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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MARCH 27, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

COMMISSION FILE NO. 0-16379

CLEAN HARBORS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MASSACHUSETTS                                   04-2997780
(STATE OR OTHER JURISDICTION                         (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NUMBER)

1501 WASHINGTON STREET,                              02185-0327
BRAINTREE, MASSACHUSETTS                             (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER: (617) 849-1800 EXT. 4454
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ ]

On March 3, 1997, the aggregate market value of the voting stock of the
registrant held by nonaffiliates of the registrant was $10,550,655. Reference is
made to Part III of this report for the assumptions on which this calculation is
based.

On March 3, 1997, there were outstanding 9,820,865 shares of Common Stock,
$.01 par value.
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DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant's definitive proxy statement for its
1997 annual meeting of stockholders (which is expected to be filed with the
Commission not later than April 30, 1997) are incorporated by reference into
part III of this report.

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PART I

ITEM 1.  BUSINESS

Clean Harbors, Inc., through its subsidiaries (collectively, the
"Company"), provides a wide range of industrial waste management services to a
diversified customer base across the United States. The Company was incorporated
in Massachusetts in 1980. The principal offices of the Company are located in
Braintree, Massachusetts.

The Company is one of the largest providers of industrial waste management
services in the Northeast and Mid-Atlantic regions of the United States, with a
strong presence in the Central, Midwest and Southern regions. The Company seeks
to be recognized by customers as the premier supplier of a broad range of value-
added industrial waste management services based upon quality, responsiveness,
customer service, variety of risk containment systems, and cost effectiveness.

For the second consecutive year, the Company's earnings were adversely
affected by continued poor conditions in the hazardous waste disposal industry.
Overall drum and bulk waste volumes handled by the Company decreased by 21% and
12%, respectively, from 1995 to 1996. Intense price competition, unpredictable
event business and fewer large scale remediation projects generating waste for
disposal contributed to weakness across all segments of the hazardous waste
disposal industry. To respond to industry conditions, the Company instituted
aggressive cost cutting measures and profit improvement efforts in all its
service lines during 1996.

The Company currently maintains a network of sales and regional logistics
offices and service centers located in 24 states and Puerto Rico, and operates
12 waste management facilities. The service centers interface with customers,
and perform a variety of environmental remediation and hazardous waste
management activities, utilizing the waste management facilities to store, treat
and dispose of waste. The Company also provides analytical testing and
engineering services which complement its primary services and permit it to
offer complete solutions to its customers' complex environmental requirements.
The Company's principal customers are chemical, petroleum, transportation,
utility and industrial firms, other waste management companies and government
agencies.

Federal and state environmental regulation and enforcement programs have
been a major factor in providing demand for environmental services. The Company
believes that its success is attributable in large part to customers' confidence
in the Company's ability to comply with these regulations and to manage
effectively the risks involved in providing these services. As part of its
commitment to employee safety and quality customer service, the Company has an
extensive compliance program and a trained environmental, health and safety
staff. The Company adheres to a risk management program designed to reduce
potential liabilities for the Company and its customers.

BUSINESS STRATEGY

The Company's strategy is to develop and maintain an ongoing relationship
with a diversified group of customers who have recurring needs for multiple
services in managing their environmental exposure.

In order to maintain and enhance its position in the industrial waste
management industry within the core markets in which it operates, the Company
strives to achieve internal growth through the efficient utilization of existing
facilities, and the development of new waste management services. In addition,
the Company has achieved external growth through strategic acquisitions.

Improved Utilization of Waste Management Facilities.  The Company currently
has 12 waste management facilities which represent a substantial investment in
permits, plants and equipment. In 1996, the Company implemented its
CleanEXPRESS(TM) system which the Company anticipates will result in increased
efficiencies relative to the transfer of waste materials through the Company's
network of waste management facilities to its expanded and upgraded Chicago
facility. This network of transfer facilities provides the Company with
significant operating leverage. There are opportunities to expand waste handling
capacity at these facilities by modifying the terms of the existing permits and
by adding capital equipment and new

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technology. Through selected permit modifications, the Company can expand the
range of treatment services which it offers to its customers without the large
capital investment necessary to acquire or build new waste management
facilities. The Company believes that permits for new industrial waste
management facilities will become increasingly difficult to obtain, thereby
placing new entrants and weaker competitors at a disadvantage.

New Waste Management Services.  Industrial waste generators are demanding
alternatives to traditional waste disposal methods in order to increase
recycling and reclamation and to minimize the end disposal of hazardous waste
into the environment. The Company utilizes its technological expertise and
innovation to improve and expand the range of services which it offers to its
customers.

In May 1995, the Company acquired a newly constructed hazardous waste
incinerator in Kimball, Nebraska, to incinerate liquid and solid wastes which
are not suitable for treatment in the Company's Clean Extraction System ("CES").
The availability of the Kimball incinerator has reduced the Company's dependence
on outside disposal vendors.

In November 1995, the Company entered into a Reciprocal Marketing and
Business Development Agreement with Rochem Separation Systems, Inc. ("Rochem"),
the California based subsidiary of Rochem, A.G., owner of the patented disc tube
membrane module reverse osmosis system known as DTM ("DTM"). Rochem holds the
exclusive U.S. rights to market and sell DTM, which is compatible with CES
technology. Under the terms of the Agreement, Rochem and Clean Harbors jointly
market DTM and CES technology to customers throughout the United States. Clean
Harbors also has the right to negotiate an exclusive license with Rochem for new
applications of DTM technology developed during the term of the Agreement. In
1996, the Company received orders to fabricate and deliver Rochem units to two
customers in the Northeast.

Capitalization on Industry Consolidation.  The Company believes that its
large industrial customers will ultimately require a comprehensive range of
waste treatment capabilities, field services, industrial maintenance services
and emergency response services to be provided by a select number of service
providers. This trend should place smaller operators at a competitive
disadvantage due to their size and limited financial resources. To respond to
its customers' needs, the Company has increased the range of waste management
services it offers and has followed a strategy of acquiring companies in
existing, contiguous and new market areas. Since its formation in 1980, the
Company has completed 14 acquisitions which have significantly expanded the
Company's market share. Acquisitions within the Company's existing areas of
operation serve to capture incremental market share, while geographic expansion
creates new market opportunities. The Company continues to evaluate other
business opportunities in order to enhance service to its existing customer base
and expand its customer base.

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ACQUISITIONS

The Company has completed eight acquisitions since January 1, 1989.

DATE OF
ACQUISITION                             ACQUISITION                               PURCHASE PRICE
- ----------  -------------------------------------------------------------------   --------------

1989     ChemClear Inc., a publicly-traded company in the business of
treating liquid and semi-liquid hazardous and nonhazardous
industrial wastes at treatment plants in Baltimore, Maryland;
Cleveland, Ohio; Chicago, Illinois; and Chester, Pennsylvania         $ 27.6 million
1989     Murphy's Waste Oil Service, Inc., the operator of a waste oil
treatment and storage facility in Woburn, Massachusetts               $  0.2 million
1992     Connecticut Treatment Corporation, the operator of a hazardous
waste storage and treatment facility in Bristol, Connecticut          $  2.4 million
1992     Mr. Frank, Inc., a Chicago-based transportation and environmental
services company serving industrial companies primarily in
Illinois, Indiana and Michigan                                        $  2.2 million
1993     Spring Grove Resource Recovery, Inc., the operator of a hazardous
waste storage and treatment facility in Cincinnati, Ohio              $  7.0 million
1994     The assets of a hazardous and nonhazardous oil reclamation facility
located near Richmond, Virginia                                       $  0.4 million
1995     The assets of a newly constructed hazardous waste incinerator
located in Kimball, Nebraska                                          $  5.2 million

Prior to completing any acquisition, the Company strives to investigate the
current and contingent liabilities of the company or assets to be acquired,
including potential liabilities arising from noncompliance with environmental
laws by prior owners for which the Company, as a successor owner, might become
responsible. The Company also seeks to minimize the impact of potential
liabilities by obtaining indemnities and warranties from the sellers which may
be supported by deferring payment of or by escrowing a portion of the purchase
price. See "Legal Proceedings" below for a description of the indemnities which
the Company has received in connection with past acquisitions.

SERVICES PROVIDED BY THE COMPANY

SERVICES

The principal services provided by the Company fit within three categories:
treatment and disposal of industrial wastes ("Treatment and Disposal"); field
services provided at customer sites ("Field Services"); and specialized
repackaging, treatment and disposal services for laboratory chemicals and
household hazardous wastes ("CleanPacks"). The Company markets these services
through its sales organizations and, in many instances, services in one area of
the business support or lead to work in other service lines.

In addition to these three principal services, the Company also provides
technical services such as analytical testing and engineering services and
personnel training. Such technical services primarily support the Company's
principal services, although technical services are also offered to a limited
extent on a stand-alone commercial basis.

As an integral part of the Company's services, industrial wastes are
collected from customers and transported by the Company to and between its
facilities for treatment or bulking for shipment to final disposal locations.
Customers typically accumulate waste in containers, such as 55-gallon drums, or
in bulk storage tanks or 20-cubic yard roll-off boxes. In providing this
service, the Company utilizes a variety of specially designed and constructed
tank trucks and semi-trailers, as well as third-party transporters, including
railroads. Liquid waste is frequently transported in bulk, but may also be
transported in drums. Heavier sludges or bulk solids are transported in sealed,
roll-off boxes or bulk dump trailers.

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Treatment and Disposal

The Company transports, treats and disposes of industrial wastes for
commercial and industrial customers, health care providers, educational and
research organizations, other waste management companies and governmental
entities. The wastes handled include substances which are classified as
"hazardous" because of their corrosive, ignitable, infectious, reactive or toxic
properties, and other substances subject to federal and state environmental
regulation. Waste types processed or transferred in drums or bulk quantities
include:

-- flammables, combustibles and other organics,

-- acids and caustics,

-- cyanides and sulfides,

-- solids and sludges,

-- industrial wastewaters,

-- items containing PCBs, such as utility transformers and electrical light
ballasts,

-- medical waste,

-- other regulated wastes, and

-- nonhazardous industrial waste.

The Company receives a detailed waste profile sheet prepared by the
customer to document the nature of the customer's waste. A representative sample
of the delivered waste is tested to ensure that it conforms to the customer's
waste profile record and to select an appropriate method of treatment and
disposal. Once the wastes are characterized, compatible groups are consolidated
to achieve economies in storage, handling, transportation and ultimate treatment
and disposal. At the time of acceptance of a customer's waste at the Company's
facility, a unique computer "bar code" identification label is assigned to each
container of waste, enabling the Company to use sophisticated computer systems
to track and document the status, location and disposition of the waste.

Wastewater Treatment.  The Company's wastewater treatment operations
involve processing hazardous wastes through the use of physical and chemical
treatment methods. The solid waste materials produced by these wastewater
processing operations are then disposed of off-site at facilities owned and
operated by unrelated businesses, while the treated effluent is discharged to
the local sewer system under permit.

The Company treats a broad range of industrial liquid and semi-liquid
wastes containing heavy metals, organics and suspended solids, including:

-- acids and caustics,

-- ammonias, sulfides, and cyanides,

-- heavy metals, ink wastes, and plating solutions,

-- landfill leachates and scrubber waters, and

-- oily wastes and water soluble coolants.

Wastewater treatment can be economical as well as environmentally sound, by
combining different wastewaters in a "batching" process that reduces costs for
multiple waste streams disposal. Acidic waste from one source can be neutralized
with alkaline from a second source to produce a neutral solution.

Physical Treatment.  Physical treatment methods include distillation,
separation and stabilization. These methods are used to reduce the volume or
toxicity of waste material or to make it suitable for further treatment, reuse,
or disposal. Distillation uses either heat or vacuum to purify liquids for
resale. Separation utilizes techniques such as sedimentation, filtration,
flocculation and centrifugation to remove solid materials from liquids.
Stabilization refers to a category of waste treatment processes designed to
reduce contaminant mobility or solubility and convert waste to a more chemically
stable form. Stabilization technology includes many classes of immobilization
systems and applications. Stabilization is a frequent treatment method for
metal-bearing wastes received at several Company facilities, which treat the
waste to meet specific federal land disposal restrictions. After treatment, the
waste is tested to confirm that it has been rendered

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nonhazardous. It can then be sent to a nonhazardous waste landfill, at
significantly lower cost than disposal at a hazardous waste landfill.

Thermal Treatment.  Thermal treatment refers to processes that use high
temperature combustion as the principal means of waste destruction. The
Company's state-of-the-art hazardous waste incinerator in Kimball, Nebraska,
uses a fluidized bed thermal oxidation unit for maximum destruction efficiency
of hazardous waste.

Resource Recovery.  Resource recovery involves the treatment of wastes
using various methods which will effectively remove contaminants from the
original material to restore its fitness for its intended purpose, and to reduce
the volume of waste requiring disposal. The Company operates treatment systems
for the reclamation and reuse of certain wastes, particularly solvent-based
wastes generated by industrial cleaning operations, metal finishing and other
manufacturing processes.

Spent solvents that can be recycled are processed through thin film
evaporators and other processing equipment and are distilled into usable
products. Upon recovery of these products, the Company either returns the
recovered solvents to the original generator or sells them to third parties.

Organic liquids and solids with sufficient heat value are blended to meet
strict specifications for use as supplemental fuels for cement kilns, industrial
furnaces and other high-efficiency boilers. The Company has installed fuels
blending equipment at its Chicago and Cincinnati plants to prepare these
supplemental fuels. The Company has established relationships with a number of
supplemental fuel users that are licensed to accept the blended fuel material.
Although the Company pays a fee to the users who accept this product, this
disposal method is substantially less costly than other disposal methods.

