AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1996
                                                      REGISTRATION NO. 333-05665
    
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------

                                AMENDMENT NO. 5
                                       TO
                                    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. / /
                           --------------------------
 
    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.
 
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                                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 AUGUST 20, 1996

                                3,000,000 SHARES
 
            [LOGO]
                                  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 $10.00  and $12.00 per share. See "Underwriting"
for the factors considered in determining the initial public offering price.
 
    The Common Stock  has been  approved for  quotation on  the Nasdaq  National
Market ("Nasdaq") under the symbol "SRCL," subject to notice of issuance.
 
    FOR  A DISCUSSION OF CERTAIN RISKS OF  AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 7-14.
                               -----------------
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 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.

                               [Logo] Stericycle
[Six photographs of the Company's education, collection and treatment processes;
the following are the captions to these photographs]
 
Through on-site  training and  education  programs, Stericycle  helps  customers
establish regulated medical waste management systems.
 
Stericycle  helps healthcare providers  protect patients and  employees from the
potential hazards of regulated medical waste with puncture-resistant, leak-proof
STERI-TUB collection containers.
 
Regulated medical  waste  is readied  for  treatment  at the  beginning  of  the
process.
 
The  empty STERI-TUB continues on to the  wash station where it is sanitized and
prepared for re-use.
 
A processing vessel containing the regulated medical waste automatically  enters
the  dielectric oven, where it is  treated using Stericycle's patented ELECTRO -
 THERMAL - DEACTIVATION (ETD) treatment process.
 
The regulated medical  waste has  now been rendered  noninfectious. The  treated
waste  can  now  be  recycled, used  as  a  fuel to  provide  energy,  or safely
landfilled.
 
    Steri-Cement-Registered   Trademark-,   Steri-Fuel-Registered    Trademark-,
Steri-Plastic-Registered  Trademark-  and  Steri-Tub-Registered  Trademark-  are
registered trademarks  and  Stericycle-Registered  Trademark-  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 EFFECTED IN AUGUST 1996 PURSUANT TO
WHICH EACH OUTSTANDING SHARE OF THE COMPANY'S  CLASS A AND CLASS B COMMON  STOCK
BECAME  0.1883629 SHARE OF COMMON  STOCK, AND THE UNDERLYING  CLASS OF STOCK AND
NUMBER OF SHARES ISSUABLE  UPON EXERCISE, AND THE  EXERCISE PRICE PER SHARE,  OF
EACH  OUTSTANDING OPTION AND WARRANT WERE ADJUSTED ACCORDINGLY, AND (II) 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, after giving
    effect to the issuance of 98,001  shares of Common Stock in partial  payment
    of  a note to be  repaid upon completion of  this Offering. Excludes 414,030
    shares issuable upon the exercise  of outstanding stock options  exercisable
    within  60 days  of June 1,  1996, at  a weighted average  exercise price of
    $0.69  per  share,  and  387,468  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  304,413
    shares  issuable  upon  the  exercise of  outstanding  stock  options,  at a
    weighted average  exercise  price of  $1.35  per share,  and  21,778  shares
    issuable  upon the  exercise of outstanding  warrants at  a weighted average
    exercise price of $34.27 per share, which either were not exercisable within
    60 days of June 1,  1996 or were exercisable at  prices in excess of  $11.00
    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)

                                                                                                    SIX MONTHS ENDED
                                                          YEAR ENDED DECEMBER 31,                       JUNE 30,
                                           -----------------------------------------------------  --------------------
                                             1991      1992(4)     1993       1994       1995       1995       1996
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                                                        
STATEMENTS OF OPERATIONS DATA:
Revenues.................................  $   1,563  $   5,010  $   9,141  $  16,141  $  21,339  $  10,756  $  11,616
Cost of revenues.........................      2,005      5,466      9,137     13,922     17,478      8,872      9,189
Selling, general and administrative
 expenses................................      3,377     11,223      5,988      7,927      8,137      4,663      3,315
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Loss from operations.....................     (3,819)   (11,679)    (5,984)    (5,708)    (4,276)    (2,779)      (888)
Interest expense.........................        (77)      (244)      (245)      (260)      (277)      (103)      (206)
Interest income..........................        243        283        201        156          9          6         --
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net loss.................................  $  (3,653) $ (11,640) $  (6,028) $  (5,812) $  (4,544) $  (2,876) $  (1,094)
Less cumulative preferred dividends......     (1,351)    (2,737)    (3,733)    (4,481)        --(5)    (3,146)        --
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Loss applicable to common stock..........  $  (5,004) $ (14,377) $  (9,761) $ (10,293) $  (4,544) $  (6,022) $  (1,094)
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net loss per common share (1)............  $   (2.38) $   (6.64) $   (4.51) $   (4.76) $   (0.65) $   (2.78) $   (0.15)
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Weighted average number of common shares
 outstanding.............................  2,106,842  2,165,625  2,162,611  2,162,988  7,029,441  2,162,988  7,074,440
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Pro forma net loss per common share
 (2).....................................                                              $   (0.62)            $   (0.13)
                                                                                       ---------             ---------
                                                                                       ---------             ---------
Pro forma weighted average number of
 common shares outstanding (3)...........                                              7,237,171             7,492,110
                                                                                       ---------             ---------
                                                                                       ---------             ---------

 
                                              JUNE 30, 1996
                                           --------------------
                                                         AS
                                            ACTUAL    ADJUSTED(6)
                                           ---------  ---------
                                                                                        
BALANCE SHEET DATA:
Cash and cash equivalents...............................................................  $      40     $  25,770
Total assets............................................................................     25,834        51,564
Current portion of long-term debt.......................................................      4,306           816
Long-term debt, net of current maturities...............................................      4,399         2,241
Shareholders' equity....................................................................     11,911        43,289

 
- ------------------------------
 
(1)  See  Note  2  to  the  Consolidated  Financial  Statements  for information
    concerning the computation of net loss per share.

(2) Adjusted to  give effect to  the sale of  a sufficient number  of shares  of
    Common  Stock offered hereby (at an assumed initial public offering price of
    $11.00 per share, the mid-point  of the price range  set forth on the  cover
    page  of this Prospectus, and after  the deduction of estimated underwriting
    discounts and  commissions and  a  pro rata  portion of  estimated  offering
    expenses payable by the Company) the net proceeds from the sale of which are
    used  to repay  certain indebtedness  of the  Company, and  adjusted to give
    effect, as  of  the beginning  of  the period,  to  the elimination  of  the
    interest  expense on  the indebtedness  repaid ($64,000  for the  year ended
    December 31, 1995 and $86,000 for the  six months ended June 30, 1996).  The
    number  of such shares  would be approximately 207,730  at December 31, 1995
    and approximately 417,670 at June 30, 1996. See "Use of Proceeds."

   
(3) Adjusted to include  a sufficient number of  shares of Common Stock  offered
    hereby (at an assumed initial public offering price of $11.00 per share, the
    mid-point of the price range set forth of the cover page of this Prospectus,
    and  after the deduction of estimated underwriting discounts and commissions
    and a  pro  rata portion  of  estimated  offering expenses  payable  by  the
    Company)  the net proceeds from the sale  of which are used to repay certain
    indebtedness  of  the  Company.   The  number  of   such  shares  would   be
    approximately 207,730 at December 31, 1995 and approximately 417,670 at June
    30, 1996. See "Use of Proceeds.".

(4)  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.
 
(5) 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."
 
(6) 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 $11.00 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),
    application of the estimated net proceeds to the Company and the issuance of
    98,001 shares of Common Stock in partial payment of a note to be repaid upon
    completion of this Offering. 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 June 30, 1996, the Company had an accumulated deficit
of approximately $38,196,000. For the year  ended December 31, 1995 and the  six
months  ended  June  30,  1996,  the Company  had  net  losses  of approximately
$4,544,000, or  $0.65 per  share,  and approximately  $1,094,000, or  $0.15  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.
 
    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."
 
GOVERNMENTAL ENFORCEMENT PROCEEDINGS
 
    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 and
the Rhode Island Department of Environmental Management ("RIDEM") entered into a
settlement agreement 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
 
                                       8

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.
 
    In 1994,  when the  Company  still used  a  third party  for  transportation
services  prior to obtaining its own California waste transportation permit, the
California Department of Health Services initiated an investigation of  possible
violations  of the state medical waste management act by the third party and the
Company, including delays  in transport and  insufficient tracking of  regulated
medical waste in transit. In order to resolve this matter, the Company agreed in
April  1995  to pay  $75,000  to the  California  Department of  Health Services
Medical Waste  Management  Fund and  to  assume direct  responsibility  for  the
transportation of regulated medical waste to the Company's treatment facilities.
In  1993 the Company resolved separate inquiries by the Federal Trade Commission
and state  agencies in  California  and Washington  by voluntarily  agreeing  to
clarify  in  its  promotional  materials the  proportions  of  treated regulated
medical waste going to resource recovery and recycling.
 
    There can be no assurance that the Company will be successful in its defense
of any future government enforcement 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."
 
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.
 
                                       9

    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 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.
 
POTENTIAL INABILITY TO FUND 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
 
                                       10

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."
 
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-Registered Trademark- 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 or service marks 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 RISK OF PRODUCT LIABILITY AND POTENTIAL UNAVAILABILITY OF 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
 
                                       11

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 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.
 
UNPROFITABILITY 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 approximately  $6,110,000 of  the estimated net
proceeds of  this Offering  for  debt repayment,  development of  the  Company's
transfer station in San Leandro, California as a combined treatment and transfer
facility,  and a project to utilize treated  regulated medical waste as a fossil
fuel substitute in cement production. The  Company intends to use the  remaining
estimated  net  proceeds  of  approximately  $23,780,000  for  general corporate
purposes, including capital expenditures,  working capital and potential  future
acquisitions  of other regulated medical waste management or related businesses.
As of the date of this Prospectus, the Company
 
                                       12

has no  pending  agreements,  commitments or  understandings  to  acquire  other
regulated  medical waste management or related  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."
 
CONTINUED CONTROL BY CURRENT OFFICERS, DIRECTORS AND AFFILIATED ENTITIES
 
    Following  completion  of  this Offering,  the  Company's  current executive
officers, directors and entities affiliated with them will beneficially own,  in
the aggregate, approximately 38.9% 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."
 
EFFECT OF APPLICABLE 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 5,407,728 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.  A
holder  of 461,028  of such  shares has  certain limited  redemption rights. See
"Description   of   Capital    Stock   --   Limited    Redemption   Rights    of
 
                                       13

One  Holder." Upon the expiration of  these agreements, 2,218,298 shares will be
eligible for sale without restriction pursuant to Rule 144(k), 3,354,708  shares
will  be eligible for sale subject to the volume limitation and other conditions
of Rule 144,  and the  remaining 645,449 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 of 5,227,608  shares of Common Stock, warrants
to purchase 21,778 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 696,962 shares
of Common Stock, of which options for 397,555 shares were exercisable within  60
days of June 1, 1996, and other options outstanding to purchase 21,481 shares of
Common Stock, of which options for 16,475 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 1,500,000 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 409,246
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 $7.30 in the
net tangible  book value  per share  of Common  Stock purchased  (at an  assumed
initial public offering price of $11.00, 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  $29,890,000  ($34,493,500  if  the  Underwriters'  over-allotment
option  is  exercised in  full), assuming  an initial  public offering  price of
$11.00 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 $1,348,000  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 $220,000  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.  In addition,  the  Company  currently
intends  to  use approximately  $350,000 of  the  net proceeds  on a  project to
utilize treated regulated medical  waste as a fossil  fuel substitute in  cement
production. The remainder of the net proceeds will be used for general corporate
purposes,  including capital expenditures, working  capital and potential future
acquisitions of other regulated medical waste management or related  businesses.
See  "Business -- Growth Strategy" and "-- Acquisition Program." 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
 
                                       15

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."
 
