<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[x] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Stericycle
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Stericycle
- --------------------------------------------------------------------------------
(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> 2
STERICYCLE, INC.
___________________
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 5, 1999
___________________
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Stericycle, Inc. (the "Company"), which will be held at the Rosemont Suites
Hotel, 5500 North River Road, Rosemont, Illinois 60018 on Thursday, August 5,
1999, beginning at 10:00 a.m. (Chicago time).
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following items of business:
1. Election of a Board of Directors to hold office until the Annual
Meeting of Stockholders in 2000
2. A proposal to amend the Company's certificate of incorporation to
authorize a class of preferred stock
3. A proposal to authorize the issuance and sale, for cash, of up to
5,000,000 shares of the Company's Common Stock, or securities
convertible into up to 5,000,000 shares of Common Stock, in one or
more privately negotiated transactions to be completed no later than
July 31, 2000
4. Ratification of the appointment of Ernst & Young LLP as the Company's
independent public accountants for the year ending December 31, 1999
5. 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
June 28, 1999 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 who 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 Mark C. Miller
Chairman of the Board President and Chief Executive Officer
July 7, 1999
Lake Forest, Illinois
<PAGE> 3
STERICYCLE, INC.
28161 North Keith Drive
Lake Forest, Illinois 60045
___________________
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 5, 1999
___________________
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 1999 Annual Meeting of Stockholders (the "Annual Meeting"), to be
held at the Rosemont Suites Hotel, 5500 North River Road, Rosemont, Illinois on
Thursday, August 5, 1999, beginning at 10:00 a.m. (Chicago time). This Proxy
Statement and the accompanying materials are being mailed to stockholders
beginning on or about July 7, 1999.
GENERAL
Common Stock. The Company's authorized capital stock consists of Common
Stock, par value $0.01 per share ("Common Stock"). As of May 31, 1999, there
were 14,552,417 shares of Common Stock outstanding.
Stockholders Entitled To Vote. Only stockholders of record at the close of
business on the record date of June 28, 1999 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 (Item 1). The
affirmative vote of holders of a majority of the shares of Common Stock
outstanding as of the record date will be required to approve the proposal to
amend the Company's certificate of incorporation to authorize a class of
preferred stock (Item 2). 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, entitled to vote and voting 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 (Item 1) or the vote on the
proposal to authorize the issuance and sale of up to 5,000,000 shares of Common
Stock or securities convertible into up to 5,000,000 shares of Common Stock
(Item 3)
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(which, as noted, require the affirmative vote of a plurality and a majority,
respectively, of the votes cast). Shares for which authority is withheld will
have the effect of a vote against the proposal to amend the Company's
certificate of incorporation to authorize the creation of a class of preferred
stock (Item 2) (which, as noted, requires the affirmative vote of holders of a
majority of the shares of Common Stock outstanding as of the record date).
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 and will count
as a vote against the proposal to authorize the creation of a class of preferred
stock (Item 2), but will have no effect on any of the other matters acted upon
at the meeting.
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
PROXY HOLDERS WILL VOTE THE SHARES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS.
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 May 31, 1999. 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 May 31,
1999 of more than 5% of the Company's outstanding Common Stock:
SHARES
BENEFICIALLY
NAME AND ADDRESS OWNED PERCENTAGE
---------------- ----- ----------
The TCW Group, Inc. (1).......................... 785,300 5.42%
865 South Figueroa Street
Los Angeles, California 90017
_______________________________
(1) The shares shown as beneficially owned by The TCW Group, Inc., are derived
from a Schedule 13G (Amendment No. 1), dated February 12, 1999, jointly
filed and furnished to the Company by The TCW Group, Inc., a parent holding
company, and Robert Day, an individual who may be deemed to control The TCW
Group, Inc., reporting that, for reporting purposes, each of them holds
sole voting and dispositive power over 785,300 shares. The Schedule 13G
indicates that: (i) no shares are held directly by The TCW Group, Inc.;
(ii) The TCW Group, Inc. indirectly holds shares through its subsidiaries,
Trust Company of the West, TCW Asset Management Company and TCW Funds
Management, Inc.; and (iii) aside from the indirect holdings of The TCW
Group, Inc., Robert Day does not directly or indirectly hold any of these
shares.
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<PAGE> 5
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table provides certain information regarding the beneficial
ownership of Common Stock as of May 31, 1999 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).............................................. 894,515 51,969 6.48%
Mark C. Miller(4)............................................... 543,932 136,173 4.63%
Rod F. Dammeyer(5).............................................. 11,000 14,801 *
Patrick F. Graham............................................... 9,783 19,567 *
John Patience................................................... 211,057 52,439 1.80%
Peter Vardy(6).................................................. 163,362 43,549 1.42%
L. John Wilkerson, Ph.D.(7)..................................... 29,226 -- *
Anthony J. Tomasello............................................ 129,013 38,937 1.15%
Frank J.M. ten Brink............................................ 53 30,935 *
Linda D. Lee.................................................... 69,333 -- *
Michael J. Bernert(8)........................................... 6,371 82,788 *
All directors and executive officers as a group (12 persons)(9) 2,007,656 488,944 16.59%
</TABLE>
* Less than 1%.
(1) This column shows shares of Common Stock issuable upon the exercise of
stock options or warrants exercisable as of or within 60 days after May 31,
1999.
(2) Shares of Common Stock issuable upon the exercise of stock options or
warrants exercisable as of or within 60 days after May 31, 1999 are
considered outstanding for purposes of computing the percentage of the
person holding the option or warrant but are not considered outstanding 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, and 30,000 shares owned by
a family foundation of which Mr. Schuler is the sole trustee, as to which
Mr. Schuler disclaims beneficial ownership.