Clean Extraction System.  The Clean Extraction System ("CES") is a
hazardous waste treatment system commercialized by the Company at its Baltimore
facility which extracts organic compounds from industrial wastewater. CES
removes organic contaminants such as gasoline, acetone, methylene chloride,
pesticides and other chemicals, from industrial wastewater known as "lean
water". Lean water is generated by oil companies, utilities, and manufacturers
of specialty chemicals and pharmaceuticals.

The CES process enables the Company to handle a broad range of complex,
difficult to treat organic and inorganic wastewaters which would otherwise be
sent to other companies for disposal. CES offers the Company's industrial
customers, such as chemical or pharmaceutical companies, an attractive recycling
alternative to incineration or deep well injection of their waste systems.

Disposal.  After treatment of industrial wastes at the Company's
facilities, the hazardous waste residues (such as sludges) which remain after
such treatment are disposed of in facilities operated by third parties. The
Company also arranges for the disposal of its customers' hazardous wastes which
cannot be treated at Company-owned facilities. Wastes which cannot be disposed
of in the Nebraska hazardous waste incinerator are sent to other incinerators,
landfills, and disposal facilities operated by third parties. On occasion, a
customer's waste may be shipped directly to another disposal company, such as a
landfill or incinerator, if the size of the waste shipment or its
characteristics are such that the waste does not need to pass through one of the
Company's own waste management facilities. The Company has negotiated favorable
commercial terms with a number of disposal companies.

Field Services

The Company provides a wide range of environmental field services to
maintain industrial facilities and process equipment, as well as clean up or
contain actual or threatened releases of hazardous materials into the
environment. These services are provided primarily to large chemical, petroleum,
transportation, utility, industrial waste management companies, and governmental
agencies. The Company's strategy is to identify, evaluate, and solve its
customers' environmental problems, on a planned or emergency basis, by providing
a comprehensive interdisciplinary response to the specific requirements of each
project.

Industrial Maintenance.  Many of the Company's customers have a recurring
need to clean equipment and facilities periodically in order to continue
operations, maintain and improve operating efficiencies of their

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plants, and satisfy safety requirements. Industrial maintenance involves
chemical cleaning, hydroblasting, vacuuming, and other methods to remove
deposits from process equipment, such as paint booths and plating lines, and
storage facilities for material used in the manufacturing or production process,
such as feedstocks, chemicals, fuels, paints, oils, inks, metals and many other
items. The Company's service centers are equipped with specialty equipment, such
as high volume pumps, pressure washers, nonsparking and chemical resistant
tools, and a variety of personal protective equipment, to perform maintenance
services quickly, usually during "off periods" to minimize downtime from
production.

Surface Remediation.  Surface remediation projects arise in two principal
areas: the planned cleanup of hazardous waste sites and the cleanup of
accidental spills and discharges of hazardous materials, such as those resulting
from transportation and industrial accidents. In addition, some surface
remediation projects involve the cleanup and maintenance of industrial lagoons,
ponds and other surface impoundments on a recurring basis. In all of these
cases, an extremely broad range of hazardous substances may be encountered.

Surface remediation projects generally require considerable interaction
among engineering, project management and analytical services. Following the
selection of the preferred remedial alternative, the project team identifies the
processes and equipment for cleanup. Simultaneously, the Company's health and
safety staff develops a site safety plan for the project. Remedial approaches
usually include physical removal, mechanical dewatering and stabilization or
encapsulation.

Groundwater Restoration.  The Company's groundwater restoration services
typically involve response to above-ground spills, leaking underground tanks and
lines, hazardous waste landfills and leaking surface impoundments. Groundwater
restoration efforts often require complex recovery systems, including recovery
drains or wells, air strippers, biodegradation or carbon filtration systems, and
containment barriers. These systems and technologies can be used individually or
in combination to remove a full range of floating or dissolved organic compounds
from groundwater. The Company designs and fabricates mobile or fixed site
groundwater treatment systems.

Site and Facility Decontamination.  Site and facility decontamination
involves the cleanup and restoration of buildings, equipment and other sites and
facilities that have been contaminated by exposure to hazardous materials during
a manufacturing process, or by fires, process malfunctions, spills or other
accidents. The Company's projects have included decontamination of electrical
generating stations, electrical and electronics components, transformer vaults,
and commercial, educational, industrial, laboratory, research and manufacturing
facilities.

Emergency Response.  The Company undertakes environmental remediation
projects on both a planned and emergency basis. Emergency response actions may
develop into planned remedial action projects when soil, groundwater, buildings,
or facilities are extensively contaminated. The Company has established
specially trained emergency response teams which operate on a 24-hour basis from
service centers covering 24 states and Puerto Rico. Many of the Company's
remediation activities result from a response to an emergency situation by one
of its response teams. These incidents can result from transportation accidents
involving chemical substances, fires at chemical facilities or hazardous waste
sites, transformer fires or explosions involving PCBs, and other unanticipated
developments when the substances involved pose an immediate threat to public
health or the environment, such as possible groundwater contamination.

Emergency response projects require trained personnel, equipped with
protective gear and specialized equipment, prepared to respond promptly whenever
these situations occur. To meet the staffing requirements for emergency response
projects, the Company relies in part upon a network of trained personnel who are
available on a contract basis for specific project assignments. The Company's
health and safety specialists and other skilled personnel assist field managers
in supervising these projects during and subsequent to the cleanup. The steps
performed by the Company include rapid response, containment and control
procedures, analytical testing and assessment, neutralization and treatment,
collection, and transportation of the substances to an appropriate treatment or
disposal facility.

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CleanPacks

The Company provides specialized repackaging, treatment and disposal
services for laboratory chemicals and household hazardous wastes. Such chemicals
and wastes are put into CleanPack containers for shipment and disposal. The
Company offers generators of laboratory wastes the same economical and
environmentally sound disposal services that have been offered for years to
large industrial generators. The CleanPack operation services a wide variety of
customers, including:

-- engineering and research and development divisions of industrial
companies,

-- college, university and high school laboratories,

-- EPA laboratories and Veterans Administration facilities,

-- hospitals and medical care laboratories,

-- state and local municipalities, and

-- thousands of residents through household hazardous waste collection
days.

The Company provides a team of qualified and trained personnel to collect,
label and package waste at the customer's site. CleanPacks are then transported
to one of the Company's facilities for consolidation into full-size containers,
which are then sent for further treatment or disposal as part of the Company's
treatment and disposal services described above. As described above, disposal
options include reclamation, fuels blending, incineration, aqueous treatment,
and a secure chemical landfill.

Technical Services

Technical services consist primarily of analytical testing, engineering
services and personnel training. Many of the Company's principal services as
described above involve the selection and application of various technologies.
The Company's analytical testing laboratories perform a wide range of
quantitative and qualitative analyses to determine the existence, nature, level,
and extent of contamination in various media. The Company's engineering staff
identifies, evaluates and implements the appropriate environmental solution.

Engineering and Analytical Services.  The Company provides technical
support services to complement its primary service lines. For example, if the
Company is engaged to perform an entire environmental remediation project, it
will first perform a site or situation assessment. A site assessment begins with
the determination of the existence of contamination. If present, the nature and
extent of the contamination is defined by gathering samples and then analyzing
them in order to establish or verify the nature and extent of the contaminants.
The Company's engineering staff then develops, evaluates and presents
alternative solutions to remedy the particular situation. Often treatment
systems are completely designed, engineered and fabricated by the Company in
house. It then implements the mitigation and decontamination program mutually
selected by the customer and the Company.

These services are also provided if a customer requires an analysis with
respect to certain material, or if a customer is searching for an appropriate
solution to an environmental problem or if an environmental assessment is
required to allow a transfer of property.

The Company operates a state-certified analytical testing laboratory in
Braintree, Massachusetts which tests samples provided by customers to identify
and quantify toxic pollutants in virtually every component of the environment.
The laboratory staff evaluates the properties of a given material, selects
appropriate analytical methods, and executes a laboratory work plan that results
in a comprehensive technical report. In early 1996, the Company relocated the
laboratory from its headquarter offices to its waste handling facility in
Braintree.

The Company also maintains laboratories at its principal waste management
facilities to identify and characterize waste materials prior to acceptance for
treatment and disposal.

Personnel Training.  The Company provides comprehensive personnel training
programs for its own employees and those of its customers on a commercial basis.
Such programs are designed to promote safe work practices under potential
hazardous environmental conditions, whether or not toxic chemicals are

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present, in compliance with stringent regulations promulgated under the Federal
Resource Conservation and Recovery Act of 1976 ("RCRA") and the federal
Occupational Safety and Health Act ("OSHA"). The Company's Technical Training
Center includes confined space entry, exit, extraction, equipment, an air-system
demonstration maze, respirator fit testing room, leak and spill response
equipment, and a layout of a mock decontamination zone, all designed to fulfill
the requirements of OSHA Hazardous Waste and Emergency Response Standard.

CUSTOMERS

The Company's sales efforts are directed toward establishing and
maintaining relationships with businesses which have ongoing requirements for
one or more of the Company's services. The Company's customer list includes many
of the largest United States industrial companies. In addition, the Company's
customers include most of the major utilities in the Northeast and Mid-Atlantic
regions. The Company's customers are primarily chemical, petroleum,
transportation, utility and industrial firms, other waste management companies
and government agencies. Management believes that the Company's diverse customer
base, in terms of number, industry and geographic location, as well as its large
presence in New England, provide it with a recurring stream of revenue. The
Company estimates that in excess of 80% of its revenues are derived from
previously served customers with recurring needs for the Company's services. The
Company believes the loss of any single customer would not have a material
adverse effect on the Company's financial condition or results of operations.

Although the Company's customer base is diverse, two industries each
provided over 10% of the Company's revenue in 1996. Approximately 19% of the
Company's revenues in 1996 were from the chemical and allied products industry
while approximately 14% were from the electric, gas and sanitary industry. In
addition to serving industrial customers such as utilities, railroads,
pipelines, pharmaceutical manufacturers, and chemical companies, the Company
serves health care and educational institutions, federal, state and local
governmental bodies, and thousands of small quantity generators.

Under applicable environmental laws and regulations, generators of
hazardous wastes retain potential legal liability for the proper treatment of
such wastes through and including their ultimate disposal. In response to these
potential liability concerns, many large generators of industrial wastes and
other purchasers of waste management services (such as general contractors on
major remediation projects) have decreased the number of providers of such
services that they utilize. Waste management companies which are selected as
"approved vendors" by such large generators and other purchasers are firms, such
as the Company, that possess comprehensive collection, recycling, treatment,
transportation, disposal and waste tracking capabilities and have the expertise
necessary to comply with applicable environmental laws and regulations. By
becoming an "approved vendor" of a large waste generator or other purchaser, the
Company becomes eligible to provide waste management services to the various
plants and projects of such generator or purchaser which are located in the
Company's service areas. However, in order to obtain such "approved vendor"
status, it may be necessary for the Company to bid against other qualified
competitors in terms of the services and pricing to be provided. Furthermore,
large generators or other purchasers of waste management services often
periodically audit the Company's facilities and operations to ensure that the
Company's waste management services to such customers are being performed in
compliance with applicable laws and regulations and with other criteria
established by the Company and by such customers.

COMPLIANCE/HEALTH AND SAFETY

The Company regards compliance with applicable environmental regulations
and the health and safety of its workforce as critical components of its overall
operations. The Company strives to maintain the highest professional standards
in its compliance and health and safety activities; its internal operating
requirements are in many instances more stringent than those imposed by
regulation. The Company's compliance program has been developed for each of its
waste management facilities and service centers under the direction of the
Company's corporate compliance and health and safety staffs. The compliance and
health and safety staffs consists of 55 full-time employees who are responsible
for facilities permitting and regulatory compliance, health and safety, field
safety, compliance training, transportation compliance, and related record
keeping. The

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Company also performs periodic audits and inspections of the disposal facilities
of other firms utilized by the Company.

The Company's treatment, storage and recovery facilities are frequently
inspected and audited by regulatory agencies, as well as by customers. Although
the Company's facilities have been cited on occasion for regulatory violations,
the Company believes that each facility is currently in substantial compliance
with applicable requirements. Major facilities and service centers have a
full-time compliance or health and safety representative to oversee the
implementation of the Company's compliance program at the facility or service
center. These highly-trained regulatory specialists are independent from
operations and report to corporate compliance and health and safety directors.

MANAGEMENT OF RISKS

The Company adheres to a program of risk management policies and practices
designed to reduce potential liability, as well as to manage customers' ongoing
environmental exposures. This program includes installation of risk management
systems at the Company's facilities, such as fire suppression, employee
training, environmental auditing, and policy decisions restricting the types of
wastes handled. The Company evaluates all revenue opportunities and declines
those which it believes involve unacceptable risks. The Company frequently
utilizes specialty subcontractors to handle any such materials when discovered
at a job site.

The Company disposes of its wastes at facilities owned and operated by
firms which the Company has audited and approved. Typically, the Company applies
established technologies to the treatment, storage and recovery of hazardous
wastes. The Company believes its operations are conducted in a safe and prudent
manner and in substantial compliance with applicable laws and regulations.

INSURANCE

The Company's insurance programs cover the potential risks associated with
its multifaceted operations from two primary exposures: direct physical damage
and third-party liability. The Company maintains a casualty insurance program
providing coverage for vehicles, workers' compensation, employer's liability,
and comprehensive general liability in the aggregate amount of $30,000,000 per
year, subject to a retention of $250,000 per occurrence, except for general
liability where the retention is $500,000 per occurrence. The workers'
compensation limits are established by state statutes. Since the early 1980s,
casualty insurance policies have typically excluded liability for pollution,
which is covered under a separate pollution liability program.

