any action taken or omitted to be 
taken on their part in accordance with the terms of this Lease, the Bonds, 
the Indenture or any related document or any action taken at the request of 
or with the consent of the Obligor, except when the Trustee is in occupancy 
of the Project, including the costs and expenses of the Trustee, the Paying 
Agent, any Co-Paying Agent and the Bond Registrar in defending themselves 
against any such claim, action or proceeding brought in connection with the 
exercise or performance of any of their powers or duties under this Lease, 
the Bonds, the Indenture, or any related document.

     In case any action or proceeding is brought against the Issuer, the 
IRBA, the Trustee, the Paying Agent, any Co-Paying Agent or the Bond 
Registrar in respect of which indemnity may be sought hereunder, the party 
seeking indemnity promptly shall give notice of that action or proceeding to 
the Obligor, and the Obligor upon receipt of that notice shall have the

                                     -43-

obligation and the right to assume the defense of the action or proceeding; 
provided, that failure of a party to give that notice shall not relieve the 
Obligor from any of the Obligor's obligations under this Section unless that 
failure prejudices the defense of the action or proceeding by the Obligor.  
At its own expense, an indemnified party may employ separate counsel and 
participate in the defense.  The Obligor shall not be liable for any 
settlement made without the Obligor's consent.

     The indemnification set forth above is intended to and shall include the 
indemnification of all affected officials, directors, officers and employees 
of the Issuer, the IRBA, the Trustee, the Paying Agent, any Co-Paying Agent 
and the Bond Registrar, respectively, and such indemnification is intended to 
and shall be enforceable by the Issuer, the IRBA, the Trustee, the Paying 
Agent, any Co-Paying Agent and the Bond Registrar, respectively, to the full 
extent permitted by law.

     Section 8.8  Obligor to Maintain its Existence; Sale of Assets, Stock or 
Mergers.  The Obligor shall do all things necessary to preserve and keep in 
full force and effect its existence, rights and franchises, except as 
otherwise permitted by this Section.  In particular, the Obligor shall not 
(a) sell, transfer or otherwise dispose of all, or substantially all of its 
assets or stock; (b) consolidate with or merge into any other entity; or (c) 
permit one or more other entities to consolidate with or merge into it.  The 
preceding restrictions shall not apply, however, to a transaction approved by 
the IRBA if both of the following conditions are met:

          (i)  the transferee or the surviving or resulting entity has a net 
     worth, determined in accordance with generally accepted accounting
     principles consistently applied, equal to or greater than the net worth
     of the Obligor immediately prior to such consolidation, merger, sale,
     transfer or disposition; and

          (ii) the transferee or the surviving or resulting entity, if other
     than the Obligor, by proper written instrument satisfactory to the Issuer,
     the Trustee and the IRBA, irrevocably and unconditionally assumes the
     obligation to perform and observe the agreements and obligations of the
     Obligor under the Obligor Documents.

     Section 8.9  Confidentiality of Certain Information.  Except as required
by law, the Issuer hereby agrees to maintain the confidentiality of any
information provided by the Obligor with regard to trade secrets or other
non-public information, as requested by the Obligor.

                                     -44-

     Section 8.10  Tax Payments into Tax Escrow Fund.  The Obligor is 
required to make, or cause to be made, payments in lieu of taxes and 
assessments on the Project (the "Taxes") to the Taxing Authorities as such 
Taxes, or a portion thereof, shall become due.  The Obligor is also required 
to cause the Project to be valued, to cause the appropriate rate or rates of 
taxes or assessments to be properly applied to such valuation, to cause the 
Taxing Authorities to submit statements (the "Tax Statements") specifying the 
amounts and due date or dates (the "Tax Payment Dates") of the Taxes, or a 
portion thereof, due the Taxing Authorities, and to file any accounts or tax 
returns required by the Taxing Authorities.  Every year thereafter, the 
Obligor shall provide the Trustee with a copy of each Tax Statement of the 
Taxing Authorities within fifteen (15) days of the receipt of such statement.

     On June 1 of each year of the term of the Lease (the "Tax Estimation 
Date"), the Trustee shall estimate (i) the Taxes to be assessed as of 
December 31 of the year immediately preceding the Tax Estimation Date and 
(ii) the Tax Payment Dates.  The Trustee's estimates as to the Taxes and the 
Tax Payment Dates shall be based upon information derived by the Trustee from 
the Tax Statements and other evidence provided by the Obligor pursuant to the 
foregoing paragraph, subject to the Trustee's right of revision as 
hereinbelow described. The Trustee shall provide the IRBA with a statement as 
to each such estimate. The Trustee shall determine the amount of each Tax 
Payment to be paid by the Obligor to the Trustee under the Lease.  The amount 
of each Tax Payment shall be computed on a pro rata basis counting the number 
of monthly payments payable by the Obligor under the Lease during the period 
commencing on each Tax Payment Date and ending fifteen (15) days prior to the 
next succeeding Tax Payment Date and the Taxes, or a portion thereof, 
estimated by the Trustee to be due on said next succeeding Tax Payment Date.  
The Trustee shall credit to the Tax Payments due any investment proceeds of 
monies in the Tax Escrow Fund, but the Trustee shall not be obligated to 
apply such credit other than on a quarterly basis. The Trustee shall have the 
right to revise any such estimate of the Taxes and Tax Payment Dates and the 
Trustee's calculation of monthly Tax Payments at any time and from time to 
time if the Trustee is reasonably of the opinion that such estimate or 
calculation does not provide for payment in full of the Taxes to be assessed 
by the Taxing Authorities as of March 31 of any year as such Taxes, or a 
portion thereof, shall become due.  The Trustee shall provide the IRBA with a 
statement as to each such revision.

     The Obligor shall pay, or cause to be paid, the Tax Payments on each 
Obligor Payment Date with respect to interest.  The Obligor has the right to 
seek exemptions and

                                     -45-

discounts, if any, from the Taxes and to contest the same as provided in the 
Lease, however such right shall not reduce the payments required to be made 
hereunder unless Obligor has received a final favorable judgment with respect 
to such exemptions and discounts.

                                     -46-

                                 ARTICLE IX.

                   LEASE, SUBLEASE AND RELEASE OF PROJECT

     Section 9.1  Lease or Sublease by Obligor.  The Obligor may lease or 
sublease the Project, in whole or in part, with the prior written consent of 
the Issuer and the IRBA to any person, provided that:

          (a)  No such lease or sublease shall relieve the Obligor from the 
     Obligor's obligations under the Obligor Documents;

          (b)  In connection with any such lease or sublease the Obligor shall
     retain such rights and interests as will permit the Obligor to comply with
     obligations under the Obligor Documents;

          (c)  No such lease or sublease shall impair the purposes of the Act 
     to be accomplished by operation of the Project as herein provided;

          (d)  All such leases or subleases shall be subject to the terms and
     conditions of this Lease, including those provisions as to maintenance of
     the Project; and

          (e)  The Obligor shall, prior to execution of any such lease or
     sublease, furnish or cause to be furnished to the Trustee a certificate
     of the proposed lessee or sublessee setting forth the information 
     necessary to satisfy the Trustee that such lease or sublease will not 
     adversely affect the exemption of interest on the Bonds from Federal 
     income taxation.

     Section 9.2  Restrictions on Issuer.  The Issuer agrees that, except for 
the assignment and pledge of the Trust Estate to the Trustee pursuant to the 
Indenture and the IRBA's right of subrogation, it shall not create or suffer 
to be created any assignment, pledge, charge, lien or encumbrance on the 
Trust Estate.

     Section 9.3  Retention of Title to Project; Grant of Easements, Release 
of Equipment and Certain Land.  The Issuer shall not sell, assign, encumber, 
convey or otherwise dispose of the Project or any portion thereof during the 
Lease Term without the prior written consent of the Obligor and the IRBA.  At 
the request of the Obligor and with the approval of the IRBA (which approval 
will not be unreasonably withheld or delayed), the Issuer shall grant such 
encumbrances, rights of way or

                                     -47-

easements over, across or under, the Project, or grant such permits or 
licenses in respect to the use thereof, free from the lien of the Indenture, 
but only if such encumbrances, rights of way, easements, permits or licenses 
shall not materially adversely affect the operation of or security for the 
Project.  The Issuer agrees to execute and deliver and to cause and direct 
the Trustee to execute and deliver any and all instruments necessary or 
appropriate to confirm and grant any such interests and to release the same 
from the lien of the Indenture.

     Notwithstanding any other provision of this Lease, the Obligor may from 
time to time, with the prior written consent of the IRBA, request in writing 
to the Issuer the release of and removal from this Lease and the leasehold 
estate created hereby and the release from the lien of the Indenture of any 
part of the Project.  Upon any such request by the Obligor and upon the 
receipt of the prior written consent of the IRBA, the Issuer and the Trustee 
shall execute and deliver any and all agreements or instruments which are, in 
the opinion of the Issuer or the Trustee, as the case may be, necessary or 
appropriate to release and remove such part of the Project and convey title 
thereto to the Obligor or such person as the Obligor may designate.

