AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1996
                                                      REGISTRATION NO. 333-05665
    
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------

                                AMENDMENT NO. 2
                                       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 JULY 29, 1996

                                3,000,000 SHARES
 
                                STERICYCLE, INC.
 
                                  Common Stock
 
    The 3,000,000 shares of Common Stock, par value $.01 per share (the  "Common
Stock"),  offered hereby (this "Offering") are being offered by Stericycle, Inc.
("Stericycle" or the "Company"). Prior to this Offering there has been no public
market for the Common Stock. It  is currently estimated that the initial  public
offering  price will be between $11.00  and $13.00 per share. See "Underwriting"
for the factors considered in determining the initial public offering price.

    The 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 TO 14.
                               -----------------
THESE   SECURITIES   HAVE   NOT   BEEN   APPROVED   OR   DISAPPROVED   BY    THE
   SECURITIES    AND   EXCHANGE   COMMISSION    OR   ANY   STATE   SECURITIES
     COMMISSION  NOR  HAS  THE   SECURITIES  AND  EXCHANGE  COMMISSION   OR
       ANY   STATE  SECURITIES   COMMISSION  PASSED   UPON  THE  ACCURACY
           OR  ADEQUACY  OF   THIS  PROSPECTUS.  ANY   REPRESENTATION
                       TO THE CONTRARY IS A CRIMINAL OFFENSE.
                              -------------------

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

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

                                 [Illustration]

    Steri-Cement-Registered   Trademark-,   Steri-Fuel-Registered    Trademark-,
Steri-Plastic-Registered  Trademark-  and  Steri-Tub-Registered  Trademark-  are
registered trademarks  and  Stericycle-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, TO BE EFFECTIVE PRIOR TO COMPLETION
OF  THIS  OFFERING, (II)  REFLECTS  THE REDESIGNATION  OF  ALL OF  THE COMPANY'S
OUTSTANDING SHARES OF CLASS A  COMMON STOCK AND CLASS B  COMMON STOCK AS A  LIKE
NUMBER  OF SHARES OF COMMON  STOCK, TO BE EFFECTIVE  PRIOR TO COMPLETION OF THIS
OFFERING, AND (III) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS  NOT
EXERCISED.   SEE   "DESCRIPTION   OF   CAPITAL   STOCK,"   "CAPITALIZATION"  AND
"UNDERWRITING."  UNLESS   THE   CONTEXT  REQUIRES   OTHERWISE,   REFERENCES   TO
"STERICYCLE"  AND THE "COMPANY" REFER TO  STERICYCLE, INC. AND ITS SUBSIDIARIES.
PROSPECTIVE INVESTORS  SHOULD CAREFULLY  CONSIDER  THE INFORMATION  UNDER  "RISK
FACTORS."

                                  THE COMPANY
 
    Stericycle  is  a  multi-regional integrated  company  employing proprietary
technology  to  provide  environmentally-responsible  management  of   regulated
medical waste for the health care industry. Because of the Company's health care
orientation, proprietary technology and breadth of service, the Company believes
that  it is in a unique position to meet the fundamental need of the health care
industry to manage regulated medical waste  in a safe and cost-effective  manner
and  to capitalize on  the current consolidation trend  in the regulated medical
waste management  industry. The  Company believes  that its  exclusive focus  on
regulated  medical waste and the experience of its management in the health care
industry distinguish  the  Company from  its  chief competitors,  most  of  whom
participate  in multiple businesses  and most of  whose management experience is
primarily in the solid waste business.  The Company believes that its  regulated
medical waste management system, including its proprietary
ELECTRO-THERMAL-DEACTIVATION    ("ETD")   treatment   process,   is   the   only
commercially-proven system that provides all  of the following benefits: (i)  it
kills  human  pathogens in  regulated  medical waste  without  generating liquid
effluents or regulated  air emissions;  (ii) it affords  certain operating  cost
advantages  over  the principal  competing  technologies; (iii)  it  reduces the
volume of  regulated medical  waste by  up  to 85%;  (iv) it  renders  regulated
medical  waste  unrecognizable; (v)  it permits  the  recovery and  recycling of
usable plastics from regulated medical waste; and (vi) it enables the  remaining
regulated  medical waste to be safely landfilled  or used as an alternative fuel
in energy production. The Company's full-service program is designed to help  to
protect  its  customers and  their employees  against potential  liabilities and
injuries in  connection  with  the  handling,  transportation  and  disposal  of
regulated medical waste.
 
    The   Company's   integrated  services   include  regulated   medical  waste
collection, transportation, treatment, disposal, reduction, reuse and  recycling
services,  together  with related  training  and education  programs, consulting
services and product sales,  in four geographic  service areas: (i)  California;
(ii)  Washington, Oregon, Idaho and British Columbia; (iii) Wisconsin, Illinois,
Indiana and Michigan;  and (iv)  Massachusetts, Maine,  New Hampshire,  Vermont,
Rhode Island, Connecticut, New York and New Jersey. As of December 31, 1995, the
Company  served  over 13,000  customers, consisting  of  two principal  types of
regulated medical  waste generators.  Approximately 70%  of the  Company's  1995
revenues   were  derived   from  hospitals,   blood  banks   and  pharmaceutical
manufacturers ("Core" generators),  and approximately 30%  of its revenues  were
derived from long-term and subacute care facilities, outpatient clinics, medical
and   dental  offices,  industrial   clinics,  dialysis  centers,  laboratories,
biotechnology and  biomedical companies,  veterinary offices,  municipal  health
departments,  ambulance, fire  and police  departments, correctional facilities,
schools, park districts  and funeral  homes ("Alternate  Care" generators).  The
Company's  current  operations  are  comprised of  four  treatment  centers, one
recycling center, five transfer stations and four customer service centers.
 
    Regulated medical waste is generally defined as any waste that can cause  an
infectious  disease  or  that reasonably  can  be suspected  of  harboring human
pathogenic organisms.  Regulated medical  waste includes  single-use  disposable
items such as needles, syringes, gloves and laboratory, surgical, emergency room
and  other supplies  which have  been in  contact with  blood or  bodily fluids;
cultures and stocks of infectious agents; and blood and blood products.
 
    Generators of regulated medical  waste are responsible  for that waste  from
its  origin through  its disposal.  The Company  seeks to  offer a single-source
solution to  a  wide  spectrum  of regulated  medical  waste  management  issues
 
                                       3

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

                                  THE OFFERING

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

- ------------------------
   
(1) Based on  the number  of shares  outstanding as  of June  1, 1996.  Excludes
    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  $1.37  per share,  and  22,381 shares
    issuable upon the  exercise of  outstanding warrants at  a weighted  average
    exercise price of $33.18 per share, which either were not exercisable within
    60  days of June 1,  1996 or were exercisable at  prices in excess of $12.00
    per share, the mid-point of the price  range as set forth on the cover  page
    of  this Prospectus. See  "Description of Capital Stock  -- Options" and "--
    Warrants."

                                       5

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

                                                                                                   THREE MONTHS ENDED
                                                          YEAR ENDED DECEMBER 31,                      MARCH 31,
                                           -----------------------------------------------------  --------------------
                                             1991      1992(4)     1993       1994       1995       1995       1996
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                                                        
STATEMENTS OF OPERATIONS DATA:
Revenues.................................  $   1,563  $   5,010  $   9,141  $  16,141  $  21,339  $   5,446  $   5,578
Cost of revenues.........................      2,005      5,466      9,137     13,922     17,478      4,227      4,337
Selling, general and administrative
 expenses................................      3,377     11,223      5,988      7,927      8,137      2,762      1,505
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Loss from operations.....................     (3,819)   (11,679)    (5,984)    (5,708)    (4,276)    (1,543)      (264)
Interest expense.........................        (77)      (244)      (245)      (260)      (277)       (54)       (83)
Interest income..........................        243        283        201        156          9          6         --
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net loss.................................  $  (3,653) $ (11,640) $  (6,028) $  (5,812) $  (4,544) $  (1,591) $    (347)
Less cumulative preferred dividends......     (1,351)    (2,737)    (3,733)    (4,481)        --(5)    (1,573)        --
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Loss applicable to common stock..........  $  (5,004) $ (14,377) $  (9,761) $ (10,293) $  (4,544) $  (3,164) $    (347)
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net loss per common share (1)............  $   (2.79) $   (7.77) $   (5.28) $   (5.57) $   (0.64) $   (1.71) $   (0.05)
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Weighted average number of common shares
 outstanding.............................  1,791,662  1,850,445  1,847,432  1,847,808  7,060,438  1,847,808  7,094,703
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                           ---------  ---------  ---------  ---------  ---------  ---------  ---------
Pro forma net loss per common share
 (2).....................................                                              $   (0.45)            $   (0.03)
                                                                                       ---------             ---------
                                                                                       ---------             ---------
Pro forma weighted average number of
 common shares outstanding (3)...........                                              10,060,438            10,094,703
                                                                                       ---------             ---------
                                                                                       ---------             ---------

 
                                                   MARCH 31, 1996
                                           -------------------------------
                                                                    PRO
                                                                  FORMA,
                                                         PRO        AS
                                            ACTUAL    FORMA(6)   ADJUSTED(7)
                                           ---------  ---------  ---------
                                                                                        
BALANCE SHEET DATA:
Cash and cash equivalents................................................  $     120     $     120        $  28,800
Total assets.............................................................     23,876        25,710           54,390
Current portion of long-term debt........................................        759         2,593              759
Long-term debt, net of current maturities................................      5,996         5,996            2,342
Shareholders' equity.....................................................     12,228        12,228           46,396

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

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

   
(2)  Adjusted to  give effect to  the sale  of 3,000,000 shares  of Common Stock
    offered hereby and application of the estimated net proceeds to the  Company
    for contemplated debt repayment, with elimination of the interest expense on
    the  indebtedness repaid ($64,000  for the year ended  December 31, 1995 and
    $38,000 for the three months ended March 31, 1996). See "Use of Proceeds."

   
(3) Adjusted to  give effect to  the sale  of 3,000,000 shares  of Common  Stock
    offered hereby.

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

   
(7) Adjusted to  give effect to  the sale  of 3,000,000 shares  of Common  Stock
    offered  hereby (at an  assumed initial public offering  price of $12.00 per
    share, the mid-point of the  price range as set forth  on the cover page  of
    this Prospectus, and after the deduction of estimated underwriting discounts
    and  commissions and estimated offering expenses payable by the Company) and
    application of  the estimated  net  proceeds to  the  Company. See  "Use  of
    Proceeds."

                                       6

                                  RISK FACTORS
 
    IN  ADDITION  TO THE  OTHER INFORMATION  CONTAINED  IN THIS  PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN INVESTMENT  IN
THE COMMON STOCK OFFERED BY THIS PROSPECTUS.
 
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY

    The  Company is engaged in the  regulated medical waste management business.
The Company's  operations  have not  been  profitable since  the  Company  began
operations in 1989. As of March 31, 1996, the Company had an accumulated deficit
of  approximately  $37,449,000. For  the year  ended December  31, 1995  and the
quarter ended  March 31,  1996,  the Company  had  net losses  of  approximately
$4,544,000,  or $0.64 per share, and approximately $347,000, or $0.05 per share,
respectively. The Company  estimates that  it had  a net  loss of  approximately
$1,100,000  for the six months ended June 30, 1996, on revenues of approximately
$11,600,000. 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
 
                                       7

competitors or others alleging that the  Company is not operating in  compliance
with  a particular permit, could 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

                                       8

Company believes that there is no basis for the issuance of any such  additional
notices  and that the resolution of the matter will be favorable to the Company.
There can be no assurance, however, that if the resolution is unfavorable to the
Company, the Company's obligations as a result of any such additional notices of
violation would not have  a material adverse effect  on the Company's  business,
financial condition or results of operations.

    The   Company  believes  that  the   action  by  RIDEM  prompted  regulatory
authorities in all of  the other states  in which the  Company does business  to
investigate   or  inquire   into  the   Company's  operations.   None  of  these
investigations or inquiries  has resulted  in any fines,  penalties or  remedial
work. The Company believes that the Massachusetts Attorney General inquired into
the Company's activities in Massachusetts but does not know whether the inquiry,
if any, is still pending. The Company believes, however, that if there is or was
any  such inquiry, it was begun following the adverse publicity that the Company
received in connection with the notices of violation from RIDEM.

   
    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
 
                                       9

medical waste management industry  will not result  in continued or  accelerated
price  reductions. Substantial  continued or accelerated  price reductions would
have a material adverse  effect on the  Company's business, financial  condition
and results of operations.
 
    The  Company  faces  competition  from  several  national  waste  management
companies and many regional and local  businesses in its present locations,  and
will be confronted in the future with such competition in each location where it
seeks  to expand. The Company's business  strategy involves selling its services
to customers  who may  have established  relationships with  existing  regulated
medical  waste management businesses  and who therefore may  be reluctant to use
the Company's services. Several of the Company's competitors are larger and have
substantially  greater  capital  resources,  regulatory  experience,  sales  and
marketing  capabilities  and  broader  product and  service  offerings  than the
Company and are well established in their respective markets. Among these larger
competitors are  Browning-Ferris  Industries, Inc.  ("BFI"),  WMX  Technologies,
Inc.,  Laidlaw Waste  Systems, Inc. and  USA Waste Services,  Inc. The Company's
primary competitor is BFI.  BFI or other competitors,  either alone or  together
with  competitors  having sufficient  resources, could  engage  in a  variety of
actions that may have the effect of delaying or preventing the implementation of
the Company's business strategy. These  activities may include 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.
 
                                       10

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 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'
 
                                       11

compensation  insurance  which the  Company  considers adequate  to  protect its
business and  employees. An  uninsured or  partially insured  claim against  the
Company,  however,  could  have  a  material  adverse  effect  on  the Company's
business,  financial   condition  and   results  of   operations.  The   federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended  ("CERCLA"), and  similar state laws,  impose strict,  joint and several
liability on current and  former owners and operators  of facilities from  which
releases   of  hazardous  substances   have  occurred  and   on  generators  and
transporters of  the  hazardous substances  that  come  to be  located  at  such
facilities.  Responsible  parties  may  be  liable  for  substantial  waste site
investigation and clean-up  costs and  natural resource  damages, regardless  of
whether   they  exercised  due  care  and  complied  with  applicable  laws  and
regulations. If  the  Company  were  found  to be  a  responsible  party  for  a
particular  site, it  could be  required to  pay the  entire cost  of waste site
investigation and clean-up, even  though other parties also  may be liable.  The
Company's  ability to obtain contribution from  other responsible parties may be
limited by  the Company's  inability  to identify  those  parties and  by  their
financial inability to contribute to investigation and clean-up costs. There can
be  no 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.
 
                                       12

BROAD DISCRETION IN USE OF PROCEEDS

    The Company intends  to use  approximately $5,964,000 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  $26,716,000  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  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 32.9% of the Company's outstanding Common Stock. If
they were  to  act  together,  these  stockholders  would  be  able  to  control
substantially  all  matters requiring  approval  by the  Company's stockholders,
including the  election  of directors  and  the  approval of  mergers  or  other
business combination transactions. This concentration of ownership could prevent
a change in control of the Company. See "Principal Stockholders."

   
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
 
                                       13

qualify for an exemption from registration under Rule 144. Holders of  5,571,624
shares  of Common Stock, including all  of the Company's officers and directors,
have entered into "lock-up" agreements  with the Managing Underwriters  pursuant
to  which such holders have  agreed not to offer,  sell, contract to sell, grant
any option to purchase or otherwise  dispose of, directly or indirectly, any  of
their  shares of Common Stock,  or any shares that  they may acquire through the
exercise of stock options or warrants, or to exercise any of their  registration
rights  in respect  of their shares  of Common Stock,  for a period  of 180 days
after the date of this Prospectus  without the prior written consent of  Dillon,
Read  & Co. Inc. on behalf of the  Managing Underwriters. A holder of 461,028 of
such shares has certain limited  redemption rights. See "Description of  Capital
Stock  -- Limited Redemption Rights of 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 5,107,829 shares of Common  Stock, warrants to purchase 6,773  shares
of Common Stock and a note payable upon completion of this Offering by, in part,
the   Company's  issuance  of  98,001  shares  of  Common  Stock,  have  certain
registration rights  in  respect  of  such shares.  By  virtue  of  the  lock-up
agreements,  no registration rights  can be exercised  for a period  of 180 days
after the date of this Prospectus  without the prior written consent of  Dillon,
Read  & Co. Inc. on behalf of the Managing Underwriters. The number of shares of
Common Stock sold in the public  market could increase significantly if  holders
of registration rights were to exercise their rights following the expiration of
the lock-up agreements. See "Description of Capital Stock -- Registration Rights
of Certain Holders" and "Shares Eligible for Future Sale."

   
    As  of  June 1,  1996, there  were outstanding  options under  the Company's
Incentive Compensation Plan (the "1995  Stock Plan") to purchase 696,962  shares
of  Common Stock, of which options for 397,554 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  409,848
shares  of Common Stock, all of which were then exercisable. Holders of warrants
to purchase 387,829 shares of Common Stock are subject to the lock-up agreements
described above.
 
    After completion of this Offering, the Company may issue unregistered shares
of  Common  Stock  as  full   or  partial  consideration  for  future   business
acquisitions  and may grant  registration rights to the  holders of such shares.
The Company has agreed  that no such grant  of registration rights would  permit
the  rights to  be exercised for  a period  of 180 days  after the  date of this
Prospectus without  the prior  written consent  of Dillon,  Read &  Co. Inc.  on
behalf of the Managing Underwriters. See "Business -- Acquisition Program."
 
IMMEDIATE AND SUBSTANTIAL DILUTION
 
    The  initial  public offering  price is  substantially  higher than  the net
tangible book value per share of  Common Stock. New investors purchasing  Common
Stock in this Offering accordingly will incur immediate dilution of $7.57 in the
net  tangible book  value per  share of  Common Stock  purchased (at  an assumed
initial public offering price of $12.00, the mid-point of the price range as set
forth on the cover page of this Prospectus and after the deduction of  estimated
underwriting  discounts and commissions and  estimated offering expenses payable
by the Company). See "Dilution."
 
ABSENCE OF DIVIDENDS
 
    The Company has never paid any cash  dividends on its Common Stock and  does
not  anticipate paying cash  dividends in the  foreseeable future. See "Dividend
Policy."
 
                                       14

                                USE OF PROCEEDS
 
    The net  proceeds to  the Company  from this  Offering are  estimated to  be
approximately  $32,680,000  ($37,702,000  if  the  Underwriters'  over-allotment
option is  exercised in  full), assuming  an initial  public offering  price  of
$12.00  per share, the  mid-point of the price  range as set  forth on the cover
page of this  Prospectus, and after  deducting estimated underwriting  discounts
and commissions and estimated offering expenses payable by the Company.
 
    Approximately  $1,200,000  of the  net proceeds  will be  used to  repay the
Company's outstanding  indebtedness under  its  revolving credit  facility  with
Silicon  Valley Bank. The  Company's borrowings under  this credit facility were
incurred primarily to refinance  other debt, to provide  working capital and  to
finance  the Company's acquisitions of certain assets of Bio-Med of Oregon, Inc.
and WMI Medical Services of  New England, Inc. in  January 1996, and of  Doctors
Environmental  Control, Inc. ("Doctors") and Sharps Incinerator of Fort, Inc. in
May 1996,  at  an  aggregate  cost  of $2,426,000,  of  which  an  aggregate  of
$1,062,000  was paid in  cash at the respective  closings of these acquisitions.
The Company's  revolving  credit  facility  provides for  borrowings  of  up  to
$2,500,000,   subject  to  certain  limitations  based  upon  eligible  accounts
receivable, had a weighted average interest rate of 11.5% per annum at  December
31, 1995 and will mature in October 1997.
 
    Approximately  $600,000  of  the net  proceeds  will  be used  to  repay the
Company's outstanding indebtedness under certain notes given in connection  with
the Doctors acquisition in May 1996. The notes have an interest rate of 6.0% per
annum and are scheduled to mature in May 1998.
 
    Approximately  $222,000  of  the net  proceeds  will  be used  to  repay the
Company's outstanding  indebtedness  under a  note  to Security  State  Bank  in
connection  with a loan to acquire and equip the Company's treatment facility at
Morton, Washington. The note had an interest rate of 9.78% per annum at December
31, 1995 and is scheduled to mature in December 2007.
 
    Approximately $992,000 of  the net  proceeds will be  used to  pay the  cash
portion  of a  note (the  "Safe Way  Note") to  Safe Way  Disposal Systems, Inc.
("Safe Way")  which was  given  in connection  with  the Company's  purchase  of
certain  of  Safe Way's  assets  in September  1994. The  Safe  Way Note  is for
$2,480,000, does not bear interest, is due upon completion of this Offering  and
is  payable in cash  for 40% of its  face amount and in  98,001 shares of Common
Stock for the balance.
 
    Approximately $1,000,000  of the  net proceeds  will be  used to  repay  the
Company's  outstanding indebtedness  to holders  of subordinated  notes that the
Company issued  in May  1996 in  connection with  a short-term  loan to  provide
working  capital. The  subordinated notes  are interest-free  if paid  when due,
subject to certain exceptions,  and are due within  30 days after completion  of
this  Offering. In connection with this loan, the Company issued warrants to the
lenders to purchase an aggregate of 226,036 shares of Common Stock at a price of
$7.96 per share. See "Certain Transactions."