The Company has pollution liability insurance policies covering the
Company's potential risk in three areas: as a contractor performing services at
customer sites; as a transporter of waste; and while it handles waste at the
Company's facilities. The Company has contractor's liability insurance of
$10,000,000 per occurrence and $10,000,000 in the aggregate, covering off-site
remedial activities and associated liabilities. Lloyds of London provides
pollution liability coverage for waste in-transit with single occurrence and
aggregate liability limits of $29,000,000. This Lloyds of London policy covers
liability in excess of $1,000,000 for pollution caused by sudden and accidental
occurrences during transportation of waste and at the Company's facilities, from
the time waste is picked up from a customer until its delivery to the final
disposal site. The Company's $30,000,000 excess automobile liability insurance
provides additional coverage for any in-transit pollution losses from accidents
over and above the Lloyds of London coverage, so that it has a total of
$59,000,000 of in-transit coverage.

Federal and state regulations require liability insurance coverage for all
facilities that treat, store, or dispose of hazardous waste. In 1989, the
Company established a captive insurance company pursuant to the Federal Risk
Retention Act of 1986. This company qualifies as a licensed insurance company
and is authorized to write professional liability and pollution liability
insurance for the Company and its operating subsidiaries. RCRA, TSCA and
comparable state hazardous waste regulations typically require hazardous waste
handling facilities to maintain pollution liability insurance in the amount of
$1,000,000 per occurrence and $2,000,000 in the aggregate per year for sudden
occurrences and $3,000,000 per occurrence and

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$6,000,000 in the aggregate per year for non-sudden occurrences. Currently, the
Company uses its captive insurance company to provide (i) the first $1,000,000
of insurance against liability from sudden and non-sudden occurrences at its
facilities, with the excess coverage provided by Lloyds of London, and (ii) the
full policy limits of insurance for non-sudden occurrences.

Operators of hazardous waste handling facilities are also required by
federal and state regulations to provide financial assurance for closure and
post-closure care of those facilities, should the facility cease operation. For
example, closure would include the cost of removing the waste stored at a
facility which ceased operating, and sending the material to another company for
disposal. The Company is in the process of obtaining surety bonds to provide
such financial assurance for closure of the waste management facilities it
currently owns, with the exception of the Kimball incinerator which has closure
and post-closure insurance provided by a commercial insurer. The Company
currently utilizes its captive insurance company to provide such financial
assurance for closure and post-closure of the facilities other than the Kimball
incinerator.

The Company's ability to continue conducting its industrial waste
management operations could be adversely affected if the Company should become
unable to obtain sufficient insurance to meet its business and regulatory
requirements in the future. The availability of insurance may also be influenced
by developments within the insurance industry, although other businesses in the
industrial waste management industry would be similarly impacted by such
developments.

Under the Company's insurance programs, coverage is obtained for
catastrophic exposures as well as those risks required to be insured by law or
contract. It is the policy of the Company to retain a significant portion of
certain expected losses related primarily to workers' compensation, physical
loss to property, and comprehensive general and vehicle liability. Provisions
for losses expected under these programs are recorded based upon the Company's
estimates of the aggregate liability for claims. The policy cancellation terms
applicable to the Company are similar to those of other companies in other
industries.

COMPETITION

The Company competes with numerous large and small companies, each of which
is able to provide one or more of the industrial waste management services
offered by the Company and some of which have access to greater financial
resources. The Company believes it offers a more comprehensive range of
industrial waste management services than its competitors in major portions of
its service territory. The Company also believes that its ability to provide
comprehensive services constitutes a significant competitive advantage for the
Company.

Treatment, recovery and disposal operations are conducted by a number of
national and regional waste management firms. The Company believes that the
ability to collect and transport waste products efficiently, quality of service,
safety, and pricing are the most significant factors in the market for treatment
and disposal services.

In field services, the Company's competitors include major national and
regional environmental services firms which have environmental remediation
staffs. The availability of skilled technical professional personnel, quality of
performance, diversity of services and price are the key competitive factors.

EMPLOYEES

As of March 3, 1997, the Company employed 1,213 people on a regular basis.
None of the Company's employees is subject to a collective bargaining agreement,
and the Company believes that its relationship with its employees is
satisfactory.

ITEM 2.  PROPERTIES

The properties of the Company consist primarily of its 12 waste management
facilities and 17 service centers, various environmental remediation equipment,
and a fleet of approximately 1,000 registered pieces of transportation
equipment. Most service center locations are leased, and occasionally move to
other locations as

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operations and space requirements change. All of the waste management facilities
are owned by the Company, except (i) the Chicago hazardous waste management
facility which is leased under a lease which (with extensions) expires September
2020, (ii) the Woburn, Massachusetts waste oil treatment and storage facility
which is leased under a lease which (with extensions) expires February 2004, and
(iii) the Virginia waste oil treatment and storage facility which is leased
under a lease which (with extensions) expires February 2002. In connection with
the placement of an industrial revenue bond in 1996, the Company entered into a
facilities lease with the City of Kimball, Nebraska whereby the City acquired a
leasehold interest in the Kimball incinerator and the Company leased the
incinerator back from the City. The Company retains title to the incinerator.

Hazardous Waste Management Facilities.  The Company operates hazardous
waste management facilities at which it processes, treats and temporarily stores
hazardous wastes for later resale, reuse or off-site treatment or disposal.
Every facility that treats, stores or disposes of hazardous wastes must obtain a
license from the federal EPA or an authorized state agency and must comply with
certain operating requirements. See "Environmental Regulation -- Federal
Regulation of Hazardous Waste" below for a description of licenses issued under
the RCRA. All of the Company's hazardous waste management facilities are subject
to RCRA licensing and have been issued RCRA Part B licenses, except for one
interim status facility. One of the RCRA permits is under administrative appeal.

Two of the facilities described above are waste oil treatment and storage
facilities which are subject to RCRA licensing because some petroleum products,
such as gasoline, are considered hazardous waste under federal law or are
located in a state which regulates waste oil as a hazardous waste. In order to
handle a variety of waste oil and petroleum products and support its field
service activities in the Northeast and Mid-Atlantic regions, the Company has
obtained or applied for RCRA licenses for those two facilities.

The Company has made substantial modifications and improvements to the
physical plant and treatment and process equipment in recent years at its
treatment facilities. These modifications are consistent with the Company's
strategy to upgrade the quality and efficiency of treatment services, to expand
the range of services provided and to ensure regulatory compliance and operating
efficiencies at these facilities. Major features of this program are the
addition of new treatment systems, such as the CES in Baltimore, expansion of
analytical testing laboratories, drum storage and processing facilities, and
equipment rearrangement and replacement to improve operating efficiency.

Chicago, IL.  The Chicago, Illinois facility is located on the south side
of Chicago, on Lake Calumet. It provides treatment of nonhazardous and hazardous
industrial wastewaters, hazardous waste fuels blending, drummed waste processing
and consolidation, and transfer and repackaging of laboratory chemicals into
CleanPacks. In November 1993, the Illinois EPA issued a Part B license for a
ten-year term, which significantly expanded the waste handling and storage
capacity of the facility.

In November, 1995, the Company acquired assets from Chemical Waste
Management, Inc. ("ChemWaste") on an adjoining leased site, together with the
existing improvements, in exchange for sharing the costs of dismantling an
existing hazardous waste incinerator and cleaning up the adjoining site. The
existing improvements on the ChemWaste site, and other improvements completed in
1995 and 1996 by the Company, have expanded the waste storage and handling
capabilities at the Chicago plant. The Chicago facility also serves as the
central receiving, processing and transshipment facility for the
CleanEXPRESS(TM) program. Waste materials are shipped via rail and truck to
Chicago from all other Company facilities. The waste materials are either
treated or processed for transshipment in Chicago.

Under the sharing arrangement with ChemWaste, the Company could over a
period of 15 years be required to contribute up to a maximum of $2,000,000 for
dismantling and decontaminating the incinerator and other equipment and up to a
maximum of $7,000,000 for studies and cleanup of the site. Any additional costs
beyond those contemplated by the sharing arrangement during this time period
would be borne by ChemWaste. In addition, the Company entered into a five year
disposal services agreement with ChemWaste in connection with the acquisition of
the assets on the adjacent site. Pursuant to the terms of the disposal services
agreement, the Company has agreed to use best efforts to deliver waste materials
to ChemWaste facilities for disposal subject to certain customer preferences,
scheduling and other considerations.

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Kimball, NE.  In May 1995, the Company acquired a newly constructed
hazardous waste incinerator in Kimball, Nebraska from Ecova Corporation, an
affiliate of Amoco Oil Company. The Kimball facility includes a 45,000
ton-per-year fluidized bed thermal oxidation unit for maximum destruction
efficiency of hazardous waste. The construction of the incinerator and its
operation have received widespread support in the local community. The
incinerator has a RCRA Part B license issued by the Nebraska Department of
Environmental Quality ("NDEQ"). In December 1994, the NDEQ approved commercial
operation at 75% of capacity. In October, 1996, the NDEQ issued temporary
authority to operate at 99.6% of capacity. The temporary authority can remain in
effect for up to 1 year. The new RCRA and air permits are expected to be issued
by NDEQ in 1997.

The incinerator is located on a 600 acre site, which includes a landfill
for disposal of incinerator ash. If the chemical composition of the ash meets
the permit requirements, which is subject to verification before it is
landfilled on-site, the ash will be classified as "delisted", meaning it will no
longer be regulated as a hazardous waste under federal and state laws. Although
the ash will be classified as nonhazardous, the landfill has been constructed to
meet RCRA Subtitle C standards, which are the same stringent requirements as for
landfills designed to handle hazardous waste.

As part of the acquisition, the Company agreed to make royalty payments to
Ecova Corporation through 2004, based on the number of tons processed at the
facility.

Braintree, MA.  The Braintree facility is located just south of Boston. The
facility is primarily engaged in drummed waste processing and consolidation,
solvent recovery, transformer decommissioning, PCB storage and processing,
blending of waste used as supplemental fuel by industrial furnaces, pretreatment
of waste to stabilize it before it is sent to landfills, and incineration of
small quantities of nonhazardous waste. The facility was acquired by the Company
in 1985 and operates under a state Interim Hazardous Waste Facility License
issued by the Massachusetts Department of Environmental Protection ("DEP") in
1981. In June 1992, the DEP approved the Company's application for a final
Hazardous Waste Facility License, and issued a final Part B license for a
five-year term. The Town of Braintree filed an appeal to the permit which is
still pending. The appeal is an administrative proceeding before the DEP, and
the facility continues to operate normally pursuant to its state license and
Interim Status authority under RCRA while the DEP considers the appeal. The
Company is confident the review will result in confirmation of the license as
granted. The authority from the federal EPA to handle PCBs is not impacted by
the appeal of the Part B license.

Natick, MA.  The Natick, Massachusetts facility is located just west of
Boston. Its primary services are storing and repackaging CleanPacks. The
facility has a state Hazardous Waste Facility License (the state equivalent of a
Part B license), which was renewed in October 1994 for a five-year term. The
facility is also authorized by the federal EPA to handle PCBs.

Cleveland, OH.  The Cleveland, Ohio facility is located south of downtown
Cleveland. It is a wastewater treatment facility that treats nonhazardous and
hazardous industrial wastewaters, and serves as a transfer station for various
types of containerized hazardous and nonhazardous waste. The facility is not
subject to Part B licensing requirements, since its on-site wastewater treatment
activities are regulated pursuant to the Clean Water Act, and therefore are
exempt from RCRA.

Baltimore, MD.  The Baltimore, Maryland facility is located in central
Baltimore. It provides treatment of nonhazardous and hazardous industrial
aqueous wastes, treatment of "lean waters" through the CES process, drummed
waste processing, waste stabilization, and transfer of CleanPacks. The facility
has a state Controlled Hazardous Substances permit (the state equivalent of a
Part B license), which was last issued in 1992 for a three-year term. The permit
also allows handling of material destined for fuels-blending and rail shipment
of hazardous and nonhazardous waste. In June, 1995 the Company submitted a
permit renewal application which allows operations to continue until the renewal
application is approved.

Bristol, CT.  In July 1992, the Company acquired Connecticut Treatment
Corporation, located in Bristol, Connecticut, approximately 20 miles southwest
of Hartford. It provides hazardous wastewater treatment, drummed waste
processing and consolidation, and transfer of CleanPacks. This facility also
provides treatment of special categories of hazardous wastewaters known as
"listed" wastewaters resulting

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from industrial processes such as electroplating. The Connecticut Department of
Environmental Protection renewed the Part B license in 1995 for a five year
term.

Cincinnati, OH.  In February 1993, the Company acquired Spring Grove
Resource Recovery, Inc. ("Spring Grove"), located north of downtown Cincinnati,
Ohio. It provides hazardous wastewater treatment, drummed waste processing and
consolidation, pretreatment of waste to stabilize it before it is sent to
landfills, fuels blending, and transfer of CleanPacks. The facility is also
authorized to handle PCBs. The facility holds a state Hazardous Waste Facility
Installation and Operation permit (RCRA Part B) which was renewed in December
1993 for a five-year term, and a federal permit under the Hazardous and Solid
Waste Amendments to RCRA issued in December, 1996. In May 1995, the Ohio
Hazardous Waste Facility Board approved the transfer of the facility hazardous
waste permit from the former owner of the facility to the Company.