     Notwithstanding the foregoing, no such release of Equipment shall be 
effected without the prior written consent of the IRBA, the Issuer and the 
Trustee and the delivery to the Trustee of an opinion of Bond Counsel to the 
effect that such release will not affect the tax exempt status of the Bonds.

     Notwithstanding the foregoing, no such release of any portion of the 
Premises shall be effected prior to expiration of the Lease Term unless there 
shall be deposited with the Trustee the following:

          (a)  A certificate of a qualified engineer (who may be an employee 
     of the Obligor), selected by the Obligor and acceptable to the Issuer 
     and the Trustee (which acceptance shall not be unreasonably withheld 
     or delayed), dated not more than sixty (60) days prior to the date of 
     the release, stating that, in the opinion of the person signing such 
     certificate, the portion of the Premises so proposed to be released is 
     not needed for the operation of the Project and the release so proposed 
     to be made will not impair the usefulness of the Project and will not 
     destroy the means of ingress thereto and egress therefrom; and

                                     -48-

          (b)  In the event the property released is sold by the Obligor, an
     amount equal to the fair market value of the Premises released to be 
     deposited in the Bond Fund and applied in accordance with Section 4.9 
     herein. 

          (c)  An opinion of counsel, acceptable to the Issuer and the IRBA,
     indicating that the portion of the Premises so released, and the portion
     remaining will comply with all zoning and subdivision laws, ordinances and
     similar regulations.

     No conveyance or release effected under the provisions of this Section 
shall entitle the Obligor to any abatement or diminution of rental payments 
hereunder.

                                     -49-

                                  ARTICLE X.

                        EVENTS OF DEFAULT AND REMEDIES

     Section 10.1  Events of Default Defined.  Each of the following shall
constitute an Event of Default:

          (a)  failure by the Obligor to pay the payments required to be made
     under Section 5.3 herein at the time specified therein; or

          (b)  failure by the Obligor to observe and/or perform any agreement
     hereunder on the Obligor's part to be observed and/or performed, other 
     than as referred to in subsection (a), (c), (d), (e) or (f) of this 
     Section, for a period of thirty (30) days after written notice 
     specifying such failure and requesting that it be remedied is given 
     to the Obligor by the Issuer, the IRBA or the Trustee, unless the Issuer, 
     the IRBA and the Trustee shall agree in writing to an extension of such 
     time prior to its expiration; provided, however, if the failure stated 
     in the notice cannot be corrected within the applicable period, the 
     Issuer, the IRBA and the Trustee will unreasonably not withhold their 
     consent to an extension of such time if it is possible to correct such
     failure and corrective action is instituted by the Obligor within the 
     applicable period and diligently pursued until the failure is corrected, 
     provided, however, that the failure by the Obligor to maintain the 
     tax-exempt status of the interest on the Bonds shall not be an Event 
     of Default hereunder provided that a Determination of Taxability has 
     occurred and the Bonds are redeemed pursuant to Section 3.1(b)(1) of 
     the Indenture; or

          (c)  the Obligor shall (i) admit in writing an inability to pay
     debts generally as they become due; (ii) have an order for relief 
     entered in any case commenced by or against the Obligor under the 
     Federal bankruptcy laws, as now or hereafter in effect; (iii) commence 
     a proceeding under any other Federal or state bankruptcy, insolvency, 
     reorganization or similar law, or have such a proceeding commenced 
     against the Obligor and such involuntary proceeding is not dismissed 
     or stayed within sixty (60) days of the commencement of such involuntary 
     proceeding; (iv) make an assignment for the benefit of creditors; or 
     (v) have a receiver or trustee appointed for the Obligor or for the 
     whole or any substantial part of the Obligor's property; or

                                     -50-

          (d)  any representation or warranty made by the Obligor herein or any
     statement in any report, certificate, financial statement or other 
     instrument furnished in connection with this Lease or with the purchase 
     of the Bonds shall at any time prove to have been materially false or 
     misleading in any material respect when made or given; or

          (e)  an event of default occurs and is continuing under the 
     Indenture; or

          (f)  written notice from the IRBA to the Issuer and the Trustee that
     there has been a breach of any covenant contained in the Regulatory 
     Agreement; or

          (g)  breach of a covenant or obligation under the Mortgage or the
     Security Agreement and such breach shall have continued beyond any 
     applicable grace period.

     The foregoing provisions of subsection (b) of this Section are subject 
to the following limitations: if by reason of force majeure the Obligor is 
unable in whole or in part to carry out the agreements on the Obligor's part 
therein referred to, the failure to perform such agreements due to such 
inability shall not constitute an Event of Default nor shall it become an 
Event of Default upon appropriate notification to the Obligor and/or the 
passage of the stated period of time.  The term "force majeure'' as used 
herein shall mean, without limitation, the following: act of God, strikes, 
lockouts or other industrial disturbances; act of public enemies; order of 
any kind of government of the United States of America or of the State or any 
of their departments, agencies, political subdivisions or officials of any 
civil or military authority; insurrections; riots; tornadoes; storms; floods; 
washouts; droughts; arrests; restraint of government and people; civil 
disturbances; explosions; breakage or accident to machinery, transmission 
pipes or canals; partial or entire failure of utilities; or any other cause 
or event not reasonably within the control of the Obligor.  The Obligor 
agrees, however, to remedy with all reasonable dispatch the cause or causes 
preventing the Obligor from carrying out such agreements; provided, that the 
settlement of strikes, lockouts and other industrial disturbances shall be 
entirely within the discretion of the Obligor, and the Obligor shall not be 
required to make settlement of strikes, lockouts and other industrial 
disturbances by acceding to the demands of the opposing party or parties when 
such course is, in the judgment of the Obligor, unfavorable to the Obligor.

                                     -51-

     Section 10.2  Remedies.  Whenever any Event of Default shall have 
happened and be continuing, the Trustee, on behalf of the Issuer as provided 
in the Indenture, may take any one or more of the following remedial steps:

          (a)  If the Mortgage Insurance Agreements are not in effect, (1) upon
     the occurrence of (i) an event of default under the Indenture and 
     acceleration of payment of the Bonds pursuant to Section 9.2 of the 
     Indenture or (ii) an Event of Default hereunder (other than an Event of 
     Default under Section 10.1(c) hereof), the Trustee shall, in accordance 
     with and subject to the Indenture, declare all payments to be made by 
     the Obligor under Section 5.3 to be immediately due and payable, 
     whereupon the same shall become immediately due and payable; and (2) 
     upon the occurrence of an Event of Default under Section 10.1(c) hereof, 
     all payments to be made by the Obligor under Section 5.3 shall 
     automatically be due and payable, without any act or action on the part 
     of any person. If the Mortgage Insurance Agreements are in effect upon 
     the occurrence of an Event of Default under the Lease the Trustee shall 
     notify the IRBA in writing of such Event of Default as provided in the 
     Mortgage Insurance Agreements.  If the Trustee exercises the remedy 
     afforded in this subsection (a) and accelerates all amounts payable under 
     Section 5.3 for the remainder of the Lease Term or such amounts are 
     automatically accelerated, the Obligor shall pay an amount sufficient, 
     together with any moneys held by the Trustee in the Bond Fund and 
     available for such purpose under Section 5.3 of the Indenture, to enable 
     the Trustee to pay the aggregate principal amount of the outstanding 
     Bonds and all interest on the Bonds then due and to become due to the 
     date of such acceleration.  In addition, the Obligor shall pay all fees 
     and expenses of the Issuer, the Trustee, the Bond Registrar and any 
     Paying Agent or Co-Paying Agent, together with any interest thereon, 
     accrued and to accrue through the date of such acceleration.

          (b)  The Trustee may take whatever action at law or in equity as may
     appear necessary or desirable to collect the payments then due and 
     thereafter to become due, or to enforce performance and observance of 
     any agreement of the Obligor hereunder subject to the provisions of the 
     Mortgage Insurance Agreements if the Mortgage Insurance Agreements are 
     in effect.

Any amounts collected pursuant to action taken under this Section shall be 
paid into the Bond Fund and applied in accordance with the provisions of the 
Indenture.

                                     -52-

     Section 10.3  No Remedy Exclusive.  No remedy herein conferred upon or 
reserved to the Issuer or the Trustee is intended to be exclusive of any 
other remedy or remedies, but each and every such remedy, to the extent 
permitted by applicable law, shall be cumulative and shall be in addition to 
every other remedy given hereunder or now or hereafter existing at law or in 
equity or by statute.  No delay or omission to exercise any right or power 
accruing upon the occurrence of any Event of Default shall impair any such 
right or power or shall be construed to be a waiver thereof, but any such 
right or power may be exercised from time to time and as often as may be 
deemed expedient.  In order to entitle the Issuer or the Trustee to exercise 
any remedy reserved in this Article, it shall not be necessary to give any 
notice, other than such notice or notices as may be herein expressly 
required.  Such remedies as are reserved to the Issuer in this Article shall 
also extend to the Trustee, and the Trustee and the bondholders shall be 
deemed third-party beneficiaries of all agreements herein contained.