(4) The shares shown as beneficially owned by Mr. Miller include 76,346 shares
owned by trusts for the benefit of his sons, as to which Mr. Miller
disclaims beneficial ownership.
(5) The shares shown as beneficially owned by Mr. Dammeyer include 1,000 shares
owned by his wife, as to which Mr. Dammeyer disclaims beneficial ownership.
(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 290,484 shares
(including 16,279 shares issuable upon the exercise of stock
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<PAGE> 6
options and warrants exercisable as of or within 60 days after May 31,
1999). 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.
(8) The shares shown as beneficially owned by Mr. Bernert include 1,000 shares
owned by his wife, as to which Mr. Bernert disclaims beneficial ownership.
(9) The group of directors and executive officers does not include Ms. Lee, who
resigned as an employee in March 1999.
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is currently comprised of seven
directors. All seven directors will be elected at the Annual Meeting. Each
director elected will hold office until the Company's Annual Meeting of
Stockholders in 2000 or until his successor is elected and qualified.
NOMINEES FOR DIRECTOR
The following table provides certain information regarding the nominees for
election as directors. All seven 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 58
Mark C. Miller....................... President, Chief Executive Officer and a Director 43
Rod F. Dammeyer...................... Director 58
Patrick F. Graham.................... Director 58
John Patience........................ Director 51
Peter Vardy.......................... Director 68
L. John Wilkerson, Ph.D. ............ Director 55
</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 and Medtronic, Inc.
and as Chairman of the Board of Directors of Ventana Medical Systems, Inc. He is
a co-founder of Crabtree Partners LLC, a private investment firm in Lake Forest,
Illinois, which was formed in June 1995. Mr. Schuler received a B.S. degree in
mechanical engineering from Tufts University and a 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 and is a director of Lake Forest Hospital. Mr.
Miller received a B.S. degree in computer science from Purdue University, where
he graduated Phi Beta Kappa.
Rod F. Dammeyer has served as a director of the Company since January 1998.
He is the Managing Partner of Equity Group Corporate Investments and Vice
Chairman and a director of Anixter International Inc., where he has been
employed since 1985. Mr. Dammeyer is a director of Antec Corporation, CNA Surety
Corporation, Grupo Azucarero Mexico, IMC Global, Inc., Jacor Communications,
Inc., Matria Healthcare,
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<PAGE> 7
Inc., Metal Management, Inc., TeleTech Holdings, Inc. and Transmedia Network,
Inc., and a trustee of Van Kampen Investments, Inc. closed-end funds. He
received a B.S. degree from Kent State University.
Patrick F. Graham has served as a director of the Company since May 1991.
Mr. Graham is President and Chief Executive Officer and a director of World
Corporation and a director of Intelidata Technologies, Inc. He was a co-founder
of Bain & Company, Inc., a management consulting firm in Boston, Massachusetts,
where he served in a number of positions from 1973 to 1997. He received a B.A.
degree in economics from Knox College and a 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
LLC, a private investment firm in Lake Forest, Illinois, which was formed in
June 1995. From January 1988 to March 1995, Mr. Patience was a general partner
of Marquette Venture Partners, L.P., a venture capital fund which he co-founded
and which led the Company's initial capitalization. Mr. Patience is a director
of TRO Learning, Inc. and Vice Chairman of the Board of Directors of Ventana
Medical Systems, Inc. He received B.A. and B.L degrees from the University of
Sydney in Sydney, Australia, and a M.B.A. degree from the Wharton School of
Business of the University of Pennsylvania.
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., 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. Dr. Wilkerson has served with The
Wilkerson Group since 1980 and prior to its acquisition by IBM Corporation was
its Chairman. Dr. Wilkerson also serves as a general partner of Galen Partners,
L.P. and Galen Partners International, L.P., affiliated health care venture
capital funds. He is a director of British Biotech Plc. and several privately
held health care 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.
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 stock
option plans as they apply to executive officers. The Audit Committee,
consisting of Messrs. Dammeyer (Chairman), Patience and Vardy, 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 six meetings during 1998 (including one meeting
by teleconference) and acted without a meeting by unanimous written consent on a
number of occasions. The Compensation and Audit Committees each held one meeting
during 1998.
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<PAGE> 8
Messrs. Dammeyer, Graham, Miller and Vardy each attended all of the
meetings of the Board of Directors during 1998. Mr. Schuler and Dr. Wilkerson
each were unable to attend one meeting, and Mr. Patience was unable to attend
two meetings. With the exception of Mr. Graham, who was then a member of the
Audit Committee, 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 approved by the
Company's stockholders in July 1996, authorizes nonstatutory stock options to
purchase 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.
As of each annual meeting, each incumbent outside director who is reelected
as a director at the annual meeting is automatically granted an option to
purchase 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
closing price of a share of Common Stock (the "closing price") on the date of
the annual meeting; and each outside director who is elected as a director for
the first time is automatically granted an option to purchase 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). In accordance with these
terms, each of the six incumbent outside directors who were reelected as
directors at the 1998 Annual Meeting in April 1998 was granted an option to
purchase 5,895 shares at an exercise price of $14.25 per share. In addition,
with the approval of the full Board (other than Mr. Dammeyer), Mr. Dammeyer, who
was initially elected as a director by the Board in January 1998, was granted an
option to purchase 28,500 shares at an exercise price of $14.00 per share in
February 1998, consistent with the option grant that he would have received if
he had been elected as a director for the first time at the 1998 Annual Meeting.