Waste Oil Treatment and Storage Facilities.  The Company has four waste oil
treatment and storage facilities: two in Massachusetts, one in Maine, and one in
Virginia. The Massachusetts facilities are located in Kingston and Woburn, in
the Boston area. The Kingston facility has a state recycling permit and is able
to store oil collected from various activities, ranging from routine cleaning of
oil storage terminals to oil spill cleanups. The facility is also used for
maintenance activities and for training of employees of the Company and
third-party customers. The Woburn facility is a waste oil storage and transfer
facility, and received a Part B license in October 1993 for a five-year term.

The facility in South Portland, Maine is a petroleum reclamation facility
that handles most of the waste oil received by the Company, which comes
primarily from the Company's remediation activities. It has a municipal sewer
user permit allowing the discharge of water separated from oil. The Company also
owns another property on Main Street in South Portland, which has a license to
store virgin oil, and it is also permitted for the temporary storage and
transfer of containerized hazardous waste.

The Virginia facility is located near Richmond, and was acquired in
September 1994. The facility is able to store waste oil and
gasoline-contaminated hazardous wastes collected from various activities,
ranging from routine cleaning of oil storage terminals to oil spill cleanups.
The facility operates under RCRA interim status pending the final review of its
application for a Part B license.

ENVIRONMENTAL REGULATION

While the Company's business has benefited substantially from increased
governmental regulation of hazardous waste transportation, storage and disposal,
the industrial waste management industry itself has become the subject of
extensive and evolving regulation by federal, state and local authorities. The
Company makes a continuing effort to anticipate regulatory, political and legal
developments that might affect its operations, but is not always able to do so.
The Company cannot predict the extent to which any environmental legislation or
regulation that may be enacted or enforced in the future may affect its
operations.

In late 1995, the EPA proposed to amend its hazardous waste regulations by
establishing constituent-specific exit levels for low-risk solid wastes that are
designated as hazardous because they are listed, or have been mixed with,
derived from, or contain listed hazardous wastes. Under the proposal, generators
of listed hazardous wastes that meet the self-implementing exit levels would no
longer be subject to the hazardous waste management system under Subtitle C of
RCRA as listed hazardous wastes. The proposed rulemaking, referred to as the
Hazardous Waste Identification Rule ("HWIR"), establishes a risk-based "floor"
to hazardous waste listings that will encourage pollution prevention, waste
minimization, and the development of innovative waste treatment technologies. If
adopted, the HWIR may adversely impact the Company's incinerator in Kimball,
since many wastes which are currently required to be managed as a hazardous
waste may no longer require incineration at a RCRA incineration unit such as
Kimball. The proposed regulation is still under review by the U.S. EPA.

The Company is required to obtain federal, state and local licenses or
approvals for each of its hazardous waste facilities. Such licenses are
difficult to obtain and, in many instances, extensive studies, tests, and public
hearings are required before the approvals can be issued. The Company has
acquired all operating licenses and approvals now required for the current
operation of its business and has applied for or is in the process of

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applying for all licenses and approvals needed in connection with continued
operation and planned expansion or modifications of its operations.

Federal Regulation of Hazardous Waste

The most significant federal environmental laws affecting the Company are
RCRA, the Superfund Act and the Clean Water Act.

RCRA.  RCRA is the principal federal statute governing hazardous waste
generation, treatment, transportation, storage and disposal. Pursuant to RCRA,
the EPA has established a comprehensive, "cradle-to-grave" system for the
management of a wide range of materials identified as hazardous waste. States,
such as Massachusetts, Connecticut, Illinois, Maryland, Ohio and Nebraska, that
have adopted hazardous waste management programs with standards at least as
stringent as those promulgated by the EPA, have been authorized by the EPA to
administer their facility permitting programs in lieu of the EPA's program.

Every facility that treats, stores or disposes of hazardous waste must
obtain a RCRA license from the EPA or an authorized state agency and must comply
with certain operating requirements. Under RCRA, hazardous waste management
facilities in existence on November 19, 1980 were required to submit a
preliminary license application to the EPA, the so-called Part A Application. By
virtue of this filing, a facility obtained Interim Status, allowing it to
operate until licensing proceedings are instituted pursuant to more
comprehensive and exacting regulations (the Part B licensing process). Interim
Status facilities may continue to operate pursuant to the Part A Application
until their Part B licensing process is concluded. Of the Company's 12 waste
management facilities, nine are subject to RCRA licensing; of the nine, only the
Virginia waste oil facility operates under interim status. The other eight have
been issued Part B licenses, one of which is under appeal.

RCRA requires that Part B licenses contain provisions for required on-site
study and cleanup activities, known as "corrective action," including detailed
compliance schedules and provisions for assurance of financial responsibility.
The EPA has developed a system for assessing the relative environmental cleanup
priority of RCRA facilities, called the National Corrective Action
Prioritization System, with a High, Medium or Low ranking for each facility.
Although several facilities of its competitors have been assessed a High cleanup
priority, none of the Company's RCRA facilities have been assessed as a High
priority.

The Company has begun RCRA corrective action investigations at its Part B
licensed facilities in Braintree, Natick, Bristol, Chicago, and Woburn. The
Company is also involved in site studies at its non-RCRA facilities in
Cleveland, Ohio; Kingston, Massachusetts; and on Main Street in South Portland,
Maine. The Company spent approximately $596,000 on corrective action at the
foregoing facilities in 1996.

The Company is also involved in a RCRA corrective action investigation at a
site in Chester, Pennsylvania owned by PECO Energy Company ("PECO"). The site
consists of approximately 30 acres which PECO had leased to various companies
over the years. In 1989, the Company acquired by merger a public company named
ChemClear Inc., which operated a hazardous waste treatment facility on
approximately eight acres of the Chester site leased from PECO. The Company
ceased operations at the Chester site, decontaminated the plant and equipment,
engaged an independent engineer to certify closure, and obtained final approval
from the Pennsylvania regulatory authorities, certifying final closure of the
facility. In 1993, the EPA ordered PECO to perform a RCRA corrective action
investigation at the Chester site. PECO asked the Company to participate in the
site studies, and in October 1994, the Company agreed to be responsible for
seventy-five percent of the cost of these studies, which is estimated to be in
the range of $1,000,000 to $2,000,000, by, among other things, performing field
service work and analytical services required to complete the site studies and
providing other environmental services to PECO at discounted rates.

While the final scopes of the work to be performed at these facilities have
not yet been agreed upon, the Company believes, based upon information known to
date about the nature and extent of contamination at these sites, that such
costs will not have a material effect on its results of operations or its
financial position, and that it will be able to finance from operating revenues
any additional corrective action required at its

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facilities. Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate.

The Bristol, Connecticut and Cincinnati, Ohio facilities were acquired from
a subsidiary of Southdown, Inc. Southdown Inc. has agreed to indemnify the
Company against any costs incurred or liability arising from contamination
on-site, including the cost of corrective action, or waste disposed of off-site,
including any liability under the Superfund Act, at those facilities.

The Superfund Act.  The Superfund Act provides for immediate response and
removal actions coordinated by the EPA to releases of hazardous substances into
the environment, and authorizes the government to respond to the release or
threatened release of hazardous substances or to order persons responsible for
any such release to perform any necessary cleanup. The statute assigns joint and
several liability for these responses and other related costs, including the
cost of damage to natural resources, to the parties involved in the generation,
transportation and disposal of such hazardous substances. Under the statute, the
Company may be deemed liable as a generator or transporter of a hazardous
substance which is released into the environment, or as the owner or operator of
a facility from which there is a release of a hazardous substance into the
environment. See also "Business -- Legal Proceedings."

Clean Water Act.  This legislation prohibits discharges to the waters of
the United States without governmental authorization. The EPA has promulgated
"pretreatment" regulations under the Clean Water Act, which establish
pretreatment standards for introduction of pollutants into publicly owned
treatment works. In the course of its treatment process, the Company's
wastewater treatment facilities generate waste water which they discharge to
publicly owned treatment works pursuant to permits issued by the appropriate
governmental authority. The Clean Water Act also serves to create business
opportunities for the Company in that it may prevent industrial users from
discharging their untreated wastewaters to the sewer. If these industries cannot
meet their discharge specifications, then they may utilize the services of an
off-site pretreatment facility such as those of the Company.

Other Federal Laws.  Company operations are also subject to the Toxic
Substances Control Act ("TSCA"), pursuant to which the EPA regulates over 60,000
commercially produced chemical substances, including the proper disposal of
PCBs. TSCA has established a comprehensive regulatory program for PCBs, under
the jurisdiction of the EPA, which oversees the storage, treatment and disposal
of PCBs at the Company's facilities in Braintree and Natick, Massachusetts;
Cincinnati, Ohio; and Bristol, Connecticut. Under the Clean Air Act, the EPA
also regulates emissions into the air of potentially harmful substances. In its
transportation operations, the Company is regulated by the U.S. Department of
Transportation, the Federal Railroad Administration, and the U.S. Coast Guard,
as well as by the regulatory agencies of each state in which it operates or
through which its trucks pass. Health and safety standards under the
Occupational Safety and Health Act are also applicable.

STATE AND LOCAL REGULATIONS

Pursuant to the EPA's authorization of their RCRA equivalent programs,
Massachusetts, Connecticut, Illinois, Maryland, Ohio, and Nebraska have
regulatory programs governing the operations and permitting of hazardous waste
facilities. Accordingly, the hazardous waste treatment, storage and disposal
activities of the Company's Braintree, Natick, Woburn, Bristol, Chicago,
Baltimore, Cincinnati, and Kimball facilities are regulated by the relevant
state agencies in addition to federal EPA regulation.

Some states, such as Connecticut and Massachusetts, classify as hazardous
some wastes which are not regulated under RCRA. For example, Massachusetts
considers PCBs and used oil as "hazardous wastes," while RCRA does not.
Accordingly, the Company must comply with state requirements for handling state
regulated wastes, and when necessary obtain state licenses for treating,
storing, and disposing of such wastes at its facilities.

The Company believes that each of its facilities is in substantial
compliance with the applicable requirements of RCRA and state laws and
regulations. Eleven of the Company's twelve waste management facilities have
been issued final licenses; the one for the Braintree facility is under appeal.
The Richmond

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facility operates under interim status. Once issued, such licenses have maximum
fixed terms of a given number of years, which differ from state to state,
ranging from three years to ten years. The issuing state agency may review or
modify a license at any time during its term. The Company anticipates that once
a license is issued with respect to a facility, the license will be renewed at
the end of its term if the facility's operations are in compliance with
applicable requirements. However, there can be no assurance that regulations
governing future licensing will remain static, or that the Company will be able
to comply with such requirements.

The Company's wastewater treatment facilities are also subject to state and
local regulation, most significantly sewer discharge regulations adopted by the
municipalities which receive treated wastewater from the treatment processes.
The Company's continued ability to operate its liquid waste treatment process at
each such facility is dependent upon its ability to continue these sewer
discharges.

The Company's facilities are regulated pursuant to state statutes,
including those addressing clean water and clean air. Local sewer discharge and
flammable storage requirements are applicable to certain of the Company's
facilities. The Company's facilities are subject to local siting, zoning and
land use restrictions. Although the Company's facilities occasionally have been
cited for regulatory violations, the Company believes it is in substantial
compliance with all federal, state and local laws regulating its business.

ITEM 3.  LEGAL PROCEEDINGS

In April 1988, the Board of Selectmen of Braintree, Massachusetts, approved
a cease and desist order with respect to the handling of flammable materials
stored at the Company's Braintree facility. The Board concluded that, when the
Company purchased the land on which the Braintree facility is located, a license
for the storage of flammable liquids was not conveyed as an incident of
ownership. The Company petitioned the Massachusetts Land Court for a declaratory
judgment that either the Company possesses such a license by operation of law or
that the statute requiring the license is pre-empted by the pervasive state
regulation of hazardous waste facilities. In March 1994, the Land Court issued a
ruling favorable to the Company, concluding that the statute is pre-empted by
state hazardous waste laws and regulations and no local flammable storage
license is required. The town has appealed this ruling, and has asked the
Company to stipulate certain facts with respect to the other issues of the case
so that a final appealable order can be issued by the Land Court. The Company
has agreed to the stipulation but the Town has taken no further action.

In October, 1995, an employee at the Company's Cincinnati plant was
accidentally killed in an explosion. The estate of the deceased employee filed a
lawsuit against three subsidiaries of the Company and two other parties alleging
wrongful death, employer intentional tort, lost earnings, loss of companionship
and consortium and pain and suffering. The amount of the damages claimed is not
specified in the complaint, and the case is in the discovery phase at this time.
In January, 1997, the Court granted the Company's motion to dismiss the employer
intentional tort claims, but granted leave to allow plaintiffs to amend the
complaint. The Company has brought cross-claims against a third-party waste
generator with respect to this action, and the Company also has insurance
coverage that should apply to the remaining claims.

Certain Company subsidiaries have transported or generated waste sent to
sites which have been designated state or federal Superfund sites. As a result,
the Company has been named as a potentially responsible party ("PRP") in a
number of lawsuits arising from the disposal of wastes at 20 state and federal
Superfund sites.

Eleven of these sites involve two subsidiaries which the Company acquired
from ChemWaste, which is a subsidiary of WMX Technologies, Inc. As part of the
acquisition, ChemWaste agreed to indemnify the Company with respect to any
liability of its Natick and Braintree subsidiaries for waste disposed of before
the Company acquired them. Accordingly, ChemWaste is paying all costs of
defending the Company's Natick and Braintree subsidiaries in these cases,
including legal fees and settlement costs.