     Section 10.4  Agreement to Pay Counsel Fees and Expenses.  If there 
should occur a default or an Event of Default hereunder and the Issuer or the 
Trustee should employ Counsel or incur other expenses for the collection of 
payments due hereunder or the enforcement of performance or observance of any 
agreement on the part of the Obligor herein contained, the Obligor agrees to 
pay on demand of the Issuer or the Trustee the reasonable fees and expenses 
of such Counsel and such other reasonable fees and expenses so incurred by 
the Issuer or the Trustee.

     If the Obligor should fail to make any payments required in this 
Section, such item shall continue as an obligation of the Obligor until the 
same shall have been paid in full, and the Obligor agrees to pay the same 
with interest thereon from the date such payment was due at the rate per 
annum equal to the Prime Rate until paid in full.

     The provisions of this Section shall survive the termination of this 
Lease.

     Section 10.5  No Additional Waiver Implied by One Waiver.  If any 
agreement contained herein should be breached by either party and thereafter 
waived by the other party, such waiver shall be limited to the particular 
breach so waived and shall not be deemed to waive any other breach hereunder.

     Section 10.6  Notice of Event of Default.  The Obligor shall notify the 
Trustee and the IRBA immediately if the Obligor becomes aware of the 
occurrence of an Event of Default or of any condition or event which, with 
the giving of notice or passage of time or both, would become an Event of 
Default.

                                     -53-

                                 ARTICLE XI.

                      PREPAYMENT OF THE RENTAL PAYMENTS

     Section 11.1  Options to Prepay Rental Payments. (a) The Obligor shall 
have, and is hereby granted, the option to prepay in whole or in part the 
rental payments required to be made by the obligor under Section 5.3 herein 
and to direct the Trustee to redeem the Bonds in the amounts, at the 
redemption prices and at the times described in Section 3.1(a)(1) of the 
Indenture.  To exercise the option granted in this Section, the Obligor 
shall, not less than thirty (30) nor more than forty-five (45) days before 
the desired prepayment date, give written notice to the Issuer and the 
Trustee of the Obligor's intention to prepay the rental payments required to 
be made by the Obligor under Section 5.3 herein on such date and shall 
specify therein the principal amount of Bonds to be redeemed with the moneys 
received upon such prepayment.  Upon the exercise of such option, the Obligor 
shall direct the Trustee to redeem Bonds in the principal amount and on the 
dates specified in the notice referred to in the preceding sentence and shall 
make arrangements satisfactory to the Trustee for the giving of the required 
notice of redemption of the Bonds.  At the times required pursuant to Section 
5.3 herein, the Obligor shall pay to the Trustee, as a prepayment of rental 
payments under Section 5.3 herein, an amount sufficient, together with any 
moneys held by the Trustee in the Bond Fund and available for such purpose 
under Section 5.3 of the Indenture, to enable the Trustee to pay the 
redemption price of the Bonds to be redeemed pursuant to Section 3.1(a)(1) of 
the Indenture plus accrued interest thereon to the redemption date.  In 
addition, the Obligor shall pay all fees and expenses of the Trustee, the 
Issuer, the Bond Registrar and any Paying Agent or Co-Paying Agent, together 
with any interest thereon, accrued and to accrue through such redemption date.

          (b)  The Obligor shall have, and is hereby granted, the option to 
prepay the rental payments required to be made by the Obligor under Section 
5.3 herein and to direct the Trustee to redeem the Bonds in whole pursuant to 
Section 3.1(a)(2) of the Indenture, if any of the following shall have 
occurred:

          (1)  the Project shall have been damaged or destroyed to such an 
     extent that, in the judgment of the Obligor, it cannot be reasonably 
     restored within a period of twelve (12) consecutive months to the 
     condition thereof immediately preceding such damage or destruction, and 
     either (i) the Obligor is thereby prevented from carrying on normal 
     operations at the Project for a period of twelve (12) consecutive months

                                     -54-

     or (ii) it would not be economically feasible for the Obligor to
     replace, repair, rebuild or restore the same;

          (2)  title in and to, or the temporary use of, all or substantially 
     all of the Project shall have been taken under the exercise of the 
     power of eminent domain by any governmental authority, or person acting 
     under governmental authority (including such taking as, in the judgment 
     of the Obligor, results in the Obligor being thereby prevented from 
     carrying on the Obligor's normal operations at the Project for a period 
     of nine (9) consecutive months);

          (3)  as a result of any changes in the Constitution of the State or 
     the Constitution of the United States of America or by legislative or 
     administrative action (whether State or Federal) or by final decree, 
     judgment, decision or order of any court or administrative body (whether 
     State or Federal), in the reasonable judgment of the Obligor this Lease 
     shall have become void or unenforceable or impossible of performance in 
     accordance with the intent and purposes of the parties as expressed 
     herein;

          (4)  this Lease is terminated prior to the expiration of the Lease 
     Term for any reason other than the occurrence of an Event of Default.

     To exercise such option, the Obligor (i) shall, within ninety (90) days 
following the event giving rise to the Obligor's desire to exercise such 
option, deliver to the Issuer and to the Trustee a certificate, executed 
by the Obligor, stating (A) the event giving rise to the exercise of such 
option, (B) that the Obligor has directed the Trustee to redeem all of the 
Bonds in accordance with the provisions of the Indenture and (C) the desired 
prepayment date, which date shall be not less than forty-five (45) nor more 
than sixty (60) days from the date such notice is mailed; and (ii) shall make 
arrangements satisfactory to the Trustee for the giving of the required 
notice of redemption.

     At the time required pursuant to Section 5.3 herein, the Obligor shall 
pay to the Trustee, as a prepayment of rental payments under Section 5.3 
herein, an amount sufficient, together with any moneys held by the Trustee in 
the Bond Fund and available for such purpose under Section 5.3 of the 
Indenture, to enable the Trustee to pay the redemption price of the Bonds 
pursuant to Section 3.1(a)(2) of the Indenture plus accrued interest thereon 
to the redemption date. In addition,

                                     -55-

the Obligor shall pay all fees and expenses of the Trustee, the Issuer, the
Bond Registrar and the Paying Agent and any Co-Paying Agent accrued and to
accrue to such redemption date.

          (c)  The Obligor shall have, and is hereby granted the option to 
prepay the rental payments required to be made by the Obligor under Section 
5.3 herein in whole by causing the Bonds to be deemed to be paid pursuant to 
Section 8.2 of the Indenture by (i) depositing irrevocably with the Trustee 
either moneys or Government Obligations, or a combination thereof, satisfying 
the requirements of Section 8.2 of the Indenture, (ii) paying all Trustee's, 
Issuer's, Bond Registrar's, Paying Agent's and any Co-Paying Agent's fees and 
expenses due in connection with the payment or redemption of any such Bonds 
and (iii) if the Bonds are to be redeemed on any date prior to their 
maturity, directing the Trustee to make arrangements satisfactory to the 
Trustee for the giving of the required notice of redemption of the Bonds.

     Section 11.2.  Obligation to Prepay Rental Payments Upon Determination 
of Taxability.  Upon the occurrence of a Determination of Taxability, as soon 
as practicable, but in no event longer than 120 days following the date of 
such Determination of Taxability, the Obligor shall be obligated to prepay 
all rental payments required to be made by the Obligor under Section 5.3 
herein and to direct the Trustee to make arrangements for the giving of 
notice of redemption of the Bonds and to redeem the Bonds in whole within the 
time provided in Section 3.3 of the Indenture.

     The Obligor shall give prompt written notice to the Issuer, the IRBA and 
the Trustee of its receipt of any oral or written advice from the Internal 
Revenue Service that an Event of Taxability has occurred.  Promptly upon 
learning of a Determination of Taxability, the Trustee shall cause notice 
thereof to be given to the bondholders in the same manner as is provided in 
the Indenture for notices of redemption.  In such notice to bondholders, the 
Trustee may make provisions for obtaining advice from bondholders, in such 
form as shall be deemed appropriate, respecting relevant assessments made on 
such bondholders by the Internal Revenue Service.

     At the time required pursuant to Section 5.3 herein, the Obligor shall 
pay to the Trustee, as a prepayment of rental payments under Section 5.3 
herein, an amount sufficient, together with any moneys held by the Trustee in 
the Bond Fund and available for such purpose under Section 5.3 of the 
Indenture, to enable the Trustee to pay the redemption price of the Bonds to 
be redeemed pursuant to Section 3.1(b)(1) of the Indenture.

                                     -56-

     Upon the redemption date provided for in this Section, provided there 
has been deposited with the Trustee the total amount as required, such 
amounts shall constitute the total compensation due the Issuer and the 
holders of the Bonds as a result of the occurrence of such Determination of 
Taxability and the Obligor shall not be deemed to be in default hereunder by 
reason of the occurrence of such Determination of Taxability.