The exercise price of each option granted under the plan is the closing
price of a share of Common Stock on the date of grant, and the term of each
option is six years from the date of grant. Each option vests in 12 equal
monthly 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
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 "outside" remuneration received by reason
of his relationship with such corporation, partnership or other entity. In
accordance with a contractual obligation, Dr. Wilkerson assigned to Galen
Partners, L.P. the option to purchase 5,895 shares that he was granted under the
plan in respect of his reelection as a director at the 1998 Annual Meeting.
CERTAIN TRANSACTIONS
In December 1998, the Company entered into a subordinated loan agreement
with a group of lenders
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consisting of six of the Company's seven directors (Mr. Graham being the only
director not participating), pursuant to which the lenders agreed to provide the
Company with up to $5,500,000 of short-term financing upon the Company's
request. In December 1998, the Company borrowed $2,750,000, and in January 1999,
the Company borrowed the remaining balance available under the loan agreement.
Each loan bore interest at 6.0% per annum and was repaid in March 1999 following
the completion in February 1999 of the Company's public offering which was
pending when the loans were made. Under the terms of the subordinated loan
agreement, the lenders were granted five-year warrants to purchase shares of the
Company's Common Stock, exercisable at any time after the first anniversary of
the grant date. Upon entering into the loan agreement, each lender was granted a
warrant to purchase a number of shares of Common Stock equal to the amount of
the lender's loan commitment multiplied by 0.05 and then divided by the closing
price of a share of Common Stock on the trading day immediately prior to the
date of the lender's execution of the loan agreement. This closing price is also
the exercise price of the warrant. In addition, at the time of each loan, each
lender was granted a warrant to purchase a number of shares of Common Stock
equal to the amount of the loan multiplied by 0.30 and then divided by the
closing price of a share of Common Stock on the trading day immediately prior to
date of disbursement of the lender's loan. This closing price is also the
exercise price of the warrant. In connection with their loans, the lenders were
granted warrants to purchase, in the aggregate, 18,970 shares of Common Stock at
$14.50 per share, 43,551 shares of Common Stock at $15.50 per share and 59,092
shares of Common Stock at $16.50 per share.
In May 1996, the Company borrowed $1,000,000 under a short-term loan from a
group of seven lenders consisting of directors (Messrs. Schuler, Miller,
Patience and Vardy), executive officers (Messrs. Tomasello and Bernert and the
Company's former Vice President, Finance) and stockholders (Galen Partners, L.P.
and Galen Partners International, L.P.). 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 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, in the aggregate, 226,036 shares of the Company's 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. During 1998, warrants
to purchase 35,940 shares were exercised, and at December 31, 1998, warrants to
purchase 190,096 shares remained outstanding.
7
<PAGE> 10
EXECUTIVE COMPENSATION
1998 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 1998, 1997 and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
FISCAL ------------------- NUMBER OF SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) UNDERLYING OPTIONS(2) Compensation(3)
--------------------------- ---- ------ ----- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Mark C. Miller(4)........................... 1998 $ 235,000 $ 30,500 51,429 $ 300
President and Chief Executive Officer 1997 235,000 -- 60,000 300
1996 148,481 -- 41,220 300
Anthony J. Tomasello........................ 1998 150,000 1,750 22,000 300
Executive Vice President and 1997 150,000 -- 20,972 300
Chief Technical Officer 1996 136,025 -- 9,946 300
Frank J.M. ten Brink(5)..................... 1998 150,000 16,867 20,429 300
Vice President, Finance and 1997 70,619 -- 55,000 300
Chief Financial Officer 1996 -- -- -- --
Linda D. Lee(6)........................... 1998 130,000 13,400 11,286 300
Vice President, Regulatory Affairs 1997 130,000 -- 16,830 300
and Quality Assurance 1996 120,583 -- 5,086 300
Michael J. Bernert........................ 1998 127,462 21,569 11,000 300
Vice President, Sales and Marketing 1997 123,833 -- 21,174 300
1996 112,615 -- 22,101 300
</TABLE>
___________________
(1) The bonuses paid during 1998 to Messrs. Miller, Tomasello, ten Brink and
Bernert and Ms. Lee were awarded under the Company's cash bonus program for
executive officers, pursuant to which executive officers may elect, in
advance of any award, to forego some portion or all of any bonus otherwise
payable under the bonus program and receive instead an immediately vested
nonstatutory stock option at an exercise price per share equal to the
closing price of a share of the Company's Common Stock on the bonus award
date (the "closing price"). For the bonuses paid in 1998, the number of
shares for which an option was granted was determined by dividing the
product of four times the amount of the cash bonus that a participating
executive officer elected to forego by the closing price. See "Report of
the Compensation Committee on Executive Compensation--Cash Bonuses."
Without giving effect to their prior elections to forego portions of their
cash bonuses, the cash bonuses paid to Messrs. Miller, Tomasello and ten
Brink and Ms. Lee would have been $70,500, $36,750, $21,867 and $28,400,
respectively. Mr. Bernert did not elect to forego any portion of his cash
bonus.
(2) The stock options granted during 1998 to Messrs. Miller, Tomasello and ten
Brink and Ms. Lee include options to purchase 11,429, 10,000, 1,429 and
4,286 shares, respectively, granted to them in lieu of portions of the cash
bonuses otherwise payable to them under the Company's cash bonus program
for executive officers. See Note 1.
(3) These amounts represent the Company's matching contribution under the
Company's 401(k) plan. For 1996, 1997 and 1998, the matching contribution
was 30% of the first $1,000 contributed by each participant.
(4) The salary for 1996 shown for Mr. Miller includes $22,917 paid to him in
February 1997. This amount
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<PAGE> 11
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. The
amount in question has been excluded from the salary for 1997 shown for Mr.
Miller.
(5) Mr. ten Brink joined the Company in June 1997.
(6) Ms. Lee resigned as an employee in March 1999.