                                    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  June  30, 1996,  the  net tangible  book  value of  the  Company  was
approximately  $2,837,000,  and  the  net  tangible  book  value  per  share was
approximately $0.46. The pro forma net tangible book value of the Company as  of
June 30, 1996 was approximately $34,215,000, and the pro forma net tangible book
value  per share was approximately $3.70, 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 $11.00 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 June 30, 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  $3.24  to existing  stockholders  and  an immediate  dilution  in net
tangible book value per share of $7.30 to new investors purchasing Common  Stock
in this Offering. The following table illustrates this per share dilution:

                                                                       
Assumed initial public offering price per share.........................  $   11.00
  Net tangible book value per share before this Offering................       0.46
  Increase per share attributable to new investors (1)..................       3.24
Pro forma net tangible book value per share after this Offering.........       3.70
                                                                          ---------
Dilution per share to new investors.....................................  $    7.30
                                                                          ---------
                                                                          ---------

- ------------------------
(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 June 30,  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 (after giving effect to the issuance of 98,001 shares
of Common Stock in partial  payment of the Safe Way  Note) and by new  investors
purchasing  Common Stock in this Offering (at an assumed initial public offering
price of $11.00 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
                                            SHARES PURCHASED           CONSIDERATION
                                         ----------------------  -------------------------  AVERAGE PRICE
                                           NUMBER     PERCENT       AMOUNT       PERCENT      PER SHARE
                                         ----------  ----------  -------------  ----------  -------------
                                                                             
Existing shareholders..................   6,253,941       67.6%  $  51,624,000       61.0%    $    8.25
New investors..........................   3,000,000       32.4      33,000,000       39.0         11.00
                                         ----------      -----   -------------      -----
    Total..............................   9,253,941      100.0%  $  84,624,000      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 June 30, 1996,
there were outstanding options to purchase 682,957 shares of Common Stock, at  a
weighted  average exercise price of $0.98 per share, and outstanding warrants to
purchase 409,246 shares of Common Stock, at a weighted average exercise price of
$6.85 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  June 30, 1996, the capitalization of
the Company and the capitalization of the Company as adjusted to give effect  to
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  $11.00 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  issuance of 98,001  shares of Common
Stock in partial payment of  the Safe Way Note. The  table also gives effect  to
(i)  a reverse 1-for-5.3089 stock split pursuant to which each outstanding share
of the Company's  Class A and  Class B  common stock became  0.1883629 share  of
Common  Stock  and  (ii)  a  decrease in  the  Company's  authorized  stock from
58,000,000 to 30,000,000 shares, both of which were effected in August 1996.

                                                                                                JUNE 30, 1996
                                                                                           -----------------------
                                                                                            ACTUAL    AS ADJUSTED
                                                                                           ---------  ------------
                                                                                               (IN THOUSANDS)
                                                                                                
Short-term debt:
  Current portion of long-term debt......................................................  $   4,306   $      816
Long-term debt:
  Industrial development revenue bonds and other.........................................      3,051        2,241
  Note payable to bank...................................................................      1,348       --
                                                                                           ---------  ------------
    Total long-term debt.................................................................      4,399        2,241
Shareholders' equity:
  Common Stock, $0.01 par value; 30,000,000 shares authorized; 6,155,940 shares issued
   and outstanding, 9,253,941 shares issued and outstanding, as adjusted.................         62           93
  Additional paid-in-capital.............................................................     50,075       81,422
  Notes receivable for common stock purchases............................................        (30)         (30)
  Accumulated deficit....................................................................    (38,196)     (38,196)
                                                                                           ---------  ------------
    Total shareholders' equity...........................................................     11,911       43,289
                                                                                           ---------  ------------
      Total capitalization...............................................................  $  20,616   $   46,346
                                                                                           ---------  ------------
                                                                                           ---------  ------------

                                       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 (the  "Consolidated Financial Statements"), 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 six
months ended June 30, 1995 and 1996 and the balance sheet data at June 30,  1996
are  derived from the  unaudited condensed consolidated  financial statements of
the  Company  (the  "Condensed  Consolidated  Financial  Statements")   included
elsewhere  in this  Prospectus. The Condensed  Consolidated Financial Statements
include all  adjustments, consisting  of normal  recurring adjustments  and  the
adjustment   described  in  Note  1  to  the  Condensed  Consolidated  Financial
Statements, that the Company considers necessary for a fair presentation of  the
financial  position and results of operations for that period. Operating results
for the six months  ended June 30,  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. The Company did
not declare any cash dividends during any of the periods for which  consolidated
financial data is presented.

                                                                                                  SIX MONTHS ENDED
                                                    YEAR ENDED DECEMBER 31,                           JUNE 30,
                                   ----------------------------------------------------------  ----------------------
                                      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  $   10,756  $   11,616
  Cost of revenues...............       2,005       5,466       9,137      13,922      17,478       8,872       9,189
  Selling, general and
   administrative expenses.......       3,377      11,223       5,988       7,927       8,137       4,663       3,315
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Loss from operations...........      (3,819)    (11,679)     (5,984)     (5,708)     (4,276)     (2,779)       (888)
  Interest expense...............         (77)       (244)       (245)       (260)       (277)       (103)       (206)
  Interest income................         243         283         201         156           9           6          --
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Net loss.......................      (3,653)    (11,640)     (6,028)     (5,812)     (4,544)     (2,876)     (1,094)
  Less cumulative preferred
   dividends.....................      (1,351)     (2,737)     (3,733)     (4,481)         --(3)     (3,146)         --
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Loss applicable to common
   stock.........................  $   (5,004) $  (14,377) $   (9,761) $  (10,293) $   (4,544) $   (6,022) $   (1,094)
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Net loss per common share
   (1)...........................  $    (2.38) $    (6.64) $    (4.51) $    (4.76) $    (0.65) $    (2.78) $    (0.15)
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Weighted average number of
   common shares outstanding.....   2,106,842   2,165,625   2,162,611   2,162,988   7,029,441   2,162,988   7,074,440
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------

                                                                      DECEMBER 31,
                                                  -----------------------------------------------------  JUNE 30,
                                                    1991       1992       1993       1994       1995       1996
                                                  ---------  ---------  ---------  ---------  ---------  ---------
                                                                           (IN THOUSANDS)
                                                                                       
BALANCE SHEET DATA:
  Cash and cash equivalents.....................  $   7,046  $  11,343  $   7,690  $   1,206  $     138  $      40
  Total assets..................................     12,720     21,368     21,355     27,809     23,491     25,834
  Long-term debt, net of current maturities.....      1,256      2,935      2,293      4,838      5,622      4,399
  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  $  11,911

- ------------------------
(1)  See  Note  2  to  the  Consolidated  Financial  Statements  for information
    concerning the computation of net 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  seeks  to  integrate  its   acquisitions  rapidly  into  its   existing
operations.  Accordingly,  the  impact  of such  acquisitions  on  the Company's
revenues, cost of revenues and expenses is  measured by the Company only to  the
extent  that  this  financial  information correlates  to  the  operations  of a
particular treatment facility  or route, which  the Company considers  to be  of
greater  financial relevance. 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.
 
                                       19

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.
 
    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. The Company's revenues increased  from $5,010,000 in 1992, before  the
Company  began  its acquisition  program, to  $21,339,000  in 1995.  The Company
estimates that  approximately  $8,500,000  of  this  increase  in  revenues  was
attributable  to the four acquisitions that  it completed during this three-year
period. 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  believes  that   cost-containment
pressures  in the health  care industry will  result in continued  growth in the
number of medical procedures performed by Alternate Care generators. 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
 
                                       20

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.
 
    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 regulated medical waste as  an
alternative  fuel  for use  in  the production  of  cement. The  Company  may be
required to expend approximately  $350,000 or more 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.
 
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
 
    REVENUES.  Revenues increased $860,000,  or 8.0%, to $11,616,000 during  the
six months ended June 30, 1996 from $10,756,000 during comparable period 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  six  months  of  revenues from  the  Safetech  Health  Care, Inc.
("Safetech") acquisition,  which was  completed  in June  1995, five  months  of
revenues  from  the  WMI  Medical  Services  of  New  England,  Inc.  ("WMI-NE")
acquisition, which was completed in January 1996 and two months of revenues from
the Doctors Environmental Control, Inc. ("DEC") and Sharps Incinerator of  Fort,
Inc.  ("Sharps") acquisitions,  both of  which were  completed in  May 1996. The
increase in revenues was partially offset by a decline in revenues  attributable
to  a lack of any  miscellaneous product sales during  the six months ended June
30, 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  $317,000,  or  3.6%, to
$9,189,000 during the six months ended June 30, 1996 from $8,872,000 during  the
comparable  period in 1995.  The principal reasons for  the increase were higher
transportation costs  as  a result  of  the  Safetech, WMI-NE,  DEC  and  Sharps
acquisitions and start-up
 
                                       21

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 decreased to 79.1% during  the six months ended June 30,
1996 from 82.5% during the comparable period in 1995.
 
    SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.    Selling,  general   and
administrative expenses decreased to $3,315,000 during the six months ended June
30, 1996 from $4,663,000 during the comparable period in 1995. This decrease was
primarily attributable to a reduction in 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 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  current period  than  they were  during  the
comparable  period in  1995. Selling, general  and administrative  expenses as a
percentage of revenues decreased to 28.5%  during the six months ended June  30,
1996 from 43.4% during the comparable period in 1995.
 
    INTEREST  EXPENSE  AND  INTEREST  INCOME.    Interest  expense  increased to
$206,000 during the  six months  ended June 30,  1996 from  $103,000 during  the
comparable  period 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  six months ended June 30, 1996 from
$6,000 during the comparable period 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  $4,785,000, or  52.4%,  to
$13,922,000  in  1994 from  $9,137,000  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 100.0% 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.
 
                                       22

    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.
 
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  $50,137,000  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 June 30, 1996, the Company's working capital was $(3,032,000) compared to
$924,000 at June 30, 1995. This reduction  was due to a lower cash position,  an
increase   in  debt  as  a   result  of  the  May   1996  bridge  loan  and  the
reclassification from long-term debt to current portion of long-term debt of the
Safe Way  Note, which  is due  upon  completion of  this Offering.  The  Company
continues  to  use  all  available  cash and  working  capital  to  fund current
operating losses and capital requirements. During the six months ended June  30,
1996,  the  Company's  loss from  operations  of  $888,000 was  exceeded  by its
depreciation and amortization expense of  $976,000, resulting in cash flow  from
operations of $88,000.
 
    The  Company is also using  its line of credit  to fund cash requirements of
any acquisitions. At June 30, 1996, the Company had drawn $1,348,000 on its line
of credit  and  had approximately  $1,102,000  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 aggregate balance of $1,560,000 as of June 30, 1996 at  fixed
interest  rates ranging from  5.8% to 7.4%,  are due in  various amounts through
June 2017.  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
 
                                       23

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  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 --
Governmental Enforcement Proceedings."
 
    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. See "Use of Proceeds."
 
    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  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. The Company is also
 
                                       27

investigating  expansion into international  markets. In June  1996, the Company
entered into an  agreement with a  Brazilian company to  assist it in  exploring
opportunities   for  the  commercialization  of   the  Company's  medical  waste
management technology in certain territories in South America.
 
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, used
      under the trademark STERI-TUB-Registered  Trademark-, 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
 
                                       30

      program  by  source-segregating   their  regulated   medical  waste.   The
      source-segregated  regulated medical 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  professionals 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
 
                                       31

Care  Program  in  California,  Washington  and  Oregon;  Northwestern  Memorial
Hospital  in Illinois; and VHA 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.  See "Description of Capital Stock -- Limited Redemption Rights of One
Holder." In  November 1995,  Baxter's parent  corporation, Baxter  International
Inc.,  announced that it intended  to spin off its  domestic hospital supply and
health care cost management businesses,  which had sales of approximately  $4.58
billion  in 1995, to  a new company,  Allegiance Corporation ("Allegiance"). The
spin-off  is  expected  to  be  completed  later  this  year,  and  the  Company
anticipates  that Baxter will transfer its interest in the alliance agreement to
Allegiance in connection with the spin-off. 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 who use
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.
 
                                       32

    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 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.
 
                                       33

    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 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 -- Governmental Enforcement Proceedings."
 
    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 166,153 shares of Common Stock issued to Safe Way
which are currently held in escrow (the  "Safe Way Escrow") and then by  off-set
rights of the Company under the Safe Way Note. See "Description of Capital Stock
- -- Common Stock."
 
