<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
STERICYCLE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
------------------------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 1997
---------------------
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Stericycle, Inc. (the "Company"), which will be held at the Hyatt Deerfield
Hotel, 1750 Lake Cook Road, Deerfield, Illinois on Monday, April 28, 1997,
beginning at 10:00 a.m.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following matters:
- Election of a Board of Directors to hold office until the 1998 Annual
Meeting of Stockholders
- Approval of the 1997 Stock Option Plan, under which stock options for a
total of 1,500,000 shares of the Company's Common Stock may be granted
- Ratification of the appointment of Ernst & Young LLP as the Company's
independent public accountants for the year ending December 31, 1997
- Any other matters that properly come before the meeting or any adjournment
of the meeting
Only stockholders of record at the close of business on the record date of
March 14, 1997 are entitled to vote at the Annual Meeting and any adjournment.
For the convenience of those stockholders who do not plan to attend the
Annual Meeting in person and desire to have their shares voted, a proxy card is
enclosed. If you do not plan to attend the Annual Meeting, please complete and
return the proxy card in the envelope provided for that purpose. If you return
your proxy card and later decide to attend the Annual Meeting in person or for
any other reason desire to revoke your proxy, you may do so at any time before
your proxy is voted.
For the Board of Directors
Jack W. Schuler
CHAIRMAN OF THE BOARD
March 28, 1997
Deerfield, Illinois
<PAGE>
STERICYCLE, INC.
1419 LAKE COOK ROAD, SUITE 410
DEERFIELD, ILLINOIS 60015
------------------------
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 1997
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Stericycle, Inc. (the "Company") for use at
the Company's 1997 Annual Meeting of Stockholders (the "Annual Meeting"), to be
held at the Hyatt Deerfield Hotel, 1750 Lake Cook Road, Deerfield, Illinois on
Monday, April 28, 1997, beginning at 10:00 a.m. This Proxy Statement and the
accompanying materials are being mailed to stockholders beginning on or about
March 28, 1997.
GENERAL
COMMON STOCK. The Company's authorized capital stock consists of Common
Stock, par value $.01 per share ("Common Stock"). As of February 11, 1997, there
were 10,000,264 shares of Common Stock outstanding.
STOCKHOLDERS ENTITLED TO VOTE. Only stockholders of record at the close of
business on the record date of March 14, 1997 are entitled to notice of the
Annual Meeting and to vote their shares of record at the Annual Meeting and at
any adjournment of the meeting. Each outstanding share of Common Stock is
entitled to one vote.
QUORUM. Holders of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting who are present in person or represented
by proxy will constitute a quorum to conduct business at the meeting. The
inspectors of election appointed at the meeting will determine the existence of
a quorum and tabulate the votes cast at the meeting.
VOTING. The affirmative vote of holders of a plurality of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote will be required for the election of directors. For each other
matter coming before the meeting, the affirmative vote of holders of a majority
of the shares present in person or represented by proxy and entitled to vote
will be required for approval of the matter.
A stockholder may withhold authority to vote for one or more nominees for
director and may abstain from voting on one or more of the other matters coming
before the Annual Meeting. Shares for which authority is withheld or which a
stockholder abstains from voting will be counted for purposes of determining
whether a quorum is present. Shares for which authority is withheld will have no
effect on the vote for election of directors (which, as noted, requires the
affirmative vote of a plurality of the votes cast); shares which a stockholder
abstains from voting will be included in the total of the votes cast and will
have the effect of a vote against the matter in question. If a broker or nominee
indicates on a proxy card that it does not have discretionary authority to vote
on a particular matter, the shares will be counted for purposes of determining
whether a quorum is present (if the shares are voted on any other matter) but
will not be included in the total of the votes cast on the matter and thus will
have no effect on the outcome of the vote.
PROXIES. If a stockholder properly completes and returns the accompanying
proxy card, the shares of Common Stock represented by the proxy will be voted as
the stockholder directs. IF NO DIRECTIONS ARE GIVEN, THE PERSONS APPOINTED AS
PROXIES WILL VOTE THE SHARES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD
OF DIRECTORS.
<PAGE>
A stockholder may revoke a proxy at any time before it is voted by filing a
signed notice of revocation with the Secretary of the Company or by returning a
properly completed proxy card bearing a later date. In addition, a stockholder
may revoke a proxy by attending the Annual Meeting in person and requesting to
vote. Attending the meeting in person will not, by itself, constitute revocation
of the proxy.
STOCK OWNERSHIP
The following tables provides certain information regarding the beneficial
ownership of shares of the Company's Common Stock as of February 11, 1997. Under
the rules of the Securities and Exchange Commission, beneficial ownership is
defined generally as the sole or shared power to vote or to direct the
disposition of a security. Unless otherwise indicated in a footnote, the persons
named in the following tables have sole voting and investment power in respect
of the shares of Common Stock shown as beneficially owned by them.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table provides certain information regarding the beneficial
ownership of Common Stock by each person (other than a director or executive
officer) who was known to the Company to be the beneficial owner as of February
11, 1997 of more than 5% of the Company's outstanding Common Stock:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME AND ADDRESS OWNED PERCENTAGE
- ----------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Marquette Venture Partners, L.P. (1)..................................................... 1,156,268 11.56%
Corporate 500 Center
520 Lake Cook Road, Suite 450
Deerfield, Illinois 60015
State Farm Mutual Automobile Insurance Company........................................... 937,522 9.37%
One State Farm Plaza
Bloomington, Illinois 61710
T. Rowe Price Associates, Inc. (2)....................................................... 810,000 8.10%
100 East Pratt Street
Baltimore, Maryland 21202
Wells Fargo Bank, N.A. (3)............................................................... 508,000 5.08%
464 California Street
San Francisco, California 94163
</TABLE>
- ------------------------
(1) The shares shown as beneficially owned by Marquette Venture Partners, L.P.
include 1,536 shares issuable in respect of the portion exercisable as of or
within 60 days after February 11, 1997 of a stock option for 8,195 shares
granted to Lloyd D. Ruth under the Company's Directors Stock Option Plan.
Mr. Ruth, a director of the Company, is an indirect general partner of
Marquette Venture Partners, L.P.
(2) The shares shown as beneficially owned by T. Rowe Price Associates, Inc. are
derived from a Schedule 13G, dated February 14, 1997, furnished to the
Company by T. Rowe Price Associates, Inc., a registered investment adviser,
reporting that it holds the sole voting power over 60,000 shares and the
sole investment power over 810,000 shares. T. Rowe Price Associates, Inc.
disclaims beneficial ownership of these shares.