1998 STOCK OPTION GRANTS
The following table provides certain information regarding stock options
granted to the named executive officers in 1998. 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 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN PRICE PER EXPIRATION OPTION TERM(4)
OPTIONS(1) FISCAL YEAR(2) SHARE(3) DATE 5% 10%
------- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Mark C. Miller.................... 8,545 2.90% $ 13.625 3/31/08 $ 73,880 $ 187,610
11,429 3.88% 14.00 3/31/08 101,499 257,726
31,455 10.69% 13.625 3/31/08 271,959 690,610
Anthony J. Tomasello.............. 12,000 4.08% 13.625 3/31/08 103,751 263,466
10,000 3.40% 14.00 3/31/08 88,809 225,502
Frank J.M. ten Brink.............. 7,725 2.62% 13.625 3/31/08 66,790 169,606
1,429 0.49% 14.00 3/31/08 12,691 32,224
11,275 3.83% 13.625 3/31/08 97,483 247,548
Linda D. Lee...................... 7,000 2.38% 13.625 3/31/08 60,522 153,688
4,286 1.46% 14.00 3/31/08 38,063 94,650
Michael J. Bernert................ 11,000 3.74% 13.625 3/31/08 95,106 241,510
</TABLE>
____________________________________
(1) All of the stock options granted to the named executive officers were
granted under the Company's 1997 Stock Option Plan. Each option granted
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. The options for 11,429, 10,000, 1,429
and 4,286 shares granted to Messrs. Miller, Tomasello and ten Brink and Ms.
Lee, respectively, were granted in lieu of portions of the cash bonuses
otherwise payable to them under the Company's cash bonus program for
executive officers. See "Report of the Compensation Committee on Executive
Compensation--Cash Bonuses."
(2) The percentages shown in the table reflect options for a total of 294,368
shares granted to employees during 1998. All of these options were granted
under the Company's 1997 Stock Option Plan.
(3) The exercise price per share shown in the table is equal to the closing
price of a share of Common Stock on the date of grant.
(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 appreciates
9
<PAGE> 12
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.
1998 OPTION EXERCISES AND YEAR END OPTION VALUES
The following table provides certain information regarding stock option
exercises in 1998 by the named executive officers and the value of the stock
options that they held at December 31, 1998. 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 VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES FISCAL YEAR END FISCAL YEAR END(2)
ACQUIRED VALUE --------------- ---------------
ON EXERCISE REALIZED(1) VESTED UNVESTED VESTED UNVESTED
----------- -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Mark C. Miller................... 26,400 $ 300,246 95,904 90,941 $ 1,163,146 $ 579,651
Anthony J. Tomasello............. 6,000 81,750 20,925 28,121 133,756 173,814
Frank J.M. ten Brink............. -- -- 17,925 57,504 137,067 360,345
Linda D. Lee..................... 11,354 159,532 5,658 19,292 21,770 123,791
Michael J. Bernert............... 2,000 29,940 62,361 31,929 901,741 238,446
</TABLE>
_________________________________
(1) The value realized was determined by multiplying the number of option
shares acquired by the closing price of a share of the Company's Common
Stock on the date of exercise, and then subtracting the aggregate exercise
price.
(2) The value of in-the-money stock options was determined by multiplying the
number of vested (exercisable) or unvested (unexercisable) options by
$16.125 per share, which was the closing price of a share of Common Stock
on December 31, 1998, and then subtracting the aggregate exercise price.
STOCK OPTION PLANS
The Company has adopted two stock option plans in addition to the Directors
Stock Option Plan: (i) the 1997 Stock Option Plan (the "1997 Plan"), which was
approved by the Company's stockholders at the 1997 Annual Meeting; and (ii) the
Incentive Compensation Plan (the "1995 Plan"), which was adopted in August 1995.
Each plan authorizes a total of 1,500,000 shares of Common Stock to be issued
pursuant to options granted under the plan or, in the case of the 1995 Plan,
restricted stock awarded under the plan. If an option granted under either plan
expires unexercised or is surrendered, or, in the case of the 1995 Plan, 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 or, in the case of the 1995 Plan, restricted stock
awards.
As of December 31, 1998, 924,224 shares were available for future option
grants under the 1997 Plan, and 377,942 shares were available for future option
grants or restricted stock awards under the1995 Plan. No option grants or
restricted stock awards were made under the 1995 Plan during 1998. Each plan has
a 10-year term, and no option may be granted under the 1997 Plan after its
expiration in January 2007, and no option may be granted or shares of restricted
stock awarded under the 1995 Plan after its expiration in July 2005.
10
<PAGE> 13
Both plans provide 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, in the case of the 1995 Plan,
restricted stock awards. Incentive stock options may be granted and, in the case
of the 1995 Plan, shares of restricted stock may be awarded only to employees of
the Company. Nonstatutory stock options may be granted under the 1997 Plan to
employees, directors and consultants and may be granted under the 1995 Plan to
employees and consultants. Both plans are 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, in the case of
the 1995 Plan, restricted stock is awarded and, subject to the provisions of the
particular 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 under the
1995 Plan, the purchase price, if any, and the restrictions applicable to the
award.
The exercise price per share of options granted under either plan must be
at least equal to the closing price of a share of Common Stock on the date of
grant, with the exception that the exercise price per share 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 granted under either plan may not exceed 10 years.
An option may be exercised only when it is vested and, in the case of an option
granted to an employee, 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 discretion of the Board of Directors or the Compensation
Committee, as the case may be, 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 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
1998, the Company made matching contributions of 30% of the first $1,000
contributed by participants. 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.
11
<PAGE> 14
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 any formal surveys 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 in the base
salaries of the Company's executive officers for 1998. The base salaries for
1998 of the Company's executive officers were the same as their base salaries
for 1997.