    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 claimed 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 union has voluntarily withdrawn the
unfair
 
                                       39

labor practice charge. The Company's production and maintenance employees at its
Morton, Washington facility voted to affiliate with the union. The Company  will
be  required  to  negotiate  a collective  bargaining  agreement  covering these
employees.

    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.  See "Risk
Factors -- Governmental Enforcement Proceedings."
 
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 Risk of  Product Liability and Potential Unavailability  of
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 reusable container, used under the trademark
STERI-TUB-Registered Trademark-.
 
                                       40

    In November 1995, the  Company entered into  a cross-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 issued 4,144  shares of Common  Stock to  IITRI and granted  to IITRI  a
royalty-free  exclusive license in  the remaining countries of  the world to 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 or  service marks 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
 
                                       41

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.
 
    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. He is a director
of Affiliated  Research  Centers, Inc.,  which  provides clinical  research  for
pharmaceutical  companies. 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
 
                                       42

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 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., Somatogen, Inc. and Ventana  Medical Systems, 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 Ventana  Medical Systems, 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.),
 
                                       43

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  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 in June  1996 and approved by the Company's  stockholders
in July 1996, directors who are not officers or 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

                                       44

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  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 a  1-for-5.3089 reverse stock  split effected in August
    1996 pursuant to which each outstanding  share of the Company's Class A  and
    Class  B  common  stock became  0.1883629  share  of Common  Stock,  and the
    underlying class of stock and number  of shares issuable upon exercise,  and
    the  exercise  price per  share, of  each  outstanding option  were adjusted
    accordingly. 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      15,807      --          --
Michael J. Bernert...................................................     23,567      25,948      --          --
Richard O. Shea......................................................     30,627      15,726      --          --

- ------------------------
   
(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 effected in August  1996 pursuant to which  each outstanding share  of
    the  Company's Class A  and Class B  common stock became  0.1883629 share of
    Common Stock,  and  the underlying  class  of  stock and  number  of  shares
    issuable   upon  exercise,  and  the  exercise  price  per  share,  of  each
    outstanding option were  adjusted accordingly. 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  effected in August  1996 pursuant to which  each outstanding share of
    the Company's Class  A and Class  B common stock  became 0.1883629 share  of
    Common  Stock,  and  the underlying  class  of  stock and  number  of shares
    issuable  upon  exercise,  and  the  exercise  price  per  share,  of   each
    outstanding  option were  adjusted accordingly. 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 July  1996 and  approved by the
Company's stockholders in May  1996, the 1995 Stock  Plan authorizes a total  of
1,500,000  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  696,962  shares  were
outstanding and  31,476  shares  were  available for  future  option  grants  or
restricted  stock awards under  the 1995 Stock  Plan. 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 in  June  1996 and
approved by  the  Company's  stockholders  in  July  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  directors of the  Company
other  than directors  who are  officers or  employees of  the Company ("outside
directors"). Under  the Directors  Plan, each  incumbent outside  director  will
automatically receive an option as of the date of closing of this Offering for a
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
average  of the  closing bid and  asked prices of  a share of  Common Stock (the
"closing price")  on  the date  of  grant. As  of  each annual  meeting  of  the
Company's  stockholders after the date of  this Offering, each incumbent outside
director  who  is  re-elected  as  a   director  at  the  annual  meeting   will
automatically  receive  an  option  for  a  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 closing  price on the date of the annual
meeting, and each outside director  who is elected as  a director for the  first
time will automatically receive an option for a number of shares of Common Stock
determined by multiplying 21,000 shares by a fraction, the numerator of which is
$12.00  and the denominator of which is closing  price on the date of the annual
meeting. These option grants are subject to a maximum grant of 9,500 shares  and
a  minimum grant of 4,500 shares  (or to a maximum grant  of 28,500 shares and a
minimum grant of 13,500 shares in the case an outside director who is elected as
a   director    for   the    first   time    at   an    annual   meeting).    In
 
                                       47

addition,  each outside director who is elected as a director for the first time
other than at an annual meeting of the Company's stockholders will automatically
receive, as of the date of his or her election, an option for a number of shares
of Common Stock equal to  three times the number of  shares of Common Stock  for
which  each incumbent outside director received an  option as of the last annual
meeting. The exercise price of each option granted under the Directors Plan will
be the closing price on the date of  grant. The term of each option will be  six
years  from  the date  of grant.  Each option  will vest  in 16  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.
 
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 effected in August 1996 pursuant
    to which each outstanding share of the Company's Class A and Class B  common
    stock  became 0.1883629 share  of Common Stock, and  the underlying class of
    stock and number of  shares issuable upon exercise,  and the exercise  price
    per  share, of  each outstanding  option will  be adjusted  accordingly. See
    "Description of Capital Stock -- Reverse Stock Split."

                                       48

(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 effected in  August 1996 pursuant to which
    each outstanding share  of the Company's  Class A and  Class B common  stock
    became  0.1883629 share of  Common Stock, and the  underlying class of stock
    and number of  shares issuable  upon exercise,  and the  exercise price  per
    share,   of  each   outstanding  option   were  adjusted   accordingly.  See
    "Description of  Capital  Stock  --  Reverse Stock  Split."  Also  prior  to
    completion  of this  Offering, 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. See "Description  of Capital  Stock --  Reverse
    Stock Split."

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 continues  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  Partners  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. As of  June 1, 1996,  warrants for 59,127  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  Partners
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.
 
    In June 1996, the  Company loaned $31,000 to  Richard O. Shea, an  executive
officer  of the Company. This loan has an interest rate of 11.75% per annum. The
Company  previously  made  two  loans  to  Mr.  Shea  of  $60,000  and   $5,000,
respectively, which remain outstanding. These loans have interest rates of 5.54%
per  annum. All three  loans are due  on December 2,  1998 and are  secured by a
security interest in  all of Mr.  Shea's shares of  Common Stock, including  any
shares issuable upon his exercise of any stock options.
 
                                       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, L.P. (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)...............................................................     813,382        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)..................................................................     160,107         2.6%         1.7%
L. John Wilkerson, Ph.D. (14).....................................................      --            *            *
All officers and directors as a group (11 persons) (15)...........................   2,120,119        31.8%        21.7%

- ------------------------
  * 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 H. Missner, who is a general partner
    and a  limited  partner  of  Missner Venture  Partners  II,  L.P.  ("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 and limited
    partnership interests 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 Partners International,  L.P. L. John  Wilkerson, Ph.D., a
    director of the  Company, is  a general partner  of the  general partner  of
    Galen  Partners, L.P. and  Galen Partners International,  L.P. Dr. Wilkerson
    disclaims any beneficial  ownership of  the shares held  by Galen  Partners,
    L.P.  or  Galen Partners  International, L.P.  except to  the extent  of his
    individual ownership and  his pecuniary  interest arising  from his  general
    partnership interest in their general partner.
 
 (5)Includes 88,394 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 34,583 shares issuable under a warrant  exercisable
    within 60 days of June 1, 1996.
 
(13)Includes  22,966 shares issuable under a  warrant exercisable within 60 days
    of June 1, 1996, 1,780 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  of   Galen  Partners,   L.P.  and   Galen   Partners
    International,  L.P. Dr. Wilkerson disclaims any beneficial ownership of the
    shares held by Galen  Partners, L.P. or  Galen Partners International,  L.P.
    except  to the extent of his individual ownership and his pecuniary interest
    arising from his general partnership interest in their general partner.
 
(15)Includes 286,769 shares issuable under  stock options exercisable within  60
    days  of June 1, 1996 and 244,269 shares issuable under warrants exercisable
    within 60 days of June 1, 1996.
 
                                       52

                          DESCRIPTION OF CAPITAL STOCK

    The Company's  authorized capital  stock consists  of 30,000,000  shares  of
Common  Stock, par  value $.01 per  share. The following  description reflects a
1-for-5.3089 reverse stock split effected in August 1996 pursuant to which  each
outstanding  share of  the Company's  Class A  and Class  B common  stock became
0.1883629 share of Common Stock, and the underlying class of stock and number of
shares issuable  upon  exercise, and  the  exercise  price per  share,  of  each
outstanding  option and warrant were adjusted accordingly. See "-- Reverse Stock
Split."

COMMON STOCK
 
    As of June 1, 1996, there were 6,120,454 shares of Common Stock  outstanding
which were held of record by 160 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.  All information  in  this Prospectus,  including  the
Consolidated  Financial Statements, Condensed  Consolidated Financial Statements
and related Notes  thereto, relating  to the number  of shares  of Common  Stock
outstanding as of and after June 1, 1996 assumes the release to the Company from
the Safe Way Escrow, in satisfaction of certain of the Company's indemnification
claims  against Safe  Way, of  36,168 shares of  Common Stock  and the Company's
subsequent cancellation of the shares released. See "Business -- Regulatory  and
Legal Proceedings."
 
WARRANTS

    As  of June  1, 1996,  there were  outstanding warrants  to purchase 409,246
shares of Common Stock, all of which were then exercisable at a weighted average
exercise price of $6.85 per share.  Of these outstanding warrants, warrants  for
15,005  shares of Common Stock, at an exercise price of $18.58 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,  expire  in July  2000; and
warrants for 226,036  shares of  Common Stock, at  an exercise  price of  $7.96,
expire  in May 2001.  Holders of the  warrants expiring in  March 1998 and March
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 issuable upon exercise of the warrants. See "-- Registration Rights
of Certain Holders."

OPTIONS
 
    As of  June 1,  1996, there  were outstanding  options to  purchase  718,443
shares of Common Stock, at a weighted average exercise price of $0.97 per share,
of  which options for  414,030 shares, at  a weighted average  exercise price of
$0.69 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
11,537 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 5,227,608  shares of  Common
Stock  (including 21,778  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, which may be exercised at  any time, 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 after
completion of this Offering, 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.
 
LIMITED REDEMPTION RIGHTS OF ONE HOLDER

    Under  the Company's alliance  agreement with Baxter,  Baxter has the right,
solely until  the expiration  or earlier  termination of  its 180-day  "lock-up"
agreement  with the Managing Underwriters, to  require the Company to redeem all
of Baxter's 461,028 shares of  Common Stock under certain limited  circumstances
which  are not  within Baxter's  control: if  the Company  willfully breaches or
defaults under  the alliance  agreement; if  a competitor  of Baxter's  acquires
control  of the Company; if the Company sells or distributes hospital or medical
products or services as part of a program like Baxter's procedure-based delivery
system; or if the Company enters into an agreement with a third party to provide
regulated medical waste management services to its customers in connection  with
a  program by the third party like Baxter's procedure-based delivery system. The
redemption price has not yet been renegotiated to take into account  intervening
changes in the character of Baxter's equity investment in the Company. There can
be  no assurance that the  redemption price in the  event of any such redemption
will not be substantially in excess of the initial public offering price or  the
fair  market value of the Common Stock  at the time of redemption. See "Business
- -- Marketing  and Sales  -- Core  Generators" and  "Shares Eligible  for  Future
Sale."

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)
 
                                       54

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.
 
    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

    In August  1996, the  Company effected  a 1-for-5.3089  reverse stock  split
pursuant  to which each  outstanding share of  Class A and  Class B common stock
became 0.1883629 share of  Common Stock, and the  underlying class of stock  and
number  of shares issuable upon  exercise, and the exercise  price per share, of
each outstanding option and warrant were adjusted accordingly.

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,  after  giving effect  to  the
issuance  of 98,001 shares  of Common Stock  in partial payment  of the Safe Way
Note upon  completion  of  this  Offering,  and  assuming  no  exercise  of  the
Underwriters' over-allotment option
 
                                       55

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.
 
    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 5,407,728 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 696,962 shares of Common Stock, of which options for 397,555  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  1,500,000 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 also other  options outstanding to purchase
21,481 shares  of  Common  Stock,  of  which  options  for  16,475  shares  were
exercisable within 60 days of June 1, 1996.
 
    As  of June  1, 1996,  there were  outstanding warrants  to purchase 409,246
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 Common Stock has been approved for quotation on Nasdaq under the
symbol "SRCL," subject to notice of issuance.
 
                                       57

    The Underwriters do not expect to confirm sales to accounts over which  they
exercise discretionary authority.
 