(3) The shares shown as beneficially owned by Wells Fargo Bank, N.A. are derived
from a Schedule 13G, dated February 14, 1997, furnished to the Company by
Wells Fargo Bank, N.A., a bank, reporting that it holds sole voting power
over 498,000 shares and shared investment power over 508,000 shares.
2
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table provides certain information regarding the beneficial
ownership of Common Stock as of February 11, 1997 by (i) each of the Company's
directors, (ii) each of the Company's executive officers listed in the Summary
Compensation Table on page 8 and (iii) all of the directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
OPTION AND
SHARES WARRANT SHARES
BENEFICIALLY BENEFICIALLY COMBINED
NAME OWNED OWNED(1) PERCENTAGE(2)
- ---------------------------------------------------------------------- ----------- -------------- --------------
<S> <C> <C> <C>
Jack W. Schuler(3).................................................... 781,302 49,334 8.27%
Mark C. Miller(4)..................................................... 518,374 136,679 6.46%
Patrick F. Graham..................................................... 36,783 3,718 *
John Patience......................................................... 164,648 38,909 2.03%
Lloyd D. Ruth(5)...................................................... -- 1,536 *
Peter Vardy(6)........................................................ 135,362 28,062 1.63%
L. John Wilkerson, Ph.D.(7)........................................... -- -- *
Anthony J. Tomasello.................................................. 118,572 18,281 1.37%
Linda D. Lee.......................................................... 55,334 5,175 *
Michael J. Bernert.................................................... 4,247 60,375 *
Richard O. Shea....................................................... 10,239 49,044 *
All directors and executive officers as a group (12 persons).......... 1,871,193 410,467 21.92%
</TABLE>
- ------------------------
* Less than 1%.
(1) This column shows shares of Common Stock issuable under stock options or
warrants exercisable as of or within 60 days after February 11, 1997.
(2) Shares of Common Stock issuable under stock options or warrants exercisable
as of or within 60 days after February 11, 1997 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.
(3) The shares shown as beneficially owned by Mr. Schuler include 35,218 shares
owned by his wife and trusts for the benefit of his children, as to which
Mr. Schuler disclaims any beneficial ownership.
(4) The shares shown as beneficially owned by Mr. Miller include 75,346 shares
owned by trusts for the benefit of his children and 1,000 shares owned by
his sons, as to which Mr. Miller disclaims beneficial ownership.
(5) Mr. Ruth is an indirect general partner of Marquette Venture Partners, L.P.
Mr. Ruth disclaims any beneficial interest in any of the shares held by
Marquette Venture Partners, L.P. except to the extent of his pecuniary
interest arising from his indirect general partnership interest.
(6) The shares shown as beneficially owned by Mr. Vardy include 67,614 shares
owned by trusts for the benefit of his children, as to which Mr. Vardy
disclaims beneficial ownership.
(7) Dr. Wilkerson is an indirect general partner of Galen Partners, L.P. and
Galen Partners International, L.P., which together own 435,014 shares
(including 91,287 shares issuable under stock options and warrants
exercisable as of or within 60 days after February 11, 1997). Dr. Wilkerson
disclaims any beneficial interest in the shares held by these two limited
partnerships except to the extent of his individual ownership of limited
partnership interests and his pecuniary interest arising from his indirect
general partnership interest.
3
<PAGE>
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is currently comprised of seven
directors, but the Board of Directors has amended the Company's by-laws to
reduce the number of directors to six (without affecting the term of any
incumbent). All six directors will be elected at the Annual Meeting. Each
director elected will hold office until the Company's 1998 Annual Meeting of
Stockholders or until his or her successor is elected and qualified.
NOMINEES FOR DIRECTOR
The following table provides certain information regarding the nominees for
election as directors. All six nominees are currently serving as directors of
the Company.
<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY AGE
- ----------------------------------------- ------------------------------------------------------- ---
<S> <C> <C>
Jack W. Schuler.......................... Chairman of the Board of Directors 56
Mark C. Miller........................... President, Chief Executive Officer and a Director 41
Patrick F. Graham........................ Director 57
John Patience............................ Director 49
Peter Vardy.............................. Director 66
L. John Wilkerson, Ph.D.................. Director 53
</TABLE>
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, where he served as a director from April 1985 to August
1989. Mr. Schuler serves as a director of Chiron Corporation, Medtronic, Inc.,
Somatogen, Inc. and Ventana Medical Systems, Inc. He is a co-founder of Crabtree
Partners, a private investment partnership in Deerfield, Illinois, which was
formed in June 1995. Mr. Schuler 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.
MARK C. MILLER has served as President and Chief Executive Officer and a
director since joining the Company in 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.
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. Mr. Graham is a director of
World Corporation and Intelidata Technologies, Inc. He received a B.A. degree in
economics from Knox College and an M.B.A. degree from the Stanford University
Graduate School of Business Administration.
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 an
indirect general partner of Marquette Venture Partners, L.P., a venture capital
fund which he co-founded and which participated in the Company's initial
capitalization. Mr. Patience is a director of TRO Learning, Inc. and Ventana
Medical Systems, Inc. He received B.A. and B.L degrees from the University of
Sydney in Sydney, Australia, and an M.B.A. degree from the Wharton School of
Business of the University of Pennsylvania.
4
<PAGE>
PETER VARDY has served as a director of the Company since July 1990. He is
the Managing Director of Peter Vardy & Associates, an international
environmental consulting firm in Chicago, Illinois, which he founded in June
1990. From April 1973 to May 1990, Mr. Vardy served at Waste Management, Inc.
(now WMX Technologies, Inc.), a waste management services company, where he was
Vice President, Environmental Management. He is a director of EMCON, which he
co-founded in 1971. Mr. Vardy received a B.S. degree in geological engineering
from the University of Nevada.
L. JOHN WILKERSON, PH.D., has served as a director of the Company since July
1992. He is a consultant to The Wilkerson Group, a health care products
consulting firm in New York, New York, where he has served since 1982. Dr.
Wilkerson also serves as an indirect 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. and TheraTx, Incorporated. 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.
COMMITTEES OF THE BOARD
The Board of Directors has standing Compensation and Audit Committees. It
does not have a standing nominating committee.