The Company's subsidiary which owns the Bristol, Connecticut facility is
involved in one Superfund site. As part of the acquisition of the Bristol and
Cincinnati, Ohio facilities, the seller and its parent company,

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Southdown, Inc., agreed to indemnify the Company with respect to any liability
for waste disposed of before the Company acquired the facilities, which would
include any liability arising from Superfund sites.

With respect to the other Superfund sites at which the Company believes it
may face liability, the Company has established reserves or escrows which it
believes are appropriate. Therefore, the Company believes that any future
settlement costs arising from any or all of the 20 Superfund sites will not be
material to the Company's operations or financial position. Management routinely
reviews each Superfund site in which the Company's subsidiaries are involved,
considers each subsidiary's role at each site and its relationship to the
Company and other potentially responsible parties ("PRPs") at the site, the
quantity and content of the waste it disposed of at the site, and the number and
financial capabilities of the other PRPs at the site. Based on reviews of the
various sites and currently available information, and management's judgment and
prior experience with similar situations, expense accruals are provided by the
Company for its share of future site cleanup costs, and existing accruals are
revised as necessary. As of December 31, 1996, the Company had accrued
environmental costs of $434,000 for cleanup of Superfund sites. Superfund
legislation permits strict joint and several liability to be imposed without
regard to fault, and, as a result, one PRP might be required to bear
significantly more than its proportional share of the cleanup costs if other
PRPs do not pay their share of such costs.

Five of the 20 sites involve former subsidiaries of ChemClear Inc. One of
the five sites is the Strasburg Landfill site in Pennsylvania. The Company and
two other parties identified as PRPs received an order from the EPA in 1989 to
perform certain emergency measures at the site. The Company responded by
installing a leachate treatment and discharge system and repairing the landfill
slope. Since early 1990, the Company has spent approximately $400,000 in
complying with the EPA order. In 1992, the EPA issued its Record of Decision for
the site which proposes recapping and revegetating the landfill and installing
certain air emission and leachate treatment systems. The EPA has advised the PRP
group that it plans to utilize Superfund monies to design and implement the
remedy specified in the Record of Decision for the site, and initiate a cost
recovery action for its past costs in the amount of approximately $6,000,000.
The EPA indicated that the future remediation costs are estimated to be
$11,000,000. The PRPs have indicated their willingness to accept the EPA's offer
to engage in alternative dispute resolution. In January 1996, the Company and 16
other PRPs signed a standstill and tolling agreement with the EPA which has been
extended four times and which now allows for settlement discussions to take
place up to April 9, 1997. In March, 1997, the Company and eight other PRPs
submitted a revised settlement offer of $2.5 million to the government. In
February 1996, the Company filed suit in the U.S. District Court for the Eastern
District of Pennsylvania against certain PRP's in order to preserve its claims
for cost recovery and contribution against those parties. The Company believes
its ultimate exposure in this case will not have a material impact on its
financial position or results of operations.

Mr. Frank, Inc., which was acquired by the Company in July 1992, is
involved in three Superfund sites, as a transporter of waste generated by others
prior to the Company's purchase of Mr. Frank, Inc. The Company acquired Mr.
Frank, Inc. in exchange for 233,000 shares of the Company's common stock, of
which 33,222 shares were deposited into an escrow account to be held as security
for the sellers' agreement to indemnify the Company against potential
liabilities, including environmental liabilities arising from prior ownership
and operation of Mr. Frank, Inc.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1996.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's common stock began trading publicly in the over-the-counter
market on November 24, 1987 and was added to the NASDAQ National Market System
effective December 15, 1987. The Company's common stock trades on The Nasdaq
Stock Market under the symbol: CLHB. The following table sets forth the high and
low sales prices of the Company's common stock for the indicated periods as
reported by NASDAQ.

HIGH       LOW
------     ------

1995
First Quarter............................................  $5.125     $3.375
Second Quarter...........................................   5.50       3.125
Third Quarter............................................   4.250      3.00
Fourth Quarter...........................................   3.875      2.375

1996
First Quarter............................................  $3.875     $2.375
Second Quarter...........................................   4.125      2.875
Third Quarter............................................   3.375      1.500
Fourth Quarter...........................................   3.375      1.875

On March 3, 1997 there were 862 holders of record of the Company's common
stock, excluding stockholders whose shares were held in nominee name.

The Company has never declared nor paid any cash dividends on its common
stock. In February 1993, the Board of Directors authorized the issuance of up to
156,416 shares designated as Series B Convertible Preferred Stock, with a
cumulative dividend of 7% during the first year and 8% thereafter, payable
either in cash or by the issuance of shares of common stock. 112,000 shares of
Series B Convertible Preferred Stock (the "Preferred Stock") were issued on
February 16, 1993 in partial payment of the purchase price for Spring Grove.
Except for payment of dividends on the Preferred Stock, the Company intends to
retain all earnings for use in the Company's business and therefore does not
anticipate paying any cash dividends on its common stock in the foreseeable
future. The Company's bank credit agreements contain financial covenants which
may effectively restrict or limit the payment of dividends other than Preferred
Stock dividends. See Note 9 to the Consolidated Financial Statements in Item 8
of this report.

Dividends on the Company's Preferred Stock are payable on the 15th day of
January, April, July and October, at the rate of $1.00 per share, per quarter;
112,000 shares are outstanding. Under the terms of the Preferred Stock, the
Company can elect to pay dividends in cash or in common stock with a market
value equal to the amount of the dividend payable. The Company elected to pay
the 1996 dividends in common stock. The market value of the common stock and the
shares of common stock issued to holders of preferred stock during 1996 were as
follows:

RECORD DATE                   MARKET VALUE     COMMON STOCK ISSUED
--------------------------------------------  ------------     -------------------

January 1, 1996.............................      2.612               42,871
April 1, 1996...............................      2.937               38,130
July 1, 1996................................      2.987               37,492
October 1, 1996.............................      3.212               34,866

The Company anticipates that the Preferred Stock dividends payable through
1997 will be paid in common stock.

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ITEM 6.  SELECTED FINANCIAL DATA

The following selected consolidated financial information should be
reviewed in conjunction with Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 8 -- Financial Statements
and Supplementary Data of this report.

Extraordinary Item.  During the third quarter of 1994, the Company
completed a public offering of $50,000,000 of 12.50% Senior Notes, and used the
net proceeds to prepay substantially all of the Company's debt, in order to
refinance debt which had a 13.25% interest rate. The Company also wanted to
reduce its reliance on floating rate bank debt, by extending the average life of
its long-term debt and obtaining longer-term capital at an attractive fixed
interest rate. The refinancing resulted in approximately $2,043,000 of expense
relating to the early retirement of the outstanding debt, and an extraordinary
charge of $1,220,000 ($.13 per share), net of income tax benefit, for redemption
premiums paid to the holders of the prepaid debt and for the write-off of
deferred financing costs.

Nonrecurring Charges.  During the fourth quarter of 1995, the Company
recorded a $4,247,000 nonrecurring charge in connection with the reengineering
of the Company's operations and the write down of non-performing assets, as well
as the anticipated losses on the sale of certain non-core properties. Under the
reengineering program, the Company has closed or downsized small, satellite
offices; reduced employment levels; downsized its laboratory staff and relocated
the laboratory to its waste handling facility in Braintree, Massachusetts; and
relocated its corporate headquarters to a new location in Braintree,
Massachusetts in the Spring of 1996. The components of the nonrecurring charge
are as follows:

Severance and related costs....................................    $1,097,000
Write-off of non-performing asset..............................     1,110,000
Real estate related charges....................................     2,040,000
----------
$4,247,000

During the fourth quarter of 1994, the Company renegotiated its lease on
its corporate headquarters in Quincy, Massachusetts, such that the lease would
terminate on or before December 31, 1995. The Company relocated its corporate
headquarters to Braintree, Massachusetts in the spring of 1995. In addition, the
Company has vacated laboratory space it rents in Bedford, Massachusetts, and is
subleasing the space. As a result, the Company recorded a one-time, noncash
charge of $1,035,000 before taxes for the write-off of leasehold improvements at
the two locations.

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FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1996         1995         1994         1993         1992
--------     --------     --------     --------     --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

INCOME STATEMENT DATA:
Revenues............................  $200,213     $209,250     $207,073     $200,114     $176,193
Cost of revenues....................   154,608      156,779      146,132      134,525      116,473
Selling, general and administrative
expenses..........................    36,326       39,574       38,910       42,296       35,923
Depreciation and amortization of
intangible assets.................     9,827       10,081       10,250       10,319        8,884
Nonrecurring charges................        --        4,247        1,035           --           --
--------     --------     --------     --------     --------
Income (loss) from operations.......      (548)      (1,431)      10,746       12,974       14,913
Interest expense (net)..............     9,170        8,657        7,432        7,198        7,064
--------     --------     --------     --------     --------
Income (loss) before provision for
income taxes and extraordinary
item..............................    (9,718)     (10,088)       3,314        5,776        7,849
Provision for (benefit from) income
taxes.............................    (2,775)      (3,195)       1,619        2,645        2,774
--------     --------     --------     --------     --------
Income (loss) before extraordinary
item..............................    (6,943)      (6,893)       1,695        3,131        5,075
Extraordinary loss related to early
retirement of debt, net of income
tax benefit of $823,000...........        --           --        1,220           --           --
--------     --------     --------     --------     --------
Net income (loss)...................  $ (6,943)    $ (6,893)    $    475     $  3,131     $  5,075
========     ========     ========     ========     ========
Net income (loss) per common and
common equivalent share before
extraordinary item................  $   (.77)    $   (.77)    $    .13     $    .28     $    .52
========     ========     ========     ========     ========
Extraordinary item..................  $     --     $     --     $   (.13)          --           --
========     ========     ========     ========     ========
Net income (loss) per common and
common equivalent share...........  $   (.77)    $   (.77)    $    .00     $    .28     $    .52
========     ========     ========     ========     ========
Weighted average number of common
and common equivalent shares
outstanding.......................     9,653        9,475        9,635        9,884        9,743
========     ========     ========     ========     ========
BALANCE SHEET DATA:
Working capital.....................  $ 14,245     $ 11,053     $ 20,814     $ 18,320     $ 15,487
Total assets........................  $177,997     $186,444     $159,875     $167,358     $153,939
Long-term debt, less current
portion...........................  $ 68,668     $ 70,391     $ 60,465     $ 62,507     $ 64,565
Stockholders' equity................  $ 53,584     $ 60,374     $ 67,326     $ 67,371     $ 58,065

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain operating
data associated with the Company's results of operations. This table and
subsequent discussions should be read in conjunction with Item 6 -- Selected
Financial Data and Item 8 -- Financial Statements and Supplementary Data of this
report.

PERCENTAGE OF TOTAL REVENUES
---------------------------------------------
TWELVE-MONTH YEAR ENDED DECEMBER 31,
---------------------------------------------
1996      1995      1994      1993      1992
-----     -----     -----     -----     -----

Revenues...........................................  100.0%    100.0%    100.0%    100.0%    100.0%
Cost of revenues:
Disposal costs paid to third parties.............   13.8      15.4      13.5      15.4      18.2
Other costs......................................   63.4      59.5      57.1      51.8      47.9
-----     -----     -----     -----     -----
Total cost of revenues........................   77.2      74.9      70.6      67.2      66.1
Selling, general and administrative expenses.......   18.2      18.9      18.8      21.1      20.4
Depreciation and amortization of intangible
assets...........................................    4.9       4.9       4.9       5.2       5.0
Nonrecurring charges...............................     --       2.0       0.5        --        --
-----     -----     -----     -----     -----
Income (loss) from operations......................   (0.3)     (0.7)      5.2       6.5       8.5
Interest expense (net).............................    4.6       4.1       3.6       3.6       4.0
-----     -----     -----     -----     -----
Income (loss) before provision for income taxes
and extraordinary item........................   (4.9)     (4.8)      1.6       2.9       4.5
Provision for (benefit from) income taxes..........   (1.4)     (1.5)      0.8       1.3       1.6
-----     -----     -----     -----     -----
Income (loss) before extraordinary item............   (3.5)     (3.3)      0.8       1.6       2.9
Extraordinary loss from early retirement of debt...     --        --       0.6        --        --
-----     -----     -----     -----     -----
Net income (loss)..................................   (3.5)%    (3.3)%     0.2%      1.6%      2.9%
=====     =====     =====     =====     =====

Revenues.  Revenues for 1996 were $200,213,000 as compared to $209,250,000
for 1995 and $207,073,000 for 1994. During the fourth quarter of 1996, the
Company received approximately $7,000,000 of revenue from the cleanup of a large
oil spill off the Maine coast. Excluding this event business in the fourth
quarter, the base business declined approximately 8% from the previous year. The
revenue decline was the result of industry-wide pricing pressures and a decrease
in the volumes of waste which were processed through the Company's facilities.
During 1994, the Company received approximately $7,000,000 of revenue from its
leading role in the cleanup of a large oil spill from a barge off the coast of
Puerto Rico. Excluding the revenue from that event in 1994, the Company's base
business grew approximately 5% from 1994 to 1995.

There are many factors which have impacted, and continue to impact, the
Company's revenues. These factors include: competitive industry pricing;
continued efforts by generators of hazardous waste to reduce the amount of
hazardous waste they produce; significant consolidation among treatment and
disposal companies; industry-wide overcapacity; and direct shipment by
generators of waste to the ultimate treatment or disposal location.