    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") 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. In  addition,  the
Commission  maintains  a Web  site  on the  World Wide  Web,  and copies  of the
Registration Statement  and  its exhibits  may  be  accessed at  this  Web  site
(http://www.sec.gov). 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 SHEET AT JUNE 30, 1996 (UNAUDITED)..........................................        F-16
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
 (UNAUDITED)...............................................................................................        F-17
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1996
 (UNAUDITED)...............................................................................................        F-18
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
 (UNAUDITED)...............................................................................................        F-19
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)...........................................        F-20

                                      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.

                                             ERNST & YOUNG LLP

   
Chicago, Illinois
March 20, 1996,
except for the first paragraph of Note 7,
as to which the date is August 19, 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............................................................       9,137      13,922      17,478
Selling, general and administrative expenses................................       5,988       7,927       8,137
                                                                              ----------  ----------  ----------
  Total costs and expenses..................................................      15,125      21,849      25,615
                                                                              ----------  ----------  ----------
Loss from operations........................................................      (5,984)     (5,708)     (4,276)
Other income (expense):
Interest income.............................................................         201         156           9
Interest expense............................................................        (245)       (260)       (277)
                                                                              ----------  ----------  ----------
  Total other income (expense)..............................................         (44)       (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...................................................  $    (4.51) $    (4.76) $    (0.65)
                                                                              ----------  ----------  ----------
                                                                              ----------  ----------  ----------
Weighted average number of common shares outstanding........................   2,162,611   2,162,988   7,029,441
                                                                              ----------  ----------  ----------
                                                                              ----------  ----------  ----------

   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 adopted  FAS 121 in 1996, the  effect of which was  not
material to the Company's financial position or results of operations.
 
    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 issued a  $2,480,000 note and  25,228 shares of  preferred stock with  a
liquidation  value  of  $100  per  share.  The  Company  assumed  liabilities of
$2,271,000 related to this acquisition. 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  25,228 shares of
preferred stock  issued  in  connection  with  the  Safe  Way  acquisition  were
reclassified  as 130,003 shares of common  stock. See further discussion in Note
7.
 
                                      F-9

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 4 -- ACQUISITIONS AND DIVESTITURES (CONTINUED)
    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.
 
    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................................      $     (4.90)         $     (4.90)

    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
 
                                      F-10

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 5 -- LONG-TERM DEBT (CONTINUED)
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  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 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.
 
                                      F-11

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 5 -- LONG-TERM DEBT (CONTINUED)
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.
 
    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
                                                                            ------
                                                                            ------

                                      F-12

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 7 -- COMMON AND PREFERRED STOCK
   
    STOCK SPLIT:

   
    All  common shares,  per share,  weighted average  shares outstanding, stock
option and warrant  data have been  adjusted to reflect  a 1-for-5.3089  reverse
stock  split effective  August 19, 1996.  In connection with  this reverse stock
split, each outstanding share of the Company's Class A and Class B common  stock
was redesignated as a share of common stock, and the Company's authorized common
stock  was reduced from  58,000,000 shares to  30,000,000 shares, also effective
August 19, 1996.

    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................................................    923,292
Warrants.........................................................    242,396
                                                                   ---------
    Total shares reserved........................................  1,273,632
                                                                   ---------
                                                                   ---------

    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 15,005 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 and a holder of a warrant to purchase
up to

                                      F-14

                       STERICYCLE, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1995
 
NOTE 9 -- REGISTRATION AGREEMENT (CONTINUED)
   
15,005 shares of  common stock which  the Company issued  in conjunction with  a
lease  financing  agreement.  After  the  Company's  1995  recapitalization, the
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, shares issuable under  the warrant issued in  conjunction with the  lease
financing  agreement 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.

    The  Alliance  also  gives the  investor  the right,  under  certain limited
circumstances which  are  not within  the  investor's control,  to  require  the
Company  to redeem the investor's 461,028  shares of the Company's common stock.
The redemption price upon  any such redemption is  currently not defined as  the
Company  and  the  investor are  negotiating  the price.  This  redemption right
terminates 180 days from  the date of the  Company's initial public offering  of
common  stock. Due to the limited nature  and remote possibility of a redemption
of  these  shares,  the  Company  has  recorded  the  investor's  investment  in
shareholders' equity in the accompanying balance sheets.

    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 SHEET (UNAUDITED)

                                                                                             JUNE 30,
                                                                                               1996
                                                                                          --------------
                                                                                          (IN THOUSANDS)
                                                                                       
ASSETS
Current Assets:
  Cash and cash equivalents.............................................................    $       40
  Accounts receivable, less allowance for doubtful accounts of $157.....................         4,521
  Parts and supplies....................................................................           457
  Prepaid expenses......................................................................           486
  Other current assets..................................................................           419
                                                                                          --------------
    Total current assets................................................................         5,923
Property, Plant and Equipment:
  Land..................................................................................            90
  Buildings and improvements............................................................         5,407
  Machinery and equipment...............................................................         8,445
  Office equipment and furniture........................................................           431
  Construction in progress..............................................................           281
                                                                                          --------------
                                                                                                14,654
Less accumulated depreciation and amortization..........................................        (4,347)
                                                                                          --------------
    Property, plant and equipment -- Net................................................        10,307
Other Assets:
  Organization costs, net...............................................................            10
  Goodwill, less accumulated amortization of $596.......................................         9,064
  Other.................................................................................           530
                                                                                          --------------
    Total other assets..................................................................         9,604
                                                                                          --------------
      Total assets......................................................................    $   25,834
                                                                                          --------------
                                                                                          --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.....................................................    $    4,306
  Accounts payable......................................................................         1,508
  Accrued liabilities...................................................................         2,547
  Deferred revenue......................................................................           594
                                                                                          --------------
    Total current liabilities...........................................................         8,955
Long-Term Debt:
  Industrial development revenue bonds and other........................................         3,051
  Note payable to bank..................................................................         1,348
                                                                                          --------------
    Total long-term debt................................................................         4,399
Other Liabilities.......................................................................           569
Shareholders' Equity:
  Common stock (par value $.01 per share; 30,000,000 shares authorized, 6,155,940 issued
   and outstanding).....................................................................            62
  Additional paid-in capital............................................................        50,075
  Notes receivable for common stock purchases...........................................           (30)
  Accumulated deficit...................................................................       (38,196)
                                                                                          --------------
    Total shareholders' equity..........................................................        11,911
                                                                                          --------------
      Total liabilities and shareholders' equity........................................    $   25,834
                                                                                          --------------
                                                                                          --------------

   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 SIX MONTHS ENDED
                                                                                       JUNE 30,
                                                                              --------------------------
                                                                                  1995          1996
                                                                              ------------  ------------
                                                                                (IN THOUSANDS, EXCEPT
                                                                              SHARE AND PER SHARE DATA)

Revenues....................................................................  $     10,756  $     11,616
 
Costs and expenses:
  Cost of revenues..........................................................         8,872         9,189
  Selling, general and administrative.......................................         4,663         3,315
                                                                              ------------  ------------
    Total costs and expenses................................................        13,535        12,504
                                                                              ------------  ------------
 
Loss from operations........................................................        (2,779)         (888)
 
Other income (expense):
  Interest income...........................................................             6            --
  Interest expense..........................................................          (103)         (206)
                                                                              ------------  ------------
    Total other income (expense)............................................           (97)         (206)
                                                                              ------------  ------------
Net loss....................................................................        (2,876)       (1,094)
Less cumulative preferred dividends.........................................        (3,146)           --
                                                                              ------------  ------------
Loss applicable to common stock.............................................  $     (6,022) $     (1,094)
                                                                              ------------  ------------
                                                                              ------------  ------------
Net loss per common share...................................................  $      (2.78) $      (0.15)
                                                                              ------------  ------------
                                                                              ------------  ------------
Weighted average number of common shares outstanding........................     2,162,988     7,074,440
                                                                              ------------  ------------
                                                                              ------------  ------------

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

                       STERICYCLE, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                  (UNAUDITED)
                                 (IN THOUSANDS)
                                  COMMON STOCK

                                                                                NOTES
                                                                              RECEIVABLE
                                          ISSUED AND             ADDITIONAL   FOR COMMON                     TOTAL
                                          OUTSTANDING             PAID-IN       STOCK      ACCUMULATED   SHAREHOLDERS'
                                            SHARES      AMOUNT    CAPITAL     PURCHASES      DEFICIT        EQUITY
                                          -----------   ------   ----------   ----------   -----------   -------------
                                                                                       
BALANCES AT DECEMBER 31, 1995...........     5,582       $ 55     $49,621       $  --       $(37,102)      $ 12,574
Common stock issued -- $.01 per share...       574          7         454         (30)                          431
Net loss for the six months ended June
 30, 1996...............................                                                      (1,094)        (1,094)
                                             -----      ------   ----------     -----      -----------   -------------
BALANCES AT JUNE 30, 1996...............     6,156       $ 62     $50,075       $ (30)      $(38,196)      $ 11,911
                                             -----      ------   ----------     -----      -----------   -------------
                                             -----      ------   ----------     -----      -----------   -------------

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

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

                                                                                      FOR THE SIX MONTHS
                                                                                        ENDED JUNE 30,
                                                                                     --------------------
                                                                                       1995       1996
                                                                                     ---------  ---------
                                                                                        (IN THOUSANDS)
                                                                                          
OPERATING ACTIVITIES:
  Net loss.........................................................................  $  (2,876) $  (1,094)
  Adjustments to reconcile net loss to
   net cash used in operating activities:
    Depreciation and amortization..................................................        945        976
    Asset write down...............................................................        503         --
    Gain on divestiture............................................................       (408)        --
  Change in net operating assets,
   net of effect of acquisitions and divestitures:
    Accounts receivable............................................................        910       (319)
    Parts and supplies.............................................................         62         47
    Prepaid expenses and other.....................................................        (79)       (49)
    Other assets...................................................................       (145)         6
    Accounts payable...............................................................        554       (430)
    Accrued liabilities............................................................       (719)       600
    Deferred revenue and other liabilities.........................................        286        (12)
                                                                                     ---------  ---------
Net cash used in operating activities..............................................       (967)      (275)
                                                                                     ---------  ---------
INVESTING ACTIVITIES:
  Capital expenditures.............................................................       (153)      (235)
  Proceeds from divestiture........................................................        544         --
  Payments for acquisitions, net of cash acquired..................................       (119)    (1,068)
                                                                                     ---------  ---------
Net cash provided by (used in) investing activities................................        272     (1,303)
                                                                                     ---------  ---------
FINANCING ACTIVITIES:
  Repayment of long-term debt......................................................        (71)      (264)
  Issuance of common stock.........................................................         --        431
  Proceeds from bridge loan........................................................         --      1,000
  Net proceeds from note payable to bank...........................................         --        490
  Principal payments under capital lease obligations...............................       (263)      (177)
                                                                                     ---------  ---------
Net cash (used in) provided by financing activities................................       (334)     1,480
                                                                                     ---------  ---------
  Net decrease in cash and cash equivalents........................................     (1,029)       (98)
Cash and cash equivalents at beginning of period...................................      1,206        138
                                                                                     ---------  ---------
Cash and cash equivalents at end of period.........................................  $     177  $      40
                                                                                     ---------  ---------
                                                                                     ---------  ---------
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-19

                       STERICYCLE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 JUNE 30, 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.
During the six months ended June 30, 1995, the Company recorded a write-down  in
the carrying value of a project to utilize treated regulated medical waste as an
alternative  fuel in  the production  of cement.  The Company  realized that the
viability and completion of the project  were doubtful and that, if the  project
were  completed, the economic cost  would not permit the  Company to recover its
investment. In the opinion of management,  all adjustments necessary for a  fair
presentation  for  the  periods  presented have  been  reflected  and,  with the
exception of the asset write-down during the six months ended June 30, 1995, 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  six-month period  ended June  30, 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  was
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 and bear interest
at the rate of 6% per annum. 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  was accounted  for using  the
purchase method of accounting.

    These  acquisitions are not significant to results of operations for the six
months ended June 30, 1996.
 
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 226,036 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  30,826 shares of  common stock by various  consultants to the Company.
The options carry an exercise price of $2.12 per share.
 