    The Company intends to  use a portion  of the net  proceeds to complete  the
construction  and  equipping  of  a  treatment  facility  at  its  San  Leandro,
California transfer  station.  The  Company  currently  estimates  the  cost  of
completion  at  approximately  $1,600,000. 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  March 31,  1996,  the net  tangible book  value  of the  Company was
approximately $4,410,000,  and  the  net  tangible  book  value  per  share  was
approximately  $0.79. The pro forma net tangible book value of the Company as of
March 31, 1996  was approximately $38,578,000,  and the pro  forma net  tangible
book  value per share  was approximately $4.43,  after giving effect  to (i) the
sale of  the 3,000,000  shares of  Common Stock  offered hereby  (at an  assumed
initial  public offering price of  $12.00 per share, the  mid-point of the price
range as set forth on the cover page of this Prospectus, and after the deduction
of estimated  underwriting  discounts  and commissions  and  estimated  offering
expenses  payable by the Company)  and (ii) payment of  the Safe Way Note, which
was outstanding as  of March 31,  1996 and  is payable upon  completion of  this
Offering  by payment of $992,000 in cash and delivery of 98,001 shares of Common
Stock. This difference  represents an  immediate increase in  net tangible  book
value  per share of $3.64 to existing  stockholders and an immediate dilution in
net tangible book value  per share of $7.57  to new investors purchasing  Common
Stock in this Offering. The following table illustrates this per share dilution:

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

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

                                                                 TOTAL CASH CONSIDERATION
                                            SHARES PURCHASED
                                         ----------------------  -------------------------  AVERAGE PRICE
                                           NUMBER     PERCENT       AMOUNT       PERCENT      PER SHARE
                                         ----------  ----------  -------------  ----------  -------------
                                                                             
Existing shareholders..................   5,714,652       65.6%  $  49,749,000       58.0%    $    8.71
New investors..........................   3,000,000       34.4      36,000,000       42.0         12.00
                                         ----------      -----   -------------      -----
    Total..............................   8,714,652      100.0%  $  85,749,000      100.0%
                                         ----------      -----   -------------      -----
                                         ----------      -----   -------------      -----

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

                                 CAPITALIZATION

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

   

                                                                                       MARCH 31, 1996
                                                                           ---------------------------------------
                                                                                                       PRO FORMA,
                                                                            ACTUAL    PRO FORMA (1)   AS ADJUSTED
                                                                           ---------  --------------  ------------
                                                                                       (IN THOUSANDS)
                                                                                             
Short-term debt:
  Current portion of long-term debt......................................  $     759    $    2,593     $      759
Long-term debt:
  Industrial development revenue bonds and other.........................      2,564         2,564          2,342
  Note payable to bank...................................................        952           952              0
  Note payable...........................................................      2,480         2,480              0
                                                                           ---------  --------------  ------------
    Total long-term debt.................................................      5,996         5,996          2,342
Shareholders' Equity:
  Common Stock, $0.01 par value; 30,000,000 shares authorized actual;
   5,616,651 shares issued and outstanding actual, 8,714,652 shares
   issued and outstanding pro forma, as adjusted.........................         56            56             87
  Additional paid-in-capital.............................................     49,693        49,693         83,830
  Notes receivable for common stock purchases............................        (72)          (72)           (72)
  Accumulated deficit....................................................    (37,449)      (37,449)       (37,449)
                                                                           ---------  --------------  ------------
    Total shareholders' equity...........................................     12,228        12,228         46,396
                                                                           ---------  --------------  ------------
      Total capitalization...............................................  $  18,983    $   20,817     $   49,497
                                                                           ---------  --------------  ------------
                                                                           ---------  --------------  ------------

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

                      SELECTED CONSOLIDATED FINANCIAL DATA

    The following table sets forth  selected consolidated financial data of  the
Company.  The statements  of operations  data for  the years  ended December 31,
1991, 1992, 1993, 1994 and 1995 and the balance sheet data at December 31, 1991,
1992, 1993, 1994  and 1995  have been  derived from  the consolidated  financial
statements  of the Company (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 three
months  ended March 31,  1995 and 1996 and  the balance sheet  data at March 31,
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 three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the  entire year ending December 31, 1996.  The
data set forth below should be read in conjunction with "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  and  the
Consolidated Financial Statements,  Condensed Consolidated Financial  Statements
and related Notes thereto included elsewhere in this Prospectus. The Company did
not  declare any cash dividends during any of the periods for which consolidated
financial data is presented.

   

                                                                                                 THREE MONTHS ENDED
                                                    YEAR ENDED DECEMBER 31,                          MARCH 31,
                                   ----------------------------------------------------------  ----------------------
                                      1991      1992(2)       1993        1994        1995        1995        1996
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                    (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                                                      
STATEMENTS OF OPERATIONS DATA:
  Revenues.......................  $    1,563  $    5,010  $    9,141  $   16,141  $   21,339  $    5,446  $    5,578
  Cost of revenues...............       2,005       5,466       9,137      13,922      17,478       4,227       4,337
  Selling, general and
   administrative expenses.......       3,377      11,223       5,988       7,927       8,137       2,762       1,505
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Loss from operations...........      (3,819)    (11,679)     (5,984)     (5,708)     (4,276)     (1,543)       (264)
  Interest expense...............         (77)       (244)       (245)       (260)       (277)        (54)        (83)
  Interest income................         243         283         201         156           9           6          --
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Net loss.......................      (3,653)    (11,640)     (6,028)     (5,812)     (4,544)     (1,591)       (347)
  Less cumulative preferred
   dividends.....................      (1,351)     (2,737)     (3,733)     (4,481)         --(3)     (1,573)         --
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Loss applicable to common
   stock.........................  $   (5,004) $  (14,377) $   (9,761) $  (10,293) $   (4,544) $   (3,164) $     (347)
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Net loss per common share
   (1)...........................  $    (2.79) $    (7.77) $    (5.28) $    (5.57) $    (0.64) $    (1.71) $    (0.05)
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
  Weighted average number of
   common shares outstanding.....   1,791,662   1,850,445   1,847,432   1,847,808   7,060,438   1,847,808   7,094,703
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                   ----------  ----------  ----------  ----------  ----------  ----------  ----------

 

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

- ------------------------
   
(1) See  Note  2  to  the  Consolidated  Financial  Statements  for  information
    concerning the computation of 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.
 
QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED MARCH 31, 1995
 
    REVENUES.  Revenues increased  $132,000, or 2.4%,  to $5,578,000 during  the
quarter  ended March 31,  1996 from $5,446,000 during  the comparable quarter in
1995 as  the  Company  continued  to  implement  its  strategy  of  focusing  on
higher-margin  Alternate  Care  generators while  simultaneously  paring certain
higher-revenue but  lower-margin accounts  with Core  generators. This  increase
also  reflects the  inclusion of  a full quarter  of revenues  from the Safetech
Health Care, Inc. ("Safetech")  acquisition, which was  completed in June  1995,
and  two months of revenues  from the WMI Medical  Services of New England, Inc.
("WMI-NE") acquisition, which  was completed  in January 1996.  The increase  in
revenues was partially offset by a decline in revenues attributable to a lack of
any  miscellaneous product sales during the quarter ended March 31, 1996 and the
sale in April 1995 of certain unprofitable customer accounts and related  assets
obtained through acquisitions.
 
    COST  OF  REVENUES.    Cost  of revenues  increased  $110,000,  or  2.6%, to
$4,337,000 during the quarter  ended March 31, 1996  from $4,227,000 during  the
comparable  quarter in 1995. The principal  reasons for the increase were higher
transportation costs as  a result of  the Safetech and  WMI-NE acquisitions  and
start-up  expenses related to the Company's  expansion into new geographic areas
where the Company primarily serves  Alternate Care generators. Cost of  revenues
as a percentage of revenues increased slightly to 77.8% during the quarter ended
March 31, 1996 from 77.6% during the comparable quarter in 1995.
 
                                       21

    SELLING,   GENERAL  AND  ADMINISTRATIVE  EXPENSES.    Selling,  general  and
administrative expenses decreased to $1,505,000  during the quarter ended  March
31,  1996 from $2,762,000  during the comparable quarter  in 1995. This decrease
was  primarily  attributable  to  a   reduction  in  research  and   development
expenditures  to  develop treated  medical waste  as an  alternate fuel  for the
production of cement  and to  savings from  the integration  into the  Company's
operations  of the Safe  Way Disposal Systems, Inc.  ("Safe Way") acquisition in
September 1994.  These  savings  resulted  from  the  elimination  of  redundant
employee and staff positions and the reallocation of resources to Alternate Care
generators.  In addition, corporate costs and  permitting expenses were at lower
levels during  the  quarter ended  March  31, 1996  than  they were  during  the
comparable  quarter in 1995.  Selling, general and  administrative expenses as a
percentage of revenues  decreased to 27.0%  during the quarter  ended March  31,
1996 from 50.7% during the comparable quarter in 1995.
 
    INTEREST EXPENSE AND INTEREST INCOME.  Interest expense increased to $83,000
during  the  quarter ended  March 31,  1996 from  $54,000 during  the comparable
quarter in 1995. This increase was primarily attributable to higher indebtedness
under the Company's  revolving credit  facility. Interest income  declined to  a
negligible amount during the quarter ended March 31, 1996 from $6,000 during the
comparable quarter in 1995.
 
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
 
    REVENUES.   Revenues increased $5,198,000, or  32.2%, to $21,339,000 in 1995
from $16,141,000  in  1994. This  increase  was attributable  primarily  to  the
inclusion  of a full year of revenues from customers acquired as a result of the
Recovery Corporation of  Illinois ("RCI")  acquisition, which  was completed  in
March 1994, and the Safe Way acquisition, which was completed in September 1994.
Revenues  for 1995 reflected only  a partial year of  revenues from the Safetech
acquisition, which was completed in June 1995.
 
    COST OF  REVENUES.   Cost of  revenues increased  $3,556,000, or  25.5%,  to
$17,478,000  in 1995  from $13,922,000  in 1994.  The principal  reasons for the
increase were higher  transportation costs, processing  costs, disposal  volumes
and  container costs attributable to  additional customers acquired during 1995.
Cost of revenues as  a percentage of  revenues decreased to  81.9% in 1995  from
86.3%  in  1994.  This  percentage  decrease  was  primarily  due  to  increased
utilization of the Company's  treatment facilities and transportation  equipment
as a result of increased volumes.
 
    SELLING,   GENERAL  AND  ADMINISTRATIVE  EXPENSES.    Selling,  general  and
administrative expenses increased to $8,137,000 in 1995 from $7,927,000 in 1994.
The increase was primarily attributable  to an increase in amortization  expense
as  a result  of additional goodwill  from the  Company's acquisitions. Selling,
general and administrative  expenses as  a percentage of  revenues decreased  to
38.1%  in 1995 from 49.1% in 1994. This percentage decrease was due primarily to
lower permitting costs and reduced administrative expenses, as partially  offset
by higher goodwill amortization expense.
 
    INTEREST  EXPENSE  AND  INTEREST  INCOME.    Interest  expense  increased to
$277,000 in 1995 from $260,000 in 1994, primarily as a result of commitment fees
and higher  interest  rates  associated  with  the  Company's  revolving  credit
facility. In addition, the Company incurred higher levels of indebtedness during
1995. Interest income decreased to $9,000 in 1995 from $156,000 in 1994.
 
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
 
    REVENUES.   Revenues increased $7,000,000, or  76.6%, to $16,141,000 in 1994
from $9,141,000  in  1993.  This  increase was  attributable  primarily  to  the
inclusion  of revenues from customers  acquired as a result  of the RCI and Safe
Way  acquisitions,  which   were  completed   in  March   and  September   1994,
respectively, and the addition of Core generators as new customers.

    COST  OF  REVENUES.   Cost of  revenues increased  $4,785,000, 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.

    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
 
                                       22

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  $49,749,000  in  capital  which  has  been  used  to  fund  research   and
development,  acquisitions, capital  expenditures, ongoing  operating losses and
working capital requirements. The Company has also been able to secure plant and
equipment leasing or financing in connection with some of its facilities.  These
debt  facilities are  secured by security  interests in the  financed assets. In
addition, during 1995 the Company was able to obtain a $2,500,000 revolving line
of credit secured by  accounts receivable and a  security interest in all  other
assets of the Company.

    During  1995 the Company's stockholders approved a plan of recapitalization,
pursuant to which  all of the  Company's outstanding shares  of preferred  stock
were  reclassified  as shares  of new  Class A  common stock.  As a  result, the
Company was able to eliminate any liability for accrued but unpaid dividends  on
its  preferred stock  and the preferential  rights on liquidation  of holders of
preferred stock.
 
    At March 31,  1996, the Company's  working capital was  $39,000 compared  to
$1,770,000 at March 31, 1995. This reduction was due to a lower cash position, a
lower  level of accounts receivable as a result of improved collections, a lower
level of  prepaid insurance  and  a reduced  supply  of recycled  plastics.  The
Company  continues to use all available cash and working capital to fund current
operating losses and capital  requirements. During the  quarter ended March  31,
1996,  the  Company's  loss from  operations  of  $264,000 was  exceeded  by its
depreciation and amortization expense of  $479,000, resulting in cash flow  from
operations of $215,000.
 
    The  Company is also using  its line of credit  to fund cash requirements of
any acquisitions. At March 31, 1996, the Company had drawn $952,000 on its  line
of  credit  and had  approximately  $1,348,000 available.  The  revolving credit
facility matures in October 1997. The facility requires the Company to  maintain
certain  financial ratios  and consult  with the  bank on  acquisitions and also
includes a prohibition on the payment  of dividends. In April 1996, the  Company
used  substantially all of its remaining line of credit to fund the cash portion
of two  additional acquisitions,  for Doctors  Environmental Control,  Inc.  and
Sharps  Incinerator of  Fort, Inc. The  bank agreed to  revise certain financial
covenants in order to allow the  Company to complete the acquisitions. The  loan
agreement  allows  the  bank  to demand  immediate  repayment  of  the Company's
indebtedness if  the bank,  acting in  a commercially  reasonable manner,  deems
itself insecure.
 
    In  May 1996, the Company borrowed $1,000,000 under a short-term loan from a
lending group comprised of certain  officers, directors and stockholders of  the
Company  to provide working capital. The subordinated notes issued in connection
with  this  loan  are  interest-free  if  paid  when  due,  subject  to  certain
exceptions,  and are due within  30 days after completion  of this Offering. See
"Certain Transactions."

    The Company's  other financial  obligations include  industrial  development
revenue  bonds issued on behalf of and  guaranteed by the Company to finance its
Woonsocket, Rhode Island  treatment facility and  equipment. These bonds,  which
had an outstanding aggregate balance of $1,602,000 as of March 31, 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  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

                                       23

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 129,985 shares of Common Stock issued to Safe Way
which are currently held  in escrow and  then by off-set  rights of the  Company
under the Safe Way Note.
 
    In  April 1996, Local 174,  International Brotherhood of Teamsters, AFL-CIO,
filed an unfair  labor practice  charge against  the Company  with the  National
Labor Relations Board. The charge arose from an attempt by the union to organize
the  the Company's truck drivers  in Washington and Oregon,  and claims that the
Company's elimination  of  certain drivers'  positions  shortly before  a  union
recognition  election, which  the union  lost, unlawfully  discriminated against
employees engaged in protected activity. The Company is defending its actions as
unrelated to  any  union  activity. The  Company's  production  and  maintenance
employees  at its Morton, Washington facility voted to affiliate with the union.
The Company is challenging the results of that vote.
 
                                       39

    The Company operates in a highly competitive industry and may be exposed  to
regulatory  inquiries or investigations from time to time. Investigations can be
initiated for a  variety of reasons.  The Company has  been involved in  several
legal  and  administrative  proceedings  that  have  been  settled  or otherwise
resolved on terms acceptable to the  Company, without having a material  adverse
effect  on the Company's business, financial condition or results of operations.
From time to time the Company may consider it more cost-effective to settle such
proceedings than to involve itself  in costly and time-consuming  administrative
actions  or litigation. The Company is also a party to various legal proceedings
arising in the ordinary  course of its business.  The Company believes that  the
resolution of these other matters will not have a material adverse effect on the
Company's  business,  financial condition  or results  of operations.  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-.

    In November 1995,  the Company  entered into  a license  agreement with  IIT
Research Institute ("IITRI"). Under this agreement, IITRI granted to the Company
a  royalty-free  exclusive license  in North  America,  Europe, Japan  and other
industrialized countries throughout the world  to use and commercialize  certain
patent rights and
 
                                       40

know-how  held by IITRI relating to the use of radio-frequency technology in the
treatment of  regulated  medical waste,  and  the  Company granted  to  IITRI  a
royalty-free  exclusive license in  the remaining countries of  the world to 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 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.
 
                                       41

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  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.
 
                                       42

    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. and Somatogen,  Inc., and  several privately held  companies. He  is a  co-
founder  of Crabtree  Partners, a  private investment  partnership in Deerfield,
Illinois, which was formed in June 1995. He received a B.S. degree in mechanical
engineering from  Tufts  University  and  an M.B.A.  degree  from  the  Stanford
University Graduate School of Business Administration.
 
    PATRICK F. GRAHAM has served as a director of the Company since May 1991. He
is a co-founder of Bain & Company, Inc., a management consulting firm in Boston,
Massachusetts,  where  he  has  served  in a  number  of  positions  since 1973,
including Vice Chairman and Chief Financial  Officer. He was previously a  Group
Vice  President  with  Boston Consulting  Group.  Mr.  Graham is  a  director of
WorldCorp, Inc. and several privately held companies. He received a B.A.  degree
from Knox College.
 
    JOHN   PATIENCE  has  served  as  a   director  of  the  Company  since  its
incorporation in  March  1989.  He  is a  co-founder  and  partner  of  Crabtree
Partners,  a private  investment partnership  in Deerfield,  Illinois, which was
formed in June 1995. From January 1988 to March 1995, Mr. Patience was a general
partner of the general  partner of Marquette Venture  Partners, L.P., a  venture
capital  fund  which  he  co-founded  and  which  participated  in  the  initial
capitalization of the  Company. He  was previously  a director  with McKinsey  &
Company,  Inc., a general management consulting firm. Mr. Patience is a director
of TRO Learning, Inc.,  and several privately held  companies. He received  B.A.
and B.L. degrees from the University of Sydney, Sydney, Australia, and an M.B.A.
degree from the Wharton School of Business of the University of Pennsylvania.
 
    LLOYD  D. RUTH has served as a director of the Company since September 1995.
He previously served as a director of the Company from December 1989 to  October
1990.  Mr. Ruth is a  co-founder of Marquette Venture  Partners, L.P., a venture
capital fund in Deerfield, Illinois, where he has served as a general partner of
its general partner since January 1988. From 1981 until 1988 he served with  the
Sprout  Group, a venture capital fund  affiliate of Donaldson, Lufkin & Jenrette
Securities  Corporation.  Mr.  Ruth  received   a  B.S.  degree  in   industrial
engineering from Cornell University, an M.S. degree in computer science from the
Naval  Postgraduate School  in Monterey,  California and  an M.B.A.  degree from
Stanford University.
 
    PETER VARDY has served as a director  of the Company since July 1990. He  is
the   Managing  Director   of  Peter   Vardy  &   Associates,  an  international
environmental consulting firm  in Chicago,  Illinois, which he  founded in  June
1990.  From April 1973 to  May 1990, Mr. Vardy  served at Waste Management, Inc.
(now WMX Technologies, Inc.), a waste management services company, where he  was
Vice  President, Environmental Management.  He is a director  of EMCON, which he
co-founded in 1971. Mr. Vardy received  a B.S. degree in geological  engineering
from the University of Nevada.
 
                                       43

    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  the 1-for-5.3089  reverse stock split  to be  effective
    prior  to  completion of  this Offering.  Also prior  to completion  of this
    Offering, all of  the Company's  outstanding options to  purchase shares  of
    Class  B common  stock will  be converted  into options  to purchase  a like
    number of  shares of  Common Stock.  See "Description  of Capital  Stock  --
    Reverse  Stock Split." The  options granted to  the Named Executive Officers
    vest in equal monthly increments over periods of 12, 24 or 36 months.

(2) Based on an  aggregate of 923,292  options granted to  employees during  the
    year ended December 31, 1995, all of which were granted under the 1995 Stock
    Plan.
 
(3) The  exercise price  per share of  each option  is equal to  the fair market
    value of  the  Company's Class  B  common stock  on  the date  of  grant  as
    determined by the Company's Board of Directors.
 
(4) The  potential realizable value was calculated  based on the 10-year term of
    each option on its date of grant, assuming that the fair market value of the
    underlying stock on the  date of grant appreciates  at the indicated  annual
    rate  compounded annually  for the  entire term of  the option  and that the
    option is exercised and sold on the last day of its term for the appreciated
    stock price. The potential  realizable value of  each option was  calculated
    using  the exercise  price of  the option  as the  fair market  value of the
    underlying stock on the  date of grant. The  actual realizable value of  the
    options  could be considerably  higher than the  potential realizable values
    shown in the table.
 
                                       45

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

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

- ------------------------
   
(1) All unexercised options at December 31, 1995 were options to purchase shares
    of  the Company's  Class B common  stock. The number  of unexercised options
    shown in the table has been adjusted to reflect a 1-for-5.3089 reverse stock
    split to be effective prior to completion of this Offering. See "Description
    of Capital Stock -- Reverse Stock Split."

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

   
(2) All options  received were  options to  purchase, and  all shares  of  stock
    received  were, shares of the Company's Class  B common stock. The number of
    options and  shares  of stock  received  have  been adjusted  to  reflect  a
    1-for-5.3089 reverse stock split to be effective prior to completion of this
    Offering. See "Description of Capital

                                       48

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

    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 89,524 shares issuable under warrants exercisable within 60 days of
    June  1, 1996, 39,643 shares issuable under stock options exercisable within
    60 days of June  1, 1996 and  32,716 shares owned by  Mr. Schuler's wife  or
    trusts  for the  benefit of  his children, in  respect of  which Mr. Schuler
    disclaims any beneficial ownership.
 
 (6)Includes 27,509 shares  issuable under stock  options exercisable within  60
    days  of June 1, 1996 and 63,290 shares issuable under a warrant exercisable
    within 60 days of June  1, 1996, and 75,345 shares  owned by trusts for  the
    benefit  of Mr. Miller's children, in  respect of which Mr. Miller disclaims
    any beneficial ownership.
 
 (7)Includes 25,519 shares  issuable under stock  options exercisable within  60
    days of June 1, 1996.
 
 (8)Includes  29,687 shares issuable  under stock options  exercisable within 60
    days of June 1, 1996 and 12,432 shares issuable under a warrant  exercisable
    within 60 days of June 1, 1996.
 
 (9)Includes  40,041 shares issuable  under stock options  exercisable within 60
    days of June 1, 1996 and 11,302 shares issuable under a warrant  exercisable
    within 60 days of June 1, 1996.
 