Cash Bonuses. In March 1998, the Compensation Committee recommended (and
the Board of Directors approved) the adoption of a cash bonus program for
executive officers. Under this program, each of the Company's executive officers
is 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. Pursuant to this program and on the Committee's
recommendation, in March 1998 the Company paid cash bonuses to Messrs. Miller,
Tomasello, ten Brink and Bernert and Ms. Lee of $30,500, $1,750, $16,867,
$21,569 and $13,400, respectively, for their performance during 1997. (Without
giving effect to the prior elections of Messrs. Miller, Tomasello and ten Brink
and Ms. Lee to receive stock options in lieu of cash, pursuant to the program
described in the next paragraph, their bonuses would have been $70,500, $36,750,
$21,867, and $28,400, respectively. Mr. Bernert did not elect to forego any
portion of his cash bonus.)
In keeping with the Company's philosophy of encouraging stock ownership by
management, in March 1998, the Compensation Committee recommended (and the Board
of Directors adopted) a program to allow executive officers to elect, in advance
of any award, to forego some portion or all of any bonus otherwise payable under
the cash bonus program and to receive instead an immediately vested nonstatutory
stock option at an exercise price per share equal to the closing price of a
share of the Company's Common Stock on the bonus award date (the "closing
price"). For the bonuses paid in March 1998, the number of shares for which an
option was granted to a participating executive officer was determined by
dividing the product of four times the amount of the cash bonus that he or she
elected to forego by the closing price. Pursuant to this program and in
accordance with the officers' prior elections, in March 1998, the Company
granted Messrs. Miller, Tomasello and ten Brink and Ms. Lee nonstatutory stock
options for 11,429, 10,000, 1,429 and 4,286 shares of Common Stock,
respectively.
Stock Options. The Compensation Committee believes that the grant of stock
options is a desirable method of acknowledging the efforts of the Company's
executive officers and to encouraging their continued
12
<PAGE> 15
high levels of performance. In deciding on the stock option grants to individual
executive officers in respect of their performance, the Compensation Committee
employs 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 adjusts 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 accordance
with this adjusted formula, in March 1998 the Committee granted the Company's
seven executive officers options for a total of 113,000 shares of Common Stock
in respect of their performance during 1997, and in February 1999, the
Committee granted five of the Company's six executive officers options for a
total 117,756 shares of Common Stock in respect of their performance during
1998.
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
1998. The Compensation Committee granted Mr. Miller an option for 40,000 shares
of Common Stock in March 1998 in respect of his performance during 1997 and an
option for 38,428 shares in March 1999 in respect of his performance during
1998. Pursuant to the Committee's recommendation, Mr. Miller was paid a cash
bonus of $30,500 in March 1998 in respect of his services in 1997 and, in
accordance with Mr. Miller's prior election to forego a portion of his cash
bonus, he also received a nonstatutory stock option for 11,429 shares. The
factors most influencing the Committee's determination of the amount of Mr.
Miller's cash bonus and stock option grant in March 1998 and his stock option
grant in March 1999 were his significant leadership in identifying and
negotiating the Company's eight acquisitions during 1997 and its 12 acquisitions
during 1998 (including, in particular, the Company's acquisition of Waste
Systems, Inc., the majority shareholder of 3CI Complete Compliance Corporation,
in October 1998 and its acquisition of Med-Tech Environmental Limited in
December 1998), his management of the Company's growth strategy generally and
his oversight of the integration of acquired businesses into the Company's
operations.
Compensation Committee
Jack W. Schuler, Chairman
Peter Vardy
L. John Wilkerson, Ph.D
13
<PAGE> 16
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,
1998, 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
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. (for 1996 only); Safety-Kleen Corporation (for
1996 and 1997 only); Sterigenics International, Inc. (for 1997 and 1998 only);
Sterile Recoveries, Inc.; Steris Corporation; United Waste Systems, Inc. (for
1996 and 1997 only); U.S.A. Waste Services, Inc. (for 1996 and 1997 only); and
Waste Management, Inc. The stock price performance of the Company's Common Stock
reflected in the following graph is not necessarily indicative of future
performance.
[ A CHART ]
8/23/96 12/31/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------
Stericycle, Inc. $100 $124.32 $151.49 $161
Nasdaq NMS Composite Index $100 $113.04 $136.18 $175
Russell 3000 Index $100 $111.65 $144.29 $167
Peer Group Index $100 $106.53 $138.03 $130
- --------------------------------------------------------------------------------
14
<PAGE> 17
THE BFI TRANSACTION
On April 14, 1999, the Company entered into agreements (the "Allied
Agreements") with Allied Waste Industries, Inc. ("Allied") pursuant to which the
Company agreed to acquire from Allied, upon completion of Allied's acquisition
of Browning-Ferris Industries, Inc. ("BFI"), all of BFI's medical waste
management operations in the United States, Canada and Puerto Rico, and, in
addition, all of Allied's own medical waste management operations, for $440
million in cash (the "BFI Transaction"). Allied and BFI are parties to a merger
agreement providing for Allied's acquisition of BFI. The Company included copies
of the Allied Agreements in its Form 8-K filed with the Securities and Exchange
Commission on April 23, 1999.
BFI is the largest provider of medical waste management services in the
United States and Canada, serving over 200,000 customers from 120 locations in
45 states, Canada and Puerto Rico. BFI's revenues from medical waste management
operations were approximately $198 million during its fiscal year ending
September 30, 1998. Allied's revenues from medical waste management operations
were less than $10 million during its fiscal year ending December 31, 1998.