The Company continues to focus on developing its sales force in order to
expand the customer base in the core markets in which it operates. While the
Company has taken action to protect its market share in existing regions and has
established new business relationships in the newer regions, significant price
competition has impacted revenue growth.

The Company continues to take pricing actions in response to industry
conditions, as it attempts to maintain a competitive mix of price, performance,
and customer support services while managing profitability and growth. The
Company attempts to mitigate the effects of price reductions by reducing
operating costs. There can be no assurance that pricing actions will be
effective in stimulating higher levels of sales or that cost reduction efforts
will offset the effect of pricing actions on the Company's gross margin.

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23

Cost of Revenues.  Cost of revenues, as a percentage of revenues increased
to 77.2% in 1996 from 74.9% in 1995 and 70.6% of revenues in 1994. One of the
largest components of cost of revenues is the cost of sending waste to other
companies for disposal. The Company has been able to upgrade the quality and
efficiency of its waste treatment services through the development of new
technology, strategic acquisitions, and continued modifications and upgrades at
its facilities. In addition, during the second quarter of 1995, the Company
acquired an incinerator in Kimball, Nebraska which provides the Company with
incineration capabilities, thus reducing reliance on third parties. With the
acquisition of the Kimball incinerator, the Company has seen a reduction in
outside disposal costs. Although the addition of the Kimball incinerator has
reduced the outside disposal costs to 13.8% of revenue in 1996 from 15.4% in
1995, the initial costs associated with the start-up and with obtaining the
necessary volumes to support this facility have contributed to the increase in
the other costs of revenue. Although these actions have reduced the Company's
dependence on outside disposal vendors to which the Company sends waste for
ultimate disposal, the increasingly competitive nature of pricing in the
hazardous waste industry and the industry-wide reduction in the volume of waste
materials handled have significantly reduced the margins on waste received at
the Company's facilities.

Since the Kimball incinerator is a relatively new facility, and a recent
entrant to the incineration marketplace, volumes are growing slowly due to the
time required for customers to audit and approve the facility and begin shipping
waste to it. As a result of this and other factors, the incinerator experienced
a loss from operations of approximately $3,000,000 during 1996 and $1,500,000
for the seven months ended December 31, 1995. Although the Company expects
operating improvements during 1997, there can be no assurance that such
improvements will occur.

In 1996, the Company implemented its CleanEXPRESS(TM) system which the
Company anticipates will result in increased efficiencies relative to the
transfer of waste materials through the Company's network of waste management
facilities to its expanded and upgraded Chicago facility. The Company
anticipates this will lower the costs associated with the collection network of
the transportation, treatment and disposal of routinely created hazardous waste.

The nonrecurring charge in 1995 of $4,247,000 resulted primarily from the
reengineering program, which identified more efficient methods of servicing
customers as well as certain assets and field locations which were no longer
integral to the Company's operations. Through reengineering, a two-year effort
which began in January 1994, the Company significantly reduced its cost
structure. The reengineering and cost control efforts identified over
$10,000,000 in annual cost reductions which were substantially realized in 1996.
These savings were achieved through the introduction of new computer systems
which strengthened the Company's business processes, exiting non-core
businesses, and reducing the number of offices and the amount of rented space.
Although the Company realized these savings during 1996, they were offset by
reduction in pricing, volumes and other costs increasing. The Company is
continuing to implement cost savings plans to reduce operating expenses. This
implementation included a reduction in workforce of approximately 340 employees
since September of 1995, of which a reduction of approximately 160 employees
occurred in the third quarter of 1996.

The Company believes that its ability to manage operating costs is an
important factor in its ability to remain price competitive. During 1996, the
Company continued its process of consolidating common functions to reduce
redundant costs and improve the Company's ability to deliver its services. No
assurance can be given that the Company's efforts to manage future operating
expenses will be successful.

Selling, General and Administrative Expenses.  Selling, general and
administrative expenses declined to $36,326,000 in 1996 from $39,574,000 in 1995
and $38,910,000 in 1994. The 8% decrease from 1995 to 1996 was the result of
several cost cutting measures such as reducing administrative staff, relocating
the Company's corporate headquarters to a new office park and focusing on
discretionary spending. While there continues to be an effort to expand the
Company's sales and marketing capabilities, any increases in these costs have
been more than offset by cost savings programs. The Company does not expect any
significant increases in 1997 in selling, general and administrative expenses.

During 1995, the Company incurred costs associated with marketing campaigns
for the Kimball incinerator and the expanded Chicago waste treatment facility.
As a result of the Company's strategy to

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expand geographically, its sales expenses increased. Although there were
increased costs associated with the expansion efforts, the Company implemented
cost savings programs which, to some extent, offset sales related expenditures.

Interest Expense.  Interest expense increased during 1996 to $9,170,000
from $8,657,000 in 1995 and $7,432,000 in 1994. The increase in interest expense
is attributed to an increase in the average borrowings of approximately $5
million for the twelve months ended December 31, 1996. A portion of the increase
in interest expense during 1996 and 1995 was offset by interest income from
restricted investments of $559,000 in 1996 and $243,000 in 1995. Interest
expense increased during 1995 as a result of an increase in the Company's
average cost of capital, due to its decision in 1994 to reduce its reliance on
floating rate bank debt through the issuance of $50,000,000 of 12.50% Senior
Notes, and an increase in total long-term debt, due to the costs of the
acquisition of the Kimball incinerator and the expansion of the Chicago
facility. No interest was capitalized during 1996, 1995 or 1994.

Benefit from Income Taxes.  The effective income tax rate for 1996 was 29%,
as compared to 32% for 1995 and 49% for 1994. The rate can fluctuate
significantly depending on the amount of income before taxes, as compared to the
fixed amount of goodwill and other non-deductible items.

During the ordinary course of its business, the Company is audited by
federal and state tax authorities which may result in proposed assessments. The
Company has received a Notice of Intent to assess state income taxes from one of
the states in which it operates. The Company believes that it has properly
reported its state income and intends to contest the assessment vigorously. The
Company believes that no current audits or assessments will result in charges
which would be material to results of operations.

FACTORS THAT MAY AFFECT FUTURE RESULTS

From time to time, the Company and employees acting on behalf of the
Company make forward-looking statements concerning the expected revenues,
results of operations, capital expenditures, capital structure, plans and
objectives of management for future operations, and future economic performance.
This report contains forward-looking statements. There are many factors which
could cause actual results to differ materially from those projected in a
forward-looking statement, and there can be no assurance that such expectations
will be realized.

The Company's future operating results may be affected by a number of
factors, including the Company's ability to: integrate successfully the
CleanEXPRESS(TM) program; continue to implement the treatment and disposal
reengineering program; utilize its facilities and workforce profitably, in the
face of intense price competition; maintain or increase market share in an
industry which appears to be downsizing and consolidating; integrate additional
hazardous waste management facilities, such as the Kimball incinerator and the
expanded Chicago facility; realize benefits from cost reduction programs; and
generate incremental volumes of waste to be handled through such facilities from
existing sales offices and service centers.

The future operating results of the Kimball incinerator may be affected by
factors such as its ability to: obtain sufficient volumes of waste at prices
which produce revenue sufficient to offset the operating costs of the facility;
minimize downtime and disruptions of operations; and compete successfully
against other incinerators which have an established share of the incineration
market.

The Company's operations may be affected by the commencement and completion
of major site remediation projects; seasonal fluctuations due to weather and
budgetary cycles influencing the timing of customers' spending for remedial
activities; the timing of regulatory decisions relating to hazardous waste
management projects; changes in regulations governing the management of
hazardous waste; secular changes in the waste processing industry towards waste
minimization and the propensity for delays in the remedial market; suspension of
governmental permits; and fines and penalties for noncompliance with the myriad
of regulations governing the Company's diverse operations. As a result of these
factors, the Company's revenue and income could vary significantly from quarter
to quarter, and past financial performance should not be considered a reliable
indicator of future performance.

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25

Typically during the first quarter of each calendar year there is less
demand for environmental remediation due to the cold weather, particularly in
the Northeast and Midwest regions. In addition, factory closings for the
year-end holidays reduce the volume of industrial waste generated, which results
in lower volumes of waste handled by the Company during the first quarter of the
following year.

The Company participates in a highly volatile industry, with multiple
competitors, many of which have taken large write-offs and asset write-downs and
undergone major restructurings during the past several years. As the industry
consolidates, other companies may undergo such restructurings and incur special
charges in an effort to reduce costs and offset the intense price competition in
a competitive marketplace. The Company's participation in a highly dynamic
industry could result in significant volatility of the Company's common stock
price, as well as that of its competitors.

The Company's business has not been significantly affected by inflation
during the periods discussed above.

ENVIRONMENTAL CONTINGENCIES

While increasing environmental regulation often presents new business
opportunities to the Company, it likewise often results in increased operating
and compliance costs. The Company strives to conduct its operations in
compliance with applicable laws and regulations, including environmental rules
and regulations, and has as its goal 100% compliance. This effort requires
programs to promote compliance, such as training employees and customers,
purchasing health and safety equipment, and in some cases hiring outside
consultants and lawyers. Even with these programs, management believes that in
the ordinary course of doing business, companies in the environmental services
and waste disposal industry are faced with governmental enforcement proceedings
resulting in fines or other sanctions and will likely be required to pay civil
penalties or to expend funds for remedial work on waste management facilities.

From time to time, the Company has paid fines or penalties in governmental
environmental enforcement proceedings, usually involving its waste treatment,
storage and disposal facilities. At December 31, 1996, however, there were no
pending governmental environmental enforcement proceedings where the Company
believes potential monetary sanctions will exceed $100,000. The possibility
always exists that substantial expenditures could result from governmental
proceedings, which would have a negative impact on earnings for a particular
reporting period. More importantly, federal, state and local regulators have the
power to suspend or revoke permits or licenses needed for operation of the
Company's plants, equipment, and vehicles, based on the Company's compliance
record, and customers may decide not to use a particular disposal facility or do
business with a company because of concerns about the compliance record.
Suspension or revocation of permits or licenses would impact the Company's
operations and could have a material adverse impact on financial results.

Certain Company subsidiaries have transported or generated waste sent to
sites which have been designated state or federal Superfund sites. As a result,
the Company has been named as a potentially responsible party at 20 state and
federal Superfund sites. Eleven of these sites involve two subsidiaries which
the Company acquired from Chemical Waste Management, Inc. ("ChemWaste"), a
wholly-owned subsidiary of WMX Technologies, Inc., and one site involves a
subsidiary which the Company acquired from Southdown, Inc., a public company. As
part of these acquisitions, ChemWaste and Southdown, Inc. agreed to indemnify
the Company with respect to any liability of such subsidiaries for waste
disposed of before the Company acquired them. With respect to the other
Superfund sites, the Company has established reserves or escrows which it
believes are appropriate, such that any future settlement costs of lawsuits
arising from any or all of the 20 Superfund sites will not be material to the
Company's operations or financial position. As of December 31, 1996, the Company
had accrued environmental costs of approximately $434,000 for cleanup of
Superfund sites.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations and capital expenditures primarily
by cash flow from operations. During the year ended December 31, 1996, the
Company spent $3,126,000 on additions to plant

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26

and equipment and construction in progress, as compared to its capital
expenditures of $8,852,000 during the same period of the prior year, during
which the Company also spent $5,160,000 on the acquisition of the Kimball
incinerator. During the twelve months ended December 31, 1996, net reductions to
long-term debt were $1,025,000, as compared to net additions to long-term debt
of $12,121,000 during the same period of the previous year.

In September of 1996, the Company refinanced its $45,000,000 revolving
credit and term loan agreement (the "Loan Agreement") with a financial
institution by (i) amending the Loan Agreement to reduce the maximum credit
thereunder from $45,000,000 to $35,000,000 and (ii) guaranteeing $10,000,000 of
10.75% Economic Development Revenue Bonds due September 1, 2026 issued by the
City of Kimball, Nebraska (the "Bonds"). The Company used the net proceeds from
the sale of the Bonds to repay a portion of its outstanding debt under the Loan
Agreement. That portion was originally incurred to pay for a portion of the
costs of the Kimball incinerator and landfill, including the prepaid closure
insurance programs, as well as the costs of improvements to the facility.

In December of 1996, the Company renegotiated (with a commercial insurance
company) the requirement to provide an escrow for closure and post-closure costs
of the incinerator and landfill. The $6,261,000 escrow balance is expected to be
replaced with a $2,500,000 letter of credit during 1997. The Company received
the escrow funds in January of 1997. The funds were used to paydown the
outstanding balance of the revolving loan portion under the Loan Agreement of
approximately $2 million, while the excess funds of approximately $4 million
were invested in short-term government securities.

Dividends on the Company's Series B Convertible Preferred Stock are payable
on the 15th day of January, April, July and October, at the rate of $1.00 per
share, per quarter; 112,000 shares are outstanding. Under the terms of the
preferred stock, the Company can elect to pay dividends in cash or in common
stock with a market value equal to the amount of the dividend payable. The
Company elected to pay the 1996 dividends in common stock. Accordingly, the
Company has issued a total of 153,359 shares of common stock to the holders of
the preferred stock for the year. The Company anticipates that the preferred
stock dividends payable through 1997 will be paid in common stock.

Management believes that sufficient resources will be available to meet the
Company's cash requirements through at least the next twelve months. Cash
requirements for periods beyond the next twelve months will depend on the
Company's profitability, its ability to manage working capital requirements, and
its rate of growth.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1 "Environmental Remediation Liabilities" (SOP
96-1) for fiscal years beginning after December 15, 1996. SOP 96-1 provides that
environmental remediation liabilities should be accrued when the criteria of
Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies" (SFAS 5) are met and it includes benchmarks to aid in the
determination of when environmental remediation liabilities should be
recognized. SOP 96-1 also provides guidance with respect to the measurement of
the liability and the display and disclosure of environmental remediation
liabilities in the financial statements. The Company believes that the adoption
of this SOP will not have a material impact on the Company's financial condition
or results of operations.