(10)Includes  43,544 shares issuable  under stock options  exercisable within 60
    days of June 1, 1996.
 
(11)Includes 31,087 shares  issuable under stock  options exercisable within  60
    days of June 1, 1996.

(12)Includes  1,627 shares  issuable under  stock options  exercisable within 60
    days of June 1, 1996 and 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
 
    Upon completion of  this Offering,  the Company's  authorized capital  stock
will consist of 30,000,000 shares of Common Stock, par value $.01 per share. The
following  description reflects  (i) a  1-for-5.3089 reverse  stock split  to be
effective immediately  prior  to  completion  of  this  Offering  and  (ii)  the
automatic redesignation upon completion of this Offering of all of the Company's
outstanding  shares of Class A and Class  B common stock and outstanding options
to purchase shares of Class A or Class B common stock as a like number of shares
of Common Stock or options to purchase a like number of shares of Common  Stock,
as the case may be. See "-- Reverse Stock Split."
 
COMMON STOCK
 
    As  of June 1, 1996, there were 6,218,455 shares of Common Stock outstanding
which were held of record by 139 stockholders.

    Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the  stockholders but do not  have cumulative voting rights  in
respect  of the election of  directors. Holders of Common  Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time  by
the Company's Board of Directors out of legally available funds. In the event of
the  liquidation, dissolution  or winding up  of the Company,  holders of Common
Stock are  entitled  to share  ratably  in all  of  the assets  of  the  Company
remaining  after payment or provision for  payment of the Company's liabilities.
Holders of  Common Stock  have no  preemptive or  other subscription  rights  to
purchase  any securities of the  Company, and there are  no conversion rights or
redemption  or  sinking  fund  provisions  in  respect  the  Common  Stock.  All
outstanding  shares of Class A  and Class B common stock  are, and all shares of
Common Stock to be outstanding upon  completion of this Offering will be,  fully
paid and non-assessable.

WARRANTS

    As  of June  1, 1996,  there were  outstanding warrants  to purchase 409,848
shares of Common Stock, all of which were then exercisable at a weighted average
exercise price of $6.83 per share.  Of these outstanding warrants, warrants  for
15,608  shares of Common Stock, at an exercise price of $17.63 per share, expire
in March 1998; warrants for 6,773 shares  of Common Stock, at an exercise  price
of $69.02 per share, expire in March 1999; warrants for 161,432 shares of Common
Stock, at an exercise price of $1.59 per share (or 70% of the per share purchase
price  if the Company sells  Common Stock in a  single transaction prior to July
27, 1996 in which the aggregate  purchase price is at least $1,000,000),  expire
in  July 2000; and warrants  for 226,036 shares of  Common Stock, at an exercise
price of $7.96, expire in  May 2001. Holders of  the warrants expiring on  March
17, 1999 are entitled to certain rights in respect of the registration under the
Securities  Act of  1933, as  amended (the "Securities  Act"), of  the shares of
Common Stock issued  upon the  exercise of  the warrants.  See "--  Registration
Rights of Certain Holders."

OPTIONS

    As  of  June 1,  1996, there  were outstanding  options to  purchase 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  5,212,603 shares  of Common
Stock (including  6,773 shares  issuable upon  the exercise  of certain  of  the
Company's outstanding warrants and 98,001 shares to be issued in partial payment
of  an outstanding note due upon  completion of this Offering) (the "Registrable
Shares") will be entitled  to certain rights in  respect of the registration  of
the  Registrable Shares under the Securities Act. Under the Amended and Restated
Registration Agreement dated October 19, 1994, as amended, among the Company and
such holders, holders of  a majority of the  Registrable Shares have the  right,
until  the Company is eligible  to file a registration  statement on Form S-2 or
Form S-3,  to request  on two  occasions that  the Company  file a  registration
statement  on Form S-1 to register all or a portion of their Registrable Shares.
If and when the Company is eligible to file a registration statement on Form S-2
or Form  S-3,  holders of  at  least 25%  of  the Registrable  Shares  have  the

                                       53

right  to request on  an unlimited number  of occasions that  the Company file a
registration statement on Form S-2 or Form  S-3 to register all or a portion  of
their  Registrable Shares. In addition, one holder of 937,521 Registrable Shares
has the right, 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 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 if the  Company willfully breaches or  defaults under the alliance
agreement, a competitor of Baxter's acquires control of the Company, the Company
sells or  distributes hospital  or medical  products or  services as  part of  a
program  like Baxter's  procedure-based delivery  system, or  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  will
not  exceed the greater of $15.18 per share  plus simple interest at the rate of
10% per annum from  October 1993 or  the fair market value  of the Common  Stock
that Baxter owns 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)  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.
 
                                       54

    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

    Prior to completion of this Offering, the Company will effect a 1-for-5.3089
reverse  stock split  pursuant to  which each outstanding  share of  Class A and
Class B common stock  will become 0.1884  shares, and the  number of shares  and
exercise  price of each outstanding option  will be adjusted accordingly. All of
the Company's outstanding warrants will be similarly adjusted in accordance with
their terms. Also  prior to completion  of this Offering,  all of the  Company's
outstanding  shares of Class A and Class  B common stock and outstanding options
to purchase shares of Class A or Class B common stock will be redesignated as  a
like  number of shares of  Common Stock or options to  purchase a like number of
shares of Common Stock, as the case may be.

TRANSFER AGENT AND REGISTRAR
 
    The transfer agent and  registrar for the Common  Stock is Harris Trust  and
Savings Bank.
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
    Prior to this Offering, there has been no public market for the Common Stock
of  the Company.  Future sales  of substantial  amounts of  Common Stock  in the
public market could  adversely affect the  market price of  Common Stock.  Aside
from the 3,000,000 shares sold in this Offering, only a limited number of shares
will  be available  for sale immediately  following completion  of this Offering
because of certain contractual  and legal restrictions  on resale (as  described
below). Accordingly, sales of substantial amounts of Common Stock of the Company
in  the public market after these  restrictions lapse could adversely affect the
prevailing market price and the ability  of the Company to raise equity  capital
in the future.
 
                                       55

    Upon  completion  of this  Offering, the  Company  will have  outstanding an
aggregate of  9,218,455 shares  of Common  Stock, assuming  no exercise  of  the
Underwriters' over-allotment option and no exercise of outstanding stock options
and  warrants. Of these outstanding shares of Common Stock, the 3,000,000 shares
sold in this Offering  will be freely tradeable  without restriction or  further
registration under the Securities Act, unless purchased by an "affiliate" of the
Company as that term is defined in Rule 144 under the Securities Act.
 
    The remaining 6,218,455 shares of Common Stock held by existing stockholders
(the  "Restricted  Shares")  will be  "restricted  securities" as  that  term is
defined in Rule 144 under the Securities Act. The Restricted Shares may be  sold
in  the public market only if they are registered under the Securities Act or if
they qualify  for  an exemption  from  registration  under Rule  144  under  the
Securities  Act (which is  summarized below). Sales of  the Restricted Shares in
the public market, or the availability of the Restricted Shares for sale,  could
adversely affect the market price of the Common Stock.
 
    Certain  stockholders of the  Company, including all  executive officers and
directors and the individuals and entities  named in the table under  "Principal
Stockholders,"  who will beneficially own  in the aggregate 5,571,624 Restricted
Shares after  the Offering,  have  entered into  "lock-up" agreements  with  the
Managing  Underwriters pursuant  to which they  have agreed not  to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of, directly
or indirectly, any  of their Restricted  Shares, or any  shares of Common  Stock
that  they may acquire through the exercise  of stock options or warrants, or to
exercise any of their registration rights  in respect of their shares of  Common
Stock,  for a period  of 180 days from  the date of  this Prospectus without the
prior written consent  of Dillon,  Read &  Co. Inc.  on behalf  of the  Managing
Underwriters.  As a result  of these contractual  restrictions, shares of Common
Stock subject  to the  lock-up agreements  are restricted  from sale  until  the
lock-up  agreements expire, notwithstanding that  they otherwise may be eligible
for sale under Rule 144. Upon  the expiration of the lock-up agreements,  shares
will be eligible for sale pursuant to Rule 144.
 
    In  general, under Rule 144 as currently  in effect, beginning 90 days after
the date of this Prospectus, a person  (or persons whose shares are required  to
be  aggregated) who  has beneficially owned  Restricted Shares for  at least two
years (including the  holding period  of any  prior beneficial  owner except  an
affiliate  of  the Company)  would be  entitled to  sell during  any three-month
period a number of Restricted Shares that does not exceed the greater of (i)  1%
of  the number of  shares of Common  Stock then outstanding  or (ii) the average
weekly trading  volume  of the  Common  Stock  during the  four  calendar  weeks
preceding  the  filing of  the required  notice of  sale on  Form 144.  Sales of
Restricted Shares under  Rule 144 are  also subject to  compliance with  certain
conditions relating to the manner of sale, the requirement to file notice of the
sale   with  the  Securities  and  Exchange  Commission  on  Form  144  and  the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any  time
during  the  90  days preceding  a  sale,  and who  has  beneficially  owned the
Restricted Shares proposed to  be sold for at  least three years (including  the
holding  period of any prior owner except an affiliate), may sell the Restricted
Shares under  Rule  144  without  regard  to  any  volume  limitation  or  other
conditions   or  requirements   of  the  rule.   Accordingly,  unless  otherwise
restricted, holders of Restricted Shares who are eligible to use Rule 144(k) may
sell their shares immediately upon completion of this Offering.

    As of June 1, 1996, there were outstanding options under the 1995 Stock Plan
to purchase 696,962 shares of Common Stock, of which options for 414,030  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 409,848
shares of Common Stock, all of which were then exercisable. Holders of  warrants
to purchase 387,829 shares of Common Stock are subject to the lock-up agreements
described above.
 
                                       56

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

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

    The Managing Underwriters are Dillon, Read & Co. Inc., Salomon Brothers  Inc
and William Blair & Company L.L.C.
 
    If  any  shares  of  Common  Stock  offered  hereby  are  purchased  by  the
Underwriters, all such shares will  be so purchased. The Underwriting  Agreement
contains  certain  provisions  whereby,  if  any  Underwriter  defaults  in  its
obligation to  purchase  such  shares,  and the  aggregate  obligations  of  the
Underwriters  so defaulting do not exceed 10%  of the shares offered hereby, the
remaining Underwriters, or some of them, must assume such obligations.
 
    The Common Stock offered hereby is being initially offered severally by  the
Underwriters  for  sale  at  the price  set  forth  on the  cover  page  of this
Prospectus, or at such price less a concession not to exceed $      per share on
sales to  certain dealers.  The Underwriters  may allow,  and such  dealers  may
reallow,  a concession not to exceed $       per share on sales to certain other
dealers. The offering of shares is made  for delivery when, as, and if  accepted
by  the Underwriters and  subject to prior sale  and withdrawal, cancellation or
modification of the offer without notice. The Underwriters reserve the right  to
reject  any  order for  the purchase  of  the shares.  After the  initial public
offering, the public offering price, the  concession and the reallowance may  be
changed by the Managing Underwriters.
 
    The  Company has  granted to  the Underwriters  an over-allotment  option to
purchase up  to  an  aggregate  of  450,000  shares  of  Common  Stock.  If  the
Underwriters  exercise this  option, each of  the Underwriters will  have a firm
commitment, subject to  certain conditions, to  purchase approximately the  same
percentage of the aggregate shares to be purchased as the number of shares to be
purchased  by it shown in  the above table bears  to 3,000,000. The Underwriters
may exercise such option  on or before  the thirtieth day from  the date of  the
Underwriting  Agreement and only to cover  over-allotments made of the shares in
connection with this Offering.
 
    The Company  has  agreed in  the  Underwriting Agreement  to  indemnify  the
Underwriters  against  certain  liabilities,  including  liabilities  under  the
Securities Act,  or to  contribute  to payments  that  the Underwriters  may  be
required to make in respect thereof.
 
    The Company and certain of its officers, directors and stockholders prior to
this Offering have agreed not to offer, sell, contract to sell, grant any option
to  sell, or otherwise dispose of, directly  or indirectly, any shares of Common
Stock, or securities convertible  into or exercisable  or exchangeable for,  any
shares  of Common Stock or warrants or other rights to purchase shares of Common
Stock, or permit the registration of any shares of Common Stock for a period  of
180 days after the date of this Prospectus, without the prior consent of Dillon,
Read & Co. Inc. acting on behalf of the Managing Underwriters.

    Prior to this Offering, there has been no public market for the Common Stock
of  the Company. Consequently, the initial  public offering price was determined
by negotiation  between  the  Company and  the  Managing  Underwriters.  Factors
considered  in determining this  price included, among  other things, prevailing
market conditions, the state of the Company's development, the future  prospects
of  the Company and  its industry, market valuations  of securities of companies
engaged in activities deemed by the Managing Underwriters to be similar to those
of the Company, and other factors deemed relevant. Consideration was also  given
to  the general state  of the securities  market, the market  conditions for new
issues of  securities  and  the  demand for  similar  securities  of  comparable
companies.  The 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 SHEETS AT MARCH 31, 1996 (UNAUDITED)........................................        F-16
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
 (UNAUDITED)...............................................................................................        F-17
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31,
 1996 (UNAUDITED)..........................................................................................        F-18
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 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.
 
Chicago, Illinois
March 20, 1996,
except for the first paragraph of Note 7,
as to which the date is      , 1996
 
- --------------------------------------------------------------------------------

    The  foregoing report is  in the form  that will be  signed when the reverse
stock split, decrease in authorized common stock and redesignation of the  Class
A and Class B common stock as a like number of shares of common stock all become
effective  prior to completion of an initial public offering as described in the
first paragraph of Note 7 to the financial statements.

                                             ERNST & YOUNG LLP

Chicago, Illinois
July 26, 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...................................................  $    (5.28) $    (5.57) $    (0.64)
                                                                              ----------  ----------  ----------
                                                                              ----------  ----------  ----------
Weighted average number of common shares outstanding........................   1,847,432   1,847,808   7,060,438
                                                                              ----------  ----------  ----------
                                                                              ----------  ----------  ----------

 
   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................................      $     (3.70)         $     (3.70)

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

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

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

    In  June 1996,  the Company's Board  of Directors  authorized a 1-for-5.3089
reverse stock split, to  be effective prior to  completion of an initial  public
offering  of the Company's common stock. Also  prior to completion of an initial
public offering, 5,236,209 shares of Class A common stock and 346,176 shares  of
Class  B common stock will be redesignated as  a like number of shares of common
stock.  In  July  1996,  the  Company's  Board  of  Directors  and  shareholders
authorized  a decrease in the  number of authorized shares  of common stock from
58,000,000 shares to 30,000,000 shares prior to completion of an initial  public
offering.  All common shares, per share, weighted average shares outstanding and
stock option  data have  been  adjusted to  reflect  this reverse  stock  split,
redesignation  of  the Class  A and  Class B  common stock  as common  stock and
decrease in authorized common stock.

    The following  table  details  the convertible  redeemable  preferred  stock
activities  for each of  the years in  the three-year period  ended December 31,
1995:

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

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

                                                                
Safe Way note payable............................................     98,001
1993 Plan options................................................      9,943
1995 Plan options................................................    923,292
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 15,064 shares of  common stock at $18.58 per
share. At December 31, 1995, all  of these warrants were outstanding and  expire
on March 3, 1998.

    The  Company, in connection with the  issuance of preferred stock, which was
subsequently reclassified  as common  stock  (see Note  7), issued  warrants  to
purchase  up to 6,773 shares of common stock  at an exercise price of $69.02 per
share. At December  31, 1995, warrants  to purchase 6,773  shares at $69.02  per
share were issued and outstanding. These warrants expire on March 16, 1999.
 
    During  1995, several of the Company's shareholders and directors provided a
bridge loan to  the Company. The  loan totaled $830,000  with interest at  prime
plus  3%. In addition to the interest, the lenders received warrants to purchase
220,559 shares of common stock at $1.59 per share. These warrants expire on July
31, 2000. The bridge  loan was repaid  in November 1995  with proceeds from  the
Company's revolving line of credit.
 
NOTE 9 -- REGISTRATION AGREEMENT
    The  Company  is a  party to  a Registration  Agreement which  gives certain
shareholders of the Company registration rights for their shares. The parties to
the Registration Agreement are the original holders of the Company's prior Class
A, B,  C,  D,  E,  F,  H,  and I  preferred  stock.  After  the  Company's  1995
recapitalization, the
 
                                      F-14

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

    The  Alliance also gives the investor  the right under certain circumstances
to require the Company to redeem the investor's 461,028 shares of the  Company's
common  stock at  a price not  to exceed the  greater of $15.18  per share, plus
interest at the rate of 10% per annum  from October 1993, or the fair market  of
the  investor's common  stock at the  time of redemption.  This redemption right
terminates 180 days from  the date of the  Company's initial public offering  of
common stock.

    Under   the  Alliance,  the  investor  and   the  Company  have  an  ongoing
relationship to provide services and products to the healthcare market place.
 
                                      F-15

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

                                                                                          MARCH 31, 1996
                                                                                          --------------
                                                                                          (IN THOUSANDS)
                                                                                       
ASSETS
Current Assets:
  Cash and cash equivalents.............................................................    $      120
  Accounts receivable, less allowance for doubtful accounts of $146.....................         3,995
  Parts and supplies....................................................................           436
  Prepaid expenses......................................................................           153
  Other current assets..................................................................           458
                                                                                          --------------
    Total current assets................................................................         5,162
Property, Plant and Equipment:
  Land..................................................................................            90
  Buildings and improvements............................................................         5,406
  Machinery and equipment...............................................................         8,171
  Office equipment and furniture........................................................           408
  Construction in progress..............................................................           281
                                                                                          --------------
                                                                                                14,356
Less accumulated depreciation and amortization..........................................        (3,961)
                                                                                          --------------
    Property, plant and equipment -- Net................................................        10,395
Other Assets:
  Organization costs, net...............................................................            21
  Goodwill, less accumulated amortization of $496.......................................         7,797
  Other.................................................................................           501
                                                                                          --------------
    Total other assets..................................................................         8,319
                                                                                          --------------
      Total assets......................................................................    $   23,876
                                                                                          --------------
                                                                                          --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.....................................................    $      759
  Accounts payable......................................................................         1,703
  Accrued liabilities...................................................................         2,009
  Deferred revenue......................................................................           652
                                                                                          --------------
    Total current liabilities...........................................................         5,123
Long-Term Debt:
  Industrial development revenue bonds and other........................................         2,564
  Note payable to bank..................................................................           952
  Note payable..........................................................................         2,480
                                                                                          --------------
    Total long-term debt................................................................         5,996
Other Liabilities.......................................................................           529
Shareholders' Equity:
  Common stock (par value $.01 per share; 30,000,000 shares authorized, 5,616,651 issued
   and outstanding).....................................................................            56
  Additional paid-in capital............................................................        49,693
  Notes receivable for common stock purchases...........................................           (72)
  Accumulated deficit...................................................................       (37,449)
                                                                                          --------------
    Total shareholders' equity..........................................................        12,228
                                                                                          --------------
      Total liabilities and shareholders' equity........................................    $   23,876
                                                                                          --------------
                                                                                          --------------

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

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

                                                                                FOR THE QUARTER ENDED
                                                                                      MARCH 31,
                                                                              --------------------------
                                                                                  1995          1996
                                                                              ------------  ------------
                                                                                (IN THOUSANDS, EXCEPT
                                                                              SHARE AND PER SHARE DATA)
                                                                                      
Revenues....................................................................  $      5,446  $      5,578
 
Costs and expenses:
  Cost of revenues..........................................................         4,227         4,337
  Selling, general and administrative.......................................         2,762         1,505
                                                                              ------------  ------------
    Total costs and expenses................................................         6,989         5,842
                                                                              ------------  ------------
 
Loss from operations........................................................        (1,543)         (264)
 
Other income (expense):
  Interest income...........................................................             6            --
  Interest expense..........................................................           (54)          (83)
                                                                              ------------  ------------
    Total other income (expense)............................................           (48)          (83)
                                                                              ------------  ------------
Net loss....................................................................        (1,591)         (347)
Less cumulative preferred dividends.........................................        (1,573)           --
                                                                              ------------  ------------
Loss applicable to common stock.............................................  $     (3,164) $       (347)
                                                                              ------------  ------------
                                                                              ------------  ------------
Net loss per common share...................................................  $      (1.71) $      (0.05)
                                                                              ------------  ------------
                                                                              ------------  ------------
Weighted average number of common shares outstanding........................     1,847,808     7,094,703
                                                                              ------------  ------------
                                                                              ------------  ------------

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

                       STERICYCLE, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS 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...        35          1          72         (72)                            1
Net loss for the quarter ended March 31,
 1996...................................                                                        (347)          (347)
                                             -----      ------   ----------     -----      -----------   -------------
BALANCES AT MARCH 31, 1996..............     5,617       $ 56     $49,693       $ (72)      $(37,449)      $ 12,228
                                             -----      ------   ----------     -----      -----------   -------------
                                             -----      ------   ----------     -----      -----------   -------------

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

   The accompanying notes are an integral part of these financial statements.
 
                                      F-19

                       STERICYCLE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 MARCH 31, 1996
 
NOTE 1 -- BASIS OF PRESENTATION
   
    The  accompanying  1995 and  1996  unaudited interim  consolidated financial
statements have  been prepared  pursuant to  the rules  and regulations  of  the
Securities and Exchange Commission. Certain information and footnote disclosures
normally  included  in  annual  consolidated  financial  statements  prepared in
accordance with generally accepted accounting principles have been condensed  or
omitted  pursuant to such  rules and regulations,  although the Company believes
these disclosures are adequate to make the information presented not misleading.
During the quarter ended  March 31, 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 quarter ended March 31, 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 three-month period ended  March 31, 1996 are not  necessarily
indicative  of  the results  that may  be  achieved for  the entire  year ending
December 31, 1996.

NOTE 2 -- ACQUISITIONS
    On April 30, 1996, the Company purchased the customer list and certain other
assets, totaling approximately $200,000, of Sharps Incinerator of Fort, Inc. for
$757,000 in cash of which $562,000 was  payable at closing and the balance  plus
interest  (prime plus 1%) is  due on November 1,  1996. This transaction will be
accounted for using the purchase method of accounting.
 