FINANCING FOR THE BFI TRANSACTION
One of the conditions to the Company's obligation to consummate the BFI
Transaction is that the Company has obtained the necessary financing for the
transaction on commercially reasonable terms. The Company is considering a
number of alternative means of financing the transaction. The Company currently
anticipates that it will finance the BFI Transaction primarily by the issuance
of different types of debt securities. The Company believes that, in order to
obtain more favorable rates and other terms on any debt securities that it may
issue, the Company will find it desirable to issue a significant amount of
Common Stock or, more likely, securities convertible into Common Stock, in
privately negotiated transactions.
The Company's authorized stock currently consists of 30,000,000 shares of
Common Stock , of which, as of May 31, 1999, 14,552,417 shares were issued and
outstanding and 2,618,654 shares were reserved for issuance upon the exercise of
outstanding stock options and warrants and additional stock options that may be
granted under the Company's stock option plans. Accordingly, under the laws of
Delaware, the state of the Company's incorporation, the Company could issue
approximately 12,829,000 shares of Common Stock, or debt securities convertible
into approximately 12,829,000 shares of Common Stock, without stockholder
approval. Because the Company expects that it is likely to want to issue
convertible preferred stock as part of its plan to finance the BFI Transaction,
however, the Board of Directors has approved a proposal to amend the Company's
certificate of incorporation to authorize a class of preferred stock which the
Board of Directors will have the authority to designate and issue from time to
time. This proposal is being submitted to the stockholders for their
consideration as Item 2.
In addition, although under Delaware law the Company's Board of Directors
could issue up to approximately 12,829,000 additional shares of Common Stock, or
debt securities convertible into approximately 12,829,000 additional shares of
Common Stock, without stockholder approval, the rules of the Nasdaq Stock
Market, on which the Company's Common Stock is listed, require that stockholders
approve the sale or issuance by the Company of Common Stock (or securities
convertible into Common Stock) equal to 20% or more of the Common Stock
outstanding prior to the sale or issuance. Because the Company believes that in
order to finance the BFI Transaction, it is likely to issue Common Stock or,
more probably, securities convertible into Common Stock, in an amount exceeding
20% of the Common Stock currently outstanding, the Company's Board of Directors
has approved a proposal pursuant to which the stockholders would give the Board
authority to issue and sell up to 5,000,000 shares of Common Stock, or
securities convertible into up to 5,000,000 shares of Common Stock, representing
an amount equal to approximately 34% of the Common Stock currently outstanding,
in one or more privately negotiated transactions to be completed no later than
July 31, 2000. This proposal is being submitted to stockholders for their
consideration as Item 3.
The Company currently believes that the most likely structure of the
financing for the BFI Transac-
15
<PAGE> 18
tion will be the issuance of approximately $385-400 million of debt, some of
which is likely to be in the form of a senior bank financing and some of which
is likely to be in the form of subordinated high-yield notes, and the sale of
$50-75 million of equity securities, which are most likely to be in the form of
one or more series of convertible preferred stock (if the proposal in Item 2 is
approved). The exact terms of the financing generally and, in particular, the
powers, designations, preferences and rights of the preferred stock, if any,
issued and sold as part of the financing, will depend upon a number of factors.
These factors are likely to include conditions in the debt and equity markets at
the time of commitment and issuance of the securities and the performance and
prospects of the Company and the business to be acquired in the BFI Transaction.
However, based upon current market conditions, the Company's present expectation
is that the terms and provisions of any preferred stock issued as part issued of
the financing are likely to include the following:
- a liquidation preference over the Common Stock in an amount equal to
the purchase price
- a cumulative dividend at a rate between 7-9% of the purchase price
- the right to convert, at the option of the holder, into shares of
Common Stock at a conversion price equal to a 10-25% premium over the
price of a share of Common Stock on the commitment date
- antidilution protection on a weighted average basis
- voting rights on an as-if-converted basis, with special class voting
rights on certain matters
- demand and incidental registration rights
- minority representation on the Company's Board of Directors reflective
of equity ownership
ITEM 2
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CREATE A CLASS OF PREFERRED STOCK
As noted, the Company is not currently authorized to issue shares of
preferred stock. The Board of Directors has proposed and recommends to the
stockholders that Article 4 of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") be amended to authorize the
issuance by the Company of up to 1,000,000 shares of a new class of undesignated
preferred stock, par value $.01 per share (the "Preferred Stock"). Under the
proposed amendment to Article 4, the Board of Directors would be authorized,
without further stockholder action, to provide for the issuance of all or any
shares of Preferred Stock in one or more series and to establish the powers,
designations, preferences, rights, qualifications, limitations and restrictions
of those shares as the Board, in its sole discretion, determines.
Adoption of the proposed amendment requires the approval of the holders of
a majority of the shares of Common Stock outstanding as of the record date for
the 1999 Annual Meeting. A copy of Article 4 of the Company's Certificate of
Incorporation, as Article 4 is proposed to be amended, appears as Exhibit A to
this Proxy Statement.
As noted, authorization of this class of undesignated Preferred Stock would
give the Board of Directors the flexibility to create one or more series of
Preferred Stock, from time to time, and to determine the respective powers,
designations, preferences, rights, qualifications, limitations and restrictions
of each series. These matters would include, for example: (i) the number of
shares in each series, (ii) whether a series will bear dividends and, if so,
whether the dividends will be cumulative, (iii) the dividend rate and the dates
of dividend payments, (iv) liquidation preferences, if any, (v) the terms of
redemption, if any, including timing, rates and prices, (vi) conversion rights,
if any, (vii) sinking fund requirements, if any, (viii) any restrictions on the
issuance of additional shares of any series, (ix) any voting rights and (x) any
other powers, designations, preferences, rights, qualifications, limitations or
restrictions.