     Upon the occurrence of a Determination of Taxability, any option of the 
Obligor to prepay the rental payments for the Project or to direct the 
Trustee to redeem the Bonds under any redemption provision of the Indenture 
shall be superseded by the Obligor's obligation to prepay rental payments for 
the Project under this Section as set forth herein.

     The provisions of this Section shall survive the termination of this 
Lease.

     Section 11.3  Mandatory Prepayment.  In accordance with the mandatory 
redemption requirements set forth in Sections 3.1(b)(1) and (3) of the 
Indenture, the Obligor shall be obligated to prepay lease payments required 
to be made under Section 5.3 hereof.

     In the event that the Mortgage Insurance Agreements are not executed and 
delivered by the IRBA on or before February 5, 1993, or, if the commitment of 
the IRBA to execute and deliver the Mortgage Insurance Agreements is 
extended, on or before the expiration of the commitment as extended, the 
Obligor shall be obligated to prepay rental payments required to be made by 
the Obligor under Section 5.3 herein in accordance with the mandatory 
redemption requirements set forth in Section 3.1(b)(2) of the Indenture and 
to direct the Trustee to make arrangements for the giving of any required 
notice of redemption of the Bonds and to redeem the Bonds within the time 
provided in Section 3.3 of the Indenture.

     At the time required pursuant to Section 5.3 herein, the Obligor shall 
pay to the Trustee, as a prepayment of rental payments under Section 5.3 
herein, an amount sufficient, together with any moneys held by the Trustee in 
the Bond Fund and available for such purpose under Section 5.3 of the 
Indenture, to enable the Trustee to pay the redemption price of the Bonds to 
be redeemed pursuant to Section 3.1(b) of the Indenture.

     Section 11.4  Purchase of Project.  At any time concurrently with or 
after payment in full of principal of, and premium (if any) and interest on, 
the Bonds, whether at maturity or upon redemption or acceleration of the 
Bonds, and

                                     -57-

the payment in full of all amounts owed to the Issuer, the IRBA, the Trustee,
the Bond Registrar, the Paying Agent and any Co-Paying Agent hereunder and under
the Indenture, the Obligor has the option to purchase the Project from the
Issuer at a purchase price of $2,000.

     Section 11.5  Conveyance Upon Purchase.  At the closing of any purchase 
of the Project pursuant to Section 11.4 herein, the Issuer or the Trustee on 
behalf of the Issuer will, upon payment of the purchase price, deliver to or 
cause to be delivered to the Obligor a bill of sale conveying title to the 
personal property and fixtures comprising part of the Project, a deed 
conveying title to the real property comprising the balance of the Project, 
documents releasing and conveying to the Obligor all of the Issuer's rights 
and interests in and to any rights of action, or any insurance proceeds or 
condemnation award, with respect to the Project, a release or satisfaction of 
the liens of the Indenture and the Mortgage and a termination of the 
Indenture or other documents conveying to the Obligor the leasehold interest 
in the Premises, as such property then exists, subject to the following:

          (i)  any Permitted Encumbrances to which title to said Project was 
     subject when conveyed to the Issuer;

          (ii)  any liens, easements and encumbrances created at the request 
     of the Obligor or to the creation or suffering of which the Obligor 
     consented in writing;

          (iii)  any liens and encumbrances resulting from the failure of the 
     Obligor to perform or observe any of the agreements on the Obligor's 
     part contained in this Lease; and

          (iv)  any liens of the Obligor for taxes or assessments not then 
     delinquent.

Concurrently with the delivery of such title documents, there shall be 
delivered by the Issuer to the Trustee any instructions or other instruments 
required by the Indenture to defease and pay the Bonds.

     Section 11.6  Relative Position of Options and Indenture.  The options 
to purchase the Project granted to the Obligor in this Article shall be and 
remain prior and superior to the Indenture and may be exercised whether or 
not there exists an Event of Default hereunder, provided that the existence 
of such Event of Default will not result in nonfulfillment of any condition 
to the exercise of any such option.

                                     -58-

                                     ARTICLE XII.

                                    MISCELLANEOUS

   Section 12.1  Notices.  All notices, approvals, consents, requests and other
communications hereunder shall be in writing and shall be deemed to have been
given when delivered or mailed by first class registered or certified mail,
return receipt requested, postage prepaid, and addressed to the appropriate
Notice Address.  A duplicate copy of each notice, approval, consent, request or
other communication given by the Issuer, the Obligor, the IRBA or the Trustee
shall also be given the others.  Each such party may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
approvals, consents, requests or other communications shall be sent or persons
to whose attention the same shall be directed.

   Section 12.2  Binding Effect.  This Lease shall inure to the benefit of and
shall be binding upon the Issuer, the Obligor and their respective successors
and assigns provided that this Agreement may not be assigned by the Obligor and
may not be assigned by the Issuer except to the Trustee pursuant to the
Indenture or as otherwise may be necessary to enforce or secure payment of the
Bonds.

   Section 12.3  Severability.  If any provision hereof shall be held invalid
or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.

   Section 12.4  Amounts Remaining in Project Fund, Bond Fund and Rebate Fund. 
It is agreed by the parties hereto that any amounts remaining in the Project
Fund, the Rebate Fund or the Bond Fund upon expiration or sooner termination of
this Lease, after payment in full of the Bonds and payment of the fees, charges
and expenses of the Trustee, the Issuer, the Bond Registrar, the Paying Agent
and any Co-Paying Agent in accordance with the Indenture and payment of all
amounts required to be paid to the United States in accordance with the Tax
Regulatory Agreement, shall be disposed of in accordance with the terms of the
Indenture.

   Section 12.5  Grant of Security Interest.  For the purpose of confirming the
Issuer's interest hereunder, the Obligor hereby grants to the Issuer a security
interest in all of the Obligor's interest in the Facilities and Equipment
hereto, all additions thereto, substitutions therefor and replacements thereof,
and in general all Facilities and Equipment acquired by the Issuer or the
Obligor with the proceeds of the Bonds,

                                         -59-

and all additions thereto, substitutions therefor and replacements thereof, and
any other property which under the terms of this Lease is to become the property
of the Issuer or be subjected to the lien of the Indenture including any part
thereof acquired, constructed and/or installed by the Obligor as part of the
Project, excluding, however, any machinery, equipment or other property
installed by the Obligor to which title has been specifically retained pursuant
to the terms of this Lease.

   Section 12.6  Assignment of Leases and Rents.  As additional security for
the payment and performance by the Obligor of its obligations hereunder and all
other obligations of the Obligor to the Issuer, the Obligor does hereby
transfer, assign and deliver unto the Issuer all of the rights, title and
interest of the Obligor in and to:

        (a)  All leases, subleases and tenancies, whether written or oral, now
   or hereafter existing with respect to any portion or portions of the Project
   together with any renewals or extensions thereof and all leases, subleases
   and tenancies in substitution therefor (all of which are hereinafter
   collectively referred to as the "Assigned Leases");

        (b)  All rents and other payments of every kind due or payable and to
   become due or payable to the Obligor by virtue of the Assigned Leases, or
   otherwise due or payable and to become due or payable to the Obligor as the
   result of any use, possession or occupancy of any portion or portions of the
   Project (all of which are hereinafter collectively referred to as the
   "Rents");

        (c)  All right, title and interest of the Obligor in and to all
   guarantees of the Assigned Leases, if any.

   TO HAVE AND TO HOLD the Assigned Leases and the rents, together with all the
rights, privileges and appurtenances now or hereafter in any wise belonging or
pertaining thereto, unto the Issuer, its successors and assigns, forever,
subject, however, to the terms and conditions as hereinafter provided.

   Subject to the final paragraph of this Section 12.6, the Obligor does hereby
authorize and empower the Issuer to collect said rents and other payments as the
same shall become due, and does hereby irrevocably direct each and all of the
lessees, sublessees, tenants or other occupants of the Project to pay to the
Issuer, upon demand by the Issuer, such rents and other payments as may now be
due or payable;

                                         -60-

        (a)  No such demand shall be made by the Issuer unless and until there
   shall have been an Event of Default hereunder with respect to the failure of
   the Obligor to pay any installment of rent or an Event of Default with
   respect to the performance or observance by the Obligor of any other term or
   condition, and that, until such demand is made, the Obligor shall be
   authorized to collect or continue to collect said rents and other payments.

        (b)  The Obligor's right to collect or to continue to collect such
   rents and other payments as aforesaid, shall not authorize collection by the
   Obligor of any installment of rent (exclusive of security deposits) more
   than one (1) month in advance of the respective date prescribed in the
   Assigned Leases for the payment thereof without the written consent of the
   Issuer; and

        (c)  No lessee, sublessee, tenants or other occupant of the Project
   making any payment to Issuer pursuant to this Section shall be under any
   obligation to inquire into or determine the actual existence of any Event of
   Default claimed by the Issuer.