    On May 1, 1996,  the Company purchased the  customer list and certain  other
assets  of Doctors  Environmental Control, Inc.  for $400,000 in  cash and notes
payable issued for $600,000, which are payable on May 1, 1998. In addition,  the
Company  assumed two vehicle  leases totaling $77,000  and delivered four option
agreements to shareholders of the seller giving them an option to purchase up to
a total  of 53,816  shares of  the Company's  common stock.  The price  for  the
purchase  of the common stock upon exercise  of each option is (i) the surrender
and cancellation of the  note payable, or  (ii) in the  event that any  payments
have  been made under the  notes payable, the surrender  and cancellation of the
note payable and payment of cash such that the cash payment and the  outstanding
balance of principal and interest on the note payable together equal the balance
of the note as if no payments had been made on the note payable. The transaction
will be accounted for using the purchase method of accounting.
 
    These acquisitions are not significant to the 1996 first quarter results.
 
NOTE 3 -- BRIDGE LOAN
   
    In  May 1996,  the Company  obtained a  $1,000,000 bridge  loan from certain
shareholders, directors and officers to  provide working capital and to  finance
additional  acquisitions.  The  notes are  subordinated  to bank  debt  and bear
interest at the rate of  7% per annum unless repaid  prior to January 1997.  The
notes  are due  in May  1997 or within  30 days  after completion  of an initial
public offering in which the Company raises at least $20,000,000. In  connection
with  this loan, the Company issued warrants  to members of the lending group to
purchase an aggregate of 226,036 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)
                                 MARCH 31, 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 36  months
and carry an exercise price of $1.99 per share.

   
    In  June 1996,  the Company's Board  of Directors adopted  a Directors Stock
Option Plan. The plan authorizes stock options for a total of 285,000 shares  of
common  stock to be granted to eligible  directors of the Company, 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 in both the first quarter of  1995
and  1996. Any tax  benefit resulting from  these net operating  losses has been
offset by a valuation allowance.

NOTE 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)
                                 MARCH 31, 1996

NOTE 8 -- STOCK SPLIT
    
    STOCK SPLIT:

    In  June 1996,  the Company's Board  of Directors  authorized a 1-for-5.3089
reverse stock split, to  be effective prior to  completion of an initial  public
offering of the Company's common stock. Prior to completion of an initial public
offering, 5,236,209 shares of Class A common stock and 346,176 shares of Class B
common stock will be redesignated as a like number of shares of common stock. In
July  1996,  the  Company's Board  of  Directors and  shareholders  authorized a
decrease in the  number of  authorized shares  of common  stock from  58,000,000
shares to 30,000,000 shares prior to completion of an initial public offering of
the  Company's  common stock.  All common  shares,  per share,  weighted average
shares outstanding and  stock option  data have  been adjusted  to reflect  this
reverse  stock split, redesignation of  the Class A and  Class B common stock as
common stock and decrease in authorized common stock.

                                      F-22

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

                                                              PAGE
                                                              ----
                                                           
PROSPECTUS SUMMARY..........................................    3
RISK FACTORS................................................    7
USE OF PROCEEDS.............................................   15
DIVIDEND POLICY.............................................   15
DILUTION....................................................   16
CAPITALIZATION..............................................   17
SELECTED CONSOLIDATED FINANCIAL DATA........................   18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS..................................   19
BUSINESS....................................................   25
MANAGEMENT..................................................   42
CERTAIN TRANSACTIONS........................................   50
PRINCIPAL STOCKHOLDERS......................................   51
DESCRIPTION OF CAPITAL STOCK................................   53
SHARES ELIGIBLE FOR FUTURE SALE.............................   55
UNDERWRITING................................................   57
LEGAL MATTERS...............................................   58
EXPERTS.....................................................   58
ADDITIONAL INFORMATION......................................   58
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..................  F-1

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

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

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

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

    The  Underwriting  Agreement,  filed  as Exhibit  1.1  to  this Registration
Statement, provides for  indemnification by the  Underwriters of the  Registrant
and  its  officers  and  directors  for  certain  liabilities  relating  to this
Offering.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

    In October 1993, the Registrant 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  September  1994,  the  Registrant issued  25,227.71  shares  of  Class H
preferred stock, having an aggregate value  of $2,522,700, and delivered a  note
for  $2,480,000,  payable, in  part, by  delivery  of 14,880  shares of  Class H
preferred Stock, to Safe Way Disposal  Systems, Inc. ("Safe Way") in  connection
with the Registrant's purchase of certain of Safe Way's assets.
 
    In  October 1994,  the Registrant  sold 25,225  shares of  Class I preferred
stock for $2,522,500 to 26 investors, including Jack W. Schuler, Peter Vardy and
Mark C.  Miller, directors  of the  Registrant (and  in Mr.  Miller's case,  its
President and Chief Executive Officer).
 
    In  July 1994, the Registrant issued 532  shares of common stock pursuant to
the exercise of an option granted to  a consultant for services rendered to  the
Registrant.
 
    In  July  1994,  the Registrant  issued  673  shares of  common  stock  to a
consultant who rendered services to the Registrant.
 
    In August 1994, the Registrant sold 604.5 shares of Class F preferred  stock
for  $60,450,  and  4,650  shares of  common  stock  for $6,045,  to  15  of its
employees.
 
    In July 1995, the Registrant issued warrants to purchase 1,170,926 shares of
Class A common stock, at an exercise price of $0.299 per share, to members of  a
group  of lenders,  including Jack  W. Schuler,  John Patience  and Peter Vardy,
directors of the Registrant. In May 1996, Mr. Patience exercised his warrant and
acquired 133,088 shares  of Class  A common stock  and Mr.  Vardy exercised  his
warrant and acquired 180,814 shares of Class A common stock.
 
    In  September 1995, the  Registrant issued 22,000 shares  of common stock in
connection with an agreement to settle a dispute with a consultant.
 
    In November 1995, the Registrant issued  505 shares of Class A common  stock
to a vendor for services rendered to the Registrant.

    In  November 1995,  the Registrant issued  1,211.5 shares of  Class A common
stock to 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 26,250 shares of Class A common stock to
two  consultants pursuant to the  exercise of options exercisable  at a price of
$0.40 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.

    The sales of these securities were considered to be exempt from registration
under  the Securities Act of  1933, as amended, in  reliance on Section 4(2), or
Regulation D thereunder,  as transactions by  an issuer not  involving a  public
offering.  The  recipients of  these securities  represented their  intention to
acquire the securities for investment  purposes only and not  with a view to  or
for  sale in connection  with any further  distribution, and appropriate legends
were affixed to the stock certificates and instruments issued to the recipients.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

    (a) Exhibits

   

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
        
   1.1     Form of Underwriting Agreement.
   3.1*    Certificate of Incorporation of the Registrant, as currently in effect.
   3.5*    By-Laws of the Registrant, as currently in effect.
   4.1**   Specimen Common Stock Certificate.
   4.2*    Form of Common Stock Purchase Warrant in connection with July 1995 line of credit.
   4.3     Form of Common Stock Purchase Warrant in connection with May 1996 short-term loan.
   4.4     Amended and Restated Registration Agreement dated October 19, 1994 between the Registrant and certain
            of its stockholders (previously filed), and related First Amendment dated September 30, 1995
            (previously filed) 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.

 
                                      II-3

 EXHIBIT
   NO.                                                  DESCRIPTION
- ---------  -----------------------------------------------------------------------------------------------------
  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.
  21.1*    Subsidiaries.
  23.1     Consent of Ernst & Young LLP.
  23.2**   Consent of Johnson and Colmar (to be filed as part of Exhibit 5.1).
  24.1*    Power of Attorney.

 
- ------------------------
 * Previously filed.
** To be filed by amendment.
 + Confidential treatment requested.
 
                                      II-4

                                   SIGNATURES

    Pursuant  to the requirements of the  Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2  to Registration Statement to be signed  on
its  behalf by  the undersigned,  thereunto duly  authorized, in  the Village of
Deerfield, State of Illinois, on July 26, 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.  2 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         July 26, 1996
                   Jack W. Schuler
 
                  /s/ MARK C. MILLER
     -------------------------------------------        President, Chief Executive Officer and a   July 26, 1996
                    Mark C. Miller                       Director (Principal Executive Officer)
 
                                     *                  Vice President, Finance and Chief
     -------------------------------------------         Financial Officer (Principal Financial    July 26, 1996
                   James F. Polark                       and Accounting Officer)
 
                                     *
     -------------------------------------------        Director                                   July 26, 1996
                  Patrick F. Graham
 
                                     *
     -------------------------------------------        Director                                   July 26, 1996
                    John Patience
 
                                     *
     -------------------------------------------        Director                                   July 26, 1996
                    Lloyd D. Ruth
 
                                     *
     -------------------------------------------        Director                                   July 26, 1996
               L. John Wilkerson, Ph.D.
 
                                     *
     -------------------------------------------        Director                                   July 26, 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*    Certificate of Incorporation of the Registrant, as currently in effect.
   3.5*    By-Laws of the Registrant, as currently in effect.
   4.1**   Specimen Common Stock Certificate.
   4.2*    Form of Common Stock Purchase Warrant in connection with July 1995 line of credit.
   4.3     Form of Common Stock Purchase Warrant in connection with May 1996 short-term loan.
   4.4     Amended and Restated Registration Agreement dated October 19, 1994 between the Registrant and certain
            of its stockholders (previously filed), and related First Amendment dated September 30, 1995
            (previously filed) 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.
  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.

   

 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.
  21.1*    Subsidiaries.
  23.1     Consent of Ernst & Young LLP.
  23.2**   Consent of Johnson and Colmar (to be filed as part of Exhibit 5.1).
  24.1*    Power of Attorney.

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

                       Stericycle, Inc.
                       3,000,000 Shares

                         Common Stock
                       ($0.01 Par Value)

                    UNDERWRITING AGREEMENT

            , 1996

                          UNDERWRITING AGREEMENT

                                                                     , 1996

DILLON, READ &  CO. INC.
Salomon Brothers Inc,
William Blair & Company L.L.C.
as Managing Underwriters
c/o Dillon, Read & Co. Inc.
535 Madison Avenue
New York, New York  10022

Ladies and Gentlemen:

            Stericycle, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the underwriters
named in Schedule A annexed hereto (the "Underwriters") an
aggregate of 3,000,000 shares (the "Firm Shares") of Common
Stock, $0.01 par value (the "Common Stock"), of the Company.
In addition, solely for the purpose of covering
over-allotments, the Company proposes to grant to the
Underwriters the option to purchase from the Company up to an
additional 450,000 shares of Common Stock (the "Additional
Shares").  The Firm Shares and the Additional Shares are
hereinafter collectively sometimes referred to as the "Shares".
The Shares are described in the Prospectus which is referred to
below.

            The Company has filed, in accordance with the
provisions of the Securities Act of 1933, as amended, and the
rules and regulations thereunder (collectively called the
"Act"), with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1, including a
prospectus, relating to the Shares.  The Company has furnished
to you, for use by the Underwriters and by dealers, copies of
one or more preliminary prospectuses (each thereof being herein
called a "Preliminary Prospectus") relating to the Shares.
Except where the context otherwise requires, the registration
statement, as amended when it becomes effective (together with
any registration statement filed pursuant to Rule 462(b) under
the Act increasing the size of the offering registered under
the Act), including all documents filed as a part thereof, and
including any information contained in a prospectus
subsequently filed with the Commission pursuant to Rule 424(b)
under the Act and deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430(A)
under the Act, is herein called the "Registration Statement",

and the prospectus, in the form filed by the Company with the
Commission pursuant to Rule 424(b) under the Act or, if no such
filing is required, the form of final prospectus included in
the Registration Statement at the time it became effective, is
herein called the "Prospectus".

            The Company and the Underwriters agree as follows:

            1.    Sale and Purchase.  Upon the basis of the
warranties and representations and the other terms and
conditions herein set forth, the Company agrees to sell to the
respective Underwriters and each of the Underwriters, severally
and not jointly, agrees to purchase from the Company the
aggregate number of Firm Shares set forth opposite the name of
such Underwriter in Schedule A attached hereto in each case at
a purchase price of $      per Share.  You shall release the
Firm Shares for public sale promptly after this Agreement
becomes effective.  You may from time to time increase or
decrease the public offering price after the initial public
offering to such extent as you may determine.

            In addition, the Company hereby grants to the several
Underwriters the option to purchase, and upon the basis of the
warranties and representations and the other terms and
conditions herein set forth, the Underwriters shall have the
right to purchase, severally and not jointly, from the Company,
ratably in accordance with the number of Firm Shares to be
purchased by each of them, all or a portion of the Additional
Shares as may be necessary to cover over-allotments made in
connection with the offering of the Firm Shares, at the same
purchase price per share to be paid by the Underwriters to the
Company for the Firm Shares.  This option may be exercised at
any time (but not more than once) on or before the thirtieth
day following the date hereof, by written notice from Dillon,
Read & Co. Inc. to the Company.  Such notice shall set forth
the aggregate number of Additional Shares as to which the
option is being exercised, and the date and time when the
Additional Shares are to be delivered (such date and time being
herein referred to as the "additional time of purchase");
provided, however, that the additional time of purchase shall
not be earlier than the time of purchase (as defined below) nor
earlier than the second business day1 after the date on which
the option shall have been exercised nor later than the eighth
business day after the date on which the option shall have been
exercised.  The number of Additional Shares to be sold to each
Underwriter shall be the number which bears the same proportion
to the aggregate number of Additional Shares being purchased as
the number of Firm Shares set forth opposite the name of such
Underwriter on Schedule A hereto bears to the total number of

_________________________
1     As used herein "business day" shall mean a day on which
      the New York Stock Exchange is open for trading.

Firm Shares (subject, in each case, to such adjustment as you
may determine to eliminate fractional shares).

            2.    Payment and Delivery.  Payment of the purchase
price for the Firm Shares shall be made to the Company by wire
transfer of immediately available funds, against delivery of
the certificates for the Firm Shares to you for the respective
accounts of the Underwriters.  Such payment and delivery shall
be made at 10:00 A.M., New York City time, on             ,
1996 (unless another time shall be agreed to by you and the
Company or unless postponed in accordance with the provisions
of Section 8 hereof).  The time at which such payment and
delivery are actually made is hereinafter sometimes called the
"time of purchase".  Certificates for the Firm Shares shall be
delivered to you in definitive form in such names and in such
denominations as you shall specify on the second business day
preceding the time of purchase.  For the purpose of expediting
the checking of the certificates for the Firm Shares by you,
the Company agrees to make such certificates available to you
for such purpose at least one full business day preceding the
time of purchase.

            Payment of the purchase price for the Additional
Shares shall be made at the additional time of purchase in the
same manner as the payment for the Firm Shares.  Certificates
for the Additional Shares shall be delivered to you in
definitive form in such names and in such denominations as you
shall specify on the second business day preceding the
additional time of purchase.  For the purpose of expediting the
checking of the certificates for the Additional Shares by you,
the Company agrees to make such certificates available to you
for such purpose at least one full business day preceding the
additional time of purchase.

            3.    Representations and Warranties of the Company.
The Company represents and warrants to each of the Underwriters
that:

            (a)   each Preliminary Prospectus filed as a part of
      the Registration Statement as originally filed or as part
      of any amendment thereto, or filed pursuant to Rule 424
      under the Act fully complied when so filed in all material
      respects with the Act, and when the Registration Statement
      becomes or became effective and at all times subsequent
      thereto up to the time of purchase, the Registration
      Statement and the Prospectus and any amendments or
      supplements thereto, fully complied and will fully comply
      in all material respects with the provisions of the Act,
      and the Registration Statement at all such times did not
      and will not contain an untrue statement of a material
      fact or omit to state a material fact required to be
      stated therein or necessary to make the statements therein
      not misleading, and the Prospectus at all such times did
      not and will not contain an untrue statement of a material

      fact or omit to state a material fact required to be
      stated therein or necessary to make the statements
      therein, in light of the circumstances under which they
      were made, not misleading; provided, however, that the
      Company makes no warranty or representation with respect
      to any statement contained in the Registration Statement
      or the Prospectus in reliance upon and in conformity with
      information concerning the Underwriters and furnished in
      writing by or on behalf of any Underwriter through you to
      the Company expressly for use in the Registration
      Statement or the Prospectus;

            (b)   as of the date of this Agreement, the Company
      has an authorized capitalization as set forth under the
      heading entitled "Actual" in the section of the
      Registration Statement and the Prospectus entitled
      "Capitalization" and, as of the time of purchase and the
      additional time of purchase, as the case may be, the
      Company shall have an authorized capitalization as set
      forth under the heading entitled "Pro Forma, As Adjusted"
      in the section of the Registration Statement and the
      Prospectus entitled "Capitalization"; all of the issued
      and outstanding shares of capital stock including Common
      Stock of the Company have been duly and validly authorized
      and issued and are fully paid and non-assessable; the
      Company has been duly incorporated and is validly existing
      as a corporation in good standing under the laws of the
      State of Delaware, with full power and authority to own
      its properties and conduct its business as described in
      the Registration Statement and the Prospectus, to execute
      and deliver this Agreement and to issue and sell the
      Shares as herein contemplated; each of the Subsidiaries
      has been duly organized and is validly existing as a
      corporation in good standing under the laws of its
      jurisdiction of its incorporation with full corporate
      power and authority to own its property and conduct the
      business in which it is presently engaged;

            (c)   all of the issued and outstanding shares of the
      capital stock of each of the Company's subsidiaries, all
      of which are listed on Exhibit 21.1 of the Registration
      Statement (the "Subsidiaries"), have been duly and validly
      authorized and issued and are fully paid and
      non-assessable and are owned by the Company free and clear
      of any pledge, lien, encumbrance, security interest,
      preemptive rights or other claim; except as described in
      the Registration Statement and the Prospectus there are no
      outstanding rights subscriptions, warrants, calls, options
      or other agreements of any kind with respect to the
      capital stock of the Company or of the Subsidiaries; the
      Company does not own, directly or indirectly, shares of
      capital stock of or other equity interest in any
      corporation or other entity other than the Subsidiaries;

            (d)   the Company and each of its Subsidiaries are
      duly qualified to do business and in good standing in each
      jurisdiction in which they conduct their respective
      businesses; and the Company and each of its Subsidiaries
      are in compliance in all material respects with the laws,
      orders, rules, regulations and directives issued or
      administered by such jurisdictions;

            (e)   neither the Company nor any of its Subsidiaries
      is in breach of, or in default under (nor has any event
      occurred which with notice, lapse of time, or both would
      constitute a breach of, or default under), its respective
      charter or by-laws or in the performance or observance of
      any obligation, agreement, covenant or condition contained
      in any material indenture, mortgage, deed of trust, bank
      loan or credit agreement or other agreement or instrument
      to which the Company or any of its Subsidiaries is a party
      or by which any of them or their respective properties are
      bound; and the execution, delivery and performance of this
      Agreement, the incurrence of the obligations set forth
      herein and the consummation of the transactions
      contemplated hereby will not conflict with, or result in
      any breach of or constitute a default under (nor
      constitute any event which with notice, lapse of time, or
      both would constitute a breach of, or default under), any
      provisions of the charter or by-laws, of the Company or
      any of its Subsidiaries or under any provision of any
      license, indenture, mortgage, deed of trust, bank loan or
      credit agreement or other agreement or instrument to which
      the Company or any of its Subsidiaries is a party or by
      which any of them or their respective properties may be
      bound or affected, or under any federal, state, local or
      foreign law, regulation or rule or any decree, judgment or
      order applicable to the Company or any of its
      Subsidiaries;

            (f)   neither the Company nor any of its Subsidiaries
      is a party to any litigation, and there is no such
      litigation pending or to the best knowledge of the Company
      or any of its Subsidiaries, threatened or contemplated,
      which seeks to enjoin or restrain the execution, delivery
      and performance of this Agreement, the incurrence of the
      obligations set forth herein or the consummation of the
      transactions contemplated hereby;

            (g)   this Agreement has been duly authorized,
      executed and delivered by the Company and is a legal,
      valid and binding agreement of the Company enforceable in
      accordance with its terms (except as enforcement may be
      limited by applicable bankruptcy, insolvency or similar
      laws affecting the enforcement of creditors' rights
      generally or by legal or equitable limitations on the
      availability of specific remedies); the Board of Directors
      of the Company or a committee thereof duly authorized by

      the Board of Directors of the Company has duly adopted
      resolutions authorizing the issuance and sale of the
      Shares by the Company; the Shares to be sold by the
      Company, when issued and delivered to the Underwriters as
      contemplated hereby, will be duly and validly authorized
      and fully paid and non-assessable, and free and clear of
      any pledge, lien, charge, encumbrance, security interest,
      preemptive right or other claim;

            (h)   the capital stock of the Company, including the
      Shares, conforms in all material respects to the
      description thereof contained in the Registration
      Statement and Prospectus and the certificates for the
      Shares are in due and proper form and the holders of the
      Shares will not be subject to personal liability for the
      debts or other liabilities or obligations of the Company
      by reason of being such holders;

            (i)   no approval, authorization, consent or order of
      or filing with any national, state or local governmental
      or regulatory commission, board, body, authority or agency
      is required in connection with the issuance and sale of
      the Shares as contemplated hereby other than registration
      of the Shares under the Act, clearance of the offering of
      such Shares with the National Association of Securities
      Dealers, Inc. (the "NASD") and any necessary qualification
      under the securities or blue sky laws of the various
      jurisdictions in which the Shares are being offered by the
      Underwriters;

            (j)   except for rights which have been waived
      pursuant to waivers (true and accurate copies of which
      have been provided to the Underwriters prior to the date
      of this Agreement) which are in full force and effect on
      the date of this Agreement, as of the time of purchase and
      as of the additional time of purchase, no person has the
      right, contractual or otherwise, to cause the Company to
      issue to it, or register pursuant to the Act, any shares
      of capital stock of the Company upon the issue and sale of
      the Shares to the Underwriters hereunder; no person has
      preemptive rights, rights of first refusal or other rights
      to purchase any of the Shares; no person has any right to
      have securities included in or registered pursuant to the
      Registration Statement;