Shares of Preferred Stock could have priority over shares of Common Stock
with respect to dividends (which may be made cumulative with respect to the
Preferred Stock) and with respect to the assets of the Company upon liquidation,
and could reduce the amount of assets available for distribution to the holders
of Common Stock upon a liquidation of the Company. Depending upon the particular
terms of any series of Preferred Stock, holders of that series may have
significant voting rights and the right to representation on
16
<PAGE> 19
the Company's Board of Directors. In addition, the approval of holders of shares
of Preferred Stock, voting as a class or as a series, may be required for the
taking of certain corporate actions, such as mergers.
The Board of Directors believes that the proposed authorization of this
class of Preferred Stock is desirable because it would provide the Company with
increased flexibility to arrange for financing of the BFI Transaction, to meet
future capital requirements through equity financings and to take advantage of
favorable market conditions and possible acquisition opportunities without the
delay and expense ordinarily attendant upon obtaining further stockholder
approval.
If the proposed amendment is approved, the Board of Directors will be
empowered to authorize the issuance of up to 1,000,000 shares of Preferred
Stock, from time to time, for such purposes, to such persons and for such
consideration as the Board may deem desirable, without further authorization by
the stockholders, except as may be required by applicable Delaware law, other
applicable law or the rules of the Nasdaq Stock Market or any stock exchange on
which the shares of Common Stock or Preferred Stock may be listed or traded. The
timing of the actual issuance of shares of Preferred Stock will depend upon,
among other things, market conditions and the specific purpose for which the
shares are to be issued.
Stockholders will not have any preemptive rights to acquire shares of
Preferred Stock authorized by the proposed amendment. The proposed authorization
of the issuance of shares of the Preferred Stock will not change the number of
shares of Common Stock currently outstanding or the rights of holders of Common
Stock. Under certain circumstances, however, issuance of shares of Preferred
Stock could affect existing stockholders by dilution of their voting power as
well as by dilution of earnings and book value per share, especially in the case
of Preferred Stock which is convertible into shares of Common Stock.
Stockholders should recognize that the issuance of shares of Preferred
Stock may have the effect of discouraging or thwarting persons seeking to take
control of the Company through a tender offer or proxy fight or seeking to bring
about the removal of incumbent management or a corporate transaction such as a
merger. For example, the issuance of shares of Preferred Stock in a public or
private sale, or in a merger or similar transaction, would increase the number
of the Company's outstanding shares, thereby diluting the interest of a party
seeking to take over the Company. In addition, the Preferred Stock could be
viewed as having the effect of discouraging an attempt by another person or
entity, through the acquisition of a substantial number of shares of Common
Stock, to acquire control of the Company, because the authorization of
undesignated Preferred Stock could be used by the Board of Directors for the
adoption of a stockholder rights plan or "poison pill." Stockholders should note
that any action taken by the Company that discourages, or that has the effect of
discouraging, an attempt to acquire control of the Company might result in
stockholders not being able to participate in any possible premiums that they
might obtain in the absence of anti-takeover provisions. Any transaction which
may be so discouraged or avoided could be a transaction that the Company's
stockholders might consider to be in their best interests.
The proposed amendment to authorize Preferred Stock is being made because
of the Company's desire to have flexibility in arranging for financing of the
BFI Transaction. It has not been made in response to, and is not being presented
to deter, any effort to obtain control of the Company. It is also not being
proposed as an anti-takeover measure.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND ARTICLE 4
OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO AUTHORIZE THE CREATION OF A
CLASS OF PREFERRED STOCK.
ITEM 3
PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS
TO ISSUE AND SELL, FOR CASH, UP TO 5,000,000 SHARES OF COMMON STOCK, OR
SECURITIES CONVERTIBLE INTO UP TO 5,000,000 SHARES OF COMMON STOCK, IN
PRIVATELY NEGOTIATED TRANSACTIONS TO BE COMPLETED NO LATER THAN JULY 31, 2000
17
<PAGE> 20
The Board of Directors has approved the submission to the stockholders for
their consideration of a proposal giving the Board the authority to issue and
sell, for cash, up to 5,000,000 shares of Common Stock, or securities
convertible into 5,000,000 shares of Common Stock, in privately negotiated
transactions to be completed no later than July 31, 2000.
Although under Delaware law the Board of Directors could issue
approximately 12,829,000 additional shares of Common Stock or securities
convertible into up approximately 12,829,000 additional shares of Common Stock,
without stockholder approval, the rules of the Nasdaq Stock Market, on which the
Company's Common Stock is listed, require that stockholders approve the private
sale or issuance by the Company of Common Stock (or securities convertible into
Common Stock) equal to 20% or more of the Common Stock outstanding prior to the
sale or issuance. While, as noted above, the Company does not have a definitive
financing plan in place for the BFI Transaction, the Company expects that it
will desire to issue some Common Stock or, more likely, Preferred Stock
convertible into Common Stock, as part of the eventual plan of financing. The
Company is seeking stockholder approval to authorize the issuance or potential
issuance of Common Stock in an amount equal to approximately 34% of the Common
Stock currently outstanding.