The Financial Accounting Standards Board issued Statement No. 128 ("SFAS
128"), "Earnings per Share", which requires the presentation of basic and
diluted earning per share ("EPS"). Basic EPS excludes dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS is computed
similarly to fully diluted EPS under the existing rules. The Company will adopt
SFAS 128 as of December 31, 1997 and upon adoption, will restate all prior
period EPS data presented. The Company has not yet determined the impact of
adopting SFAS 128.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Clean Harbors, Inc.:

We have audited the consolidated financial statements and the financial
statement schedule of Clean Harbors, Inc. and its subsidiaries listed in Item
14(a) of this Form 10-K. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Clean Harbors,
Inc. and its subsidiaries as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.

COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
February 5, 1997

26

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CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996         1995         1994
--------     --------     --------

Revenues...................................................  $200,213     $209,250     $207,073
Cost of revenues...........................................   154,608      156,779      146,132
Selling, general and administrative expenses...............    36,326       39,574       38,910
Depreciation and amortization of intangible assets.........     9,827       10,081       10,250
Nonrecurring charges.......................................        --        4,247        1,035
--------     --------     --------
Income (loss) from operations..............................      (548)      (1,431)      10,746
Interest expense (net).....................................     9,170        8,657        7,432
--------     --------     --------
Income (loss) before provision for income taxes and
extraordinary item.......................................    (9,718)     (10,088)       3,314
Provision for (benefit from) income taxes..................    (2,775)      (3,195)       1,619
--------     --------     --------
Income (loss) before extraordinary item....................    (6,943)      (6,893)       1,695
Extraordinary loss related to early retirement of debt, net
of income tax benefit of $823,000........................        --           --        1,220
--------     --------     --------
Net income (loss).....................................  $ (6,943)    $ (6,893)    $    475
========     ========     ========
Net income (loss) per common and common equivalent share
before extraordinary item................................  $   (.77)    $   (.77)    $    .13
========     ========     ========
Extraordinary item.........................................  $     --     $     --     $   (.13)
========     ========     ========
Net income (loss) per common and common equivalent share...  $   (.77)    $   (.77)    $    .00
========     ========     ========
Weighted average common and common equivalent shares
outstanding..............................................     9,653        9,475        9,635
========     ========     ========

The accompanying notes are an integral part of these consolidated financial
statements.

27

29

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

AS OF DECEMBER 31,
----------------------
1996          1995
--------      --------

ASSETS
Current assets:
Cash and cash equivalents............................................................   $  1,366      $    225
Restricted investments...............................................................      8,190         2,460
Accounts receivable, less reserves of $1,063 and $1,045, respectively................     42,746        48,417
Prepaid expenses.....................................................................      1,603         2,039
Supplies inventories.................................................................      2,866         2,970
Income tax receivable................................................................      1,668           722
Deferred tax asset...................................................................      3,152         1,995
--------      --------
Total current assets...............................................................     61,591        58,828
--------      --------
Property, plant and equipment:
Land.................................................................................      8,423         8,364
Buildings and improvements...........................................................     39,585        39,770
Vehicles and equipment...............................................................     78,050        77,384
Furniture and fixtures...............................................................      2,191         2,155
Construction in progress.............................................................      1,819         1,317
--------      --------
130,068       128,990
Less -- accumulated depreciation and amortization....................................     61,282        54,256
--------      --------
68,786        74,734
--------      --------
Other assets:
Restricted investments...............................................................         --         5,207
Goodwill (net).......................................................................     21,479        22,202
Permits (net)........................................................................     12,605        13,489
Deferred taxes non-current...........................................................      9,208         8,548
Other................................................................................      4,328         3,436
--------      --------
47,620        52,882
--------      --------
Total assets...................................................................   $177,997      $186,444
========      ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations..........................................   $  4,370      $  3,605
Accounts payable.....................................................................     20,069        18,614
Accrued disposal costs...............................................................      7,912         7,446
Other accrued expenses...............................................................     14,609        17,886
Income tax payable...................................................................        162            --
Deferred tax liability...............................................................        224           224
--------      --------
Total current liabilities..........................................................     47,346        47,775
--------      --------
Other liabilities:
Long-term obligations, less current maturities.......................................     68,668        70,391
Deferred taxes, long-term............................................................      7,453         7,904
Other................................................................................        946            --
--------      --------
Total other liabilities............................................................     77,067        78,295
--------      --------
Commitments and contingent liabilities (Notes 4, 8, 9, 10 and 14)
Stockholders' equity:
Preferred stock, $.01 par value:
Series A convertible preferred stock
Authorized -- 2,000,000 shares; issued and outstanding -- none...................         --            --
Series B convertible preferred stock
Authorized -- 156,416 shares; issued and outstanding -- 112,000 shares at
December 31, 1996 and 1995 (liquidation preference of $5,600,000)...............          1             1
Common stock, $.01 par value:
Authorized -- 20,000,000 shares; issued and outstanding 9,743,153 shares at
December 31, 1996 and 9,524,676 shares at December 31, 1995.......................         98            96
Additional paid-in capital...........................................................     59,477        58,871
Unrealized loss on restricted investments, net of tax................................        (15)           (7)
Retained earnings/(accumulated deficit)..............................................     (5,977)        1,413
--------      --------
Total stockholders' equity.........................................................     53,584        60,374
--------      --------
Total liabilities and stockholders' equity.....................................   $177,997      $186,444
========      ========

The accompanying notes are an integral part of these consolidated financial
statements.

28

30

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1996         1995          1994
--------      -------      --------

Cash flows from operating activities:
Net income (loss)..............................................................  $ (6,943)     $(6,893)     $    475
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................     9,827       10,081        10,250
Write-off of leasehold improvements..........................................        --           --         1,035
Write-off for reengineering program..........................................        --        3,684            --
Allowance for doubtful accounts..............................................       651          381           776
Amortization of deferred financing costs.....................................       631          536           357
Write-off of deferred financing costs........................................        --           --           963
Deferred income taxes........................................................    (1,116)      (1,515)         (929)
Loss (gain) on sale of fixed assets..........................................       (77)           9           191
(Gain) loss on sale of investments...........................................       (28)           4             2
Amortization of bond premiums (discounts)....................................        --           --             1
Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable........................................................     5,020       (3,962)          926
Income taxes receivable....................................................      (946)        (544)          429
Prepaid expenses...........................................................       436         (268)          459
Supplies inventories.......................................................       104         (300)         (237)
Deferred tax asset.........................................................    (1,157)      (1,995)           --
Accounts payable...........................................................     1,455        7,063         1,122
Accrued disposal costs.....................................................       466        1,267          (545)
Other accrued expenses.....................................................    (3,277)       2,206         2,260
Income tax payable.........................................................       162           --            --
Deferred tax liability.....................................................        --          224            --
--------      -------      --------
Net cash provided by operating activities................................     5,208        9,978        17,535
--------      -------      --------
Cash flows from investing activities:
Payment for businesses acquired, net of cash acquired..........................        --           --          (200)
Additions to property, plant and equipment.....................................    (3,126)     (12,984)       (5,270)
Proceeds from sales and maturities of restricted investments...................       740          202           232
Cost of restricted investments purchased.......................................    (1,278)      (6,124)         (960)
Increase in other assets.......................................................      (873)      (2,661)         (103)
Proceeds from sale of fixed assets.............................................       965           36           155
Increase in permits............................................................       (13)        (140)           --
Increase in other liabilities..................................................       946           --            --
--------      -------      --------
Net cash used in investing activities........................................    (2,639)     (21,671)       (6,146)
--------      -------      --------
Cash flows from financing activities:
Preferred stock dividend distribution..........................................        --         (335)         (429)
Issuance of long-term debt.....................................................    16,667       10,000        50,000
Payments on long-term obligations..............................................    (7,355)      (2,922)      (33,449)
Additions to deferred financing costs..........................................      (564)        (842)       (2,364)
Net borrowings (payments) under long-term revolver.............................   (10,337)       4,848       (24,991)
Proceeds from exercise of stock options........................................        --           17            28
Proceeds from employee stock purchase plan.....................................       161          152            --
--------      -------      --------
Net cash provided by (used in) financing activities..........................    (1,428)      10,918       (11,205)
--------      -------      --------
Increase (Decrease) in cash and cash equivalents.................................     1,141         (775)          184
Cash and cash equivalents, beginning of year.....................................       225        1,000           816
--------      -------      --------
Cash and cash equivalents, end of year...........................................  $  1,366      $   225      $  1,000
========      =======      ========
Supplemental Information:
Cash Payments (Receipts) for Interest and Income Taxes:
Interest.......................................................................  $  8,849      $ 8,715      $  6,648
Income Taxes...................................................................      (430)       1,410         1,585
Liabilities assumed in conjunction with business acquisitions:
Fair value of assets acquired..................................................  $     --      $ 5,160      $    400
Cash paid......................................................................        --        4,132           200
Liabilities assumed............................................................        --        1,028           200
Noncash Investing and Financing Activities:
Capital lease obligations incurred.............................................  $     --      $   196      $    240
Dividends declared but not paid................................................        --           --           112
Stock dividend on preferred stock..............................................       447          112            --
Property, plant and equipment accrued..........................................        --          865            --

The accompanying notes are an integral part of these consolidated financial
statements.

29

31

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS)

SERIES B
PREFERRED STOCK      COMMON STOCK                   UNREALIZED
-----------------   -----------------                GAIN/(LOSS)     RETAINED
$.01                $.01    ADDITIONAL       ON         EARNINGS/         TOTAL
NUMBER      PAR     NUMBER      PAR     PAID-IN     RESTRICTED    (ACCUMULATED   STOCKHOLDERS'
OF SHARES   VALUE   OF SHARES   VALUE    CAPITAL     INVESTMENTS     DEFICIT)        EQUITY
---------   -----   ---------   -----   ----------   -----------   ------------   -------------

BALANCE, AT DECEMBER 31, 1993....    112       $ 1      9,425      $95     $ 58,556       $  --        $  8,719        $67,371
---       ---      -----      ---     --------       -----        --------        -------
Preferred stock dividends:
Series B, $4.00 per share......     --        --         --       --           --          --            (441)          (441)
Proceeds from exercise of stock
options......................     --        --          6       --           28          --              --             28
Tax benefit from exercise of
stock options................     --        --         --       --            6          --              --              6
Unrealized loss on restricted
investments..................     --        --         --       --           --        (113)             --           (113)
Net income.....................     --        --         --       --           --          --             475            475
---       ---      -----      ---     --------       -----        --------        -------
BALANCE, AT DECEMBER 31, 1994....    112       $ 1      9,431      $95     $ 58,590       $(113)       $  8,753        $67,326
---       ---      -----      ---     --------       -----        --------        -------
Preferred stock dividends:
Series B, $4.00 per share......     --        --         29       --          112          --            (447)          (335)
Proceeds from exercise of stock
options......................     --        --          6       --           17          --              --             17
Employee Stock Purchase Plan...     --        --         59        1          152          --              --            153
Unrealized gain on restricted
investments..................     --        --         --       --           --         106              --            106
Net loss.......................     --        --         --       --           --          --          (6,893)        (6,893)
---       ---      -----      ---     --------       -----        --------        -------
BALANCE, AT DECEMBER 31, 1995....    112       $ 1      9,525      $96     $ 58,871       $  (7)       $  1,413        $60,374
---       ---      -----      ---     --------       -----        --------        -------
Preferred stock dividends:
Series B, $4.00 per share......     --        --        153        1          446          --            (447)            --
Employee Stock Purchase Plan...     --        --         65        1          160          --              --            161
Unrealized loss on restricted
investments..................     --        --         --       --           --          (8)             --             (8)
Net loss.......................     --        --         --       --           --          --          (6,943)        (6,943)
---       ---      -----      ---     --------       -----        --------        -------
BALANCE, AT DECEMBER 31, 1996....    112       $ 1      9,743      $98     $ 59,477       $ (15)       $ (5,977)       $53,584
===       ===      =====      ===     ========       =====        ========        =======

The accompanying notes are an integral part of these consolidated financial
statements.

30

32

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  OPERATIONS

Clean Harbors, Inc. and its wholly-owned subsidiaries (collectively, the
"Company") are engaged in the business of industrial waste management services
involving treatment and disposal of industrial wastes; field services provided
at customer sites; and specialized handling of laboratory chemicals and
household hazardous wastes. The Company provides these services to a diversified
customer base across the United States, primarily in the Northeast and
Mid-Atlantic Regions.

(2)  SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements of the Company reflect
the application of certain significant accounting policies as described below:

(a) Principles of Consolidation

The accompanying consolidated statements include the accounts of Clean
Harbors, Inc. and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.

(b) Revenue Recognition

The Company recognizes revenues and accrues the related cost of treatment
and disposal upon the receipt of waste materials, except for incineration when
revenue is recognized as waste is burned. Other revenues are recognized as the
related costs are incurred.

(c) Income Taxes

Under the Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS 109), deferred tax assets and liabilities are determined
based upon the difference between the financial statement and tax basis of
assets and liabilities as measured by the enacted tax rates which will be in
effect when these differences reverse. Deferred tax expense or benefit is the
result of changes between deferred tax assets and liabilities. The principal
types of differences between assets and liabilities for financial statement and
tax return purposes are accumulated depreciation, business combinations
accounted for by the purchase method, and provisions for doubtful accounts.