            (k)   Ernst & Young LLP, whose reports on the
      consolidated financial statements of the Company and its
      Subsidiaries are filed with the Commission as part of the
      Registration Statement and Prospectus, are independent
      public accountants as required by the Act;

            (l)   each of the Company and its Subsidiaries has all
      necessary licenses, authorizations, consents and approvals
      and has made all necessary filings required under any

      federal, state, local or foreign law, regulation or rule,
      and has obtained all necessary authorizations, consents
      and approvals from other persons, in order to conduct its
      respective business; neither the Company nor any of its
      Subsidiaries is in violation of, or in default under, any
      such license, authorization, consent or approval or any
      federal, state, local or foreign law, regulation or rule
      or any decree, order or judgment applicable to the Company
      or any of its Subsidiaries the effect of which,
      individually or in the aggregate, could have a material
      adverse effect on the properties, assets, liabilities,
      prospects, results of operations, business or condition
      (financial or otherwise) of the Company and its
      Subsidiaries taken as a whole (a "Material Adverse
      Effect");

            (m)   all legal or governmental proceedings, contracts
      or documents of a character required to be described in
      the Registration Statement or the Prospectus or to be
      filed as an exhibit to the Registration Statement have
      been so described or filed as required;

            (n)   there are no actions, suits or proceedings
      pending or, to the best knowledge of the Company,
      threatened against the Company or any of its Subsidiaries
      or any of their respective properties or affiliates, at
      law or in equity, or before or by any federal, state,
      local or foreign governmental or regulatory commission,
      board, body, authority or agency which, individually or in
      the aggregate, could result in a judgment, decree or order
      having a Material Adverse Effect;

            (o)   the audited financial statements included in the
      Registration Statement and the Prospectus present fairly
      the consolidated financial position of the Company and its
      Subsidiaries as of the dates indicated and the
      consolidated results of operations and changes in
      financial position of the Company and its Subsidiaries for
      the periods specified; such financial statements have been
      prepared in conformity with generally accepted accounting
      principles applied on a consistent basis during the
      periods involved [additional representation to be inserted
      re: pro formas, if required];

            (p)   subsequent to the respective dates as of which
      information is given in the Registration Statement and
      Prospectus, and except as may be otherwise stated in the
      Registration Statement or Prospectus, there has not been
      (A) any material and unfavorable change, financial or
      otherwise, in the business, properties, assets, prospects,
      regulatory environment, results of operations or condition
      (financial or otherwise), present or prospective, of the
      Company and its Subsidiaries taken as a whole, (B) any
      transaction, which is material to the business,

      properties, assets, prospects, regulatory environment,
      results of operations or condition (financial or
      otherwise), present or prospective, of the Company and its
      Subsidiaries taken as a whole, contemplated or entered
      into by the Company or any of its Subsidiaries or (C) any
      obligation, contingent or otherwise, directly or
      indirectly incurred by the Company or any of its
      Subsidiaries which is material to the business,
      properties, assets, prospects, regulatory environment,
      results of operations or condition (financial or
      otherwise), present or prospective, of the Company and its
      Subsidiaries taken as a whole;

            (q)   the Company and its Subsidiaries have good title
      to all properties and assets owned or leased by them, in
      each case, except as set forth in the Registration
      Statement and the Prospectus, free and clear of all
      pledges, liens, encumbrances, security interests, charges,
      mortgages and defects of title other than liens for taxes
      which taxes are not yet due and payable;

            (r)   each issuance of securities referred to in Item
      15 of the Registration Statement (i) was effected in
      reliance upon a valid exemption from the registration
      requirements of the Act and (ii) was effected in
      compliance with the securities or blue sky laws of each
      jurisdiction in which such securities were offered or
      sold;

            (s)   except for possible violations of which the
      Company is unaware which, individually or in the
      aggregate, would not have a Material Adverse Effect, the
      business, operations and facilities of the Company and
      each of its Subsidiaries have been and are being conducted
      in compliance with all applicable federal, state, local,
      and foreign laws, ordinances, rules, regulations,
      licenses, permits, approvals, plans, authorizations,
      orders, judgments, directives, decrees, requirements and
      common law relating to occupational safety and health, or
      pollution, or protection of health or the environment as
      now or previously in effect (including, without
      limitation, those relating to, regulating, or imposing
      liability or standards of conduct concerning emissions,
      discharges, releases or threatened releases of pollutants,
      contaminants or hazardous, dangerous, or toxic substances,
      materials constituents or wastes or toxins, viruses,
      infectious disease agents, or pathogens, into ambient air,
      surface water, groundwater or land, or relating to the
      generation, manufacture, processing, distribution, use,
      treatment, storage, disposal, transport or handling of
      chemical substances, pollutants, contaminants or hazardous
      or toxic substances, materials or wastes, including
      medical waste, whether solid, gaseous or liquid in nature)
      or otherwise relating to remediating real property or

      concerning protection of the outdoor or indoor environment
      ("Environmental Laws); and neither the Company nor any of
      its Subsidiaries has received any notice which is pending
      from a governmental instrumentality or any third party
      alleging any violation thereof or liability thereunder
      (including, without limitation, liability for costs of
      investigating or remediating sites containing hazardous
      substances and/or damages to natural resources) and all
      violations for which the Company or any of its
      Subsidiaries has previously received notice have been
      remedied;

            (t)   there is no claim pending or, to the best
      knowledge of the Company or any of its Subsidiaries,
      threatened or contemplated under any Environmental Laws
      against the Company or any of its Subsidiaries which, if
      adversely determined, individually or in the aggregate,
      would have a Material Adverse Effect; there are no past or
      present actions or conditions, including, without
      limitation, the release of any hazardous substance or
      waste regulated under any Environmental Law that are
      likely to form the basis of any such claim against the
      Company or any of its Subsidiaries which, if adversely
      determined, individually or in the aggregate would have a
      Material Adverse Effect;

            (u)   the Company and each of its Subsidiaries have
      filed all federal or state income and franchise tax
      returns required to be filed and have paid all taxes shown
      thereon as due, and there is no material tax deficiency
      which has been or might be asserted against the Company or
      any of its Subsidiaries; all material tax liabilities of
      the Company and its Subsidiaries are adequately provided
      for on the books of the Company and its Subsidiaries;

            (v)   neither the Company nor any of its affiliates
      has incurred any liability for any finder's fees or
      similar payments in connection with the transactions
      herein contemplated;

            (w)   the Company and each of its Subsidiaries has in
      effect, with financially sound and reputable insurers,
      insurance with respect to its business and properties and
      the business and properties of its Subsidiaries against
      loss or damage of the kind customarily insured against by
      corporations of established reputation engaged in the same
      or similar businesses and similarly situated, of such type
      and in such amounts as are customarily carried under
      similar circumstances by such other corporations;

            (x)   the Company owns each of the patents described
      in the Registration Statement and the Prospectus as owned
      by the Company (the "Patents") and, except as disclosed in
      the Registration Statement and the Prospectus, owns or

      possesses adequate and enforceable rights to use all other
      patents, patent applications, trademarks, trademark
      applications, service marks, copyrights, copywrite
      applications, licenses and other similar rights
      (collectively with the Patents, "Intangibles") necessary
      for the conduct of the businesses of the Company and its
      Subsidiaries as now being conducted and as described in
      the Registration Statement and the Prospectus.  Neither
      the Company nor any of its Subsidiaries has infringed, is
      infringing, or has received any notice of infringement of
      any Intangible of any other person and neither the Company
      nor any of its Subsidiaries knows of any basis therefor;

            (y)   the Company has obtained the agreement of each
      of its directors and officers and certain of its
      stockholders designated by you not to 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 exchangeable for Common
      Stock or warrants or other rights to purchase Common Stock
      for a period of 180 days after the date of this Agreement;
      and

            (z)   none of the Company or its Subsidiaries is, or
      after application of the proceeds as described under the
      caption "Use of Proceeds" in the Registration Statement
      and the Prospectus, will be an "investment company" or an
      affiliated person of, or "promoter" or "principal
      underwriter" for, an "investment company," as such terms
      are defined in the Investment Company Act of 1940, as
      amended, and the rules and regulations thereunder.

            4.    Certain Covenants of the Company.  The Company
hereby agrees:

            (a)   to furnish such information as may be required
      and otherwise to cooperate in qualifying the Shares for
      offering and sale under the securities or blue sky laws of
      such states as you may designate and to maintain such
      qualifications in effect so long as required for the
      distribution of the Shares, provided that the Company
      shall not be required to qualify as a foreign corporation
      or to consent to the service of process under the laws of
      any such state (except service of process with respect to
      the offering and sale of the Shares); and to promptly
      advise you of the receipt by the Company of any
      notification with respect to the suspension of the
      qualification of the Shares for sale in any jurisdiction
      or the initiation or threatening of any proceeding for
      such purpose; and to make every reasonable effort to
      obtain the withdrawal of any order or suspension as soon
      as practicable;

            (b)   to make available to you in New York City, as
      soon as practicable after the Registration Statement
      becomes effective, and thereafter from time to time to
      furnish to the Underwriters, as many copies of the
      Prospectus (or of the Prospectus as amended or
      supplemented if the Company shall have made any amendments
      or supplements thereto after the effective date of the
      Registration Statement) as the Underwriters may reasonably
      request for the purposes contemplated by the Act;

            (c)   to advise you promptly and (if requested by you)
      to confirm such advice in writing, (i) when the
      Registration Statement has become effective and when any
      post-effective amendment thereto becomes effective and
      (ii) if Rule 430A under the Act is used, when the
      Prospectus is filed with the Commission pursuant to Rule
      424(b) under the Act (which the Company agrees to file in
      a timely manner under such Rules);

            (d)   to advise you promptly, confirming such advice
      in writing, of any request by the Commission for
      amendments or supplements to the Registration Statement or
      Prospectus or for additional information with respect
      thereto, or of notice of institution of proceedings for,
      or the entry of a stop order suspending the effectiveness
      of the Registration Statement and, if the Commission
      should enter a stop order suspending the effectiveness of
      the Registration Statement, to make every reasonable
      effort to obtain the lifting or removal of such order as
      soon as possible; to advise you promptly of any proposal
      to amend or supplement the Registration Statement or
      Prospectus and to file no such amendment or supplement to
      which you shall object in writing;

            (e)   to furnish to you and, upon request, to each of
      the other Underwriters for a period of five years from the
      date of this Agreement (i) copies of any reports or other
      communications which the Company shall send to its
      stockholders or shall from time to time publish or
      publicly disseminate, (ii) copies of all annual, quarterly
      and current reports filed with the Commission on Forms
      10-K, 10-Q and 8-K, or such other similar form as may be
      designated by the Commission, and (iii) such other
      information as you may reasonably request regarding the
      Company or its Subsidiaries;

            (f)   to advise the Underwriters promptly of the
      happening of any event known to the Company within the
      time during which a prospectus relating to the Shares is
      required to be delivered under the Act which, in the
      judgment of the Company, would require the making of any
      change in the Prospectus then being used so that the
      Prospectus would not include an untrue statement of
      material fact or omit to state a material fact necessary

      to make the statements therein, in the light of the
      circumstances under which they are made, not misleading,
      and, during such time, to prepare and furnish, at the
      Company's expense, to the Underwriters promptly such
      amendments or supplements to such Prospectus as may be
      necessary to reflect any such change and to furnish you a
      copy of such proposed amendment or supplement before
      filing any such amendment or supplement with the
      Commission;

            (g)   to make generally available to its security
      holders, and to deliver to you, an earnings statement of
      the Company (which will satisfy the provisions of Section
      11(a) of the Act) covering a period of twelve months
      beginning after the effective date of the Registration
      Statement but not later than           , 1996, as soon as
      is reasonably practicable after the termination of such
      twelve-month period;

            (h)   to furnish to you four signed copies of the
      Registration Statement, as initially filed with the
      Commission, and of all amendments thereto (including all
      exhibits thereto) and sufficient conformed copies of the
      foregoing (other than exhibits) for distribution of a copy
      to each of the other Underwriters;

            (i)   to furnish to you as early as practicable prior
      to the time of purchase and the additional time of
      purchase, as the case may be, but not later than two
      business days prior thereto, a copy of the latest
      available unaudited interim consolidated financial
      statements, if any, of the Company and its Subsidiaries
      which have been read by the Company's independent
      certified public accountants, as stated in their letter to
      be furnished pursuant to Section 6(d) of this Agreement;

            (j)   to apply the net proceeds from the sale of the
      Shares in the manner set forth under the caption "Use of
      Proceeds" in the Registration Statement and the
      Prospectus;

            (k)   whether or not the transactions contemplated by
      this Agreement are consummated or this Agreement otherwise
      becomes effective or is terminated, to pay all expenses,
      fees and taxes (other than any transfer taxes and fees and
      disbursements of counsel for the Underwriters except as
      set forth under Section 5 hereof and clauses (iii) and
      (iv) below) in connection with (i) the preparation and
      filing of the Registration Statement, each Preliminary
      Prospectus, the Prospectus, and any amendments or
      supplements thereto, and the printing and furnishing of
      copies of each thereof to the Underwriters and to dealers
      (including costs of mailing and shipment), (ii) the
      preparation, issuance, sale and delivery of the Shares,

      (iii) the word processing and/or printing of this
      Agreement, any Agreement Among Underwriters, any dealer
      agreements, any Statements of Information and Powers of
      Attorney and the reproduction and/or printing and
      furnishing of copies of each thereof to the Underwriters
      and to dealers (including costs of mailing and shipment),
      (iv) the qualification of the Shares for offering and sale
      under state laws and the determination of their
      eligibility for investment under state law as aforesaid
      (including the legal fees and filing fees and other
      disbursements of counsel for the Underwriters) and the
      printing and furnishing of copies of any blue sky surveys
      or legal investment surveys to the Underwriters and to
      dealers, (v) any listing of the Shares on any securities
      exchange or qualification of the Shares for quotation on
      NASDAQ National Market and any registration thereof under
      the Securities Exchange Act of 1934 (the "Exchange Act"),
      (vi) any filing for review of the public offering of the
      Shares by the NASD and (vii) the performance of the
      Company's other obligations hereunder;

            (l)   to furnish to you, before filing with the
      Commission subsequent to the effective date of the
      Registration Statement and during the period referred to
      in paragraph (f) above, a copy of any document proposed to
      be filed pursuant to Sections 13, 14 or 15(d) of the
      Exchange Act;

            (m)   not to 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 exchangeable for Common Stock or warrants or other
      rights to purchase Common Stock or permit the registration
      under the Act of any shares of Common Stock, except for
      the registration of the Shares and the sales to the
      Underwriters pursuant to this Agreement and except for
      issuances of Common Stock upon the exercise of outstanding
      options, warrants and debentures, for a period of 180 days
      after the date hereof, without the prior written consent
      of Dillon, Read & Co. Inc. acting on behalf of the
      Managing Underwriters;

            (n)   to use its best efforts to cause the Shares to
      be listed on the NASDAQ National Market; and

            (o)   not to take, directly or indirectly, any action
      designed to cause or to result in, or that might
      constitute the stabilization or manipulation of the Common
      Stock to facilitate the sale or resale of the Shares.

            5.    Reimbursement of Underwriters' Expenses.  If the
Shares are not delivered for any reason other than the
termination of this Agreement pursuant to the first two
paragraphs of Section 8 hereof or the default by one or more of

the Underwriters in its or their respective obligations
hereunder, the Company shall reimburse the Underwriters for all
of their out-of-pocket expenses, including the fees and
disbursements of their counsel.

            6.    Conditions of Underwriters' Obligations.  The
several obligations of the Underwriters hereunder are subject
to the accuracy of the representations and warranties on the
part of the Company on the date hereof and at the time of
purchase (and the several obligations of the Underwriters at
the additional time of purchase are subject to the accuracy of
the representations and warranties on the part of the Company
on the date hereof and at the time of purchase (unless
previously waived) and at the additional time of purchase, as
the case may be), the performance by the Company of its
obligations hereunder and to the following conditions:

            (a)   The Company shall furnish to you at the time of
      purchase and at the additional time of purchase, as the
      case may be, an opinion of Johnson & Colmar, counsel for
      the Company, addressed to the Underwriters, and dated the
      time of purchase or the additional time of purchase, as
      the case may be, with reproduced copies for each of the
      other Underwriters and in form satisfactory to Cahill
      Gordon & Reindel, counsel for the Underwriters, stating
      that:

                  (i)  the Company has been duly incorporated and
            is validly existing as a corporation in good standing
            under the laws of the State of Delaware, with full
            corporate power and authority to own its properties
            and conduct its business as described in the
            Registration Statement and the Prospectus, to execute
            and deliver this Agreement and to issue, sell and
            deliver the Shares as herein contemplated;

                 (ii)  each of the Subsidiaries has been duly
            incorporated and is validly existing as a corporation
            in good standing under the laws of its respective
            jurisdiction of incorporation with full corporate
            power and authority to own its respective properties
            and to conduct its respective business;

                (iii)  the Company and its Subsidiaries are duly
            qualified to do business in and are in good standing
            in, each jurisdiction in which they conduct their
            respective businesses, own or lease real property or
            maintain an office and in which such qualification is
            necessary;

                 (iv)  this Agreement has been duly authorized,
            executed and delivered by the Company; the Board of
            Directors of the Company or a committee thereof duly
            authorized by the Board of Directors of the Company

            has duly adopted resolutions authorizing the issuance
            and sale of the Shares by the Company;

                  (v)  the Shares, when issued and delivered to
            and paid for by the Underwriters in accordance with
            the terms hereof, will be duly and validly authorized
            and issued and will be fully paid and non-assessable;

                 (vi)  the Company's authorized capital stock
            consists of 30,000,000 shares of Common Stock, par
            value $.01 per share, as set forth in the
            Registration Statement and the Prospectus; the
            outstanding shares of capital stock of the Company
            have been duly and validly authorized and issued and
            are fully paid, non-assessable and free of statutory
            and contractual preemptive rights; the Shares when
            issued will be free of statutory and contractual
            preemptive rights; the certificates for the Shares
            are in due and proper form and the holders of the
            Shares will not be subject to personal liability for
            the debts or other liabilities or obligations of the
            Company by reason of being such holders;

                (vii)  all of the issued and outstanding shares of
            the capital stock of each of the Company's
            Subsidiaries have been duly and validly authorized
            and issued and are fully paid and non-assessable and
            are owned by the Company free and clear of any
            pledge, lien, encumbrance, security interest,
            preemptive rights or other claim known to such
            counsel; to the best of such counsel's knowledge,
            except as described in the Registration Statement and
            the Prospectus there are no outstanding rights
            subscriptions, warrants, calls, options or other
            agreements of any kind with respect to the capital
            stock of the Company or its Subsidiaries; to the best
            of such counsel's knowledge, the Company does not
            own, directly or indirectly, shares of capital stock
            of or equity interest in any corporation or other
            entity other than its Subsidiaries;

               (viii)  the capital stock of the Company, including
            the Shares, conforms in all material respects to the
            description thereof contained in the Registration
            Statement and Prospectus;

                 (ix)  the Registration Statement and the
            Prospectus (except as to the financial statements and
            schedules and other financial and statistical data
            contained or incorporated by reference therein, as to
            which such counsel need express no opinion) comply as
            to form in all material respects with the
            requirements of the Act;

                  (x)  the Registration Statement has become
            effective under the Act and, to the best of such
            counsel's knowledge, no stop order proceedings with
            respect thereto are pending or threatened under the
            Act;

                 (xi)  no approval, authorization, consent or
            order of or filing with any national, state or local
            governmental or regulatory commission, board, body,
            authority or agency is required in connection with
            the issuance and sale of the Shares as contemplated
            hereby other than registration of the Shares under
            the Act and the clearance of the offering of such
            shares with the NASD (except such counsel need
            express no opinion as to any necessary qualification
            under the state securities or blue sky laws of the
            various jurisdictions in which the Shares are being
            offered by the Underwriters);

                (xii)  the execution, delivery and performance of
            this Agreement by the Company and the consummation by
            the Company of the transactions contemplated hereby
            do not and will not conflict with, or result in any
            breach of, or constitute a default under (nor
            constitute any event which with notice, lapse of
            time, or both, would constitute a breach of or
            default under), any provisions of the charter or
            by-laws of the Company or any of its Subsidiaries or
            under any provision of any license, indenture,
            mortgage, deed of trust, bank loan, credit agreement
            or other agreement or instrument known to such
            counsel to which the Company or any of its
            Subsidiaries is a party or by which any of them or
            their respective properties may be bound or affected,
            or under any law, regulation or rule applicable to
            the Company or any of its Subsidiaries or under any
            decree, judgment or order known to such counsel
            applicable to the Company or any of its Subsidiaries;

               (xiii)  to the best of such counsel's knowledge,
            neither the Company nor any of its Subsidiaries is a
            party to any litigation, and there is no such
            litigation pending or threatened, which seeks to
            enjoin or restrain the execution, delivery and
            performance of this Agreement, the incurrence of the
            obligations set forth herein or the consummation of
            the transactions contemplated hereby;

                (xiv)  to the best of such counsel's knowledge,
            neither the Company nor any of its Subsidiaries is in
            breach of, or in default under (nor has any event
            occurred which with notice, lapse of time, or both
            would constitute a breach of, or default under), any
            license, indenture, mortgage, deed of trust, bank

            loan or any other agreement or instrument known to
            such counsel to which the Company or any of its
            Subsidiaries is a party or by which any of them or
            their respective properties may be bound or affected
            or under any law, regulation or rule applicable to
            the Company or any of its Subsidiaries or under any
            decree, judgment or order known to such counsel
            applicable to the Company or any of its Subsidiaries;

                 (xv)  to the best of such counsel's knowledge,
            there are no contracts, licenses, agreements, leases
            or documents of a character which are required to be
            filed as exhibits to the Registration Statement or to
            be summarized or described in the Prospectus which
            have not been so filed, summarized or described;

                (xvi)  to the best of such counsel's knowledge,
            there are no actions, suits or proceedings pending or
            threatened against the Company or any of its
            Subsidiaries or any of their respective properties,
            at law or in equity or before or by any commission,
            board, body, authority or agency which are required
            to be described in the Registration Statement and the
            Prospectus but are not so described;

               (xvii)  each issuance of securities referred to in
            Item 15 of the Registration Statement (i) was
            effected in reliance upon a valid exemption from the
            registration requirements of the Act and (ii) was
            effected in compliance with the securities or blue
            sky laws of each jurisdiction in which such
            securities were offered and sold;

              (xviii)  none of the Company or its Subsidiaries is,
            or after application of the proceeds as described
            under the caption "Use of Proceeds" in the
            Registration Statement and the Prospectus, will be an
            "investment company" or an affiliated person of, or
            "promoter" or "principal underwriter" for, an
            "investment company," as such terms are defined in
            the Investment Company Act of 1940, as amended, and
            the rules and regulations thereunder; and

                (xix)  such counsel have participated in
            conferences with officers and other representatives
            of the Company, representatives of the independent
            public accountants of the Company and representatives
            of the Underwriters at which the contents of the
            Registration Statement and Prospectus were discussed
            and, although such counsel is not passing upon and
            does not assume responsibility for the accuracy,
            completeness or fairness of the statements contained
            in the Registration Statement or Prospectus (except
            as and to the extent stated in subparagraphs (vi) and

            (viii) above) and has not made any independent
            verification or check of such statements (except for
            purposes of subparagraphs (vi) and (viii) above), on
            the basis of the foregoing (relying as to materiality
            to a large extent upon the opinions of officers and
            other representatives of the Company) nothing has
            come to the attention of such counsel that causes
            them to believe that the Registration Statement or
            any amendment thereto at the time such Registration
            Statement or amendment became effective contained an
            untrue statement of a material fact or omitted to
            state a material fact required to be stated therein
            or necessary to make the statements therein not
            misleading, or that the Prospectus or any supplement
            thereto at the date of such Prospectus or such
            supplement, and at all times up to and including the
            time of purchase or additional time of purchase, as
            the case may be, contained an untrue statement of a
            material fact or omitted to state a material fact
            required to be stated therein or necessary to make
            the statements therein, in light of the circumstances
            under which they were made, not misleading (it being
            understood that such counsel need express no belief
            with respect to the financial statements and
            schedules and other financial and statistical data
            included in the Registration Statement or
            Prospectus).