The Compensation Committee, consisting of Messrs. Schuler (Chairman) and
Vardy and Dr. Wilkerson, makes recommendations to the full Board of Directors
concerning the base salaries and cash bonuses of the Company's executive
officers and reviews the employee compensation policies of the Company
generally. The Compensation Committee also administers the Company's Incentive
Compensation Plan as it applies to executive officers and similarly will
administer the 1997 Stock Option Plan if it is approved by the Company's
stockholders. The Audit Committee, consisting of Messrs. Graham, Patience
(Chairman) and Ruth, makes recommendations to the full Board of Directors
regarding the selection of independent public accountants, reviews the results
and scope of the audit and other services provided by the Company's independent
public accountants, and reviews and evaluates the Company's financial reporting
process and internal accounting controls.
MEETINGS
The Board of Directors held eight meetings during 1996 (including meetings
by teleconference) and acted without a meeting by unanimous written consent on a
number of occasions. The Compensation and Audit Committees have each held one
meeting since their creation in April 1996.
Messrs. Graham, Miller and Schuler each attended all eight meetings of the
Board of Directors during 1996. Messrs. Patience and Vardy and Dr. Wilkerson
each were unable to attend one meeting, and Mr. Ruth was unable to attend two
meetings. With the exception of Mr. Ruth, all of the members of the Compensation
and Audit Committees attended the respective meetings of those committees.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive fees or other cash compensation for
their services as directors.
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,
authorizes nonstatutory stock options for a total of 285,000 shares of Common
Stock to be granted to the Company's outside directors (i.e., directors who are
neither officers nor employees of the Company). Each option grant is for a
formula-determined number of shares. Under the plan, each of the six incumbent
outside directors automatically received an option for 8,195 shares, at an
exercise price of $10.25 per share, upon the closing of the Company's initial
public offering in August 1996.
5
<PAGE>
As of each annual meeting beginning with the 1997 Annual Meeting of
Stockholders, each incumbent outside director who is reelected as a director at
the annual meeting automatically will be granted an option for a number of
shares determined by multiplying 7,000 shares by a fraction, the numerator of
which is $12.00 and the denominator of which is the last reported sales price of
a share of Common Stock on the Nasdaq National Market (the "closing price") on
the date of the annual meeting; and each outside director who is elected as a
director for the first time automatically will be granted an option for a number
of shares 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 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).
The exercise price of each option granted under the plan is the closing
price on the date of grant, and the term of each option is six years from the
date of grant. Each option vests 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. The Directors Stock Option Plan has a
six-year term, and no option may be granted under the plan after its expiration
in June 2002.
Each option granted under the Directors Stock Option Plan is transferable to
(i) a member of the outside director's immediate family, (ii) a trust for the
primary benefit of the outside director or any one or more members of his or her
immediate family, or (iii) a corporation, partnership or other entity which,
together with its affiliates, owns at the time of transfer at least 2.0% of the
Company's outstanding Common Stock and with which the outside director has a
contractual obligation to assign his or her "outside" remuneration received by
reason of his or her relationship with such corporation, partnership or other
entity. In accordance with a contractual obligation, Dr. Wilkerson assigned to
Galen Partners, L.P. the option for 8,195 shares that he was granted under the
plan in August 1996.
CERTAIN TRANSACTIONS
In May 1996, the Company borrowed $1,000,000 under a short-term loan from a
group comprised of Galen Partners, L.P. and Galen Partners International, L.P.,
stockholders of the Company, Jack W. Schuler, Mark C. Miller, John Patience and
Peter Vardy, directors of the Company (and, in Mr. Miller's case, also an
executive officer) and Michael J. Bernert, James F. Polark and Anthony J.
Tomasello, executive officers of the Company. The Company's loan was
interest-free if paid when due and was due within 30 days after completion of an
initial public offering or upon the occurrence of certain other events. The
Company repaid the loan in full in a timely manner following the closing of its
initial public offering in August 1996. In connection with the loan, the Company
issued warrants to members of the lending group to purchase an aggregate of
226,036 shares of Common Stock at an exercise price of $7.96 per share. These
warrants expire in May 2001 and are exercisable at any time prior to their
expiration.
In June 1996, the Company loaned $31,000 to Richard O. Shea, an executive
officer of the Company, at an interest rate of 11.75% per annum. The Company
previously made two loans to Mr. Shea of $60,000 and $5,000, respectively, at an
interest rate of 5.54% per annum. All three loans are due in December 1998 and
are secured by a security interest in all of Mr. Shea's shares of Common Stock,
including the shares issuable upon his exercise of any stock options.
6
<PAGE>
EXECUTIVE COMPENSATION
1996 COMPENSATION
The following table provides certain information regarding the compensation
paid to or earned by the Company's President and Chief Executive Officer and its
four other most highly compensated executive officers (the "named executive
officers") for services rendered in 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS
COMPENSATION NUMBER OF SECURITIES
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY UNDERLYING OPTIONS
- -------------------------------------------------------------------- ----------- ------------- --------------------
<S> <C> <C> <C>
Mark C. Miller (1) ................................................. 1996 $ 148,481 41,220
President and Chief Executive Officer 1995 212,083 485,620
Anthony J. Tomasello ............................................... 1996 136,025 9,946
Vice President, Operations 1995 146,875 31,816
Linda D. Lee ....................................................... 1996 120,583 5,086
Vice President, Regulatory Affairs 1996 127,916 28,621
and Quality Assurance
Richard O. Shea .................................................... 1996 113,598 22,101
Vice President, Western Region 1995 113,541 46,353
Michael J. Bernert ................................................. 1996 112,615 22,101
Vice President, Eastern Region 1995 108,750 49,515
</TABLE>
- ------------------------
(1) The salary for 1996 shown for Mr. Miller includes $22,917 paid to him in
February 1997. This amount represented the additional salary that the
Company would have paid to Mr. Miller in 1996 if, like the Company's other
executive officers, he had resumed receiving his full base salary upon the
termination in mid-October 1996 of a voluntary 12-month salary reduction
program for management. See "Report of the Compensation Committee on
Executive Compensation--Executive Compensation Policies" on page 12.