        (d)  The Obligor does hereby constitute and appoint the Issuer, while
   this assignment remains in full force and effect, irrevocably, and with full
   power of substitution and revocation, its true and lawful attorney, for it
   and in its name, place and stead, to take such action as may be necessary or
   advisable as to insure that the construction of the Project takes place in
   accordance with this Lease, and to enter and take possession without the
   commencement of any action to foreclose hereunder or to exercise any rights
   or powers it may have hereunder and to do, execute and perform any act,
   deed, matter or thing whatsoever that ought to be done, executed and
   performed in and about or with respect to the Project as fully as the
   Obligor might do; provided, however, that this assignment shall in no
   respect operate to place upon the Issuer any responsibility or obligation to
   take any action whatsoever with respect to the operation, control, care,
   management or repair of the Project and that any action taken or failure or
   refusal to act by the Issuer shall be at the Issuer's election and without
   any liability on its part, and provided further that the Issuer shall not
   exercise any of the above rights or powers until there shall have been an
   Event of Default in payment or performance of any of the terms hereof.

                                         -61-

   Section 12.7  Recording.  This Lease and every assignment, supplement and
modification hereof or any appropriate and sufficient memorandum thereof shall
be recorded in the office of the Recorder of Deeds of the Town of Woonsocket,
Rhode Island, or in any other such office as may be at the time provided by law
as the proper place for the recordation of this Lease.  This Lease as originally
executed or an appropriate and sufficient memorandum thereof shall be so
recorded prior to the recordation of the Indenture.  The security interest of
the Issuer created herein or any supplement thereto and the assignment of such
security interest to the Trustee shall be perfected by the filing of financing
statements which fully comply with the U.C.C. in the office of the Secretary of
the State of Rhode Island, in the City of Providence, Rhode Island, and in the
office of the Recorder of Deeds of the Town of Woonsocket, Rhode Island.  The
parties hereto further agree that all necessary continuation statements shall be
filed by the Trustee within the time prescribed by the U.C.C. to continue the
security interest created by this Lease, so the rights of the Trustee in the
Project and the assignment to the Trustee of the amounts payable under this
Lease shall be fully preserved as against creditors or purchasers for value from
the Issuer or the Obligor.

   Section 12.8  Delegation of Duties by Issuer.  It is agreed that under the 
terms of this Lease the Issuer has delegated certain of its duties hereunder 
to the Obligor and that under the terms of the Indenture the Issuer has 
delegated certain of its duties thereunder to the Trustee.  The fact of such 
delegation shall be deemed a sufficient compliance by the Issuer to satisfy 
the duties so delegated and the Issuer shall not be liable in any way by 
reason of acts done or omitted by the Obligor, the Authorized Obligor 
Representative or the Trustee. The Issuer shall have the right at all times 
to act in reliance upon the authorization, representation or certification of 
the Authorized Obligor Representative or the Trustee.

   Section 12.9  Extent of Covenants of the Issuer; No Personal Liability.  All
covenants, obligations and agreements of the Issuer contained in this Lease or
the Indenture shall be effective to the extent authorized and permitted by
applicable law.  No such covenant, obligation or agreement shall be deemed to be
a covenant, obligation or agreement of any present or future director, officer,
agent or employee of the Issuer in

                                         -62-

other than his or her official capacity, and neither the directors of the Issuer
nor any official executing the Bonds shall be liable personally on the Bonds or
be subject to any personal liability or accountability by reason of the issuance
thereof or by reason of the covenants, obligations or agreements of the Issuer
contained in this Lease or in the Indenture.

   Section 12.10  Amendments, Changes and Modifications.  This Lease may not be
effectively amended or terminated except as provided in the Indenture.

   Section 12.11  Counterparts.  This Lease may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

   Section 12.12  Captions.  The captions and headings herein are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions hereof.

   Section 12.13  Law Governing Construction of Lease.  This Lease shall be
governed by, and construed in accordance with, the laws of the State.

   Section 12.14  Indenture Governs.  Except as set forth in Section 11.6
hereof, in any conflict between this Lease or any other documents executed in
connection with the issuance of the Bonds and the Indenture, the Indenture shall
govern.

   IN WITNESS WHEREOF, the Issuer has caused this Lease to be executed in its
name by an authorized officer and its corporate seal to be affixed hereto and
attested by an authorized officer, and the Obligor has cause this Lease to be
executed in its name by an authorized officer and its corporate seal to be
affixed hereto and attested by an authorized officer, all as of the date first
above written.

(Corporate Seal)                       RHODE ISLAND INDUSTRIAL
   FACILITIES CORPORATION

Attest: /s/ Robert E. Donovan          By: /s/ Earl F. Queenan, Jr.
        ------------------------          ------------------------
        Robert E. Donovan                 Earl F. Queenan, Jr.
        Secretary                         Treasurer

                                         -63-

                                       STERICYCLE, INC.

                                       By: /s/ Vernon J. Nagel
                                          ------------------------
                                          Vernon J. Nagel
                                          Chief Financial Officer
                                          and Vice President

STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE

   I, the undersigned, a Notary Public in and for said State and County, do
hereby certify that before me personally appeared Earl F. Queenan, Jr., whose
name as Treasurer of the Rhode Island Industrial Facilities Corporation is
signed to the foregoing Lease, and who is known to me and known by me to be such
officer, acknowledged before me on this day under oath, that, being informed of
the contents of said Lease he, with full authority, executed the same as his
free act and deed and as the free act and deed of said Rhode Island Industrial
Facilities Corporation.

   Given under my hand and seal of office this 29th day of June, 1992.

                                       /s/ Carol I. O'Reilly
                                       Notary Public
                                       CAROL I. O'REILLY Notary Public
                                       State of Rhode Island [Illegible]
                                       My Commission Expires January 1, 1994

STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE

   I, the undersigned, a Notary Public in and for said State and County, do
hereby certify that before me personally appeared Vernon J. Nagel, whose name as
Chief Financial Officer and Vice President of Stericycle, Inc. is signed to the
foregoing Lease, and who is known to me and known by me to be such officer,
acknowledged before me on this day under oath, that, being informed of the
contents of said Lease he, with full authority, executed the same as his free
act and deed and as the free act and deed of Stericycle, Inc.

   Given under my hand and seal of office this 29th day of June, 1992.

                                       /s/ Carol I. O'Reilly
                                       Notary Public
                                       CAROL I. O'REILLY Notary Public
                                       State of Rhode Island [Illegible]
                                       My Commission Expires January 1, 1994

                                         -64-

                                      EXHIBIT A

A certain lot or parcel of land with all the buildings and improvements 
thereon situated on the* southerly side at Roadway A In the City of Woonsocket, 
County of Providence, state of Rhode Island and shown as Lot 204 on that plan 
recorded or to be recorded entitled, "Resubdivision of Woonsocket Industrial 
Park - East prepared for Woonsocket, Industrial Development Corporation 
Woonsocket, Rhode Island, April, 1983 Scale: 1 inch Equals 80 Feet by 
Robert C. Cournoyer & Associates, Inc." more particularly bounded and 
described as follows:

Beginning at a point on said southerly line of Roadway A said point
being one hundred forty one and fifty nine one hundredths (141.59)
feet on the bearing of N 41 DEG. 24' 57" E from a point of curvature at
the intersection of the easterly line of CVS Drive and the southerly
line of Roadway A and being the most northeasterly corner of Lot 6a as
shown on the above, mentioned plan and being the most southwesterly
corner of the parcel hereby described;

thence:   N 41 DEG. - 24' - 57" E, along said southerly line of Roadway A one
          hundred four and twenty one one hundredths (104.21) feet to a point
          of curvature

thence:   Northeasterly along a curved line to the left having a radius of one
          thousand two hundred twenty five (1225.00) feet, two hundred twenty
          seven and nine one hundredths (227.09). feet to the southwesterly
          corner of Lot l9b as shown on the above mentioned plan.  The last two
          (2) lines bounding on said southerly line of Roadway A;

thence:   S 48 DEG. 35' - 03" E, along said westerly line of Parcel 19b two
          hundred ninety five and ninety nine one hundredths (295.91) feet to
          the northerly line of Lot 21a as shown on the above mentioned plan

thence:   S 41 DEG. - 24' - 57" W, along said northerly line of Lot 21a two
          hundred forty nine and eight one hundredths (249.05) feet

thence:   S 69 DEG. - 46' - 00" W, fifty eight and six tenths (58.60) feet to
          the easterly line of Lot 6a as shown on the above mentioned plan. 
          The last two (2) lines bounding on the northerly line off Lot 21a;

thence:   S 41 DEG. - 24' - 57" W, twenty nine and thirty four one hundredths
          (29.34) feet

thence:   N 48 DEG. - 35' - 03" W, two hundred forty seven and seventeen one
          hundredths (247.17) feet to the point of beginning.  The last two (2)
          lines bounding on said easterly line of Lot 6a.

   SUBJECT TO any and all covenants, conditions, restrictions, easements,
rights of way terms and rights of record.