            (b)   The Company shall furnish to you at the time of
      purchase and at the additional time of purchase, as the
      case may be, an opinion of Brinks Hofer Gilson & Lione,
      patent counsel for the Company, addressed to the
      Underwriters, and dated the time of purchase or the
      additional time of purchase, as the case may be, with
      reproduced copies for each of the other Underwriters and
      in form satisfactory to Cahill Gordon & Reindel, counsel
      for the Underwriters, stating that:

                  (i)  the statements contained in the
            Registration Statement and the Prospectus, insofar as
            they relate to the Company's and its Subsidiaries'
            patent position, have been reviewed and approved by
            such counsel, are accurate in all material respects
            and fairly present the information set forth therein;

                 (ii)  to the best of such counsel's knowledge,
            except as disclosed in the Registration Statement and
            the Prospectus, there are no pending or threatened
            legal or governmental proceedings relating to
            patents, trademarks, service marks or proprietary
            information owned or used by the Company or its
            Subsidiaries to which the Company or its Subsidiaries
            is a party or of which any property of the Company or
            its Subsidiaries is the subject;

                (iii)  to the best of such counsel's knowledge,
            neither the Company nor any of its Subsidiaries is
            currently in breach of, or in default under, any
            agreement or instrument of which such counsel has
            knowledge to which the Company or any of its
            Subsidiaries is a party or by which any of them or
            any of their property may be bound or affected;

                 (iv)  such counsel has no reason to believe that
            either the Registration Statement or the Prospectus
            or any amendment thereof or supplement thereto
            contains any untrue statement of a material fact or
            omits to state any material fact required to be
            stated therein or necessary to make the statements
            therein not misleading;

                  (v)  the Company owns of record all right, title
            and interest in and to the patents and patent
            applications described in the Registration Statement
            and the Prospectus free and clear of any adverse
            claim known by such counsel of any third party; to
            the best of such counsel's knowledge, the Company has
            not infringed, is not infringing and has not received
            any notice of infringement of any patents of any
            other person which individually or in the aggregate
            could have a Material Adverse Effect;

                 (vi)  to the best of such counsel's knowledge,
            there is no litigation or governmental or other
            proceeding relating to the Patents, before any court
            or before or by any public body or board (other than
            the United States Patent and Trademark Office)
            pending to which the Company or any of its
            Subsidiaries is a party or threatened against the
            Company or any of its Subsidiaries which individually
            or in the aggregate could have a Material Adverse
            Effect; to the best of such counsel's knowledge, the
            Company has not given notice to any third party of
            any claim of infringement of its patents; and

                (vii)  the applications and other documents filed
            by the Company or any of its Subsidiaries with the
            United States Patent and Trademark Office have been
            duly and adequately filed and to the best of such
            counsel's knowledge, in connection with such
            applications, no fraud on such office was practiced
            or attempted and the duty of disclosure required by
            such office was not violated through bad faith or
            gross negligence, and except as specifically
            described in the Registration Statement and the
            Prospectus such counsel knows of no infringement or
            conflict with the existing enforceable rights of
            others (or of claims thereof) with respect to the
            products or processes covered by such applications or

            documents or utilized by the Company or any of its
            Subsidiaries in their respective businesses which,
            individually or in the aggregate, if the subject of
            an unfavorable decision, ruling or finding, could
            have a Material Adverse Effect.

            (c)   The Company shall furnish to you at the time of
      purchase and at the additional time of purchase, as the
      case may be, an opinion of local counsel to the Company,
      in each of the jurisdictions identified on Schedule B
      hereto, addressed to the Underwriters, and dated the time
      of purchase or the additional time of purchase, as the
      case may be, with reproduced copies for each of the other
      Underwriters and in form satisfactory to Cahill Gordon &
      Reindel, counsel for the Underwriters, stating that:

                  (i)  the business, operations and facilities of
            the Company and each of its Subsidiaries have been
            and are being conducted in compliance with all
            applicable federal, state, local, and foreign laws,
            ordinances, rules, regulations, licenses, permits,
            approvals, plans, authorizations, orders, judgments,
            directives, decrees, requirements and common law
            relating to occupational safety and health, or
            pollution, or protection of health or the environment
            as now or previously in effect (including, without
            limitation, those relating to, regulating, or
            imposing liability or standards of conduct concerning
            emissions, discharges, releases or threatened
            releases of pollutants, contaminants or hazardous,
            dangerous, or toxic substances, materials
            constituents or wastes or toxins, viruses, infectious
            disease agents, or pathogens, into ambient air,
            surface water, groundwater or land, or relating to
            the generation, manufacture, processing,
            distribution, use, treatment, storage, disposal,
            transport or handling of chemical substances,
            pollutants, contaminants or hazardous or toxic
            substances, materials or wastes, including medical
            waste, whether solid, gaseous or liquid in nature) or
            otherwise relating to remediating real property or
            concerning protection of the outdoor or indoor
            environment ("Environmental Laws"); and to the best
            knowledge of such counsel, neither the Company nor
            any of its Subsidiaries has received any notice which
            is pending from a governmental instrumentality or any
            third party alleging any violation thereof or
            liability thereunder (including, without limitation,
            liability for costs of investigating or remediating
            sites containing hazardous substances and/or damages
            to natural resources) and all violations for which
            the Company or any of its Subsidiaries has previously
            received notice have been remedied;

                 (ii)  to the best knowledge of such counsel,
            there is no claim pending, threatened or contemplated
            under any Environmental Laws against the Company or
            any of its Subsidiaries which, if adversely
            determined, individually or in the aggregate, would
            have a Material Adverse Effect; there are no past or
            present actions or conditions including, without
            limitation, the release of any hazardous substance or
            waste regulated under any Environmental Law that are
            likely to form the basis of any such claim against
            the Company or any of its Subsidiaries which, if
            adversely determined, individually or in the
            aggregate would have a Material Adverse Effect; and

                (iii)  the Statements contained in the
            Registration Statement and the Prospectus relating to
            Environmental Laws have been reviewed and approved by
            such counsel, are accurate in all material respects
            and fairly present the information set forth therein.

            (d)   You shall have received from Ernst & Young LLP,
      letters dated, respectively, the date of this Agreement
      and the time of purchase and additional time of purchase,
      as the case may be, and addressed to the Underwriters
      (with reproduced copies for each of the Underwriters) in
      the forms heretofore approved by the Managing
      Underwriters.

            (e)   You shall have received at the time of purchase
      and at the additional time of purchase, as the case may
      be, the favorable opinion of Cahill Gordon & Reindel,
      counsel for the Underwriters, dated the time of purchase
      or the additional time of purchase, as the case may be, in
      form and substance reasonably satisfactory to you.

            (f)   No amendment or supplement to the Registration
      Statement or Prospectus shall be filed prior to the time
      the Registration Statement becomes effective to which you
      object in writing.

            (g)   The Registration Statement shall become
      effective, or if Rule 430A under the Act is used, the
      Prospectus shall have been filed with the Commission
      pursuant to Rule 424(b) under the Act, at or before 5:00
      P.M., New York City time, on the date of this Agreement,
      unless a later time (but not later than 5:00 P.M., New
      York City time, on the second full business day after the
      date of this Agreement) shall be agreed to by the Company
      and you in writing or by telephone, confirmed in writing;
      provided, however, that the Company and you and any group
      of Underwriters, including you, who have agreed hereunder
      to purchase in the aggregate at least 50% of the Firm
      Shares may from time to time agree on a later date.

            (h)   Prior to the time of purchase or the additional
      time of purchase, as the case may be, (i) no stop order
      with respect to the effectiveness of the Registration
      Statement shall have been issued under the Act or
      proceedings initiated under Section 8(d) or 8(e) of the
      Act; (ii) the Registration Statement and all amendments
      thereto, or modifications thereof, if any, shall not
      contain an untrue statement of a material fact or omit to
      state a material fact required to be stated therein or
      necessary to make the statements therein not misleading;
      and (iii) the Prospectus and all amendments or supplements
      thereto, or modifications thereof, if any, shall not
      contain an untrue statement of a material fact or omit to
      state a material fact required to be stated therein or
      necessary to make the statements therein, in the light of
      the circumstances under which they are made, not
      misleading.

            (i)   Between the time of execution of this Agreement
      and the time of purchase or the additional time of
      purchase, as the case may be, (i) no material and
      unfavorable change, financial or otherwise (other than as
      referred to in the Registration Statement and Prospectus),
      in the properties, assets, liabilities, results of
      operations, business, condition (financial or otherwise)
      or prospects of the Company and its Subsidiaries taken as
      a whole shall occur or become known and (ii) no
      transaction which is material and unfavorable to the
      Company shall have been entered into by the Company or any
      of its Subsidiaries.

            (j)   The Company will, at the time of purchase or
      additional time of purchase, as the case may be, deliver
      to you a certificate of its chief executive officer and
      chief financial officer to the effect that the
      representations and warranties of the Company as set forth
      in this Agreement and the conditions set forth in
      paragraph (h) and paragraph (i) have been met and that
      they are true and correct as of each such date.

            (k)   You shall have received signed letters from each
      of the directors and officers of the Company and certain
      stockholders of the Company designated by you to the
      effect that such persons shall not sell, contract to sell,
      grant any option to sell or otherwise dispose of, directly
      or indirectly, any shares of Common Stock of the Company
      or securities convertible into or exchangeable for Common
      Stock or warrants or other rights to purchase Common Stock
      for a period of 180 days after the date of this Agreement
      without the prior written consent of Dillon, Read & Co.
      Inc. acting on behalf of the Managing Underwriters.

            (l)   The Company shall have furnished to you such
      other documents and certificates as to the accuracy and

      completeness of any statement in the Registration
      Statement and the Prospectus as of the time of purchase
      and the additional time of purchase, as the case may be,
      as you may reasonably request.

            (m)   The Company shall have performed such of its
      obligations under this Agreement as are to be performed by
      the terms hereof at or before the time of purchase and at
      or before the additional time of purchase, as the case may
      be.

            (n)   The Company shall have taken all actions
      necessary to effect a reverse stock split so that each
      5.3089 shares of Class A common stock of the Company or
      Class B common stock of the Company become one share of
      Class A common stock of the Company or Class B common
      stock of the Company, as the case may be, and to
      redesignate all of the Company's outstanding shares of
      Class A common stock of the Company and Class B common
      stock of the Company as Common Stock.

            (o)   The Shares shall have been approved for listing
      on the NASDAQ National Market, subject only to notice of
      issuance at or prior to the time of purchase.

            7.    Effective Date of Agreement; Termination.  This
Agreement shall become effective (i) if Rule 430A under the Act
is not used, when you shall have received notification of the
effectiveness of the Registration Statement, or (ii) if Rule
430A under the Act is used, when the parties hereto have
executed and delivered this Agreement.

            The obligations of the several Underwriters hereunder
shall be subject to termination in the absolute discretion of
you or in the absolute discretion of Dillon, Read & Co. Inc.,
acting on your behalf, or any group of Underwriters (which may
include you) which has agreed to purchase in the aggregate at
least 50% of the Firm Shares, if, at any time prior to the time
of purchase or, with respect to the purchase of any Additional
Shares, the additional time of purchase, as the case may be,
trading in securities on the New York Stock Exchange shall have
been suspended or minimum prices shall have been established on
the New York Stock Exchange, or if a banking moratorium shall
have been declared either by the United States or New York
State authorities, or if the United States shall have declared
war in accordance with its constitutional processes or there
shall have occurred any material outbreak or escalation of
hostilities or other national or international calamity or
crisis of such magnitude in its effect on the financial markets
of the United States as, in your judgment or in the judgment of
Dillon, Read & Co. Inc., acting on your behalf, or in the
judgment of such group of Underwriters, to make it
impracticable to market the Shares.

            If you or Dillon, Read & Co. Inc., acting on your
behalf, or any group of Underwriters elects to terminate this
agreement as provided in this Section 7, the Company and each
other Underwriter shall be notified promptly by letter or
telegram.

            If the sale to the Underwriters of the Shares, as
contemplated by this Agreement, is not carried out by the
Underwriters for any reason permitted under this Agreement or
if such sale is not carried out because the Company shall be
unable to comply with any of the terms of this Agreement, the
Company shall not be under any obligation or liability under
this Agreement (except to the extent provided in Sections 4(k),
5 and 9 hereof), and the Underwriters shall be under no
obligation or liability to the Company under this Agreement
(except to the extent provided in Section 9 hereof) or to one
another hereunder.

            8.    Increase in Underwriters' Commitments.  If any
Underwriter shall default in its obligation to take up and pay
for the Firm Shares to be purchased by it hereunder and if the
number of Firm Shares which all Underwriters so defaulting
shall have agreed but failed to take up and pay for does not
exceed 10% of the total number of Firm Shares, the non-
defaulting Underwriters shall take up and pay for (in addition
to the aggregate principal amount of Firm Shares they are
obligated to purchase pursuant to Section 1 hereof) the number
of Firm Shares agreed to be purchased by all such defaulting
Underwriters, as hereinafter provided.  Such Shares shall be
taken up and paid for by such non-defaulting Underwriter or
Underwriters in such amount or amounts as you may designate
with the consent of each Underwriter so designated or, in the
event no such designation is made, such Shares shall be taken
up and paid for by all non-defaulting Underwriters pro rata in
proportion to the aggregate number of Firm Shares set opposite
the names of such non-defaulting Underwriters in Schedule A.

            Without relieving any defaulting Underwriter from its
obligations hereunder, the Company agrees with the non-
defaulting Underwriters that it will not sell any Firm Shares
hereunder unless all of the Firm Shares are purchased by the
Underwriters (or by substituted Underwriters selected by you
with the approval of the Company or selected by the Company
with your approval).

            If a new Underwriter or Underwriters are substituted
by the Underwriters or by the Company for a defaulting
Underwriter or Underwriters in accordance with the foregoing
provision, the Company or you shall have the right to postpone
the time of purchase for a period not exceeding five business
days in order that any necessary changes in the Registration
Statement and Prospectus and other documents may be effected.

            The term Underwriter as used in this agreement shall
refer to and include any Underwriter substituted under this
Section 8 with like effect as if such substituted Underwriter
had originally been named in Schedule A.

            9.    Indemnity by the Company and the Underwriters.

            (a)   The Company agrees to indemnify, defend and hold
harmless each Underwriter, any person who controls any
Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and their respective agents,
representatives, employees, officers, partners and directors
(collectively, the "Underwriter indemnified parties"), from and
against any loss, expense, damage, judgment, liability or claim
(including the costs of investigating, defending or settling
such matters and fees and expenses of counsel in connection
therewith) as they are incurred (and regardless of whether the
Underwriter indemnified party is a party to the litigation, if
any) which, jointly or severally, any such Underwriter
indemnified party may incur under the Act, the Exchange Act or
otherwise insofar as such loss, expense, damage, judgment,
liability or claim arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact
contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by
the Company) or in a Prospectus (the term Prospectus for the
purpose of this Section 9 being deemed to include any
Preliminary Prospectus, the Prospectus and the Prospectus as
amended or supplemented by the Company), or arises out of or is
based upon any omission or alleged omission to state a material
fact required to be stated in either such Registration
Statement or Prospectus or necessary to make the statements
made therein not misleading, except insofar as any such loss,
expense, damage, judgment, liability or claim arises out of or
is based upon any untrue statement or alleged untrue statement
of a material fact contained in and in conformity with
information furnished in writing by any Underwriter through you
to the Company expressly for use with reference to such
Underwriter in such Registration Statement or such Prospectus
or arises out of or is based upon any omission or alleged
omission to state a material fact in connection with such
information required to be stated in either such Registration
Statement or Prospectus or necessary to make such information
not misleading; provided, however, that the indemnity agreement
contained in this subsection (a) with respect to any
Preliminary Prospectus or amended Preliminary Prospectus shall
not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) from whom the
person asserting any such loss, expense, liability or claim
purchased the Shares which is the subject thereof to the extent
the Prospectus corrected any such alleged untrue statement or
omission and if such Underwriter failed to send or give a copy
of the Prospectus to such person at or prior to the written
confirmation of the sale of such Shares to such person.

            If any action or proceeding (including any
governmental or regulatory investigation or proceeding) is
brought or asserted against any Underwriter indemnified party
in respect of which indemnity may be sought against the Company
pursuant to the foregoing paragraph, such Underwriter
indemnified party shall promptly notify the Company in writing
of the institution of such action or proceeding and the Company
shall assume the defense of such action or proceeding,
including the employment of counsel satisfactory to the
Underwriter indemnified party and payment of all fees and
expenses; provided that the omission to so notify the Company
shall not in any way relieve the Company from any liability it
may have to an Underwriter indemnified party.  An Underwriter
indemnified party shall have the right to employ separate
counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Underwriter indemnified
party unless the employment of such counsel shall have been
authorized in writing by the Company in connection with the
defense of such action or the Company shall not have employed
counsel to have charge of the defense of such action within a
reasonable period of time or such Underwriter indemnified party
or parties shall have reasonably concluded that there may be
one or more defenses available to it or them which are
different from or additional to those available to the Company
(in which case the Company shall not have the right to direct
the defense of such action on behalf of the Underwriter
indemnified party or parties), in any of which events such fees
and expenses shall be borne by the Company and paid as incurred
(it being understood, however, that the Company shall not be
liable for the expenses of more than one separate counsel (in
addition to local counsel), which counsel shall be designated
by Dillon, Read & Co. Inc., in any one action or series of
related actions in the same jurisdiction representing the
Underwriter indemnified parties who are parties to such
action).  Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its
written consent (which consent shall not be unreasonably
withheld or delayed) unless the Company shall be in breach of
its obligations to pay fees and expenses pursuant to this
Agreement, but if settled with the written consent of the
Company, or if there is a final judgment with respect thereto,
the Company agrees to indemnify and hold harmless each
Underwriter indemnified party from and against any loss or
liability by reason of such settlement or judgment.

            (b)   Each Underwriter severally agrees to indemnify,
defend and hold harmless the Company, its directors and
officers, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange
Act (each, a "Company Indemnitee") from and against any loss,
expense, damage, judgment, liability or claim (including the
costs of investigating, defending or settling such matters and
fees and expenses of counsel in connection with therewith) as

they are incurred (and regardless of whether the Company
Indemnitee is a party to the litigation if any) which, jointly
or severally, such Company Indemnitee may incur under the Act
or otherwise, insofar as such loss, expense, damage, judgment,
liability or claim arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact
contained in and in conformity with information furnished in
writing by or on behalf of such Underwriter through you to the
Company expressly for use with reference to such Underwriter in
the Registration Statement (or in the Registration Statement as
amended by any post-effective amendment thereof by the Company)
or in a Prospectus, or arises out of or is based upon any
omission or alleged omission to state a material fact in
connection with such information required to be stated either
in such Registration Statement or Prospectus or necessary to
make such information not misleading.

            If any action is brought against the Company or any
such person in respect of which indemnity may be sought against
any Underwriter pursuant to the foregoing paragraph, the
Company or such person shall promptly notify such Underwriter
in writing of the institution of such action and such
Underwriter shall assume the defense of such action, including
the employment of counsel and payment of expenses.  The Company
or such person shall have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel
shall be at the expense of the Company or such person unless
the employment of such counsel shall have been authorized in
writing by such Underwriter in connection with the defense of
such action or such Underwriter shall not have employed counsel
to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are
different from or additional to those available to such
Underwriter (in which case such Underwriter shall not have the
right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees
and expenses shall be borne by such Underwriter and paid as
incurred (it being understood, however, that such Underwriter
shall not be liable for the expenses of more than one separate
counsel in any one action or series of related actions in the
same jurisdiction representing the indemnified parties who are
parties to such action).  Anything in this paragraph to the
contrary notwithstanding, no Underwriter shall be liable for
any settlement of any such claim or action effected without the
written consent of such Underwriter.