1996 STOCK OPTION GRANTS
The following table provides certain information regarding stock options
granted to the named executive officers in 1996. In accordance with the rules of
the Securities and Exchange Commission, the following table also provides the
potential realizable value over the term of the options (i.e., 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 in 1996.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------- ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION FOR
SECURITIES OPTIONS GRANTED EXERCISE OPTION TERM(4)
UNDERLYING TO EMPLOYEES IN PRICE PER EXPIRATION ----------------------
OPTIONS(1) FISCAL YEAR(2) SHARE(3) DATE 5% 10%
----------- ---------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark C. Miller............................ 10,329 5.2% $ 0.53 1/29/06 $ 141,880 $ 223,271
30,892 15.5% 1.99 4/30/06 384,609 639,003
Anthony J. Tomasello...................... 3,918 2.0% 0.53 1/29/06 53,818 84,691
6,028 3.0% 1.99 4/30/96 75,049 124,690
Linda D. Lee.............................. 2,072 1.0% 0.53 1/29/06 28,461 37,525
3,014 1.5% 1.99 4/30/96 44,788 62,345
Richard O. Shea........................... 2,888 1.5% 0.53 1/29/06 39,670 62,427
19,213 9.7% 1.99 4/30/96 239,204 397,422
Michael J. Bernert........................ 2,888 1.5% 0.53 1/29/06 39,670 62,427
19,213 9.7% 1.99 4/30/96 239,204 397,422
</TABLE>
- ------------------------
(1) All of the stock options granted to the named executive officers were
granted under the Company's Incentive Compensation Plan. The options granted
were for shares of the Company's then-authorized Class B common stock. The
number of options shown in the table has been adjusted to reflect a
1-for-5.3089 reverse stock split in August 1996 in connection with the
Company's initial public offering, pursuant to which each outstanding share
of the Company's Class A and Class B common stock became 0.1883629 share of
Common Stock. Each option granted in January 1996 vests (i.e., becomes
exercisable) in equal monthly increments over a one-year period, and each
option granted in April 1996 vests over a four-year period: one-quarter of
the option vests at the end of the first year, and the balance of the option
vests in equal monthly increments over the next 36 months.
(2) The percentages shown in the table reflect options for a total of 199,057
shares granted to employees in 1996 (as adjusted to reflect the 1-for-5.3089
reverse stock split in August 1996 in connection with the Company's initial
public offering). All of these options were granted under the Company's
Incentive Compensation Plan.
(3) The exercise price per share shown in the table 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 and has been adjusted to
reflect the 1-for-5.3089 reverse stock split in August 1996 in connection
with the Company's initial public offering.
(4) The potential realizable value was calculated on the basis of the 10-year
term of each option on its grant date, assuming that the fair market value
of the underlying stock on the grant date and as adjusted appreciates at the
indicated annual rate compounded annually for the entire term of the 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 grant date, adjusting the fair
market value of the underlying stock to $9.00 per share on August 23, 1996,
when the Company's Common Stock was first offered to the public (at a price
of $9.00 per share).
8
<PAGE>
1996 OPTION EXERCISES AND YEAR END OPTION VALUES
The following table provides certain information regarding stock option
exercises in 1996 by the named executive officers and the value of the stock
options that they held at December 31, 1996. No named executive officer
exercised any stock appreciation rights during the year or had any stock
appreciation rights outstanding at the end of the year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS
SHARES END AT FISCAL YEAR END(3)
ACQUIRED ON VALUE ---------------------- ----------------------
EXERCISE(1) REALIZED(2) VESTED UNVESTED VESTED UNVESTED
----------- ----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark C. Miller............................... 421,827 $ 615,867 72,278 32,736 $ 792,890 $ 314,012
Anthony J. Tomasello......................... 29,688 224,738 5,456 6,618 59,852 63,799
Linda D. Lee................................. 25,519 193,179 5,002 3,186 54,872 30,550
Richard O. Shea.............................. -- -- 47,007 24,610 515,667 241,921
Michael J. Bernert........................... -- -- 48,736 19,718 534,634 188,255
</TABLE>
- ------------------------
(1) All of the shares acquired were shares of the Company's then-authorized
Class B common stock. The number of shares acquired shown in the table has
been adjusted to reflect a 1-for-5.3089 reverse stock split in August 1996
in connection with the Company's initial public offering, pursuant to which
each outstanding share of the Company's Class A and Class B common stock
became 0.1883629 share of Common Stock.
(2) The stock options that Mr. Miller exercised were exercised in May 1996. The
value that he realized was calculated using the fair market value of the
Company's Class B common stock as of April 30, 1996, as determined by the
Company's Board of Directors for internal purposes. The stock options that
Mr. Tomasello and Ms. Lee exercised were exercised in August 1996, shortly
before the Company's initial public offering. The value that each of them
realized was calculated using a 10% discount from the price of $9.00 per
share at which Common Stock was offered for sale in the Company's public
offering.
(3) The value of in-the-money stock options was determined by multiplying the
number of vested (exercisable) or unvested (unexercisable) options by $11.50
per share, which was the last reported sales price of the Company's Common
Stock on December 31, 1996, and then subtracting the exercise price.
STOCK OPTION PLAN
The Company's Incentive Compensation Plan was adopted by the Board of
Directors in August 1995 and approved by the Company's stockholders in September
1995. As amended and restated, the 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 plan expires unexercised
or is surrendered, or if the Company repurchases shares of restricted stock
awarded under the plan, the shares subject to the option or repurchased by the
Company once again become available for option grants and restricted stock
awards under the plan. As of December 31, 1996, 9,999 shares were available for
future option grants or restricted stock awards under the plan. The 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.
9
<PAGE>
The Incentive Compensation Plan provides for the grant of incentive stock
options intended to satisfy the requirements of Section422 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
plan is administered by the Board of Directors in respect of all eligible
persons other than executive officers and by the Compensation Committee of the
Board of Directors in respect of executive officers. The Board of Directors or
the Compensation Committee, as the case may be, 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 Incentive Compensation Plan
must be at least equal to the closing price of the Company's 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
Company's outstanding Common Stock must be at least 110% of the closing price.
The maximum term of an 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. In the discretion of the Board of Directors or the Compensation
Committee, as the case may be, the exercisability of a nonstatutory option may
be extended to any date ending on or before the expiration date of the option,
and the exercisability of an incentive stock option may be extended to any date
no later than 90 days after the employee's termination of employment. In
addition, the Board of Directors or the Compensation Committee, as the case may
be, may accelerate the exercisability of an option at any time.
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 as determined each year by the Board of Directors. For
1996, the Company made a matching contribution of 30% of the first $1,000
contributed by each participant. The Company also maintains a nonqualified
employee stock purchase plan under which employees may purchase Common Stock on
the open market through payroll deductions.
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.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is determined generally
by the Compensation Committee of the Company's Board of Directors. The three
members of the Compensation Committee, Messrs. Schuler and Vardy and Dr.
Wilkerson, are outside directors of the Company.
Decisions of the Compensation Committee relating to the executive officers'
base salaries and cash bonuses are subject to the review and approval of the
full Board of Directors; decisions of the Compensation Committee relating to
executive officers' stock options are reviewed by the full Board but are not
subject to the Board's approval.