                                      EXHIBIT B

                                   STERICYCLE, INC.

                               WOONSOCKET, RHODE ISLAND

                              PROPOSED EQUIPMENT LISTING

MACHINERY AND EQUIPMENT - CLASS LIFE: 10 YEARS

Description                             Quantity
- -----------                             --------

R.F. Unit                                  1

Size Reduction System                      2

Air Transport System                       2

Screw Conveyors                            2

Cooling Towers                             2

Hydraulic Power Unit/Cyl.                  1

Lift Tables                                2

Hydraulic Pusher                           1

Wash Station                               1

Lot Scales                                 1

Lot Conveying System                       1

Baler                                      1

Lot Chutes and Collectors                  1

Hydraulic Presses                          2

Incline Conveyors                          2

Air Compressor (cart)                      1

Radiation Detector                         4

Press Room Compressors                     2

Cooler                                     1

Lot Door Seals                             1

Lot Blade Assemblies                       1

500 gallon storage tank                    1

Magna Helix                                1

Staging Tables                             4

Washer/Dryer                               1

Exhaust Fans                               6

Lot Make Up Air Unit                       1

Fire Suppression Systems                   2

Lot Rubber ISO Prebreaker                  1

Lot Hydraulic Pipins                       1

Hydraulic Cylinder Pum & Valve             1

Wash Stat Pump                             1

Miscellaneous Electrical                   1

Thermocouples                              1

High Press Washer                          1

Disk Grinder                               1

Radiation Probe                            1

Welder                                     1

Tach. & Dial Indicator                     1

Hammer Drill                               1

Grease Gun                                 1

Mechanics Tools (Misc.)                    1

Safety Clothing/Gloves/Suites              1

Disinfectant                               1

Detergent                                  1

First Aid Kit                              1

Safety Belt System                         1

Respirator Hoses                           1

                                         B-2

Size Reduction System

Material Transport (Air)

Chutes/Collectors

Air Filtration

Scale

Horizontal Wrapper

Screw Conveyor

Miscellaneous

SUBTOTAL MACHINERY AND EQUIPMENT

OFFICE EQUIPMENT - CLASS LIFE; 10 YEARS

Description                   Quantity
- -----------                   --------

Phone System                    1

Furniture                       1

Supplies                        1

Microwave & Refrigerator        1

Other Office Equipment          1

SUBTOTAL OFFICE EQUIPMENT

TOTAL

                                   STERICYCLE, INC.

                               WOONSOCKET RHODE ISLAND

                                 CONSTRUCTION BUDGET

CLASS LIFE; 45 YEARS

Description

SITEWORK:

Preparation/Demo

Utilities

Improvements

SUBTOTAL SITEWORK

BUILDING IMPROVEMENT:

Framework

Exterior Wall

Footing & Foundations

Walls

Doors

Windows

Roof Coverings

Offices Finishes

Plumbing

Fire Protection

Heating

Electrical Service & Dist.

Specialties

General Condition

O&P

SUBTOTAL BUILDING IMPROVEMENT

Architecture & Engineering:
- ---------------------------

Architecture & Engineering

SUBTOTAL ARCHITECTURE & ENGINEERING

TOTAL

          -JOURNAL-                DATE JUN-24-1992       TIME 13:50

DATE/TIME     - JUN-24 13:47

JOURNAL NO.   - 28

COMM.RESULT   - OK

PAGES         - 06

DURATION      - 00:03'10

MODE          - XMT

STATION NAME  -

TELEPHONE NO. - T        14012766611

RECEIVED ID   - 4012766611

RESOLUTION    - STANDARD

                                       -STERICYCLE (CORP)

                                           -     1 708 945 653- 

                                     EXHIBIT "C"

                                   REQUISITION NO.

                                      $2,030,000

                    Rhode Island Industrial Facilities Corporation
                         Industrial Development Revenue Bonds
                (Industrial-Recreational Building Authority Program -
                       Stericycle, Inc.-Project - 1992 Series)

To:  Fleet National Bank, as

    Trustee under Trust Indenture dated as of June 1, 1992.

    This Requisition is made pursuant to Section 6.3 of the above Trust
Indenture and Section 4.3 of the Lease, as defined in the Trust Indenture.

    The Trustee is directed to pay sums out of the Project Fund as follows:

          Payee               Purpose of Payment               Amount
          -----               ------------------               ------

                                         C-1

   I hereby certify on behalf of STERICYCLE, INC. (the 'Obligor") that
(capitalized terms are as defined in the Lease and the Tax Regulatory
Agreement):

       (i)  each obligation mentioned herein (a) has been properly incurred,
   (b) is a proper charge against the Project Fund, (c) is currently due and
   payable, (d) has not been previously paid or reimbursed (as applicable) and
   (e) has not been the basis of any previous withdrawal;

       (ii)  this Requisition and the use of proceeds set forth herein are
   consistent in all material respects with the Tax Regulatory Agreement;

       (iii)  95% or more of the amount requisitioned is to be applied to costs
   (a) paid or incurred after the adoption of the Issuer's Inducement
   Resolution for the Project, (b) for the acquisition, construction or
   reconstruction of land or property of a character subject to the allowance 
   for depreciation provided in Section 167 of the Code and (c) which are
   chargeable to the capital account of the Project or would be so chargeable
   either with an election by the Obligor or but for the election of the
   Obligor to deduct the amount of the item;

       (iv)  this Requisition and the use of proceeds set forth herein will not
   cause more than 2% of the proceeds of the Bonds to be applied to costs of
   issuance of the Bonds; and

       (v)  this Requisition shall be conclusive evidence of the facts and
   statements set forth herein and shall constitute full warrant, protection
   and authority to the Trustee for its actions taken pursuant hereto.

Reviewed and Approved:                 STERICYCLE, INC.

By                                     By
  ---------------------------------      ------------------------------------
    Project Supervisor                     Authorized Obligor
                                           Representative

                                         C-2

Approved:

RHODE ISLAND INDUSTRIAL-RECREATIONAL
BUILDING AUTHORITY

By
  ---------------------------------
     Manager

Acknowledged:

RHODE ISLAND INDUSTRIAL
FACILITIES CORPORATION

By
  ---------------------------------
     Authorized Issuer
     Representative

                                         C-3

                STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS

                                CONSENT AGREEMENT

                                     BETWEEN

               RHODE ISLAND DEPARTMENT OF ENVIRONMENTAL MANAGEMENT

                                       AND

                                STERICYCLE, INC.

                                    PREAMBLE

This Consent Agreement is entered by and between the Rhode Island Department of
Environmental Management ("the Department") and Stericycle, Inc. ("Stericycle"
or "the Company"), a Delaware corporation with its corporate offices located in
Deerfield, Illinois.  This Agreement is entered into in accordance with 
Chapters 23 18.9, 23-19.12 and 42-17.1 of the Rhode Island General Laws 
("R.I.G.L.").

WHEREAS, on 29 September 1994 and 3 April 1995, the Rhode Island Department of
Environmental Management ("Department") issued a Notice of Violation and Order
and Penalty ("NOVAP") to Stericycle.

WHEREAS, the NOVAP alleged violations of R.I. Gen. Laws Section 23-18.9, as
amended (the "Solid Waste Act"), governing Refuse Disposal and the Rules and
Regulations adopted thereunder ( the "Solid Waste Regulations") and Section 23-
19.12, as amended, the ("Medical Waste Act"), governing Generation,
Transportation, Storage, Treatment, Management and Disposal of Regulated Medical
Waste and the Rules and Regulations (the "Medical Waste Regulations") adopted
thereunder.

WHEREAS, the Department alleges in the NOVAP that violations of the above-cited
statutes and regulations occurred on diverse dates between October 19, 1992 and
September 6, 1994.

WHEREAS, the Company and the Department desire to limit the administrative
process and avoid the need for and expense of an administrative hearing and
protracted litigation arising out of the allegations.

In lieu of convening an Administrative Hearing regarding the alleged violations,
and in order to effect a resolution of all disputed issues in this matter, the
Department and the Company (the "parties") agree as follows:

                                    AGREEMENT

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, RONALD GAGNON, CHIEF OF
THE DIVISION OF WASTE MANAGEMENT FOR THE DEPARTMENT and MARK MILLER, PRESIDENT
AND CHIEF EXECUTIVE OFFICER OF THE COMPANY do hereby acknowledge and agree to
the following:

     1)   The Company is subject to the provisions of the Rhode Island General
          Laws, specifically chapters 42-17.1, 23-18.9 and 23-19.12 and the
          applicable regulations of the Department promulgated thereunder.

     2)   The Department has jurisdiction over the subject matter of this
          Agreement and has personal jurisdiction over the Company pursuant to
          the Medical Waste Act and the Medical Waste Regulations.

     3)   The provisions of this Agreement shall apply to and be binding upon
          the Company and the Department and their respective agents, servants,
          employees, successors and assigns.