            (c)   If the indemnification provided for in this
Section 9 is unavailable to an indemnified party under
subsections (a) and (b) of this Section 9 in respect of any
losses, expenses, damages, judgments, liabilities or claims
referred to therein, then each applicable indemnifying party,
in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified

party as a result of such losses, expenses, liabilities or
claims (if and only to the extent that indemnification of such
indemnified party would be required under this Section 9 if the
indemnification provided for in this Section 9 were available)
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and
the Underwriters on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the
Company on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in
such losses, expenses, damages, judgments, liabilities or
claims, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting
expenses) received by the Company bear to the total
underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the
cover page of the Prospectus.  The relative fault of the
Company on the one hand and of the Underwriters on the other
shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission relates to
information supplied by the Company or by the Underwriters and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission.  The amount paid or payable by a party as a result of
the losses, expenses, damages, judgments, liabilities and
claims referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any claim or action.

            (d)   The Company and the Underwriters agree that it
would not be just and equitable if contribution pursuant to
this Section 9 were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose)
or by any other method of allocation that does not take account
of the equitable considerations referred to in subsection (c)
above.  Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the
Shares underwritten by such Underwriter and distributed to the
public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to
pay by reason of such untrue statement or alleged untrue
statement or omission or alleged omission.  No person guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.  The Underwriter's obligations to contribute

pursuant to this Section 9 are several in proportion to their
respective underwriting commitments and not joint.

            (e)   The indemnity and contribution agreements
contained in this Section 9 and the covenants, warranties and
representations of the Company contained in this Agreement
shall remain in full force and effect regardless of any
investigation made by or on behalf of any Underwriter
indemnified party, or by or on behalf of any Company
indemnified party, and shall survive any termination of this
Agreement or the issuance and delivery of the Shares.  The
indemnity and contribution agreements contained in this Section
9 are in addition to any other remedies that the parties hereto
may have in equity or at law.  The Company and each Underwriter
agree promptly to notify the others of the commencement of any
litigation or proceeding against it and, in the case of the
Company, against any of the Company's officers and directors in
connection with the issuance and sale of the Shares, or in
connection with the Registration Statement or Prospectus.

            10.   Notices.  Except as otherwise herein provided,
all statements, requests, notices and agreements shall be in
writing or by telegram and, if to the Underwriters, shall be
sufficient in all respects if delivered or sent to Dillon, Read
& Co. Inc., 535 Madison Avenue, New York, N.Y. 10022,
Attention:  Syndicate Department and, if to the Company, shall
be sufficient in all respects if delivered or sent to the
Company at the offices of the Company at 1419 Lake Cook Road,
Suite 410, Deerfield, IL 60015, Attention:  President and Chief
Executive Officer.

            11.   CONSTRUCTION.  THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.  THE
SECTION HEADINGS IN THIS AGREEMENT HAVE BEEN INSERTED AS A
MATTER OF CONVENIENCE OF REFERENCE AND ARE NOT A PART OF THIS
AGREEMENT.

            12.   Parties at Interest.  The Agreement herein set
forth has been and is made solely for the benefit of the
Underwriters and the Company and the Underwriter indemnified
parties and the Company indemnified parties referred to in
Section 9 hereof, and their respective successors, assigns,
executors and administrators.  No other person, partnership,
association or corporation (including a purchaser, as such
purchaser, from any of the Underwriters) shall acquire or have
any right under or by virtue of this Agreement.

            13.   Counterparts.  This agreement may be signed by
the parties in counterparts which together shall constitute one
and the same agreement among the parties.

            If the foregoing correctly sets forth the
understanding among the Company and the Underwriters, please so
indicate in the space provided below for the purpose, whereupon
this letter and your acceptance shall constitute a binding
agreement among the Company and the Underwriters, severally.

                                    Very truly yours,

                                    STERICYCLE, INC.

                                    By:
                                       Name:
                                       Title:

Accepted and agreed to as of
  the date first above written,
  on behalf of themselves and
  the other several Underwriters
  named in Schedule A

DILLON, READ & CO. INC.
SALOMON BROTHERS INC
WILLIAM BLAIR & COMPANY L.L.C.

By:  DILLON, READ & CO. INC.

By:__________________________
   Name:
   Title:

                                SCHEDULE A

                                                            Number of
      Underwriter                                           Firm Shares

DILLON, READ & CO. INC.
SALOMON BROTHERS INC
WILLIAM BLAIR & COMPANY L.L.C.

                                                            _________

                        Total ............................  3,000,000
                                                            _________

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

                                   STERICYCLE, INC.
                            COMMON STOCK PURCHASE WARRANT

                               VOID AFTER MAY    , 2001

    Stericycle, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for value received,                  ("Holder"), or assigns, are entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time before 5:00 p.m. Central time on May   , 2001 (the
"Expiration Date"), at the purchase price of $1.50 per share, subject to
adjustment as set forth in Section 6, up to             shares of Class A Common
Stock of the Company.

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

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

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

    1.   INITIAL EXERCISE DATE; EXPIRATION.  This Warrant may be exercised at
any time or from time to time.  It shall expire at 5:00 p.m. central time on May
   , 2001.

    2.   EXERCISE OF WARRANT; PARTIAL EXERCISE.

         (a)  This Warrant may be exercised in full or in part by the Holder by

surrender of this Warrant, with the form of subscription attached hereto duly
executed by the Holder, to the Company at its principal office, accompanied by
payment, (a) in cash or by certified or official bank check payable to the order
of the Company, of the purchase price of the shares of Stock to be purchased
hereunder, or (b) the cancellation by the Holder of indebtedness of the Company
to the Holder in an amount equal to such purchase price. For any partial
exercise hereof, the Holder shall designate in the subscription the number of
shares of Stock that he or it wishes to purchase.   On any such partial
exercise, the Company at its expense shall forthwith issue and deliver to the
Holder a new warrant of like tenor, in the name of the Holder, which shall be
exercisable for such number of shares of Stock represented by this Warrant which
have not been purchased or surrendered upon such exercise.

         (b)  At any time at or after the closing of the Company's initial
    registered firm commitment underwritten public offering of its common
    securities, in lieu of the payment of cash or the cancellation of
    indebtedness to the Holder set forth in paragraph 2(a) above, the Holder
    shall have the right ("Conversion Right") to convert this Warrant in its
    entirety (without payment of any kind) into that number of shares of Stock
    equal to the quotient obtained by dividing the Net Value (as defined below)
    of the Stock issuable upon exercise of the Warrant by the Fair Market Value
    (as defined below) of one share of Stock.  As used herein, (A) the Net
    Value of the Stock means the aggregate Fair Market Value of all shares of
    Stock subject to this Warrant minus the aggregate purchase price of all
    such shares of Stock; and (B) the Fair Market Value of one share of Stock
    means:

              (i)  If the exercise is upon the closing of the Company's initial
         registered firm commitment underwritten public offering of its common
         securities, the Fair Market Value of one share of Stock means the
         initial "Price to Public" specified in the final prospectus with
         respect to the offering;

              (ii) if the exercise occurs at a time during which the Company's
         common stock is traded on a national securities exchange or on the
         Nasdaq National Market, the Fair Market Value of one share of Stock
         means the average last reported or closing sale price for the
         Company's common stock on such exchange or market for the three
         trading days ending one business day before the exercise of this
         Warrant;

              (iii) if the exercise is in connection with a merger, sale of
         assets or other reorganization transaction, the Fair Market Value of
         one share of Stock means the value received by the holders of the
         Stock pursuant to such transaction; and

              (iv) in all other cases, the Fair Market Value of one share of
         Stock shall be determined in good faith by the Company's Board of
         Directors.

    4.   WHEN EXERCISE IS EFFECTIVE.  The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant is surrendered to the Company as provided in
Section 3, and at such time the person

                                          2

in whose name any certificate for shares of Stock are to be issued upon such
exercise (as provided in Section 5) shall be deemed to be the record holder of
such Stock for all purposes.

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

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

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

         6.2  ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS.  In case the
    Company shall make or issue, or shall fix a record date for the
    determination of eligible holders entitled to receive, a dividend or other
    distribution with respect to the Stock (or any shares of stock or other
    securities at the time issuable upon exercise of the Warrant) payable in
    (i) securities of the Company (other than shares of Stock) or (ii) assets
    (excluding cash dividends paid or payable solely out of retained earnings),
    then in each case, the Holder on exercise hereof at any time after the
    consummation, effective date or record date of such event shall receive, in
    addition to the Stock (or such other stock or securities) issuable on such
    exercise prior to such date, the securities or such other assets of the
    Company to which the Holder would have been entitled upon such date if the
    Holder had exercised this Warrant immediately prior thereto (all subject to
    further adjustment as provided in this Warrant).

         6.3  ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.  In
    case of any consolidation or merger of the Company with or into any other
    corporation, entity or person, or any other corporate reorganization, in
    which the Company shall not be the continuing or surviving entity of such
    consolidation, merger or reorganization, or any transaction in which in
    excess of 50% of the Company's voting power is transferred, or any sale of
    all or substantially all of the assets of the Company (any such transaction
    being hereinafter referred to as a "Reorganization"), then, in each case,
    the Holder, on exercise hereof at any time after the consummation or
    effective date of such

                                          3

    Reorganization (the "Effective Date"), shall receive, in lieu of the Stock
    issuable on such exercise prior to the Effective Date, the stock and other
    securities and property (including cash) to which the Holder would have
    been entitled upon the Effective Date if the Holder had exercised this
    Warrant immediately prior thereto (all subject to further adjustment as
    provided in this Warrant).

         6.4  ADJUSTMENT UPON SALE OF STOCK  If at any time prior to the first
    to occur of (i) the Company's initial firm commitment underwritten public
    offering of securities or (ii) the expiration or termination of this
    Warrant, the Company effects a sale of any of its Stock in exchange for
    cash equity for an aggregate purchase price of at least One Million Dollars
    ($1,000,000) where the per share purchase price of the Stock sold is less
    than the exercise price for purchase of Stock pursuant to this Warrant (an
    "Equity Raise"), then this Warrant shall, immediately and with no further
    action on the part of the holder hereof, become exercisable for the number
    of shares of Stock determined by dividing:

         (X) the number of shares of Stock issuable upon exercise of this
         Warrant  multiplied by the exercise price for one share of Stock
         pursuant to this Warrant; by

         (Y) the issue price per share of the Stock issued pursuant to the
         Equity Raise.

    In such event, the exercise price per share for the Stock purchasable
    pursuant to this Warrant shall be equal to the per share price at which
    Stock was issued pursuant to the Equity Raise.

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

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

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

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

                                          4

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

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

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

then and in each such event the Company will mail to the Holder a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Stock (or any shares
of stock or other securities at the time issuable upon the exercise of this
Warrant) shall be entitled to exchange their shares for securities or other
property deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up.  Such
notice shall be mailed at least 20 days prior to the date therein specified.

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

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

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

    12.  NO RIGHTS OR LIABILITY AS A STOCKHOLDER.  This Warrant does not
entitle the

                                          5

Holder to any voting rights or other rights as a stockholder of the Company.  No
provisions hereof, in the absence of affirmative action by the Holder to
purchase Stock, and no enumeration herein of the rights or privileges of the
Holder shall give rise to any liability of the Holder as a stockholder of the
Company.

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

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

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

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

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

                                          6

                                 FORM OF SUBSCRIPTION

To:

    The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,                  shares of Class A Common Stock of
Stericycle, Inc., and herewith makes payment of $1.50 per share therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to                                       , whose address is
                        .

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

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

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

Dated:

                                 SECOND AMENDMENT TO

                     AMENDED AND RESTATED REGISTRATION AGREEMENT

    This Amendment is entered into as of July 1, 1996 by Stericycle, Inc., a
Delaware corporation (the "Company") and Baxter Healthcare Corporation,
Marquette Venture Partners, L.P., State Farm Mutual Automobile Insurance 
Company and Jack W. Schuler (the "Investors").

                                       PREAMBLE

    A.   The Company and the Investors are parties to an Amended and Restated
Registration Agreement dated October 19, 1994, as amended by a First Amendment
to Amended and Restated Registration Agreement, dated September 30, 1995 (as
amended, the "Registration Agreement").

    B.   The Investors hold more than a majority of the Registrable Shares (as
"Registrable Shares" is defined in Paragraph 8(e) of the Registration Agreement)
and accordingly have the power and authority under Paragraph 9(d) of the
Registration Agreement to consent to an amendment of the agreement.

    C.   The Company desires to amend the Registration Agreement as follows,
and the Investors are willing to consent to this amendment.

    Now, therefore, the Company and the Investors agree as follows:

    1.   AMENDMENT OF PARAGRAPH 2(a).  Paragraph 2(a) of the Registration
Agreement is amended to read as follows:

         (a)  RIGHT TO PIGGYBACK.  Whenever the Company proposes to register
    any of its securities under the Securities Act (other than pursuant to an
    initial public offering of its securities or pursuant to a Demand
    Registration) and the registration form to be used may be used for the
    registration of Registrable Securities (a "Piggyback Registration"), the
    Company will give prompt written notice to all holders of Registrable
    Securities of its intention to effect such a registration and will include
    in such registration (subject to the priorities set forth in paragraphs
    2(c) and 2(d) below) all Registrable Securities with respect to which the
    Company has received written requests for inclusion therein within 20 days
    after receipt of the Company's notice.

    2.   AMENDMENT OF PARAGRAPH 3(a).  Paragraph 3(a) of the Registration
Agreement is amended to read as follows:

         (a)  Each holder of Registrable Securities agrees not to effect any
    public sale or distribution of equity securities of the Company, or any
    securities convertible into or exchangeable or exercisable for such
    securities, during the 180-day period beginning on

    the effective date of any underwritten public offering of equity securities
    of the Company (except as part of such underwritten registration), unless
    the underwriters managing the registered public offering otherwise agree.

    3.   MISCELLANEOUS.  As amended by this Agreement, the Registration
Agreement shall continue in full force and effect.  This Agreement shall be
governed by the laws of the State of Delaware, without regard to choice-of-law
rules.  This Amendment may be signed in any number of counterparts, any one of
which need not contain the signature of more than one party, but all of which
taken together shall constitute one and the same instrument.

    In witness, the parties have signed this Amendment.

                                       STERICYCLE, INC.

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

                                       BAXTER HEALTHCARE CORPORATION

                                       By: /s/ John F. Gaither, Jr.
                                          ------------------------------------
                                            Name:   John F. Gaither, Jr.
                                                   ---------------------------
                                            Title:  Corporate Vice President
                                                   ---------------------------

                                       MARQUETTE VENTURE PARTNERS, L.P.

                                       By:  Marquette Venture Associates, L.P.,
                                              GENERAL PARTNER

                                            By:  Marquette Management Partners,
                                                   GENERAL PARTNER

                                       By: /s/ Lloyd D. Ruth
                                          ------------------------------------
                                            Name:   Lloyd D. Ruth
                                                   ---------------------------
                                            Title: General Partner
                                                   ---------------------------

                           [Signatures continue on page 3.]

                                         -2-

                                       STATE FARM MUTUAL AUTOMOBILE INSURANCE
                                       COMPANY

                                       By: /s/ John S. Concklin
                                          ------------------------------------
                                            Name:   John S. Concklin
                                                   ---------------------------
                                            Title: Vice President-Fixed Income
                                                   ---------------------------

                                       Attest:

                                              /s/ W. Thomas Gardner
                                              --------------------------------

                                            Name:   W. Thomas Gardner
                                                   ---------------------------
                                            Title:  Investment Officer
                                                   ---------------------------

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

                                         -3-

                                   STERICYCLE, INC.

                                 AMENDED AND RESTATED
                             INCENTIVE COMPENSATION PLAN

    The Stericycle, Inc. Incentive Compensation Plan, as amended, is amended
and restated to read as follows, effective as of the closing of the initial
public offering for which the Company has filed a registration statement on Form
S-1 (Registration No. 333-05665).

                                      ARTICLE 1

                                       PURPOSE

    The purpose of this Plan is to permit the Company to grant stock options
and award restricted stock to selected officers, directors and employees of the
Company and its Subsidiaries and to other eligible persons, in order to reward
them for their efforts on the Company's behalf and to provide an additional
incentive to contribute to the Company's attainment of its performance
objectives.

                                      ARTICLE 2

                                     DEFINITIONS

    BOARD means the Company's Board of Directors.

    COMMON STOCK means the Company's Common Stock, $.01 par value.

    CLOSING PRICE means the average of the closing bid and asked prices of a
share of Common Stock on the Nasdaq National Market.

    COMPANY means Stericycle, Inc., a Delaware corporation.

    DIRECTOR means a director of the Company.

    ELIGIBLE PERSON means a person or entity eligible under Article 6 to be
granted an Option or awarded Restricted Stock.

    EMPLOYEE means a full-time employee of the Company or any Subsidiary.

    EXPIRATION DATE means (i) in the case of an Option which is or may become
exercisable in full at one time, the last day on which the Option may be
exercised, and (ii) in the case of an Installment, the last day on which the
Installment may be exercised.

    GRANT DATE means the date on which an Option is granted.

    ISO is defined in Article 4.

    INSTALLMENT means an installment of an Option which is or may become
exercisable in installments.

    NON-EMPLOYEE DIRECTOR means a Director who (i) is not currently an Officer
or Employee, (ii) does not receive direct or indirect compensation from the
Company or any Subsidiary for services rendered as a consultant, or in any
capacity other than as a Director, in an amount for which disclosure would be
required under Item 404(a) of Regulation S-K of the Securities and Exchange
Commission, (iii) does not possess an interest in any other transaction for
which disclosure would be required under Item 404(a) of Regulation S-K and (iv)
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) of Regulation S-K.

    NSO is defined in Article 4.

    OFFICER means (i) the Company's President and Chief Executive Officer, (ii)
any Vice President of the Company and (iii) any other person who is considered
an "officer" of the Company for purposes of Rule 16a-1(f) under the Securities
Exchange Act of 1934.

    OFFICER OPTIONS COMMITTEE is defined in Paragraph 7.2.

    OPTION means an option granted under this Plan to purchase shares of Common
Stock.

    OPTION AGREEMENT is defined in Paragraph 8.6.

    PLAN means this plan, as amended and restated and as it may be further
amended.  The name of the Plan is the "Stericycle, Inc. Incentive Compensation
Plan."

    PLAN ADMINISTRATOR means, as the context requires, (i) the Board or the
committee of the Board to which the Board has delegated its authority in
accordance with Paragraph 7.1 (in the context of the administration of this Plan
in respect of Eligible Persons other than Officers) or (ii) the Officer Options
Committee (in the context of the administration of this Plan in respect of
Officers).

    OFFICER-EMPLOYEE means an Officer who is also an Employee.

    RESTRICTED STOCK means shares of Common Stock awarded under the Plan.

    RESTRICTED STOCK AGREEMENT is defined in Article 10.

    10% STOCKHOLDER means an Officer or Employee who, at the time that he or
she is granted an ISO, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company.

    SUBSIDIARY means a corporation in which the Company owns stock possessing
at least 50% of the total combined voting power of all classes of stock.

    TERMINATION DATE means the date of termination of an Employee's or Officer-
Employee's employment by the Company or a Subsidiary.

    UNDERLYING SHARES means the shares of Common Stock for which an Option or
Installment is or may become exercisable.

                                      ARTICLE 3

                           EFFECTIVE DATE AND TERM OF PLAN

    This Plan became effective on August 1, 1995, subject to approval by the
Company's stockholders, and has term of 10 years expiring on July 31, 2005.  No
Option may be granted and no Restricted Stock may be awarded under this Plan
after its expiration.

                                      ARTICLE 4

                           SHARES AVAILABLE UNDER THE PLAN

    4.1  MAXIMUM NUMBER OF SHARES.  The maximum combined total number of shares
of Common Stock for which Options may be granted and Restricted Stock may be
awarded under this Plan is 1,500,000 shares (subject to adjustment as provided
in Paragraph 11.1).

    4.2  SHARES ADDED BACK.  If an Option or Installment expires unexercised or
is surrendered prior to July 31, 2005, the number of Underlying Shares in
respect of the Option or Installment shall be added back to the number of shares
of Common Stock for which Options may be granted and shares of Restricted Stock
may be awarded under this Plan.  Similarly, if the Company repurchases any
shares of Restricted Stock pursuant to a Restricted Stock Agreement (or
otherwise), the number of shares repurchased shall be added back to the number
of shares of Common Stock for which Options may be granted and shares of
Restricted Stock may be awarded under this Plan.

                                      ARTICLE 5

                                   TYPES OF OPTIONS

    Two types of Options may be granted under this Plan:  (i) incentive stock
options intended to satisfy the requirements of Section 422 of the Internal
Revenue Code of 1986 ("ISOs") and (ii) nonstatutory stock options ("NSOs").

                                      ARTICLE 6

                                     ELIGIBILITY

    NSOs may be granted, and Restricted Stock may be awarded, to Employees,
Officers and Directors and to consultants to the Company (who also may be
Directors).  ISOs may be granted only to Employees and to Officer-Employees.

                                      ARTICLE 7

                                    ADMINISTRATION

    7.1  BOARD.  This Plan shall be administered by the Board in respect of all
Eligible Persons other than Officers.  The Board may delegate its authority to a
standing committee of the Board or to a committee appointed by the Board for the
purpose consisting of at least two Directors.

    7.2  OFFICER OPTIONS COMMITTEE.  The Plan shall be administered by a
committee (the "Officer Options Committee") in respect of Officers.  The Officer
Options Committee shall be or consist of (i) the Compensation Committee of the
Board, or (ii) if any member of the Compensation Committee is not a Non-Employee
Director, the members of the Compensation Committee who are Non-Employee
Directors, or (iii) if there are not at least two members of the Compensation
Committee who are Non-Employee Directors, the full Board.

    7.3  POWERS.  The Board shall have sole authority to grant Options and to
award Restricted Stock to Eligible Persons other than Officers, and the Officers
Option Committee shall have sole authority to grant Options and to award
Restricted Stock to Officers.  Within the scope of their respective authority
and subject to the express provisions of this Plan, the Board and the Officer
Options Committee may (i) select the Eligible Persons to whom Options are
granted or Restricted Stock is awarded, (ii) designate an Option as an ISO or
NSO, (iii) determine the number of shares of Common Stock for which an Option is
granted or Restricted Stock is awarded and (iv) determine the other terms,
conditions, restrictions and limitations applicable to an Option or an award of
Restricted Stock.