10
<PAGE>
EXECUTIVE COMPENSATION POLICIES
The Company's executive compensation policies seek to coordinate the
executive officers' compensation with the Company's performance objectives and
business strategy. These policies are intended to attract, motivate and retain
executive officers whose contributions are critical to the Company's long-term
success and to reward executive officers for attaining individual and corporate
objectives that enhance stockholder value.
The Company's compensation program for its executive officers consists of
cash compensation and long-term compensation. Cash compensation is paid in the
form of a base salary and a discretionary cash bonus, and long-term compensation
is paid in the form of stock options. Bonuses are intended to provide executive
officers with an opportunity to earn additional cash compensation through
individual and Company performance. Stock options are intended to focus
executive officers on managing the Company from the perspective of owners with
an equity interest and to align their long-term compensation with the benefits
realized by the Company's stockholders.
SALARIES. The Compensation Committee determines the salaries of executive
officers on the basis of (i) the individual officer's salary grade within the
Company, scope of responsibilities and level of experience, (ii) the rate of
inflation, (iii) the range of the Company's salary increases for its employees
generally and (iv) the salaries paid to comparable officers in comparable
companies. The Compensation Committee has not commissioned a formal survey of
executive officer compensation at comparable companies, but has relied on
published salary surveys for indications of salary trends generally and at small
growth companies in particular.
The Compensation Committee did not recommend any changes during 1996 in the
base salaries of the Company's six executive officers. During the first 10
months of 1996, all six officers continued to participate in a voluntary
12-month salary reduction program for management that began in October 1995, and
only resumed receiving their 1995 base salaries in mid-October. Because the
Company is not yet operating profitably, and because, as discussed later (under
"Cash Bonuses" and "Stock Options"), the Committee considered the grant of stock
options the appropriate means to reward and encourage performance, the
Compensation Committee recommended a minimal increase for 1997 in the bases
salaries of executive officers. The aggregate base salaries for 1997 of the
Company's six executive officers will increase by less than 1% over their
aggregate base salaries for 1996.
CASH BONUSES. In assessing the performance of the Company's executive
officers' during 1996, the Compensation Committee considered in particular (i)
the Company's successful initial public offering in August, (ii) the Company's
acquisitions in January and May of the regulated medical waste management
businesses of four companies, including a subsidiary of Waste Management, Inc.,
and (iii) the Company's continued progress in implementing its acquisition
program as manifested by its acquisition in December of the major portion of the
remaining regulated medical waste business of Waste Management, Inc. Balanced
against these very positive factors, however, was the fact that the Company was
not yet operating profitably. The Compensation Committee concluded that the
appropriate means of rewarding performance during 1996 was by long-term
compensation in the form of stock options. The Compensation Committee
accordingly did not recommend the payment of cash bonuses to any of the
Company's executive officers for their performance during 1996.
The Compensation Committee did recommend (and the Board of Directors
approved) the adoption of a cash bonus program for executive officers for 1997.
Under this program, each of the Company's six executive officers will be
eligible for a cash bonus of up to 20%, 25% or 30% of his or her base salary
(depending upon salary grade), with the actual amount awarded being determined
by the Compensation Committee on the basis of specific Company and individual
performance goals and criteria.
STOCK OPTIONS. As noted earlier, the Compensation Committee concluded that
the grant of stock options was the appropriate means to acknowledge the efforts
of the Company's executive officers during
11
<PAGE>
1996 and to encourage their continued high levels of performance. In deciding on
the stock option grants to individual executive officers, the Compensation
Committee employed a formula taking into account each officer's salary grade and
the Company's financial performance as measured by a trailing average of the
market price of the Company's Common Stock. The Compensation Committee then
adjusted the formula-determined option grant by a factor reflecting the
Committee's assessment of the individual officer's performance, initiative and
contribution to the Company's success in meeting its performance objectives. In
February 1997, the Compensation Committee granted the Company's six executive
officers stock options for a total of 146,479 shares of Common Stock in respect
of their performance during 1996. Mr. Miller was granted an option for 60,000
shares, Mr. Tomasello was granted an option for 20,972 shares, Ms. Lee was
granted an option for 16,830 shares, Messrs. Bernert and Shea were each granted
options for 21,174 shares, and Mr. Polark was granted an option for 16,751
shares. All of these stock option grants were contingent upon the approval by
the Company's stockholders of the Company's 1997 Stock Option Plan.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee determines the compensation of the Company's
President and Chief Executive Officer, Mark C. Miller, on the basis of the same
criteria applicable to the Company's executive officers generally.
As noted earlier, the Compensation Committee recommended (and the Board of
Directors approved) continuing Mr. Miller's base salary of $235,000 through 1997
and not paying him a cash bonus for his services during 1996. As also noted
earlier, the Compensation Committee granted Mr. Miller a stock option for 60,000
shares of Common Stock in February 1997. The factors most influencing the
Committee's adjustment of the formula-determined grant to Mr. Miller were his
significant leadership in the Company's successful initial public offering, his
role in identifying and negotiating the Company's five acquisitions during 1996
(including, in particular, the Company's acquisition in December of the major
portion of the regulated medical waste business of Waste Management, Inc.) and
his management of the Company's growth strategy generally.
Compensation Committee
Jack W. Schuler, CHAIRMAN
Peter Vardy
L. John Wilkerson, Ph.D
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return (i.e., stock price
appreciation plus dividends) on the Company's Common Stock for the period from
August 23, 1996, when the Common Stock was first traded, through December 31,
1996, with the cumulative total return for the same period on the Nasdaq NMS
Composite Index, the Russell 3000 Index and an index of a peer group of 10
companies selected by the Company. The graph assumes that $100 was invested on
August 23, 1996 in the Company's Common Stock and in the stock represented by
each of the three indexes, and that all dividends were reinvested. The common
stock of the following companies has been included in the peer group index:
Allied Waste Industries, Inc.; Browning-Ferris Industries, Inc.; Isolyser
Company, Inc.; Isomedix, Inc.; Safety-Kleen Corporation; Sterile Recoveries,
Inc.; Steris Corporation; United Waste Systems, Inc.; U.S.A. Waste Services,
Inc.; and WMX Technologies, Inc.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STERICYCLE,
INC. NASDAQ NMS COMPOSITE INDEX RUSSELL 3000 INDEX PEER GROUP INDEX
<S> <C> <C> <C> <C>
8/23/96 $100 $100 $100 $100
12/31/96 $128 $113 $111 $110
</TABLE>
13
<PAGE>
ITEM 2
APPROVAL OF 1997 STOCK OPTION PLAN
INTRODUCTION
The Board of Directors adopted the Stericycle, Inc., 1997 Stock Option Plan
(the "1997 Plan") effective as of February 1, 1997, subject to approval by the
Company's stockholders. The 1997 Plan is intended to replace the Company's
Incentive Compensation Plan, which was adopted in August 1995 and under which
only 9,999 shares of the authorized total of 1,500,000 shares of Common Stock
remain available for the grant of future stock options and restricted stock
awards. No stock options have been granted or restricted stock awarded under the
Incentive Compensation Plan since the Company's initial public offering in
August 1996.