     4)   This Agreement shall have the full force and effect of a final
          administrative adjudication and shall be fully enforceable in Superior
          Court under the provisions of Title 42-Chapter 35 of the General Laws
          of the State of Rhode Island.

     5)   The Company agrees to comply with any newly promulgated regulations.
          In the event of inconsistency between a provision of this Agreement
          and a regulation, the parties agree that the regulation shall govern
          and replace the inconsistent portion of this Agreement.  The remainder
          of this Agreement shall remain unaffected.

                                        2

     6)   (a) Stericycle agrees to pay and the Department agrees to accept the
          amount of four hundred thousand dollars ($400,000.00) which shall be
          paid to the Air and Water Protection Fund established by R.I. Gen.
          Laws Section 42-17.1-2 according to the following schedule.

               August 31, 1995                   $35,000.00
               December 31, 1996                 $35,000.00
               December 31, 1997                 $35,000.00
               December 31, 1998                 $35,000.00
               December 31, 1999                 $50,000.00
               December 31, 2000                 $60,000.00
               December 31, 2001                $150,000.00

          In the event Stericycle fails to comply with any of the terms of this
          Agreement or violates any provisions of the above-cited statute of
          rules or regulations, Stericycle agrees that the remaining amount set
          forth above shall become immediately due and owing unless excused by
          paragraph 7 of this Agreement.

          (b)  In addition to the four hundred thousand dollar ($400,000.00)
          monetary amount agreed to by the parties and set forth in paragraph
          (a) above, the Company agrees to complete the following supplemental
          environmental projects ("SEPs").  Stericycle shall submit monthly
          reports to the Department which monitor the SEPs and provide
          documentation at the completion of the SEPs.  SEPs shall commence
          within ninety (90) days of execution of this document unless otherwise
          specified.

               (1)  Educational Program
                    Stericycle shall conduct four educational programs during a
                    four (4) year period, one (1) seminar per year beginning in
                    1996.  The seminar shall consist of two categories: an
                    Environmental Health and Safety Regulatory Update and
                    Bloodborn Pathogens.  Enrollment in such program shall be
                    limited to no less than 150 participants per session which
                    shall not include Stericycle employees, agents, etc.  The
                    seminars shall be conducted at facilities throughout Rhode
                    Island and shall not be conducted at the Stericycle facility
                    in Woonsocket, Rhode Island.  In the event that the four
                    seminars do not yield a total of six hundred (600)
                    participants, Stericycle agrees to conduct additional
                    seminars within the four year period to reach the six
                    hundred (600) participant requirement.

                                        3

               (2)  Public Service Medical Waste Management Program
                    Stericycle shall implement a Public Service Medical Waste
                    Management Program which shall provide for the collection
                    and treatment of medical waste generated by twenty (20)
                    Rhode Island public service agencies such as police, fire,
                    emergency and ambulance services.  Stericycle shall provide
                    a total of not less than one thousand and two hundred (1200)
                    containers, two per agency, to these twenty (20) agencies
                    throughout the State of Rhode Island and shall collect and
                    treat the same over a five (5) year period.  Stericycle
                    shall provide for this regulated medical waste to be picked
                    up six (6) times per year.  This program shall not be used
                    as an incentive for future contractual obligations with the
                    participant.

               (3)  Residential Sharps Management Program
                    Stericycle shall implement over a five (5) year period a
                    Residential Sharps Management Program.  Stericycle shall
                    implement a program to provide for collection and treatment
                    of sharps from twenty (20) selected pharmacies throughout
                    the State of Rhode Island.  Stericycle shall provide for not
                    less than one thousand two hundred (1,200) containers, two
                    per agency, to these twenty (20) pharmacies and shall
                    provide for this regulated medical waste to be collected and
                    treated six (6) times per year during the five (5) year
                    period.  This program shall not be used as an incentive for
                    future contractual obligations with the participant.

          Correspondence, notice, advertisement or other related materials sent
          forth related to these SEPs must disclose that the project was
          implemented in connection with the settlement of an environmental
          enforcement action.

          (c)  Stericycle shall submit an amendment to its operating plan for
          Department review within ninety (90) days of execution of this
          Agreement and must implement the approved amended procedures within
          fifteen (15) days of Department approval of the same.  The amendments
          to the operating plan must include:

                                        4

               (1)  Spore strip testing shall be increased to occur at a minimum
                    of once per week and analysis of spore strips must be
                    performed by an independent consultant and laboratory.  The
                    results of such analysis shall be submitted directly to the
                    Department from the independent laboratory simultaneously
                    with the reporting of the same to Stericycle.  In the event
                    that spore strip analysis yields a positive result, a
                    protocol with a number of negative sample results shall be
                    required to negate the positive test results.  Those tests
                    will be conducted with copies of the results forwarded
                    directly to the Department simultaneously with the reporting
                    of the same to Stericycle.

               (2)  Stericycle shall submit to the Department a contingency plan
                    that includes a maximum quantity and time period of storage
                    of regulated medical waste storage at the Woonsocket
                    facility when treatment and/or destruction processes fail or
                    do not perform in the manner specified in the approved
                    operating plan.  Stericycle shall refuse all shipments which
                    will increase the volume of regulated medical waste to
                    exceed the final approved limit provided for in the
                    contingency plan.

               (3)  Stericycle shall orally notify the Department within twenty-
                    four (24) hours of all incidents, medical waste spills,
                    fires, acceptance of radioactive waste or hazardous waste.
                    A complete written report shall be submitted to the
                    Department within seven (7) days of the incident detailing
                    the incident in question as well as Stericycle's response to
                    the incident.

               (4)  In the event of a temporary failure of the process as set
                    forth in the approved operating plan, Stericycle shall
                    insure that all regulated medical waste is shipped within
                    fourteen (14) days to a Department approved alternative
                    treatment and destruction facility pursuant to the
                    contingency plan described in paragraph 2 above.

               (5)  Stericycle shall notify the Department immediately of all
                    loads of waste returned to the Stericycle Woonsocket
                    facility from SEAMASS or other facility.  Stericycle agrees
                    to subject said returned loads to Department inspection.

                                        5

               (6)  Stericycle shall submit a plan for Department approval for
                    the random testing of the contact surface of Steritubs which
                    assures that the public is not exposed to contaminated tubs.
                    The plan shall be implemented within six (6) months of the
                    execution of this agreement.

               (7)  Stericycle shall submit to the Department a list of all
                    processing vessels.  The number of vessels in use shall
                    reflect Stericycle's operating capacity, based on hours of
                    operation and average weight of a processing vessel.
                    Documentation shall be provided to the Department that
                    indicates the number of processing vessels in use by the
                    facility, the number assigned to the processing vessel, the
                    date the processing vessel was put into services and the
                    date that the processing vessel was taken out of service.
                    This list shall be kept current and the Department shall be
                    notified of any modifications to said list within forty-
                    eight (48) hours of the modification.  Stericycle shall
                    insure that no two (2) processing vessels have the same
                    number.

               (8)  Stericycle agrees to implement a revised training program
                    for all of its employees.  Prior to implementation of this
                    program, Department approval is required.  This program will
                    guarantee that all employees are trained prior to performing
                    any job at ft Stericycle facility in Woonsocket, Rhode
                    Island.  Stericycle shall maintain certificates of
                    completion of training for all employees and shall submit
                    copies of the same to the Department within ten (10) days
                    of each employees completion of the training.  Stericycle
                    agrees to provide to the Department the name, title,
                    business address, educational background and other relevant
                    experience of each training instructor prior to that
                    individual conducting any training program.  Stericycle
                    shall implement this revised training program within sixty
                    (60) days of execution of this Agreement.

               (9)  Stericycle shall construct a fence at least six (6) feet in
                    height or other Department approved comparable control to
                    prohibit access to areas where regulated medical waste is
                    stored.

                                        6

               (10) Stericycle shall submit an approved plan for implementation
                    of a system for the automatic monitoring and recording of
                    temperatures of waste subsequent to exit from the RF oven.
                    Stericycle shall submit a plan within ninety (90) days that
                    sets forth this system.  Testing and verification of this
                    system must occur within nine (9) months of execution of
                    this agreement and shall be fully implemented within twelve
                    (12) months of execution of this agreement.

               (11) Stericycle shall install video monitoring equipment at its
                    Woonsocket facility.  Such installation shall be completed
                    and the process of monitoring employees' performance shall
                    commence within ninety (90) days of execution of this
                    Agreement.

               (12) Stericycle shall insure that all regulated medical waste is
                    destroyed to a size of no greater than four (4) inches
                    except for preapproved Department exceptions.  In the event
                    that the four (4) inch minimum is not accomplished
                    Stericycle shall either accomplish the four (4) inch minimum
                    or comply with the Medical Waste Regulations and handle this
                    regulated medical waste as such.

          (d)  Nothing in this provision shall be construed as limiting the
          right of the Department to assess other administrative penalties for
          any additional violations of law or regulation or this Agreement.