    7.4  INTERPRETATION.  Within the scope of their respective authority and
subject to the express provisions of this Plan, the Board and the Officer
Options Committee may interpret this Plan, adopt and revise policies and
procedures to administer this Plan, and make all determinations required for
this Plan's administration.  The actions of the Board and the Officer Options
Committee on matters within the scope of their respective authority shall be
final and binding.

                                      ARTICLE 8

                                    STOCK OPTIONS

    8.1  EXERCISE PRICE.  The Plan Administrator shall determine the exercise
price of each Option.  The exercise price per share may not be less than the
Closing Price on the Grant Date of the Option (or on the last trading day
preceding the Grant Date if it is not a trading day).

    8.2  TERM.  The Plan Administrator shall determine (i) whether each Option
shall be exercisable in full at one time or in Installments at different times
and (ii) the time or times at which the Option or Installments shall become and
remain exercisable.  No Option or Installment may have an Expiration Date more
than 10 years from the Grant Date.  The Plan Administrator may accelerate the
exercisability of any Option or Installment at any time.

    8.3  TERMINATION OF EMPLOYMENT.  Any Option or Installment held by an
Employee or

Officer-Employee which is unexercisable as of his or her Termination Date shall
expire on the Termination Date.  Any Option or Installment held by an Employee
or Officer-Employee which is exercisable as of his or her Termination Date shall
expire on the Termination Date unless the expiration date is extended by the
Plan Administrator.  The Plan Administrator may extend the expiration of an
exercisable NSO (or Installment of a NSO) to any date ending on or before the
applicable Expiration Date.  The Plan Administrator may extend the expiration of
an exercisable ISO (or Installment of an ISO) to the earlier of (i) a date no
later than 90 days after the Termination Date or (ii) the applicable Expiration
Date, unless the Employee's or Officer-Employee's termination occurred as a
result of his or her death.  In that case, the Plan Administrator may extend the
expiration to the earlier of (i) a date no later than the first anniversary of
the Employee's or Officer-Employee's death or (ii) the applicable Expiration
Date.

    8.4  TRANSFERABILITY.  No Option or Installment may be transferred,
assigned or pledged (whether by operation of law or otherwise), except as
provided by will or the applicable laws of intestacy, and no Option shall be
subject to execution, attachment or similar process.  An Option or Installment
may be exercised only by the person to whom it was granted, except in the case
of his or her death, when it may be exercised by the person or persons to whom
it passes by will or inheritance.

    8.5  ISO LIMITATIONS.  Notwithstanding anything to the contrary in
Paragraphs 8.1 and 8.2:  (i) the exercise price per share of an ISO granted to a
10% Stockholder shall not be less than 110% of the Closing Price on the Grant
Date (or on the last trading day preceding the Grant Date if it is not a trading
day); (ii) no ISO granted to a 10% Stockholder may have an Expiration Date more
than five years from the Grant Date; and (iii) the aggregate fair market value
(determined in respect of each ISO on the basis of the Closing Price on the
Grant Date, or on the last trading day preceding the Grant Date if it was not a
trading day) of the Underlying Shares of all ISOs which become exercisable by an
individual for the first time in any calendar year shall not exceed $100,000.

    8.6  OPTION AGREEMENTS.  Each Option shall be evidenced by a written
agreement (an "Option Agreement"), in a form approved by the Plan Administrator,
entered into by the Company and the person to whom the Option is granted.  Each
Option Agreement shall contain the terms, conditions, restrictions and
limitations applicable to the Option and any other provisions that the Plan
Administrator considers advisable to include.

                                      ARTICLE 9

                                 EXERCISE OF OPTIONS

    9.1  MANNER OF EXERCISE.  An exercisable Option or Installment may be
exercised in full or in part (but only in respect of a whole number of
Underlying Shares) by (i) written notice to the Plan Administrator (or its
designee) stating the number of Underlying Shares in respect of which the Option
or Installment is being exercised and (ii) full payment of the exercise price of
those shares.

    9.2  PAYMENT OF EXERCISE PRICE.  Payment of the exercise price of an Option
or Installment

shall be made by certified or bank cashier's check or, if permitted by the Plan
Administrator (either in the applicable Option Agreement or at the time of
exercise):  (i) by delivering shares of Common Stock having a fair market value
on the date of exercise equal to the exercise price; (ii) by directing the
Company to withhold, from the Underlying Shares otherwise issuable upon exercise
of the Option or Installment, Underlying Shares having a fair market value on
the date of exercise equal to the exercise price; (iii) by surrendering
exercisable Options or Installments having a fair market value on the date of
exercise equal to the exercise price (measuring the fair market value of the
Options or Installments surrendered by the excess of the aggregate fair market
value on the date of exercise of the Underlying Shares over the aggregate
exercise price); (iv) by any combination of the preceding methods of payment; or
(v) by any other method of payment authorized by the Plan Administrator.  For
purposes of this Paragraph and Paragraph 9.3, "fair market value" shall be
determined by the Closing Price on the Nasdaq National Market on the date in
question (or on the last trading day preceding the date in question if it is not
a trading day).

    9.3  WITHHOLDING.  Each person exercising a NSO or an Installment of a NSO
shall remit to the Company an amount sufficient to satisfy its federal, state
and local withholding tax obligation in connection with the exercise.  Payment
shall be made by certified or bank cashier's check or, if permitted by the Plan
Administrator (either in the applicable Option Agreement or at the time of
exercise):  (i) by delivering shares of Common Stock having a fair market value
on the date of exercise equal to the withholding obligation; (ii) by directing
the Company to withhold, from the Underlying Shares otherwise issuable upon
exercise of the Option or Installment, Underlying Shares having a fair market
value on the date of exercise equal to the withholding obligation; (iii) by any
combination of the preceding methods of payment; or (iv) by any other method of
payment authorized by the Plan Administrator.

                                      ARTICLE 10

                             RESTRICTED STOCK AGREEMENTS

    Each Eligible Person to whom Restricted Stock is awarded shall enter into a
written agreement with the Company (a "Restricted Stock Agreement"), in a form
approved by the Plan Administrator.  Each Restricted Stock Agreement shall
contain the terms, conditions, restrictions and limitations applicable to the
award of Restricted Stock and any other provisions that the Plan Administrator
considers advisable to include.

                                      ARTICLE 11

                               MISCELLANEOUS PROVISIONS

    11.1 CAPITALIZATION ADJUSTMENTS.  The aggregate number of shares of Common
Stock for which Options may be granted and Restricted Stock may be awarded under
this Plan, the aggregate number of Underlying Shares in respect of each
outstanding Option, and the exercise price of each outstanding Option may be
adjusted by the Board as it considers appropriate in the event of changes in the
number of outstanding shares of Common Stock by reason of stock dividends, stock
splits, recapitalizations, reorganizations and the like.  Adjustments under this
Paragraph 11.1 shall be made in the Board's discretion, and its decisions shall
be final and

binding.

    11.2 AMENDMENT AND TERMINATION.  The Board may amend, suspend or terminate
this Plan at any time.  The Company's stockholders shall be required to approve
any amendment which would increase the number of shares of Common Stock for
which Incentive Stock Options may be granted (other than an amendment authorized
under Paragraph 11.1).  If this Plan is terminated, the provisions of this Plan
shall continue to apply to Options granted or Restricted Stock awarded prior to
termination, and no amendment, suspension or termination of the Plan shall
adversely affect the rights of the holder of any outstanding Option or any
shares of Restricted Stock without his or her consent.

    11.3 NO RIGHT TO EMPLOYMENT.  Nothing in this Plan or in any Option
Agreement or Restricted Stock Agreement shall confer on any person the right to
continue in the employ of the Company or any Subsidiary or limit the right of
the Company or Subsidiary to terminate his or her employment.

    11.4 NOTICES.  Notices required or permitted under this Plan shall be
considered to have been duly given if sent by certified or registered mail
addressed to the Plan Administrator at the Company's principal office or to any
other person at his or her address as it appears on the Company's payroll or
other records.

    11.5 SEVERABILITY.  If any provision of this Plan is held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions, and the Plan shall be construed and administered as if the
illegal or invalid provision had not been included.

    11.6 GOVERNING LAW.  This Plan and all Option Agreements and Restricted
Stock Agreements shall be governed in accordance with the laws of the State of
Illinois.

                                   STERICYCLE, INC.

                             DIRECTORS STOCK OPTION PLAN

                                      ARTICLE 1

                                       PURPOSE

    The purpose of this Plan is to permit the Company to grant stock options to
its outside directors to reward them for their efforts on the Company's behalf
and to provide an additional incentive to contribute to the attainment of the
Company's long-term plans and objectives.

                                      ARTICLE 2

                                     DEFINITIONS

    ANNUAL MEETING means the annual meeting of the Company's stockholders.

    BOARD means the Company's Board of Directors.  If the Board delegates its
authority to administer the Plan to a committee of the Board in accordance with
Article 5, references to the "Board" shall be construed as references to the
committee.

    CLOSING PRICE means the average of the closing bid and asked prices of a
share of Common Stock on the Nasdaq National Market.

    COMMON STOCK means the Company's Common Stock, $.01 par value.

    COMPANY means Stericycle, Inc., a Delaware corporation.

    DIRECTOR means a director of the Company.

    EFFECTIVE DATE means (i) the date of closing of the initial public offering
for which the Company has filed a registration statement on Form S-1
(Registration No. 333-05665), if this Plan previously has been approved by the
Company's stockholders or (ii) the date that this Plan is approved by the
Company's stockholders, if the closing of the Company's initial public offering
previously has occurred.

    EXPIRATION DATE is defined in Paragraph 6.3.

    FUNDAMENTAL CHANGE means (i) a sale or transfer of substantially all of the
assets of the Company and its subsidiaries on a consolidated basis or (ii) any
merger or consolidation to which the Company is a party other than a merger in
which there is no change in control of the Company.

    GRANT DATE means the date on which an Option is granted.

    OFFICER means (i) the Company's President and Chief Executive Officer, (ii)
any Vice President of the Company and (iii) any other person who is considered
an "officer" of the Company for purposes of Rule 16a-1(f) under the Securities
Exchange Act of 1934.

    OPTION means an option granted under this Plan to purchase shares of Common
Stock.

    OPTION AGREEMENT is defined in Paragraph 6.6.

    OUTSIDE DIRECTOR means a Director who is neither an Officer nor an employee
of the Company or of any corporation in which the Company owns stock possessing
at least 50% of the total combined voting power of all classes of stock.

    PLAN means this stock option plan, as it may be amended.  The name of this
Plan is the "Stericycle, Inc. Directors Stock Option Plan."

    UNDERLYING SHARES means the shares of Common Stock for which an Option is
or may become exercisable.

                                      ARTICLE 3

                           EFFECTIVE DATE AND TERM OF PLAN

    This Plan shall become effective on the Effective Date and shall have a
term of six years expiring on the sixth anniversary of the Effective Date.  No
Option may be granted under this Plan after its expiration.

                                      ARTICLE 4

                              TYPE AND NUMBER OF OPTIONS

    4.1  TYPE OF OPTIONS.  The type of Options granted under this Plan are
nonstatutory stock options.

    4.2  MAXIMUM NUMBER OF OPTIONS.  The maximum number of shares of Common
Stock for which Options may be granted is 285,000 shares (subject to adjustment
as provided in Paragraph 8.1).  If an Option expires unexercised or is
surrendered prior to the Plan's expiration, the number of Underlying Shares in
respect of the Option shall be added back to the number of shares of Common
Stock for which Options may be granted under the Plan.  The Underlying Shares to
be delivered upon the exercise of an Option may be either authorized but
unissued shares or issued shares reacquired by the Company (or any combination
of the two).

                                      ARTICLE 5

                                    ADMINISTRATION

    This Plan shall be administered by the Board.  Subject to the express
provisions of the

Plan, the Board may interpret the Plan, adopt and revise policies and procedures
to administer the Plan and make all determinations required for the Plan's
administration.  The actions of the Board shall be final and binding.  Except
for the Board's authority under Paragraph 6.2 to accelerate vesting in the event
of an anticipated Fundamental Change and the Board's authority under Paragraph
8.1 to make capitalization adjustments, the Board may delegate its authority to
a committee appointed by the Board consisting of at least two Directors.

                                      ARTICLE 6

                                    STOCK OPTIONS

    6.1  OPTION GRANTS.  The Company shall grant Options to Outside Directors
as follows:

    (a)  on the Effective Date, the Company shall grant each incumbent Outside
         Director 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 the Closing Price on the
         Effective Date, subject to a minimum grant of 4,500 shares and a
         maximum grant of 9,500 shares;

    (b)  on the date of the Annual Meeting each year, the Company shall grant
         each incumbent Outside Director who is re-elected as a Director at the
         Annual Meeting 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 the Closing Price on
         the date of the Annual Meeting (or on the last trading day preceding
         the Annual Meeting if it is not a trading day), subject to a minimum
         grant of 4,500 shares and a maximum grant of 9,500 shares;

    (c)  on the date of the Annual Meeting each year, the Company shall grant
         each new Outside Director who is elected as a Director at the Annual
         Meeting 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 the Closing Price on the date
         of the Annual Meeting (or on the last trading day preceding the Annual
         Meeting if it is not a trading day), subject to a minimum grant of
         13,500 shares and a maximum grant of 28,500 shares; and

    (d)  on the date of election of each new Outside Director who is elected as
         a Director other than at an Annual Meeting, the Company shall grant
         the new Outside Director an Option for a number of shares equal to
         three times the number of shares for which each incumbent Outside
         Director was granted an Option on the date of the Annual Meeting
         preceding the election of the new Outside Director (or on the
         Effective Date, if no Annual Meeting was held after the Effective Date
         and prior to the election of the new Outside Director).

The exercise price of each Option shall be the Closing Price on the Grant Date
of the Option (or the last trading day preceding the Grant Date if it is not
trading day)..

    6.2  TERM.  Each Option shall have a six-year term expiring on the sixth
anniversary of

the date that it was granted (the "Expiration Date"), subject to early
expiration as provided in Paragraph 6.3, and may be exercised in whole or in
part at any time prior to its Expiration Date to the extent that it is vested.
Each Option shall become vested in 16 equal quarterly installments beginning on
the first day of the first January, April, July or October following the date
that it was granted.  An Option shall not continue to vest if the holder of the
Option for any reason ceases to serve as an Outside Director.  In the event that
the Board determines that a Fundamental Change is likely to occur, the Board may
accelerate the vesting of all outstanding Options held by incumbent Outside
Directors as the Board considers appropriate in its discretion.

    6.3  EARLY EXPIRATION.  If the holder of an Option ceases to serve as an
Outside Director for any reason (for example, his or her resignation, death,
disability or removal from office or the expiration of his or her term of office
without re-election), the vested portion, if any, of the Option shall expire 90
days after the date that the holder ceases to serve as an Outside Director (but
in no event later than the Option's Expiration Date), unless the holder ceases
to serve an Outside Director as a result of his or her death or disability.  In
either of these cases, the vested portion of the Option shall expire on the
first anniversary of the date that the holder ceases to serve as an Outside
Director (but in no event later than the Option's Expiration Date).  The
portion, if any, of the Option which was not vested as of the date that the
holder ceases to serve as an Outsider Director shall expire as of that date.

    6.4  TRANSFERABILITY.  No Option may be transferred, assigned or pledged
(whether by operation of law or otherwise), except as provided by will or the
applicable intestacy laws, and no Option shall be subject to execution,
attachment or similar process.  An Option or Installment may be exercised only
by Outside Director to whom it was granted, except in the case of his or her
death, when it may be exercised by the person or persons to whom it passes by
will or inheritance.

    6.5  OPTION AGREEMENTS.  Each Option shall be evidenced by a written
agreement (an "Option Agreement"), in a form approved by the Board, entered into
by the Company and the Outside Director to whom the Option is granted.

                                      ARTICLE 7

                                 EXERCISE OF OPTIONS

    7.1  MANNER OF EXERCISE.  The vested portion of an Option may be exercised
in full or in part (but only in respect of a whole number of shares) by (i)
written notice to the Board (or its designee) stating the number of shares of
Common Stock in respect of which the Option is being exercised and (ii) full
payment of the exercise price of those shares.

    7.2  PAYMENT OF EXERCISE PRICE.  Payment of the exercise price of the
vested portion of an Option shall be made by certified or bank cashier's check
or, if permitted by the Board (either in the applicable Option Agreement or at
the time of exercise):  (i) by delivering shares of Common Stock having a fair
market value on the date of exercise equal to the exercise price; (ii) by
directing the Company to withhold, from the shares of Common Stock otherwise
issuable upon exercise of the Option, shares of Common Stock having a fair
market value on the date of exercise equal to the exercise price; (iii) by
surrendering exercisable Options which have a

fair market value on the date of exercise equal to the exercise price (measuring
the fair market value of the Options surrendered by the excess of (A) the
aggregate fair market value on the date of exercise of the shares of Common
Stock issuable upon exercise of the Option over (B) the aggregate exercise
price); (iv) by any combination of the preceding methods of payment; or (v) by
any other method of payment authorized by the Board.  For purposes of this
Paragraph and Paragraph 7.3), "fair market value" shall be determined by the
closing bid and asked prices of a share of Common Stock on the Nasdaq National
Market on the date in question (or on the last trading day preceding the date in
question if it is not a trading day).

    7.3  WITHHOLDING.  Each Outside Director exercising the vested portion of
an Option shall remit to the Company an amount sufficient to satisfy the
Company's federal, state and local withholding tax obligation in connection with
the exercise.  Payment shall be made by certified or bank cashier's check or, if
permitted by the Board (either in the applicable Option Agreement or at the time
of exercise), by either one or both of the following methods:  (i) by delivering
shares of Common Stock having a fair market value on the date of exercise equal
to the Company's withholding obligation; or (ii) by directing the Company to
withhold, from the shares of Common Stock otherwise issuable upon exercise of
the Option, shares of Common Stock having a fair market value on the date of
exercise equal to the Company's withholding obligation.

                                      ARTICLE 8

                               MISCELLANEOUS PROVISIONS

    8.1  CAPITALIZATION ADJUSTMENTS.  The aggregate number of shares of Common
Stock for which Options may be granted under the Plan, the aggregate number of
Underlying Shares in respect of each outstanding Option, and the exercise price
of each such Option may be adjusted by the Board as it considers appropriate in
the event of changes in the number of outstanding shares of Common Stock by
reason of stock dividends, stock splits, recapitalizations, reorganizations and
the like.  Adjustments under this Paragraph 8.1 shall be made in the Board's
discretion, and its decisions shall be final and binding.

    8.2  AMENDMENT AND TERMINATION.  The Board may amend, suspend or terminate
the Plan at any time; but except to comply with changes in the Internal Revenue
Code of 1986 and the related regulations, the Board may not amend the Plan more
once every six months to change:  (i) the number of shares of Common Stock for
which Options may be granted under the Plan; (ii) the benefits under the Plan;
or (iii) the eligibility requirements of the Plan.  The Company's stockholders
shall be required to approve any such amendment (other than an amendment
authorized under Paragraph 8.1) that would materially increase the number of
shares, materially increase the benefits or materially change the eligibility
requirements.  If the Plan is terminated, the provisions of the Plan shall
continue to apply to Options granted prior to termination, and no amendment,
suspension or termination of the Plan shall adversely affect the rights of an
Outside Director in respect of any Option held without his or her consent.

    8.3  COMPLIANCE WITH SECTION 16(b).  The Plan shall be interpreted and
administered in a manner that satisfies the applicable requirements of Rule 16b-
3 under the Securities Exchange Act so that Outside Directors will be entitled
to the benefits of Rule 16b-3.

    8.4  NO RIGHT TO NOMINATION.  Nothing in the Plan or in any Option
Agreement shall confer on any Outside Director the right to continue to be
nominated for election as a Director.

    8.5  NOTICES.  Notices required or permitted under the Plan shall be
considered to have been duly given if sent by certified or registered mail
addressed to the Board at the Company's principal office or to any Outside
Director at his or her address as it appears on the Company's records.

    8.6  SEVERABILITY.  If any provision of the Plan is held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
provisions, and the Plan shall be construed and administered as if the illegal
or invalid provision had not been included.

    8.7  GOVERNING LAW.  The Plan and all Option Agreements shall be governed
in accordance with the laws of the State of Illinois.

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

Average shares outstanding                                       369,380      369,756    5,582,385      369,756    5,616,651

Net effect of dilutive stock options and warrants based on
the treasury stock method using the mid point of the offering  1,380,051    1,380,051    1,380,052    1,380,051    1,380,051

Other                                                             98,001       98,001       98,001       98,001       98,001
                                                              --------------------------------------------------------------
                                                               1,847,432    1,847,808    7,060,438    1,847,808    7,094,703
                                                              --------------------------------------------------------------
                                                              --------------------------------------------------------------

Net loss applicable to common stock                              ($9,761)    ($10,293)     ($4,544)     ($3,164)       ($347)
                                                                --------------------------------------------------------------
                                                                --------------------------------------------------------------

Net loss per common share                                         ($5.28)      ($5.57)      ($0.64)      ($1.71)      ($0.05)
                                                                --------------------------------------------------------------
                                                                --------------------------------------------------------------

                                                                    EXHIBIT 23.1
 
                        CONSENT OF INDEPENDENT AUDITORS

    We  consent to the reference to our  firm under the caption "Experts" and to
the use of our report  dated March 20, 1996, except  for the first paragraph  of
Note  7, as to which the date  is               in the Registration Statement on
Form S-1 (No.  333-05665) for  the registration  of 3,450,000  shares of  common
stock.

   
Chicago, Illinois
July 26, 1996

   
The  foregoing consent is in the form that will be signed when the reverse stock
split, decrease in authorized common stock and redesignation of the Class A  and
Class  B common  stock as  a like number  of shares  of common  stock all become
effective prior to completion of an initial public offering as described in  the
first paragraph of Note 7 to the financial statements.

                                             ERNST & YOUNG LLP