SUMMARY OF PRINCIPAL TERMS
The following summary describes the principal terms of the 1997 Plan. The
complete text of the 1997 Plan is attached to this Proxy Statement as Exhibit 1.
PURPOSE. The purpose of the 1997 Plan is to permit the Company to grant
stock options to selected officers, directors and employees of the Company and
its subsidiaries 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.
NUMBER OF SHARES. The 1997 Plan authorizes options to be granted for a
total of 1,500,000 shares of Common Stock. If an option expires unexercised or
is surrendered prior to the expiration of the plan, the shares subject to the
option once again become available for option grants under the plan.
TERM. The 1997 Plan has a 10-year term which began on February 1, 1997. No
option may be granted under the plan after January 31, 2007.
TYPES OF OPTIONS. The 1997 Plan authorizes two types of options to be
granted: (i) incentive stock options intended to satisfy the requirements of
Section422 of the Internal Revenue Code of 1986, as amended ("ISOs"); and (ii)
nonstatutory stock options ("NSOs"). A "nonstatutory" stock option is the
generic term for a stock option that does not qualify for special treatment
under the Internal Revenue Code.
ELIGIBILITY. The 1997 Plan authorizes ISOs to be granted to any employee of
the Company, or any subsidiary of the Company, and authorizes NSOs to be granted
to any employee of the Company or any subsidiary, any director of the Company or
any consultant to the Company. As of February 1, 1997, there were 321 employees
eligible to be granted ISOs and 327 employees and directors eligible to be
granted NSOs.
ADMINISTRATION. The 1997 Plan has a bifurcated administrative structure.
The plan is administered by the Company's Board of Directors in respect of all
eligible persons other than executive officers of the Company. The Board of
Directors may delegate its authority to administer the plan (other than its
authority to grant NSOs to directors) to a standing committee of the Board or to
another committee of the Board consisting of at least two directors.
The 1997 Plan is administered in respect of executive officers by the
Officer Options Committee. The Officer Options Committee is or consists of: (i)
the Compensation Committee of the Company's Board of Directors; or (ii) if any
member of the Compensation Committee is not an "outside" director, the members
of the Compensation Committee who are "outside" directors; or (iii) if there are
not at least two members of the Compensation Committee who are "outside"
directors, the full Board of Directors. Under the rules of the Securities and
Exchange Commission, an "outside" director is a director of the Company who: (i)
is neither an officer nor an employee; (ii) is not directly or indirectly
receiving compensation from
14
<PAGE>
the Company, for services rendered in any capacity other than as a director, in
an amount that would require proxy statement disclosure; and (iii) has no
interest in any transaction with the Company involving an amount that would
require proxy statement disclosure. The current members of the Compensation
Committee are Mr. Schuler, Mr. Vardy and Dr. Wilkerson. All three members are
"outside" directors and, accordingly, the Compensation Committee will serve as
the Officer Options Committee.
PLAN ADMINISTRATOR. For convenience, the term "Plan Administrator" is used
in the balance of this description of the 1997 Plan to refer both to (i) the
Company's Board of Directors (or the standing committee or other committee to
which the Board may delegate its authority), in the context of the plan's
administration in respect of all eligible persons other than executive officers,
and to (ii) the Officer Options Committee, in the context of the plan's
administration in respect of executive officers.
Subject to the express terms of the 1997 Plan, the Plan Administrator has
the power in its discretion to select the eligible persons to whom options are
to be granted and to determine the terms and conditions of each option granted.
The Plan Administrator also has the authority to interpret the plan, adopt and
revise policies and procedures to administer the plan, and take any other action
that it considers necessary or appropriate for the plan's administration.
EXERCISE PRICE. The Plan Administrator determines the exercise price of
each option granted under the 1997 Plan. The exercise price per share may not be
less than the last reported sales price of a share of Common Stock on the Nasdaq
National Market on the date that the stock option is granted (the "grant date").
EXERCISABILITY. The Plan Administrator determines whether each option
granted under 1997 Plan will be exercisable in full at one time or in two or
more installments at different times. The Plan Administrator also determines the
first date on which a stock option will become exercisable and the last date on
which it may be exercised (the "expiration date"). Under the 1997 Plan, the
maximum term of an option may not exceed 10 years. The Plan Administrator may
accelerate the exercisability of an option at any time prior to its expiration
date.
An unexercisable option held by an employee will lapse (i.e., the option
will become null and void) on the employee's termination of employment by the
Company or a subsidiary. An exercisable option held by an employee will also
lapse on the employee's termination of employment, but the Plan Administrator,
in its discretion, may extend the lapse date. The Plan Administrator may extend
the lapse date of a NSO to any date ending on or before the option's expiration
date, and may extend the lapse date of an ISO to the earlier of (i) any date no
later than 90 days after the date of the employee's termination or (ii) the
ISO's expiration date, unless the employee's employment terminated as a result
of his or her or death. In that case, the Plan Administrator may extend the
lapse date of the ISO to the earlier of (i) any date no later than the first
anniversary of the employee's death or (ii) the ISO's expiration date.
EXERCISE OF OPTIONS. An exercisable option granted under the 1997 Plan may
be exercised by giving written notice to the Plan Administrator (or its
designee) stating the number of shares of Common Stock in respect of which the
stock option is being exercised and tendering payment in full of the exercise
price of those shares. Payment of the exercise price must be made by a certified
or bank cashier's check. If permitted by the Plan Administrator (either in the
applicable option agreement or at the time), payment of the exercise price also
may be made by a personal check or by any one or combination of the following
methods: (i) delivering shares of Common Stock having a fair market value on the
date of exercise equal to the exercise price; (ii) directing the Company to
withhold, from the shares of the Common Stock otherwise issuable upon exercise
of the option, a number of shares having a fair market value on the date of
exercise equal to the exercise price; (iii) surrendering exercisable options
granted under the plan having a fair market value on the date of exercise equal
to the exercise price; or (iv) any other method of payment authorized by the
Plan Administrator.