                                      F-20

                       STERICYCLE, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)
                                 JUNE 30, 1996
 
NOTE 4 -- STOCK OPTIONS (CONTINUED)
    In April 1996, the  Board of Directors granted  options to purchase  149,984
shares  of common stock to employees. The options will vest over 12 to 48 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, consisting  of
directors  who are  neither officers  nor employees  of the  Company. Under such
plan, each incumbent eligible director  will automatically receive an option  as
of  the date of  closing of an  initial public offering  of the Company's common
stock for a  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 average of  the closing bid and asked  prices of a share of  common
stock  (the "closing price") on the date of  grant. As of each annual meeting of
the Company's stockholders after  the date of such  an initial public  offering,
each  incumbent eligible director who is re-elected  as a director at the annual
meeting will automatically receive  an option for a  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 closing price on the date of the
annual meeting, and each eligible director who is elected as a director for  the
first time will automatically receive an option for a number of shares of Common
Stock  determined by multiplying  21,000 shares by a  fraction, the numerator of
which is $12.00 and the denominator of which is closing price on the date of the
annual meeting. These  option grants  are subject to  a maximum  grant of  9,500
shares  and a  minimum grant of  4,500 shares (or  to a maximum  grant of 28,500
shares and a minimum grant of 13,500 shares in the case an eligible director who
is elected as a director for the first time at an annual meeting). In  addition,
each  eligible director who  is elected as  a director for  the first time other
than at  an annual  meeting  of the  Company's stockholders  will  automatically
receive, as of the date of his or her election, an option for a number of shares
of  common stock equal to  three times the number of  shares of common stock for
which each incumbent eligible director received an option as of the last  annual
meeting. The exercise price of each option will be the closing price on the date
of  grant. The term of each option will be  six years from the date of grant and
will vest in 16 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, by surrendering exercisable options having a fair market value on
the date of exercise equal to the exercise price, 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,
or by a combination of these methods.
 
NOTE 5 -- STOCK ISSUANCES
    In May  1996,  warrants to  purchase  59,128  shares of  common  stock  were
exercised  at a  price of  $1.59 per  share. In  May and  June 1996,  options to
purchase 24,233 shares and  459,844 shares of  common stock, respectively,  were
exercised at prices of $2.12 per share and $0.53 per share, respectively.
 
NOTE 6 -- INCOME TAXES
    The  Company incurred a net operating loss for the six months ended June 30,
1995 and 1996.  Any tax benefit  resulting from these  net operating losses  has
been offset by a valuation allowance.
 
NOTE 7 -- 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.
 
                                      F-21

                       STERICYCLE, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)
                                 JUNE 30, 1996
 
NOTE 8 -- STOCK SPLIT
    STOCK SPLIT:

    All common shares,  per share,  weighted average  shares outstanding,  stock
option  and warrant  data have been  adjusted to reflect  a 1-for-5.3089 reverse
stock split effective  August 19, 1996.  In connection with  this reverse  stock
split,  each outstanding share of the Company's Class A and Class B common stock
was redesignated as a share of common stock, and the Company's authorized common
stock was reduced from  58,000,000 to 30,000,000  shares, also effective  August
19, 1996.

NOTE 9 -- RELATED PARTIES
   
    In October 1993, the Company entered into an Alliance Agreement ("Alliance")
with  an investor  in the  Company. The Alliance  gives the  investor the right,
under certain limited circumstances which are not within the investor's control,
to require the Company to redeem the investor's 461,028 shares of the  Company's
common  stock. The  redemption price upon  any such redemption  is currently not
defined as  the  Company  and  the investor  are  negotiating  the  price.  This
redemption  right terminates  180 days  from the  date of  the Company's initial
public offering of  common stock. Due  to the limited  circumstances and  remote
possibility  of  a redemption  of  these shares,  the  Company has  recorded the
investor's investment in shareholders' equity in the accompanying balance sheet.

                                      F-22

                                    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  5 of the Registrant's By-Laws requires the Company to indemnify its
directors and officers, and permits the  Company to indemnify its 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 10 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 October 1993,  the Registrant  sold 750.75  shares of  Class B  preferred
stock  and  21,450 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 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  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 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 August 1996, Mr.
Schuler exercised his  warrant and  acquired 285,675  shares of  Class A  common
stock.

   
    In  November 1995, the Registrant issued 22,000  shares of common stock to a
third party in connection  with a cross-license  agreement which the  Registrant
entered into in part to settle a dispute with the third party.

   
    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 each of two consultants 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.

   
    In May 1996, the Registrant issued 102,400 shares of Class A common stock to
seven consultants, including Peter Vardy, a director of the Company, pursuant to
the exercise of options exercisable at a price of $0.40 per share.

                                      II-2

    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.

   
    In June 1996, the Registrant issued  162,141 shares of Class B common  stock
to  Patrick F. Graham, 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 20,971 shares of Class B common stock to
an employee pursuant  to the exercise  of an  option exercisable at  a price  of
$0.10 per share.

   
    In August 1996, the Registrant issued 285,675 shares of Class A common stock
to Jack W. Schuler, a director of the Registrant, pursuant to the exercise of an
option exercisable at a price of $0.10 per share.

   
    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     Amended and Restated Certificate of Incorporation of the Registrant.
   3.2     Amended and Restated By-Laws of the Registrant.
   4.1     Specimen certificate for shares of the Registrant's Common Stock, par value $.01 per share (revised).
   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 and Second Amendment dated
            July 1, 1996.
   5.1     Opinion of Johnson and Colmar.
  10.1*    Amended and Restated Incentive Compensation Plan.
  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.

 
                                      II-3

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
  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
            and related First Amendment dated August 1, 1996.
  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.
  10.15*+  Interim Agreement dated June 28, 1996 between the Registrant and a Brazilian company.
   11      Statement Re Computation of Per Share Earnings (revised).
  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.

 
- ------------------------
   
 * Previously filed.
    
 + Confidential treatment requested.
 
                                      II-4

                                   SIGNATURES

    Pursuant  to the requirements of the  Securities Act of 1933, the Registrant
has duly caused this Amendment No. 5  to Registration Statement to be signed  on
its  behalf by  the undersigned,  thereunto duly  authorized, in  the Village of
Deerfield, State of Illinois, on August 20, 1996.

                                        STERICYCLE, INC.
 
                                        By:          /s/ MARK C. MILLER
                                           -------------------------------------
                                                      Mark C. Miller
                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER

    Pursuant to the requirements of the  Securities Act of 1933, this  Amendment
No.  5 to Registration Statement has been  signed below by the following persons
in the capacities and on the dates indicated.

   

                         NAME                                           TITLE                         DATE
- ------------------------------------------------------  --------------------------------------  -----------------
 
                                     *
     -------------------------------------------        Chairman of the Board of Directors       August 20, 1996
                   Jack W. Schuler
 
                  /s/ MARK C. MILLER                    President, Chief Executive Officer and
     -------------------------------------------         a Director (Principal Executive         August 20, 1996
                    Mark C. Miller                       Officer)
 
                                     *                  Vice President, Finance and Chief
     -------------------------------------------         Financial Officer (Principal            August 20, 1996
                   James F. Polark                       Financial and Accounting Officer)
 
                                     *
     -------------------------------------------        Director                                 August 20, 1996
                  Patrick F. Graham
 
                                     *
     -------------------------------------------        Director                                 August 20, 1996
                    John Patience
 
                                     *
     -------------------------------------------        Director                                 August 20, 1996
                    Lloyd D. Ruth
 
                                     *
     -------------------------------------------        Director                                 August 20, 1996
               L. John Wilkerson, Ph.D.
 
                                     *
     -------------------------------------------        Director                                 August 20, 1996
                     Peter Vardy
 
*By            /s/ MARK C. MILLER
               ---------------------------------------
                      Mark C. Miller
                     ATTORNEY-IN-FACT

 
                                      II-5

                                 EXHIBIT INDEX

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
        
   1.1*    Form of Underwriting Agreement.
   3.1     Amended and Restated Certificate of Incorporation of the Registrant.
   3.2     Amended and Restated By-Laws of the Registrant.
   4.1     Specimen certificate for shares of the Registrant's Common Stock, par value $.01 per share (revised).
   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 and Second Amendment dated
            July 1, 1996.
   5.1     Opinion of Johnson and Colmar.
  10.1*    Amended and Restated Incentive Compensation Plan.
  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
            and related First Amendment dated August 1, 1996.
  10.7*+   Agreement dated May 6, 1994 between the Registrant and SAGE Products, Inc., and related letter
            agreement dated November 7, 1995 (revised).
  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.

   

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
  10.15*+  Interim Agreement dated June 28, 1996 between the Registrant and a Brazilian company.
        
  11       Statement Re Computation of Per Share Earnings (revised).
  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.

 
- ------------------------
   
 * Previously filed.
    
 + Confidential treatment requested.

                                                                        EXH 3.1

                                 AMENDED AND RESTATED

                             CERTIFICATE OF INCORPORATION

                                          OF

                                   STERICYCLE, INC.

    Stericycle, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), certifies as follows:

    The Corporation filed its original Certificate of Incorporation with the
Secretary of State of the State of Delaware on March 21, 1989.  The Corporation
filed an Amended and Restated Certificate of Incorporation on September 27,
1994, and subsequent Certificates of Amendment on November 2, 1995 and July 16,
1996.  The Corporation has filed this Amended and Restated Certificate of
Incorporation in order to integrate and further amend its Certificate of
Incorporation as currently in effect.

    This Amended and Restated Certificate of Incorporation was duly proposed by
the Corporation's board of directors and adopted by the Corporation's
stockholders in the manner and by the vote prescribed by Sections 228, 242 and
245 of the General Corporation Law of the State of Delaware (the "Delaware
General Corporation Law").

    The Corporation's Certificate of Incorporation, as currently in effect, is
amended and restated to read as follows:

                                      ARTICLE 1

                                         NAME

    The name of the Corporation is Stericycle, Inc.

                                      ARTICLE 2

                        REGISTERED OFFICE AND REGISTERED AGENT

    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.  The
name of the Corporation's registered agent at this address is The Prentice-Hall
Corporation System, Inc.

                                      ARTICLE 3

                                       PURPOSE

    The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.

                                      ARTICLE 4

                                    CAPITAL STOCK

    The Corporation is authorized to issue 30,000,000 shares of stock of one
class, designated as Common Stock, having a par value of $.01 per share.

                                      ARTICLE 5

                        REVERSE STOCK SPLIT AND REDESIGNATION

    Immediately upon the filing of this Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware (the
"Filing"):

    (a)  each share of the Corporation's Class A Common Stock, par value $.01
         per share, shall be exchanged into and redesignated as 0.1883629
         shares of Common Stock, automatically and without the necessity of
         further action; and

    (b)  each share of the Corporation's Class B Common Stock, par value $.01
         per share, shall be exchanged into and redesignated as 0.1883629
         shares of Common Stock, automatically and without the necessity of
         further action.

    As of the Filing, the rights of each holder of shares of Class A or Class B
Common Stock, as the case may be, shall cease in respect of those shares, and
the holder shall become the holder of record of the shares of Common Stock to be
issued in respect of those shares by reason of the exchange and redesignation
under this Article.  Each certificate representing shares of Class A or Class B
Common Stock shall be considered to represent the number of shares of Common
Stock to be issued by reason of the exchange and redesignation; and upon a
holder's surrender to the Corporation of a certificate representing shares of
Class A or Class B Common Stock (or upon submission of 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 Common Stock issuable by reason of the
exchange and redesignation.  All shares of Common Stock issued by reason of the
exchange and redesignation of outstanding shares of Class A and Class B Common
Stock shall be fully paid and non-assessable.

    The exchange and redesignation under this Article shall be effected on a
certificate-by-certificate basis.  If in any case the resulting number of shares
of Common Stock to be issued is not a whole number, any fractional share shall
be rounded up to a whole share.

                                          2

                                      ARTICLE 6

                                       DURATION

    The Corporation shall have perpetual existence.

                                      ARTICLE 7

                                       BY-LAWS

    The Corporation's board of directors is authorized to adopt, amend or
repeal the Corporation's by-laws.

                                      ARTICLE 8

                                 NUMBER OF DIRECTORS

    The number of directors shall be fixed by, or determined in the manner
specified in, the Corporation's by-laws.