     7)   With respect to Stericycle's compliance with any interim or final
          deadline set forth in this Consent Agreement, no penalties will be
          sought by the Department for delay caused by circumstances beyond
          Stericycle's control, such as by act of God, war or other force
          majeure.  Force majeure shall include any event arising from causes
          beyond the control of Stericycle, including, but not limited to: Acts
          of God; fire; war; insurrection; civil disturbance; explosion; riot;
          catastrophe; governmental actions; adverse weather conditions that
          could not be reasonable anticipated and causing unusual delay in
          transportation and/or field activities or restraint by court order or
          order of public authority.  Financial inability to perform any
          obligation under this Agreement shall not be considered a cause of
          delay that is beyond the reasonable control of Stericycle.
          Stericycle, shall use due diligence to anticipate and minimize or
          avoid delay or circumstances which might result in the delay or
          prevention of performance of its obligations under this Agreement.
          Stericycle's inability to perform due to economic circumstances shall
          not

                                        7

          constitute an acceptable reason for failure to perform.  Stericycle
          shall promptly notify the Department orally and shall, within five (5)
          business days of oral notification to the Department, notify the
          Department in writing of the anticipated length and cause of any delay
          and the timetable by which Stericycle intends to implement these
          measures.  Upon receipt of such notification, the Department shall
          determine whether the delay is appropriately excused under this
          paragraph and shall so notify Stericycle.  Stericycle agrees to use
          its best efforts to minimize any delay regardless of cause, and
          acknowledges that it will have the burden of justifying excuses for
          delay in performance under this paragraph.

     8)   In addition to the requirements set forth in paragraph 6(a) of this
          Agreement, in the event Stericycle fails to comply with any provision
          of this Consent Agreement, Stericycle, shall pay to the Department the
          stipulated penalties in the amount of five hundred dollars ($500.00)
          per day, unless excused by the provisions of paragraph 7 of this
          Agreement.  The payment of liquidated damages in accordance with this
          paragraph shall not preclude the Department from seeking any other
          appropriate remedy.

     9)   Compliance with Agreement shall satisfy the requirements set forth in
          the NOVAPs.

     10)  If any part or provision of this Agreement, or application thereof to
          any persons entity, or circumstances be adjudged invalid by any court
          of competent jurisdiction, the judgment shall be confined in its
          operation to the party of or provision of or application directly
          involved in the controversy in which the judgment shall have been
          rendered and shall not affect or impair the validity of the remainder
          of this Agreement or the application thereof to other persons,
          entities, or circumstances.

     11)  This Agreement may be modified only through a writing signed by all of
          the parties.

     12)  The within Agreement contains the entire agreement between the
          parties.

     13)  The parties hereunto stipulate and agree that the agreements contained
          herein are entered into voluntarily and that none of the parties have
          been coerced to enter into this Agreement through fraud, duress,
          misrepresentation, mistake, undue influence, or any other means that
          may affect the voluntariness of the mutual assent upon which this
          Agreement is based.

                                        8

     14)  The terms of this Agreement apply only to the cases described above
          and shall not be used as precedent in any other matter with DEM and
          any other party.

     15)  Stericycle agrees to waive any rights to sue or initiate any type of
          action against the State of Rhode Island, the Department or any of
          their agents regarding the issuance and the effect thereof of the
          NOVAP including but not limited to the terms of the NOVAP, the April
          4, 1995 press release or any interpretation thereof, the
          interpretation of the Solid Waste Act, Solid Waste Regulations,
          Medical Waste Act or Medical Waste Regulations or any other statements
          made by the Department or its representatives involving Stericycle
          from the time period of September 29, 1994 to the present.  Stericycle
          does hereby agree to accept this executed document in full settlement
          and satisfaction of, and as sole consideration for the final release
          and discharge of, all actions, claims and demands whatsoever, that now
          exist, or may hereafter accrue, against the State of Rhode Island.

     16)  The Department agrees not to initiate an enforcement action against
          Stericycle for violations of the Medical Waste Regulations known to
          the Department prior to Stericycle's execution of this Agreement that
          were not cited by the Department in either SW94-8 or SW95-5 and that
          are the same type of violations cited in the above-referenced cases
          but that occurred during time periods subsequent to those cited in the
          NOVAPs.

     17)  Stericycle agrees not to use any of the terms or conditions or the
          execution of this document in a defense that they may assert against
          the Department in any action that the Department may take against
          Stericycle in future enforcement actions, nor as a basis or in support
          of any action that Stericycle takes against the Department.

     18)  Stericycle, agrees not to interfere with, obstruct or hinder any
          inspection or study that the Department wishes to conduct or to take
          or of any or all of the processes employed by Stericycle at its
          Woonsocket, Rhode Island facility.

                                        9

     19)  The obligations and responsibilities regarding any of the terms or
          conditions of this Agreement shall remain effective and not terminate
          or in any way be affected upon the issuance or denial of the license
          renewal application that has been submitted to the Department by
          Stericycle, unless otherwise specified.  In the event that the medical
          waste treatment license for which Stericycle has submitted an
          application for approval is denied, then the terms of 
          paragraphs 6(c)(1), 6(c)(4), 6(c)(7), 6(c)(10) and 6(c)(12) shall 
          not apply.

     20)  This document does not constitute an admission of any facts or of
          liability.

     21)  This Agreement shall not compromise, diminish or in any other way
          affect the rights of the Department with respect to any other
          subsequent action that the Department may choose to take against any
          person on information that was not the basis of the NOVAP against
          Stericycle.

     22)  Full execution of this document resolves the actions set forth in
          Notices of Violation and Orders and Penalties SW94-8 and SW95-5
          against Stericycle by the Department.

     23)  The mutual agreements contained within this document shall constitute
          sufficient consideration to support this Agreement.

     24)  The Rhode Island Superior Court shall have sole jurisdiction to
          interpret and enforce the terms of this Agreement and any dispute
          regarding the same shall be brought before this Court.

     25)  Nothing contained herein releases Stericycle from its obligations to
          comply with State and Federal law and regulation.

                                       10

This Agreement shall be deemed effective on the date that all parties have
executed this document.

     IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of 
August, 1995

                                        /s/ Ronald Gagnon
                                        -----------------------------------
                                        RONALD GAGNON, Chief

     Subscribed and sworn to before me this 22nd day of August, 1995

                                        /s/ Susan W. Cabecerias
                                        -----------------------------------
                                        NOTARY PUBLIC
                                        My commission expires:     8/1/97
                                                               ------------

     IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of
August, 1995.                                             

                                        /s/ Mark Miller
                                        -----------------------------------
                                        MARK MILLER, President
                                        (the above individual certifies that
                                        he/she has the authority to bind the
                                        corporation to the terms of this
                                        agreement)

     Subscribed and sworn to before me this 18th day of August, 1995

                                        /s/ Rhonda D. Toth
                                        -----------------------------------
                                        NOTARY PUBLIC
                                        My commission expires:   12/7/95
                                                               ------------

                                                            [SEAL]

                                       11

                                                        Exhibit 21.1

                        SUBSIDIARIES OF THE REGISTRANT

     Stericycle of Arkansas, Inc., an Arkansas corporation

     Stericycle of Washington, Inc., a Washington corporation

     SWD Acquisition Corp., a Delaware corporation

                                                                    EXHIBIT 23.1
 
                        CONSENT OF INDEPENDENT AUDITORS
 
    We  consent to the reference to our  firm under the caption "Experts" and to
the use of our report  dated March 20, 1996, except  for the first paragraph  of
Note  7, as to which the date is             in the Registration Statement (Form
S-1 No. 333-   ) for the registration of 3,450,000 shares of common stock.
 
Chicago, Illinois
June 11, 1996
 
The foregoing consent is in the form that will be signed upon the completion  of
the  reverse  stock split,  the approval  of the  decrease in  authorized common
shares, and the redesignation of the Class A and Class B common shares as a like
number of common shares effective upon the closing of an initial public offering
as described in the first paragraph of Note 7 to the financial statements.

 5

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATION STATEMENTS OF
OPERATION FOUND ON PAGES F-3, F4, F-16 AND F-17 ON THIS REGISTRATION
STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.

 1,000

                   YEAR                   3-MOS
                          DEC-31-1995             DEC-31-1996
                               DEC-31-1995             MAR-31-1996
                                             138                     120
                                         0                       0
                                     3731                    3995
                                       138                     146
                                          0                       0
                                  5192                    5162
                                           10228                   10395
                                    3587                    3961
                                   23491                   23876
                             4753                    5123
                                           1633                    1602
                                0                       0
                                          0                       0
                                            55                      56
                                       12519                   12172
                     23491                   23876
                                          21339                    5578
                                 21339                    5578
                                            17478                    4337
                                    17478                    4337
                                  8405                    1588
                                     0                       0
                                 277                      83
                                 (4544)                   (347)
                                         0                       0
                             (4544)                   (347)
                                       0                       0
                                      0                       0
                                            0                       0
                                    (4544)                   (347)
                                    (.70)                   (.05)
                                    (.70)                   (.05)