15
<PAGE>
SPECIAL LIMITATIONS ON ISOS. In accordance with the requirements of the
Internal Revenue Code of 1986, as amended, ISOs are subject to certain special
limitations. The principal limitation is that total fair market value of the
shares of Common Stock subject to ISOs which are exercisable for the first time
in any given calendar year by an employee may not exceed $100,000 (measured by
the value of the shares as of the grant date of each ISO).
TRANSFERABILITY. No option granted under the 1997 Plan may be sold, pledged
or otherwise transferred except at death in accordance with the decedent's will
or the applicable laws of intestacy.
AMENDMENT AND TERMINATION. The Company's Board of Directors may amend,
suspend or terminate the 1997 Plan at any time. The Company's stockholders are
required to approve any amendment that would materially increase the number of
shares of Common Stock for which NSOs may be granted or that would increase the
number of shares of Common Stock for which ISOs may be granted under the plan.
FEDERAL INCOME TAX CONSEQUENCES. The federal income tax treatment of ISOs
and NSOs is significantly different.
The grant of an ISO or NSO will not result in any federal income tax
consequences to the holder of the option or the Company.
The exercise of an ISO will not result in any regular income tax to the
holder of the option or any income tax consequences to the Company. The exercise
of an ISO, however, may affect the holder's alternative minimum tax liability.
Unless the shares acquired upon exercise of the ISO are disposed of in the same
year, the holder's alternative minimum taxable income will be increased in an
amount equal to the excess of (i) the fair market on the date of exercise of the
shares acquired over (ii) the exercise price of the ISO. The exercise of a NSO
will result in ordinary income to the holder in an amount equal to the excess of
(i) the fair market value on the date of exercise of the shares acquired over
(ii) the exercise price of the NSO. The Company will be entitled to an income
tax deduction in the same amount.
Gain on the sale of shares acquired upon the exercise of an ISO is measured
by the excess of (i) the amount realized on the sale of the shares over (ii) the
exercise price of the ISO. If the shares acquired upon the exercise of an ISO
are not sold either within one year from the date of exercise or two years from
the grant date of the ISO, the holder's gain on the sale of the shares will be
treated as long-term capital gain. If the shares are sold within either of these
periods, a portion of the holder's gain will be treated as ordinary income and
the balance, if any, will be treated as short-term or long-term capital gain
(depending upon whether the shares were held for more than one year). The
portion treated as ordinary income is equal to the excess of (i) the lesser of
(a) the fair market value on the date of exercise of the shares sold or (b) the
amount realized on the sale of the shares, over (ii) the exercise price of the
ISO. The Company will be entitled to an income tax deduction in the year of sale
in an amount equal to the portion of the holder's gain treated as ordinary
income.
Gain on the sale of shares acquired upon exercise of a NSO is measured by
the excess of (i) the amount realized on the sale of the shares over (ii) the
holder's adjusted basis in those shares. The holder's adjusted basis is the sum
of (i) the exercise price of the NSO and (ii) the ordinary income realized upon
the exercise of the NSO. The holder's gain on the sale of the shares will be
treated as long-term or short-term capital gain (depending upon whether the
shares were held for more than one year).
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors believes that adoption of the 1997 Stock Option Plan
is necessary in order to enable the Company to continue to grant stock options
to attract, motivate and retain the Company's executive officers and employees
and to align their long-term compensation with the benefits realized by the
Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE 1997 STOCK OPTION PLAN.
16
<PAGE>
ITEM 3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed Ernst & Young LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1997. Ernst & Young
LLP has served as the Company's independent public accountants since the
Company's incorporation in March 1989. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting to respond to appropriate questions
and will have the opportunity to make a statement if they desire to do so.
Ratification of the appointment of Ernst & Young LLP as the Company's
independent public accountants will require the affirmative vote of a majority
of the shares of Common Stock represented in person or by proxy and entitled to
vote at the Annual Meeting. In the event that the Company's stockholders do not
ratify the appointment of Ernst & Young LLP, the Board of Directors may
reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to come before the Annual Meeting for consideration by the
Company's stockholders. If any other business properly comes before the meeting,
the persons named as proxies in the accompanying proxy card will vote the shares
of Common Stock represented by the proxy in accordance with their judgment.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Any proposal of a stockholder intended to be presented for consideration at
the Company's 1998 Annual Meeting of Stockholders must be received by the
Company no later than November 27, 1997 in order to be eligible for inclusion in
the Company's proxy statement for the meeting. Stockholder proposals must
satisfy the requirements of the rules of the Securities and Exchange Commission
in order to be included. Stockholder proposals should be sent to the Secretary
of the Company at 1419 Lake Cook Road, Suite 410, Deerfield, Illinois 60015.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers and persons beneficially owning more than 10% of
the Company's outstanding Common Stock to file periodic reports of stock
ownership and stock transactions with the Securities and Exchange Commission. On
the basis solely of a review of copies of these reports, the Company believes
that all filing requirements for 1996 were satisfied in a timely manner with two
exceptions. Jack W. Schuler, a director of the Company, and Michael J. Bernert,
an executive officer of the Company, each filed one report one month late (in
Mr. Schuler's case, in respect of the purchase by his wife and trusts for his
children in the Company's initial public offering of a total of 2,500 shares, as
to which Mr. Schuler disclaims beneficial ownership, and in Mr. Bernert's case,
in respect of his purchase in the Company's initial public offering of a total
of 3,000 shares).
ADDITIONAL INFORMATION
The cost of soliciting proxies on the accompanying proxy card will be borne
by the Company. Some officers and regular employees of the Company may solicit
proxies by personal conversations, mail, telephone or telecopier, but will not
receive any additional compensation for their services. The Company
17
<PAGE>
may reimburse brokers and others for their reasonable expenses in forwarding
proxy solicitation material to the beneficial owners of shares of the Company's
Common Stock.
With the Company's 1996 Annual Report furnished to all stockholders of
record on the record date, the Company has provided a copy of its Annual Report
on Form 10-K for the year ended December 31, 1996, as filed with the Securities
and Exchange Commission. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
STOCKHOLDER OF RECORD ON THE RECORD DATE, UPON WRITTEN REQUEST, AN ADDITIONAL
COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996.
REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY AT 1419 LAKE COOK
ROAD, SUITE 410, DEERFIELD, ILLINOIS 60015.
18
<PAGE>
EXHIBIT 1
STERICYCLE, INC.
1997 STOCK OPTION PLAN
ARTICLE 1
PURPOSE
The purpose of this Plan is to permit the Company to grant stock options to
selected officers, directors and employees of the Company and its Subsidiaries,
and to selected consultants to the Company, 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, par value $.01 per share.
CLOSING PRICE means the last reported sales price 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.