                                      ARTICLE 9

                  BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS

    The Corporation elects to be governed by Section 203 of the General
Corporation Law of the State of Delaware.

                                      ARTICLE 10

                          LIMITATION ON DIRECTORS' LIABILITY

    A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for a breach of the
director's fiduciary duty as a director, except for:  (i) a breach of the
director's duty of loyalty to the Corporation or its stockholders; (ii) an act
or omission which was not in good faith or which involved intentional misconduct
or a knowing violation of law; (iii) liability under Section 174 of the Delaware
General Corporation Law for the unlawful payment of dividends or the unlawful
purchase or redemption of stock; or (iv) any transaction from which the director
derived an improper personal benefit.

    If the Delaware General Corporation Law is amended to authorize corporate
action further limiting or eliminating the personal liability of directors, the
liability of a director of the Corporation shall be further limited or
eliminated to the fullest extent permitted by the amendment.

    No circumscribing amendment or repeal of this Article 10 shall apply to or
have any effect on the personal liability or alleged liability of any director
of the Corporation for or in respect

                                          3

of acts or omissions occurring prior to the amendment or repeal.

                                      ARTICLE 11

                                      AMENDMENTS

    The Corporation reserves the right to amend or repeal any provisions of
this Amended and Restated Certificate of Incorporation, and add any new
provisions, in the manner now or in the future prescribed by the Delaware
General Corporation Law, and all rights conferred upon the Corporation's
stockholders by this Amended and Restated Certificate of Incorporation are
subject to this reservation.

                                  *   *   *   *   *

    In witness, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its President and Chief Executive
Officer, Mark C. Miller, and attested to by its Vice President-Finance, Chief
Financial Officer and Secretary, James F. Polark, on August 16, 1996.  Their
signatures below constitute their respective affirmations and acknowledgements,
under penalties of perjury, that this instrument is the Corporation's act and
deed and that the facts stated in this instrument are true.

                                  STERICYCLE, INC.

                                  By   /s/ Mark C. Miller
                                    -------------------------------------
                                       Mark C. Miller
                                       PRESIDENT AND CHIEF EXECUTIVE OFFICER

                                  Attest:

                                       /s/ James F. Polark
                                       ----------------------------------
                                            James F. Polark
                                            VICE PRESIDENT-FINANCE, CHIEF
                                            FINANCIAL OFFICER AND SECRETARY

                                          4

                             AMENDED AND RESTATED BY-LAWS

                                          OF

                                   STERICYCLE, INC.

                                  TABLE OF CONTENTS

                                                                            PAGE
                                 ARTICLE 1 - OFFICES

1.1  Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . .   1
1.2  Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1

                               ARTICLE 2 - STOCKHOLDERS

2.1  Annual Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
2.2  Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . .   1
2.3  Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . .   1
2.4  Notice of Meetings  . . . . . . . . . . . . . . . . . . . . . . . . .   1
2.5  Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
2.6  Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2

2.7  Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
2.8  Voting List . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
2.9  Inspectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
2.10 Adjournments. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
2.11 Action by Consent . . . . . . . . . . . . . . . . . . . . . . . . . .   3

                                ARTICLE 3 - DIRECTORS

3.1  General Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
3.2  Number and Term of Office . . . . . . . . . . . . . . . . . . . . . .   3
3.3  Regular Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . .   3
3.4  Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . .   3
3.5  Notice of Special Meetings. . . . . . . . . . . . . . . . . . . . . .   4
3.6  Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
3.7  Participation by Telephone. . . . . . . . . . . . . . . . . . . . . .   4
3.8  Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
3.9  Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
3.10 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
3.11 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
3.12 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
3.13 Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
3.14 Action by Consent . . . . . . . . . . . . . . . . . . . . . . . . . .   5

                                 ARTICLE 4 - OFFICERS

4.1  Principal Officers. . . . . . . . . . . . . . . . . . . . . . . . . .   5
4.2  Election and Term of Office . . . . . . . . . . . . . . . . . . . . .   5
4.3  Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5
4.4  Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5
4.5  Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
4.6  Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . .   6
4.7  President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
4.8  Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . .   6
4.9  Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
4.11 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
4.12 Assistant Officers. . . . . . . . . . . . . . . . . . . . . . . . . .   7
4.13 Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7

                             ARTICLE 5 - INDEMNIFICATION . . . . . . . . .   7

                                  ARTICLE 6 - STOCK

6.1  Stock Certificates. . . . . . . . . . . . . . . . . . . . . . . . . .   9
6.2  Endorsements. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
6.3  Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
6.4  Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .  10
6.5  Stockholders of Record. . . . . . . . . . . . . . . . . . . . . . . .  10
6.6  Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

                            ARTICLE 7 - GENERAL PROVISIONS

7.1  Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
7.2  Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
7.3  Checks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
7.4  Depositories. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
7.5  Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
7.6  Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
7.7  Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . .  11
7.8  Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . .  11
7.9  Transactions with Interested Parties. . . . . . . . . . . . . . . . .  11
7.10 Certificate of Incorporation. . . . . . . . . . . . . . . . . . . . .  12
7.11 Use of Words. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

                                ARTICLE 8 - AMENDMENTS

8.1  By the Board of Directors . . . . . . . . . . . . . . . . . . . . . .  12
8.2  By the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . .  12

                             AMENDED AND RESTATED BY-LAWS

                                          OF

                                   STERICYCLE, INC.

                                      ARTICLE 1

                                       OFFICES

    1.1   REGISTERED OFFICE.  The Corporation's registered office in the State
of Delaware shall be located at 32 Loockerman Square, Suite L-100, Dover,
Delaware 19901 (Kent County), and its registered agent shall be The Prentice
Hall Corporation System, Inc.  The Corporation's registered office and
registered agent may be changed at any time by the board of directors.

    1.2   OTHER OFFICES.  The Corporation may also have other offices, either
within or outside the State of Delaware, as the board of directors determines or
as the Corporation's business requires.

                                      ARTICLE 2

                                     STOCKHOLDERS

    2.1   ANNUAL MEETING.  An annual meeting of stockholders for the election
of directors and the transaction of any other business which properly comes
before the meeting shall be held between March 1 and June 30 of each year on the
date fixed by the board of directors.

    2.2   SPECIAL MEETINGS.  A special meeting of stockholders may be called
for any purpose or purposes by the chairman of the board, the president or the
board of directors.  The business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of the meeting.

    2.3   PLACE OF MEETINGS.  Meetings of stockholders shall be held at the
place designated by the board of directors, which may be within or outside the
State of Delaware.  If the Board does not designate a place, the place shall be
the Corporation's principal office.

    2.4   NOTICE OF MEETINGS.  Written notice of each meeting of stockholders
shall be given to all stockholders entitled to vote at the meeting at least 10
but not more than 60 days prior to the meeting (unless otherwise provided by
law).  The notice shall state the date, place and time of the meeting, and in
the case of a special meeting of stockholders, the purpose or purposes for which
the meeting is called.  If mailed, the notice shall be considered given when
deposited in the United States mail, proper postage prepaid, directed to the
stockholder at his address as it appears on the Corporation's records.

                                          1

    2.5   QUORUM.  The holders of a majority of the shares entitled to vote at
a meeting of stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the meeting, except as
otherwise provided by law or by the Corporation's certificate of incorporation.

    2.6   VOTING.  Each stockholder shall be entitled to one vote for each
share of stock entitled to vote that he holds of record.  When a quorum is
present at any meeting of stockholders, the affirmative vote of holders of a
majority of the shares present in person or represented by proxy, entitled to
vote on a matter and voting shall decide the matter, except in the case of the
election of directors or when a different vote is required by law or by the
Corporation's certificate of incorporation.  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 on the election of directors.
    2.7   PROXIES.  Each stockholder entitled to vote at a meeting of
stockholders, or to consent to corporate action without a meeting, may authorize
another person or persons to act for him by a written proxy signed by him or his
authorized agent and delivered to the secretary of the Corporation prior to or
at the time of the meeting or other action.  No proxy may be voted or acted on
more than three years after its date, unless the appointment expressly provides
for a longer period.  A stockholder may revoke his appointment of a proxy by
written notice to the secretary of the Corporation, by a subsequent appointment
or by attendance at the meeting and voting in person.

    2.8   VOTING LIST.  At least 10 days before every meeting of stockholders,
the secretary of the Corporation shall prepare a complete alphabetical list of
the stockholders entitled to vote at the meeting, showing the address of each
stockholder and the number of shares registered in his name.  This 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.  The place of inspection shall be either the place where the
meeting is to be held or a place within the city where the meeting is to be
held, in which case the notice of the meeting shall specify the place of
inspection.  This list shall also be produced and kept open during the meeting
of stockholders and may be inspected by any stockholder who is present.

    2.9   INSPECTORS.  The board of directors shall appoint in advance of any
meeting of stockholders one or more inspectors to act at the meeting.  If no
inspector appointed is able to act at the meeting, the chairman of the meeting
shall appoint one or more inspectors.  Each inspector shall take and sign an
oath faithfully to carry out the duties of inspector with strict impartiality
and according to the best of his ability.  The inspectors shall determine the
number of shares outstanding and the voting power of each, determine the shares
represented at the meeting and the validity of proxies and ballots, count all
votes and ballots, determine (and retain for a reasonable period a record of)
the disposition of any challenges made to any determination of the inspectors,
and certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots.

    2.10  ADJOURNMENTS.  Any meeting of stockholders may be adjourned to
another time or place by the holders of a majority of the shares present or
represented by proxy at the meeting and entitled to vote, even though less than
a quorum.  Notice need not be given of the adjourned

                                          2

meeting if the time and place of the adjourned meeting are announced at the
meeting at which the adjournment is taken, unless the adjournment is for more
than 30 days or, after the adjournment, a new record date is fixed for the
adjourned meeting.  The Corporation may transact any business at the adjourned
meeting which might have been transacted at the original meeting.

    2.11  ACTION BY CONSENT.  Any action which may be taken at a meeting of
stockholders may be taken without a meeting (and without prior notice) if a
written consent or consents, setting forth the action taken, are signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take the action at a meeting at which
all shares entitled to vote were present and voted.  Prompt notice of the taking
of any corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented.

                                      ARTICLE 3

                                      DIRECTORS

    3.1   GENERAL POWERS.  The Corporation's business and affairs shall be
managed by or under the direction of a board of directors, which may exercise
all of the powers of the Corporation except as otherwise provided by law or by
the Corporation's certificate of incorporation.

    3.2   NUMBER AND TERM OF OFFICE.  The number of directors constituting the
board of directors shall be seven.  The number of directors may be changed by a
resolution of the board of directors or the stockholders, but if changed, no
decrease in the number of directors shall reduce the term of any incumbent.
Directors shall be elected at the annual meeting of stockholders, and each
director shall hold office until his successor is elected or until his earlier
death, resignation or removal.  Despite the expiration of a director's term, the
director shall continue to serve in office until the next meeting of
stockholders at which directors are elected.  Directors need not be stockholders
of the Corporation.

    3.3   REGULAR MEETINGS.  Regular meetings of the board of directors shall
be held at the times and places determined by the board of directors.  Notice of
a regular meeting of the board of directors need not be given (except to a
director who was absent when the determination of the time and place was made).

    3.4   SPECIAL MEETINGS.  Special meetings of the board of directors may be
held at any time at the call of the chairman of the board, the president or any
two Directors.  Special meetings shall be held at the Corporation's principal
office unless the board of directors designates a different location.

    3.5   NOTICE OF SPECIAL MEETINGS.  Written notice of a special meeting of
the board of directors shall be given to each director at his business address
by the secretary of the Corporation, or by the officer or one of the directors
calling the meeting, by personal delivery, telecopier, overnight courier service
or mail at least 48 hours prior to the meeting.  The notice

                                          3

shall state the time and place of the meeting but need not specify the purpose
of the meeting.

    3.6   QUORUM.  A majority of the total number of directors shall constitute
a quorum to transact business at all meetings of the board of directors.  In the
absence of quorum at any meeting, a majority of the directors present may
adjourn the meeting without further notice other than announcement of the time
and place of the adjourned meeting.