If stockholders approve both this proposal and the proposal in Item 2 (to
amend the Certificate of Incorporation to create a class of undesignated
preferred stock), the Board of Directors would have the authority not only to
create one or more series of Preferred Stock and to fix the powers,
designations, preferences and rights of each series, but also to issue shares of
Preferred Stock that are convertible into a greater number of shares of Common
Stock than would have been the case if this proposal had not been approved. If
stockholders approve the proposal in this Item 3 but not the proposal in Item 2,
the Board would not have the authority to issue any shares of Preferred Stock
but would have the authority to issue more shares of Common Stock, or securities
convertible into more shares of Common Stock, such as convertible debt
securities, than would have been the case if the proposal in this Item 3 had not
been approved. If the proposal in Item 2 is approved but the proposal in this
Item 3 is not, the Board of Directors would have the authority to create one or
more series of Preferred Stock and to fix the powers, designations, preferences
and rights of each series, with the limitation that if the Preferred Stock were
convertible into Common Stock and were issued and sold in private transactions,
the number of shares of Common Stock into which any such Preferred Stock could
be converted could not exceed 20% of the number of shares of Common Stock
outstanding before the issuance of the Preferred Stock. Any issuance of Common
Stock or securities convertible into Common Stock could have the effect of
diluting the interests of existing holders of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AUTHORIZE THE
BOARD OF DIRECTORS TO ISSUE AND SELL, FOR CASH, UP TO 5,000,000 SHARES OF COMMON
STOCK, OR SECURITIES CONVERTIBLE INTO UP TO 5,000,000 SHARES OF COMMON STOCK, IN
ONE OR MORE PRIVATELY NEGOTIATED TRANSACTIONS TO BE COMPLETED NO LATER THAN JULY
31, 2000.
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<PAGE> 21
ITEM 4
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, 1999. 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, 1999.
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 2000 ANNUAL MEETING
Any stockholder of the Company who wishes to present a proposal to be
considered at the Company's Annual Meeting of Stockholders in 2000 and who,
pursuant to Rule 14a-8 of the Securities and Exchange Commission, wishes to have
his or her proposal included in the Company's proxy statement and form of proxy
for that meeting, must submit the proposal in writing to the Company so that it
is received by March 8, 2000. Any stockholder who wishes to present a proposal
to be considered at the Company's Annual Meeting of Stockholders in 2000, but to
do so outside of the processes of Rule 14a-8, must submit his or her proposal in
writing to the Company so that it is received by May 24, 2000.
Stockholder proposals for inclusion in the Company's proxy statement and
form of proxy 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 28161 North Keith Drive, Lake Forest,
Illinois 60045.
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 1998 were satisfied in a timely manner.
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 in person or by mail, telephone or
19
<PAGE> 22
telecopier, but will not receive any additional compensation for their services.
The Company may retain a proxy solicitor to assist in the solicitation of
proxies. If a proxy solicitor is retained, the firm may solicit proxies in
person or by mail, telephone or telecopier. The Company estimates that the fees
of any proxy solicitor that it may retain will not exceed $25,000 plus
reimbursement of customary out-of-pocket expenses. The Company 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.
The Company has previously furnished to all stockholders of record as of
March 31, 1999 a copy of its Annual Report on Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission. THE
COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH STOCKHOLDER OF RECORD ON THE RECORD
DATE FOR THE ANNUAL MEETING, UPON THE STOCKHOLDER'S WRITTEN REQUEST, AN
ADDITIONAL COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1998. REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY AT 28161
NORTH KEITH DRIVE, LAKE FOREST, ILLINOIS 60045.
20
<PAGE> 23
EXHIBIT A
FIRST AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
STERICYCLE, INC.
Article 4 of the Corporation's Amended and Restated Certificate of
Incorporation shall be amended to read as follows:
ARTICLE 4
CAPITAL STOCK
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 31,000,000 shares, divided into two classes as
follows: (i) 30,000,000 shares of Common Stock, with a par value of $.01 per
share, and (ii) 1,000,000 shares of Preferred Stock, with a par value of $.01
per share.
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is expressly authorized to fix by resolution the
powers, designations, preferences and relative, participating, optional and
other rights, and qualifications, limitations and restrictions, of each series
of Preferred Stock, including, without limitation, the dividend rate, conversion
rights, voting rights, liquidation preference and redemption price of the
series.
21
<PAGE> 24
PROXY PROXY
STERICYCLE, INC.
28161 North Keith Drive
Lake Forest, Illinois 60045
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
Frank J.M. ten Brink (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 June 28, 1999 at the 1999 Annual
Meeting of Stockholders to be held on August 5, 1999 (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: FOR each of the seven
nominees for election as a director (Item 1); FOR approval of a proposal to
amend the Company's certificate of incorporation to authorize a class of
preferred stock (Item 2); FOR approval of a proposal to authorize the issuance
and sale, for cash, of up to 5,000,000 shares of the Company's Common Stock, or
securities convertible into up to 5,000,000 shares of Common Stock, in one or
more privately negotiated transactions to be completed no later than July 31,
2000 (Item 3); and FOR ratification of the appointment of Ernst & Young LLP as
the Company's independent public accountants (Item 4). It will be voted in the
best judgment 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.)
<PAGE> 25
STERICYCLE, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
1. ELECTION OF DIRECTORS--
Nominees: Jack W. Schuler, Mark C. Miller, Patrick F. Graham,
Rod F. Dammeyer, John Patience, Peter Vardy, L. John Wilkerson, Ph.D.
FOR ALL / / WITHHOLD ALL / / FOR ALL EXCEPT / /
______________________________________
(Except Nominee(s) written above
2. Proposal to amend the Company's Certificate of Incorporation to create
a class of preferred stock
FOR / / AGAINST / / ABSTAIN / /
3. Proposalto authorize the Board Of Directorsto issue and sell, for cash,
up to 5,000,000 shares of Common Stock, or securities convertible into
up to 5,000,000 shares of Common Stock, in privately negotiated
transactions to be completed no later than July 31, 2000
FOR / / AGAINST / / ABSTAIN / /
4. Ratification of appointment of Ernst &Young LLP as the Company's
independent public accountants for the year ending December 31, 1998.
FOR / / AGAINST / / ABSTAIN / /
Date: _______________________________, 1999
Signature: ________________________________
Signature: ________________________________
Title or Capacity: ________________________
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.