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 5.
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 ("Item 404(a)"), (iii) does not possess an interest in any other
transaction for which disclosure would be required under Item 404(a) and (iv) is
not engaged in a business relationship for which disclosure would be required
under Item 404(a).
NSO is defined in Article 5.
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.
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PLAN means this plan, as it may be amended. The name of this Plan is the
"Stericycle, Inc. 1997 Stock Option Plan."
PLAN ADMINISTRATOR means, in the context of the administration of this Plan
in respect of Eligible Persons other than Officers, the Board or the committee
of the Board to which the Board has delegated its authority in accordance with
Paragraph 7.1, and in the context of the administration of this Plan in respect
of Officers, the Officer Options Committee.
OFFICER-EMPLOYEE means an Officer who is also an Employee.
10% STOCKHOLDER means an Officer or Employee who, at the time that he or she
is granted an ISO, owns more than 10% of the Company's outstanding Common Stock.
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 employment by the Company
or a Subsidiary of an Employee or Officer-Employee. A transfer of employment
from the Company to a Subsidiary, or from a Subsidiary to the Company or to
another Subsidiary, will not be considered a termination of employment.
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
3.1 EFFECTIVE DATE. When adopted by the Board, this Plan shall become
effective retroactive to February 1, 1997, but shall be subject to approval by
the Company's stockholders. Options may be granted under this Plan (but may not
be exercised) prior to stockholder approval, but if for any reason stockholder
approval is not obtained on or before December 31, 1997, all such options shall
be cancelled.
3.2 TERM. This Plan shall have a term of 10 years expiring on January 31,
2007. No Option may be granted under this Plan after its expiration.
ARTICLE 4
SHARES AVAILABLE UNDER PLAN
4.1 MAXIMUM NUMBER OF SHARES. The total number of shares of Common Stock
for which Options may be granted under this Plan is 1,500,000 shares (subject to
adjustment as provided in Paragraph 10.1).
4.2 SHARES ADDED BACK. If an Option or Installment expires unexercised or
is surrendered prior to January 31, 2007, 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 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 Section422 of the Internal
Revenue Code of 1986, as amended ("ISOs") and (ii) nonstatutory stock options
("NSOs").
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ARTICLE 6
ELIGIBILITY
NSOs may be granted 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. Except for the Board's authority to
administer the Plan in respect of Directors, the Board may delegate its
authority to administer the Plan 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. This 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 to
Eligible Persons other than Officers, and the Officers Option Committee shall
have sole authority to grant Options 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, (ii) designate an Option as an ISO or NSO, (iii)
determine the number of shares of Common Stock for which an Option is granted
and (iv) determine the other terms, conditions, restrictions and limitations
applicable to an Option.
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 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 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 an 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 also 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 an
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<PAGE>
exercisable 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 exercisable Installment of an ISO) to the earlier of (i) any
date no later than 90 days after the Termination Date or (ii) the applicable
Expiration Date, unless the termination of the Employee or Officer-Employee
occurred as a result of his or her death. In this case, the Plan Administrator
may extend the expiration to the earlier of (i) any date no later than the first
anniversary of the death of the Employee or Officer-Employee 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) a personal check; (ii) delivery of shares of
Common Stock having a fair market value on the date of exercise equal to the
exercise price; (iii) 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; (iv) 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); (v) any combination of the preceding methods
of payment; or (vi) 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).
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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, if any, 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) a personal check; (ii) delivery of shares of Common Stock
having a fair market value on the date of exercise equal to the withholding
obligation; (iii) 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; (iv) any combination of the preceding methods of payment; or (v) by
any other method of payment authorized by the Plan Administrator.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 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 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 10.1 shall be
made in the Board's discretion, and its decisions shall be final and binding.
10.2 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 that would materially increase the number of shares of Common
Stock for which NSOs may be granted or that would increase the number of shares
of Common Stock for which ISOs may be granted (other than an amendment
authorized under Paragraph 10.1). If this Plan is terminated, the provisions of
this 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 the holder of any outstanding Option without his or her consent.
10.3 NO RIGHT TO EMPLOYMENT. Nothing in this Plan or in any Option
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.
10.4 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.
10.5 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.
10.6 GOVERNING LAW. This Plan and all Option Agreements shall be governed
in accordance with the laws of the State of Illinois.
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<PAGE>
PROXY PROXY
STERICYCLE, INC.
1419 Lake Cook Road, Suite 410
Deerfield, Illinois 60015
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STERICYCLE, INC.
I or we hereby appoint each of Jack W. Schuler, Mark C. Miller and James F.
Polark (the "proxies") as my or our proxy, each with the power to appoint his
substitute, and authorize each of them acting alone to vote all of the shares
of Common Stock, par value $.01 per share, of Stericycle, Inc. (the
"Company") held of record by me or us on March 14, 1997 at the 1997 Annual
Meeting of Stockholders to be held on April 28, 1997 (the "Annual Meeting"),
and at any adjournment of the Annual Meeting.
If properly completed and returned, this Proxy will be voted as directed. If no
direction is given, this Proxy will be voted in accordance with the
recommendations of the Company's Board of Directors, i.e., FOR each of the six
nominees for election as a director (Item 1), FOR approval of the 1997 Stock
Option Plan (Item 2) and FOR ratification of the appointment of Ernst & Young
LLP as the Company's independent public accountants (Item 3). It will be voted
in the best judgement of the proxies in respect of any other business that
properly comes before the Annual Meeting.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED REPLY ENVELOPE
(Continued and to be signed on the reverse side.)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY / /
1. ELECTION OF DIRECTORS.
Jack W. Schuler, Mark C. Miller, Patrick F. Graham, John Patience,
Peter Vardy, L. John Wilkerson, Ph.D.
FOR ALL / / WITHHOLD ALL / / FOR ALL (EXCEPT NOMINEE(S) WRITTEN BELOW) / /
2. Approval of 1997 Stock Option Plan
FOR / / AGAINST / / ABSTAIN / /
3. Ratification of appointment of Ernst & Young LLP as the Company's
independent public accountants for the year ending December 31, 1997
FOR / / AGAINST / / ABSTAIN / /
Instruction: Please sign exactly as your name appears immediately to the
left. If signing as a fiduciary (for example, as a trustee), please indicate
your fiduciary capacity. If signing on behalf of a corporation, partnership
or other entity, please indicate your title or other authorized capacity. If
the shares for which this Proxy is given are held jointly, both joint tenants
must sign.
Date: ____________________________________________, 1997
Signature:______________________________________________
Signature:______________________________________________
Title or Capacity:______________________________________