    3.7   PARTICIPATION BY TELEPHONE.  A director or member of any committee
designated by the board of directors may participate in any meeting of the board
of directors or of such committee by conference telephone or similar
communications equipment which enables all persons participating in the meeting
to hear one another, and participation in this manner shall constitute presence
in person at the meeting.

    3.8   VOTING.  The vote of a majority of the directors present at any
meeting of the board of directors at which a quorum is present shall be the act
of the board of directors, unless the vote of a greater number is required by
the Corporation's certificate of incorporation.

    3.9   RESIGNATION.  A director may resign at any time by written notice to
the Corporation at its principal office or to the chairman of the board,
president or secretary.  Unless otherwise specified in the director's notice,
his resignation shall be effective on receipt by the Corporation or designated
officer.

    3.10  REMOVAL.  Any director may be removed, with or without cause, at any
special meeting of stockholders called for that purpose, by the affirmative vote
of holders of a majority of the shares then entitled to vote at an election of
directors.

    3.11  VACANCIES.  Any vacancy in the board of directors created by a
director's resignation, death or removal, or any vacancy arising because of an
increase in the number of directors may be filled by the incumbent directors.  A
director elected to fill a vacancy shall hold office for the balance of the term
for which he was elected.

    3.12  COMPENSATION.  The board of directors may establish reasonable fees
to be paid to directors for their services, and may also authorize the payment
of their expenses, if any, reasonably incurred in attending meetings of the
board of directors.

    3.13  COMMITTEES.  The board of directors, by resolution passed by a
majority of the whole Board, may create one or more committees (for example, a
Compensation Committee or an Audit Committee) of two or more directors to serve
at the Board's pleasure.  The board of directors may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member of the committee at any meeting of the committee.  To the
extent provided in the resolution creating each committee, and subject to the
limitations imposed by law, the committee shall have and may exercise all of the
powers and authority of the board of directors in respect of matters within the
scope of the committee's authority.  Unless the resolution creating any
committee specifies a greater number, a majority of the members of the committee
shall constitute a quorum, and a majority of a quorum shall be necessary for
committee action.  Subject to the direction of the board of directors, each com-

                                          4

mittee shall determine the time and place of its meetings and establish
appropriate rules to govern its activities.

    3.14  ACTION BY CONSENT.  Any action which may be taken at a meeting of the
board of directors or of any committee of the board of directors may be taken
without a meeting (and without prior notice) if a written consent or consents,
setting forth the action taken, are signed by all of the directors or members of
the committee and filed with minutes of proceedings of the board of directors or
the committee.

                                      ARTICLE 4

                                       OFFICERS

    4.1   PRINCIPAL OFFICERS.  The principal officers of the Corporation shall
consist of a president, chief financial officer and secretary.  The board of
directors may elect a chairman of the board from among the directors and may
appoint such other officers and assistant officers, including one or more vice
presidents, assistant treasurers and assistant secretaries as the Board
considers advisable.  More than one office may be held by the same person.

    4.2   ELECTION AND TERM OF OFFICE.  The president, chief financial officer
and secretary shall be elected annually by the board of directors at the first
meeting of the board of directors following the annual meeting of stockholders.
A chairman of the board and other officers may be elected or appointed at this
meeting or at any other meeting.  Each officer shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal.  The election or appointment of an officer shall not of itself create
any contract rights.

    4.3   RESIGNATION.  An officer may resign at any time by written notice to
the Corporation at its principal office or to the chairman of the board,
president or secretary.  Unless otherwise specified in the officer's notice, his
resignation shall be effective on receipt by the Corporation or designated
officer.

    4.4   REMOVAL.  Any officer may be removed by the board of directors, with
or without cause, whenever in its judgment the officer's removal would serve the
Corporation's best interests.  Unless the board of directors determines
otherwise, no officer who is removed shall have any right to compensation as an
officer for any period following his removal except as provided in an authorized
contract with the Corporation.

    4.5   VACANCIES.  The board of directors may fill a vacancy in any office
occurring for any reason or may leave any vacant office unfilled other than the
offices of president, Treasurer or secretary.

    4.6   CHAIRMAN OF THE BOARD.  The chairman of the board, if one is elected,
shall confer with the president on matters of general policy affecting the day-
to-day management of the Corporation's business and have such other powers and
duties as the board of directors assigns.  The chairman of the board shall
preside at all meetings of the board of directors.

                                          5

    4.7   PRESIDENT.  The president shall be the Corporation's chief executive
officer and, subject to the direction of the board of directors and such
supervisory powers, if any, that the board may give to the chairman of the
board, shall have general charge of the Corporation's business and day-to-day
management.  He shall also supervise the Corporation's other officers and see
that all resolutions and orders of the board of directors are carried into
effect.  He shall preside at all meetings of the stockholders and, in the
absence of the chairman of the board or if one is not elected, at all meetings
of the board of directors.  In general, the president shall have the powers and
duties usually vested in the office of president of a corporation and such other
powers and duties as the board of directors assigns.

    4.8   CHIEF FINANCIAL OFFICER.  The chief financial officer of the
Corporation shall be responsible, under the president's direction, for all
financial and accounting matters, including custody of the Corporation's funds
and securities and responsibility for depositing, investing and disbursing the
Corporation's funds. The chief financial officer shall have the powers and
duties usually vested in the office of chief financial officer of a corporation
and such other powers and duties as the president or board of directors assigns.

    4.9   VICE PRESIDENTS.  The vice president, if one is appointed, or, if
there is more than one, the vice presidents, shall assist the president as he
directs in the management of the Corporation's business and the implementation
of resolutions and orders of the board of directors.  If there is more than one
vice president, the board of directors may give them titles that are descriptive
of their respective functions or indicative of their relative seniority.  In the
event of the absence or inability to act of the president, the vice president,
or if there is more than one, the vice presidents in the order of their
seniority as indicated by their titles or as otherwise determined by the board
of directors, shall perform the duties of president.  The vice president or vice
presidents shall also have such other powers and duties as the president or
board of directors assigns.

    4.10  SECRETARY.  The secretary shall the powers and duties usually vested
in the office of secretary of a corporation, including custody of the
Corporation's corporate records and responsibility for sending all notices to
stockholders and directors required by law or by these By-Laws and recording all
proceedings of meetings of the stockholders and the directors.  The secretary
shall have authority to certify copies of these By-Laws, resolutions of the
stockholders and directors and other documents of the Corporation as true and
correct and shall also such other powers and duties as the president or board of
directors assigns.

    4.11  ASSISTANT OFFICERS.  The assistant treasurer and the assistant
secretary (or if more than one is appointed, the assistant treasurers and
assistant secretaries in the order determined by the board of directors) shall
perform the duties of the treasurer or secretary, as the case may be, in the
event of his absence or inability to act.  Each assistant treasurer or assistant
secretary shall also have such powers and duties as the president or board of
directors assigns.

    4.12  SALARIES.  Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as the board of directors determines.
No officer shall be prevented from receiving a salary by reason of the fact that
he is also a director.

                                          6

                                      ARTICLE 5

                                   INDEMNIFICATION

    The Corporation shall indemnify each person who was or is made a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the Corporation (a "proceeding") by
reason of the fact that he, or the person of whom he is the legal
representative, is or was a director or officer of the Corporation or, while a
director or officer, is or was serving at the Corporation's request as a
director, officer, trustee, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
that he reasonably incurs in connection with the proceeding, to the fullest
extent authorized by the Delaware General Corporation Law, as it now exists and
as it may be amended (but in the case of any amendment, only to the extent that
the amendment authorizes the Corporation to provide broader indemnification
rights than were permitted prior to the amendment).  This right to
indemnification shall continue as to a person who has ceased to be a director or
officer of the Corporation and shall inure to the benefit of his heirs and legal
representatives.

    The Corporation shall be required to indemnify a director or officer in
connection with any proceeding initiated that the director or officer initiated
only if the initiation of the proceeding was authorized by the board of
directors.

    The right to indemnification shall include the right to be paid by the
Corporation the expenses incurred in defending any proceeding in advance of its
final disposition.  Payment of such expenses shall be made, however, only upon
delivery of an undertaking by the director or officer to repay all amounts
advanced if it is ultimately determined that he is not entitled to
indemnification under this Article (or otherwise).

    The right to indemnification under this Article shall not be exclusive of
any other rights that a director or officer may have by law, under the
corporation's certificate of incorporation, these By-Laws or any contract or by
vote of the stockholders or disinterested directors or otherwise.

    The Corporation, by action of its board of directors, may provide
indemnification to its employees and agents with the same scope and effect as
the indemnification provided to its directors and officers in this Article.

    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 or agent of
the Corporation or is or was serving at the Corporation's request as a director,
officer, trustee, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any such capacity, whether or not the Corporation
would have the power to indemnify such person against such liability under this
Article 5 or the General Corporation Law of the State of Delaware.

                                          7

                                      ARTICLE 6

                                        STOCK

    6.1   STOCK CERTIFICATES.  The shares of the Corporation shall be
represented by certificates.  The board of directors may provide by resolution
that some or all of the Corporation's stock shall be uncertificated shares, but
any such resolution shall not apply to any shares represented by a certificate
until the certificate is surrendered to the Corporation.  In any case, every
holder of stock represented by certificates, and upon request every holder of
uncertificated shares, shall be entitled to a certificate representing the
number of shares registered in his name.  Each certificate shall be signed by or
in the name of the Corporation by the chairman of the board or the president or
a vice president and by the secretary or an assistant secretary.  Any or all of
the signatures on the certificate may be a facsimile.  If any officer, transfer
agent or registrar who has signed a certificate, or whose facsimile signature
has been placed upon a certificate, ceases to serve before the certificate is
issued, the certificate may be issued with the same effect as if the officer,
transfer agent or registrar were still serving at the time of issuance.  All
certificates shall be in the form prescribed by the board of directors, and
shall be consecutively numbered or otherwise identified.  The name and post
office address of the person to whom the shares represented by the certificate
are issued, with the number of shares and date of issuance, shall be entered on
the Corporation's stock transfer books.

    6.2   ENDORSEMENTS.  Each certificate for shares of stock which are subject
to any restriction on transfer pursuant to the Corporation's certificate of
incorporation, these By-Laws, applicable securities laws or an agreement between
the Corporation and any number of stockholders shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement that the shares of stock represented by the certificate are subject to
the restriction.

    6.3   TRANSFERS.  Shares of stock of the Corporation may be transferred on
the books of the Corporation by the surrender to the Corporation or its transfer
agent of the certificate representing such shares properly endorsed or
accompanied by a written assignment or power of attorney properly executed, with
such proof of authority or authenticity of signature as may be required by rules
and regulations adopted by the board of directors.  Whenever any transfer of
shares is made for collateral security and not absolutely, it shall be so
expressed in the entry in the Corporation's stock transfer books if, when the
certificate is presented for transfer, both the transferor and the transferee
request the Corporation to do so.

    6.4   LOST CERTIFICATES.  The Corporation may issue a new certificate of
stock in place of any certificate previously issued which is alleged to have
been lost, stolen or destroyed on such terms and conditions as the board of
directors may prescribe, including presentation of reasonable evidence of such
loss, theft or destruction and such bond or other indemnity as the board of
directors requires for the protection of the Corporation and its transfer agent.

    6.5   STOCKHOLDERS OF RECORD.  Except as may be otherwise required by law,
the Corporation shall be entitled to treat the holder of record of any shares of
its stock as shown on its stock transfer records as the owner of those shares
for all purposes, including the payment

                                          8

of dividends and the right to vote, until the shares have been transferred on
the Corporation's stock transfer records in accordance with these By-Laws,
regardless of any intervening transfer, pledge or other disposition of the
shares.

    6.6   RECORD DATE.  The board of directors may fix a date in advance as the
record date for purposes of determining the stockholders entitled to notice of
or to vote at any meeting of stockholders, to consent to corporate action
without a meeting, to receive payment of any dividend or other distribution, to
exercise any rights in respect of any change, conversion or exchange of stock,
or for purposes of any other lawful action.  The record date may be fixed within
these limits:  (i) the record date for determining the stockholders entitled to
notice of and to vote at any meeting of stockholders shall not be less than 10
or more than 60 days prior to the date of the meeting; (ii) the record date for
determining the stockholders entitled to consent to corporate action without a
meeting shall not be earlier than the date of the resolution fixing the record
date or more than 10 days after such date; and (iii) the record date for
determining the stockholders for any other purpose shall not be earlier than the
date of the resolution fixing the record date or more than 60 days prior to the
action for which the determination is being made.  If the board of directors
does not fix a record date:  (i) the record date for determining the
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the date on which notice is given;
(ii) the record date for determining stockholders entitled to consent to
corporate action without a meeting shall be the first date on which a signed
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation; and (iii) the record date for determining the stockholders for
any other purpose shall be the close of business on the day that the board of
directors adopts the resolution authorizing the action with respect to which the
determination is being made.

                                      ARTICLE 7

                                  GENERAL PROVISIONS

    7.1   CONTRACTS.  The board of directors may authorize any officer or
officers to enter into any contract or agreement for the Corporation.  This
authorization may be general or confined to specific instances.

    7.2   LOANS.  The Corporation shall not borrow money unless authorized by
the board of directors.  This authorization may be general or confined to
specific instances.

    7.3   CHECKS.  All checks, drafts and other orders for the payment of
money, and all promissory notes and other evidences of indebtedness issued in
the Corporation's name, shall be signed by the officer or officers and in the
manner authorized by the board of directors.

    7.4   DEPOSITORIES.  All funds of the Corporation shall be deposited in its
name in the banks, trust companies or other depositories authorized by the board
of directors.

    7.5   FISCAL YEAR.  The Corporation's fiscal year shall be fixed by the
board of directors.

    7.6   CORPORATE SEAL.  The corporate seal shall be in such form as the
board of directors

                                          9

approves.

    7.7   WAIVER OF NOTICE.  Whenever notice is required to be given by law,
the Corporation's certificate of incorporation or these By-Laws, a written
waiver, signed by the person entitled to notice at any time before or after the
time stated in the waiver, shall be considered equivalent to proper notice.
Attendance of a person at any meeting shall constitute a waiver of notice of the
meeting, unless the person attends for the express purpose of objecting, at the
beginning of the meeting, to transacting any business the meeting because the
meeting was not lawfully called or convened.

    7.8   EVIDENCE OF AUTHORITY.  A certificate by the secretary or an
assistant secretary as to any action taken by the stockholders or board of
directors or any committee of the board of directors or officer of the
Corporation shall be conclusive evidence of such action as to all persons who
rely on the certificate in good faith.

    7.9   TRANSACTIONS WITH INTERESTED PARTIES.  No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates
in the meeting of the board of directors or committee which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:

    (a)   the material facts as to his relationship or interest and as to the
          contract or transaction are disclosed or are known to the board of
          directors or the committee, and the Board or committee in good faith
          authorizes the contract or transaction by the affirmative vote of a
          majority of the disinterested directors, even though the
          disinterested directors are less than a quorum;

    (b)   the material facts as to his relationship or interest and as to the
          contract or transaction are disclosed or are known to the
          stockholders entitled to vote on the matter, and the contract or
          transaction is specifically approved in good faith by the vote of the
          stockholders; or

    (c)   the contract or transaction is fair as to the Corporation as of the
          time that it is authorized, approved or ratified by the board of
          directors, committee or stockholders.

Interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee of directors which
authorizes the contract or transaction.

    7.10  CERTIFICATE OF INCORPORATION.  All references in these By-Laws to the
Corporation's certificate of incorporation mean the Corporation's certificate of
incorporation as it may be amended and in effect at the time.

    7.11  USE OF WORDS.  Whenever the context requires, words used in these By-
Laws in the singular shall be considered to be in the plural, and conversely.
Similarly, the words "he," "his"

                                          10

and "him" shall be considered "she" or "her" or "it" or "its" when appropriate
to the reference.

                                      ARTICLE 8

                                      AMENDMENTS

    8.1   BY BOARD OF DIRECTORS.  These By-Laws may be amended or repealed or
new by-laws may be adopted by the affirmative vote of a majority of the
directors present at any regular or special meeting of the board of directors at
which a quorum is present.

    8.2   BY STOCKHOLDERS.  These By-Laws may be amended or repealed or new by-
laws may be adopted by the affirmative vote of holders of a majority of the
shares entitled to vote at any annual meeting of stockholders or at any special
meeting of stockholders at which notice of the meeting included a statement or
description of the proposed amendment, repeal or adoption of new by-laws.

                                          11

                                                                  [EXHIBIT 4.1]

                                        [LOGO]

                                                             SEE REVERSE SIDE
                                                         FOR CERTAIN DEFINITIONS

                                                               -----------------
                                                                    SHARES

- -----------
                                                               -----------------
S[NUMBER]
                                  STERICYCLE, INC              CUSIP 858912 10 8
- -----------

                 INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

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

This Certifies That

is the owner of
- --------------------------------------------------------------------------------

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.01 PER
SHARE OF

                                   STERICYCLE, INC.

transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed.  This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
         WITNESS the facsimile seal of the corporation and the facsimile
signatures of the Corporation's duly authorized officers.

DATED:

                                       COUNTERSIGNED AND REGISTERED:
                                              HARRIS TRUST AND SAVINGS BANK
                                                                  TRANSFER AGENT
                                                                   AND REGISTRAR
       /s/ Mark C. Miller
PRESIDENT AND CHIEF EXECUTIVE OFFICER

                                   [CORPORATE SEAL]
                                                      BY

        /s/ James F. Polark
           SECRETARY
                                                            AUTHORIZED SIGNATURE

                                   STERICYCLE, INC.

    The corporation will furnish without charge to each stockholder who so
requests, a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.

    The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common       UNIF GIFT MIN ACT - _______Custodian_______
                                                         (Cust)          (Minor)

TEN ENT - as tenants by the entireties             under Uniform gifts to Minors

JT TEN - as joint tenants with right               Act .........................
         of survivorship and not as                           (State)
         tenants in common

        Additional abbreviations may also be used though not in the above list

For value received, _____________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
    IDENTIFYING NUMBER OF ASSIGNEE
  _____________________________________
/______________________________________/________________________________________

________________________________________________________________________________

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)

________________________________________________________________________________

________________________________________________________________________________

__________________________________________________________________________Shares

of the Stock represented by the within Certificate, and do hereby irrevocably

constitute and appoint _________________________________________________________

________________________________________________________________________________
Attorney to transfer the said stock on the Books of the within-named Corporation
with full power of substitution in the premises.

Dated ________________________         ______________________________________
                                                      Signature

                                       _______________________________________
                                       THE SIGNATURE TO THIS ASSIGNMENT MUST
                                       CORRESPOND WITH THE NAME AS WRITTEN UPON
                                       THE FACE OF THE CERTIFICATE IN EVERY
                                       PARTICULAR WITHOUT ALTERATION OR
                                       ENLARGEMENT OR ANY CHANGE WHATEVER.

SIGNATURE(S) GUARANTEED

________________________________________________________________________________
The signature(s) must be guaranteed by an eligible guarantor institution (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions with membership in
an approved signature guarantee Medallion Program),) pursuant to S.E.C. Rule
17Ad-15.

                       Johnson and Colmar
                           Suite 1000
                      300 South Waeker Drive
                      Chicago, Illinois 60606
                     Telephone (312) 922-1980
                     Telecopier (312) 922-9283

                        August 19, 1996

Board of Directors
Stericycle, Inc.
1419 Lake Cook Road
Suite 410
Deerfield, Illinois  60015

                        Re: Registration Statement on Form S-1

Gentlemen:

    We have acted as counsel to Stericycle, Inc. (the "Company") in connection
with the preparation and filing with the Securities and Exchange Commission of a
Registration Statement on Form S-1 (the "Registration Statement") for the
registration (Registration No. 333-05665) under the Securities Act of 1933, as
amended, of 3,450,000 shares of the Company's Common Stock, par value $.01 per
share (the "Shares"), of which 3,000,000 Shares are to be offered for sale in a
public offering underwritten by Dillon, Read & Co. Inc., Salomon Brothers Inc
and William Blair & Company, L.L.C. and other underwriters (the "Underwriters")
and 450,000 Shares are intended to cover the Underwriters' over-allotments, if
any.

    As such counsel, we have examined the Registration Statement (including the
prospectus which is part of the Registration Statement), as the Registration
Statement (and prospectus) have been amended to date, the Company's certificate
of incorporation and by-laws, each as amended to date, minutes of meetings and
records of proceedings of the Company's Board of Directors and stockholders
(including, but not limited to, (i) the minutes of a meeting by teleconference
of the Board of Directors on June 11, 1996, (ii) the Consent of Directors dated
as of July 31, 1996, signed by all of the Company's directors, pursuant to
which, in accordance with section 141(f) of the General Corporation Law of the
State of Delaware (the "Delaware General Corporation Law"), the Company's Board
of Directors adopted certain resolutions without the necessity of a formal
meeting of the Board of Directors and (iii) the Consent of Stockholders dated as
of July 31, 1996, signed by holders of a majority of the Corporation's then
outstanding shares of Class A Common Stock and holders of a majority of the
Corporation's then outstand-

Board of Directors
Stericycle, Inc.
August  19, 1996
Page Two

ing shares of Class B Common Stock pursuant to which, in accordance with section
228 of the Delaware General Corporation Law, the Company's stockholders adopted
certain resolutions without the necessity of a formal meeting of the
stockholders), and such other matters of fact and questions of law as we have
considered necessary to form the basis of our opinion.  In the course of this
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents and certificates submitted to us as originals by
representatives of the Company, public officials and third parties, and the
conformity to and authenticity of the originals of all documents and
certificates submitted to us as copies.

    On the basis of our examination, we are of the opinion that the Company has
duly authorized the issuance of the Shares and that, when issued and delivered
to the Underwriters against payment in accordance with the underwriting
agreement to be entered into by the Company and Dillon, Read & Co. Inc., Salomon
Brothers Inc and William Blair & Company, L.L.C., as managing underwriters and
representatives of the several underwriters to be named in Schedule A to the
underwriting agreement, the Shares will be validly issued, fully paid and non-
assessable.

    We consent to the use of our opinion as an exhibit to the Registration
Statement.

                        Very truly yours,

                        /s/ Johnson and Colmar

                        JOHNSON AND COLMAR

                                                                                                     
Exhibit 11 - Statement Re Computation of Per Share Earnings      Dec. 31,     Dec. 31,     Dec. 31,    June 30,     June 30,
                                                                  1993         1994         1995         1995         1996

Average shares outstanding                                       369,431      369,808    5,582,385      369,808    6,155,940

Net effect of dilutive stock options and warrants based on
the treasury stock method using the mid point of the offering  1,695,179    1,695,179    1,349,055    1,695,179      820,499

Other                                                             98,001       98,001       98,001       98,001       98,001
                                                              --------------------------------------------------------------
                                                               2,162,611    2,162,988    7,029,441    2,162,988    7,074,440
                                                              --------------------------------------------------------------
                                                              --------------------------------------------------------------

Net loss applicable to common stock                              ($9,761)    ($10,293)     ($4,544)     ($6,022)     ($1,094)
                                                                --------------------------------------------------------------
                                                                --------------------------------------------------------------

Net loss per common share                                         ($4.51)      ($4.76)      ($0.65)      ($2.78)      ($0.15)
                                                                --------------------------------------------------------------
                                                                --------------------------------------------------------------

Pro forma

Average shares outstanding                                                                7,029,441                7,074,440

Net effect of shares issued to repay certain
indebtedness, using the mid-point of the
estimated initial public offering price after
the deduction of estimated underwriting discounts 
and commissions and a pro rata portion of estimated 
offering expenses payable by the registrant.                                                207,730                  417,670
                                                                                          ---------                ---------

                                                                                          7,237,171                7,492,110
                                                                                          ---------                ---------
                                                                                          ---------                ---------

Pro forma net loss per common share                                                          ($0.62)                  ($0.13)

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

                                                                    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  August 19, 1996, in the Registration Statement
on Form S-1 (No. 333-05665) for  the registration of 3,450,000 shares of  common
stock.

   
                                             /s/ Ernst & Young LLP
    
                                             ERNST & YOUNG LLP
 
Chicago, Illinois
August 20, 1996