(d) Net Income Per Common and Common Equivalent Share

Net income per common and common equivalent share is based on net income
less preferred dividend requirements divided by the weighted average number of
common and common equivalent shares outstanding during each of the respective
years. Fully diluted net income per common share has not been presented as the
amount would not differ significantly from that presented.

(e) Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with original
maturities of less than three months to be cash equivalents.

(f) Restricted Investments

The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115),
in 1994. Under this statement, the Company's debt securities are classified as
"available for sale" and are recorded at current market value with an offsetting
valuation adjustment, net of tax, in stockholders' equity.

31

33

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(g) Supplies Inventory

Supplies inventory, stated at the lower of cost or market, is charged to
operations on a first-in, first-out basis.

(h) Property, Plant and Equipment

Property, plant and equipment are stated at cost. The Company depreciates
and amortizes the cost of these assets, less the estimated salvage value, using
the straight-line method as follows:

ESTIMATED
ASSET CLASSIFICATION                     USEFUL LIFE
---------------------------------------------------------  -----------

Buildings and improvements...............................   5-30 years
Vehicles and equipment...................................   3-15 years
Furniture and fixtures...................................    5-8 years

Leaseholds are amortized over the shorter of the life of the lease or the
asset. Upon retirement or other disposition, the cost and related accumulated
depreciation of the assets are removed from the accounts and the resulting gain
or loss is reflected in income. Site preparation and improvement costs are
included in land. Depreciation expense was $8,186,000 for 1996, $8,433,000 for
1995 and $8,622,000 for 1994.

(i) Goodwill and Permits

Goodwill and permits, as further discussed in Notes 5 and 6, are stated at
cost and are being amortized using the straight-line method over 20 years for
permits and periods ranging from 20 to 40 years for goodwill.

(j) Letters of Credit

The Company utilizes letters of credit to provide collateral assurance to
issuers of performance bonds for certain contracts; to assure regulatory
authorities that certain funds will be available for corrective action
activities at its hazardous waste management facilities, as described in Note
8(b) below; and to provide financial assurance to regulators of its captive
insurance company. As of December 31, 1996 and 1995, the Company had outstanding
letters of credit amounting to $6,870,000 and $7,535,000, respectively.

As of December 31, 1996, the Company had no significant concentrations of
credit risk.

(k) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

(l) Reclassifications

Certain reclassifications have been made in the prior years' consolidated
financial statements to conform with the 1996 presentation.

(3)  FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, restricted investments,
and long-term obligations approximate fair value. The Company believes similar
terms for long-term obligations would be attainable. The fair value of
restricted investments and long-term obligations is based on quoted market
prices for these

32

34

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

securities. At December 31, 1996, the estimated fair values of the Company's
financial instruments are as follows (in thousands):

CARRYING      FAIR
AMOUNT       VALUE
--------     -------

Cash and cash equivalents................................  $  1,366     $ 1,366
Restricted investments...................................     8,190       8,283
Long-term obligations....................................    75,373      67,123

(4)  RESTRICTED INVESTMENTS

Federal and state regulations require liability insurance coverage for all
facilities that treat, store, or dispose of hazardous waste, and financial
assurance that certain funds will be available for closure of those facilities,
should a facility cease operation. In 1989, the Company established a
wholly-owned captive insurance company pursuant to the Federal Risk Retention
Act of 1986. This company qualifies as a licensed insurance company and is
authorized to write closure, professional liability, and pollution liability
insurance for the Company and its operating subsidiaries. Investments are held
by the captive insurance company as collateral for its insurance policies and
are restricted for future payment of insurance claims. At December 31, 1996, the
amortized cost of these securities was $1,934,000. A valuation allowance of
$35,000 was recorded to reflect the market value of $1,899,000, and a realized
gain of $28,000 was reflected in net income for the year. The amortized cost of
these securities held at December 31, 1995 was $2,451,000. A valuation allowance
of $22,000 was recorded to reflect the market value of $2,429,000, and a
realized gain of $4,000 was reflected in net income for the year. Investments
held consist of fixed maturity and mortgage-backed securities. Fixed maturity
securities, other than mortgage-backed securities, have contractual maturity
dates after five years through ten years from December 31, 1996. Expected
maturities will differ from contractual maturities as borrowers may have the
right to call or prepay obligations without penalties.

In addition, the Company deposited as collateral $5,650,000 with a
commercial insurance company to provide for closure and post-closure costs of
its incinerator and landfill (see Note 5 below). During December, 1996, the
Company renegotiated its agreement with the insurance company to replace the
investment with a letter of credit. As a result the Company transferred all its
held-to-maturity government securities to the available for sale category. At
December 31, 1996 the amortized cost of these securities was $6,261,000, while
the market value was $6,354,000. The Company has an additional $30,000 escrow
deposited for closure costs at December 31, 1996. The market value approximated
the amortized costs of these investments, therefore no valuation allowance has
been recorded. These government debt securities are classified as available for
sale.

(5)  BUSINESS ACQUISITIONS

On May 12, 1995, the Company acquired a newly constructed hazardous waste
incinerator in Kimball, Nebraska from Ecova Corporation, a wholly-owned
affiliate of Amoco Oil Company. The incinerator is subject to the final permit
requirements under the federal Resource Conservation and Recovery Act of 1976,
as amended ("RCRA"), and has a RCRA "Part B" license issued by the Nebraska
Department of Environmental Quality ("NDEQ"). The incinerator is located on a
600 acre site, which includes a landfill for disposal of the ash from the
incinerator. The Company acquired the Kimball facility for $5,160,000.

Under RCRA, an owner or operator of a "Part B" licensed facility must
provide financial assurance that funds will be available for closure of the
facility, should the facility cease operation. An owner or operator may satisfy
the requirements for financial assurance by using one of several mechanisms
allowed under RCRA: a trust fund, surety bond, letter of credit, insurance,
financial test, or corporate guarantee. The mechanism chosen by the Company is
insurance which has been approved by NDEQ. The Company has obtained two
insurance policies: one covers closure of the incinerator, and the other covers
closure of the landfill and the post-closure costs of maintaining the site after
the landfill is closed. Each insurance policy has a 30 year term.

33

35

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The NDEQ requires that the policy premiums through the year 2025 be prepaid by
the Company to eliminate the risk that the policy might be canceled for failure
to pay premiums some time in the future. The Company had deposited funds into an
escrow account as collateral for the insurance policies which is restricted for
future payment of insurance claims.

As of December 31, 1996, the Company had paid $1,805,000 for the premium on
the insurance policy for the incinerator and $2,000,000 for the premium on the
insurance policy for the landfill. At December 31, 1996, the Company had
deposited $5,650,000 with a commercial insurance Company to provide for closure
costs of the incinerator. As of January, 1997, this deposit was no longer
required (see Note 4). To replace this deposit, the Company is obligated to
deliver to the insurance company a letter of credit in the amount of $2,500,000,
to provide additional collateral for closure costs under the two insurance
policies.

(6)  INTANGIBLE ASSETS

Below is a summary of intangible assets at December 31, 1996 and 1995 (in
thousands):

1996        1995
-------     -------

Permits..................................................  $17,689     $17,676
Goodwill.................................................   27,529      27,529
-------     -------
45,218      45,205
Less -- accumulated amortization.........................   11,134       9,514
-------     -------
$34,084     $35,691
=======     =======

Amortization expense approximated $1,620,000, $1,619,000, and $1,619,000
for the years 1996, 1995, and 1994, respectively. The Company continually
reevaluates the propriety of the carrying amount of permits and goodwill as well
as the amortization period to determine whether current events and circumstances
warrant adjustments to the carrying value and estimates of useful lives. At this
time, the Company believes that no significant impairment of goodwill or permits
has occurred and that no reduction of the book value or estimated useful lives
is warranted.

(7)  OTHER ACCRUED EXPENSES

Other accrued expenses consist of the following (in thousands):

1996        1995
-------     -------

Insurance................................................  $ 3,125     $ 6,089
Other items..............................................   11,484      11,797
-------     -------
$14,609     $17,886
=======     =======

(8)  LEGAL MATTERS AND OTHER CONTINGENCIES AND COMMITMENTS

(a) Legal Matters

In April, 1988, the Board of Selectman of Braintree, Massachusetts,
approved a cease and desist order with respect to the handling of flammable
materials stored at the Company's Braintree facility. The Board concluded that,
when the Company purchased the land on which the Braintree facility is located,
a license for the storage of flammable liquids was not conveyed as an incident
of ownership. The Company petitioned the Massachusetts Land Court for a
declaratory judgment that either the Company possesses such a license by
operation of law or that the statute requiring the license is pre-empted by the
pervasive state regulation of hazardous waste facilities. In March, 1994, the
Land Court issued a favorable ruling, concluding that the statute is pre-empted
by state hazardous waste laws and regulations and no local flammable storage
license is

34

36

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

required. The town has appealed this ruling, and has asked the Company to
stipulate certain facts with respect to the other issues of the case so that a
final appealable order can be issued by the Land Court. The Company has agreed
to the stipulation but the Town has taken no further action.

In October, 1995, an employee at the Company's Cincinnati plant was
accidentally killed in an explosion. The estate of the deceased employee has
filed a lawsuit against three subsidiaries of the Company and two other parties
alleging wrongful death, employer intentional tort, lost earnings, loss of
companionship and consortium and pain and suffering. The amount of the damages
claimed is not specified in the complaint, and the case is in the discovery
phase and the Company is not able to determine its potential liability, if any,
at this time. In January, 1997, the Court granted a motion by the Company to
dismiss the plaintiffs' intentional tort claims, but granted leave to allow the
plaintiffs to amend the complaint. The Company has brought cross-claims against
a third-party waste generator with respect to this action and the Company also
has insurance coverage that should apply to the remaining claims.

In the ordinary course of conducting its business, the Company becomes
involved in environmentally related lawsuits and administrative proceedings.
Some of these proceedings may result in fines, penalties or judgments against
the Company. The Company does not believe that these proceedings, individually
or in the aggregate, are material to its business.

As of December 31, 1996, the Company has been named in a number of lawsuits
arising from the disposal of wastes by certain Company subsidiaries at 20 state
and federal Superfund sites. Eleven of these cases involve two subsidiaries
which the Company acquired from Chemical Waste Management, Inc. ("ChemWaste") a
subsidiary of WMX Technologies, Inc. As part of the acquisition, ChemWaste
agreed to indemnify the Company with respect to any liability of its Braintree
and Natick subsidiaries for waste disposed of before the Company acquired them.
Accordingly, ChemWaste is paying all costs of defending the Natick and Braintree
subsidiaries in these 11 cases, including legal fees and settlement costs. Three
cases involve Mr. Frank, Inc. and one case involves Connecticut Treatment Center
("CTC"). Southdown, Inc., from which the Company bought CTC, has agreed to
indemnify the Company with respect to any liability for waste disposed of by CTC
before the Company acquired CTC, and the sellers of Mr. Frank, Inc. agreed to a
limited indemnity against certain environmental liabilities arising from prior
operations of Mr. Frank, Inc.

The remaining five pending cases involve subsidiaries which the Company
acquired in January 1989, when it purchased all of the outstanding shares of
ChemClear Inc., a publicly traded company ("ChemClear"). The Company is unable
to predict accurately its potential liability with respect to these cases, but
believes that any future settlement costs will not be material to the Company's
operations or financial position.

Management routinely reviews each Superfund site in which the Company's
subsidiaries are involved, considers each subsidiary's role at each site and its
relationship to the other potentially responsible parties ("PRPs") at the site,
the quantity and content of the waste it disposed of at the site, and the number
and financial capabilities of the other PRPs at the site. Based on reviews of
the various sites and currently available information, and management's judgment
and prior experience with similar situations, expense accruals are provided by
the Company for its share of future site cleanup costs, and existing accruals
are revised as necessary. As of December 31, 1996, the Company had accrued
environmental costs of $434,000 for cleanup of Superfund sites. Superfund
legislation permits strict joint and several liability to be imposed without
regard to fault and, as a result, one PRP might be required to bear
significantly more than its proportional share of the cleanup costs if other
PRPs do not pay their share of such costs.

(b) Environmental Matters

Under the RCRA, every facility that treats, stores or disposes of hazardous
waste must obtain a RCRA permit from EPA or an authorized state agency and must
comply with certain operating requirements. Of the Company's 12 waste management
facilities, nine are subject to RCRA licensing. RCRA requires that permits

35

37

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contain a schedule of required on-site study and cleanup activities, known as
"corrective action", including detailed compliance schedules and provisions for
assurance of financial responsibility.

The EPA or applicable state agency have begun RCRA corrective action
investigations at the Company's RCRA licensed facilities in Bristol,
Connecticut; Baltimore, Maryland; Chicago, Illinois; Braintree, Massachusetts;
Natick, Massachusetts; and Woburn, Massachusetts. The Company is also involved
in site studies at its non-RCRA facilities in Cleveland, Ohio; Kingston,
Massachusetts; and South Portland, Maine. The Company spent approximately
$596,000 in 1996 and $790,000 in 1995 on corrective action at the foregoing
facilities. Two RCRA facilities in Bristol, Connecticut and Cincinnati, Ohio
were acquired from a subsidiary of Southdown, Inc. Southdown has agreed to
indemnify the Company against any costs incurred or liability arising from
contamination on-site arising from prior ownership, including the cost of
corrective action.

The Company is also involved in a RCRA corrective action investigation at a
site in Chester, Pennsylvania owned by PECO Energy Company ("PECO"). The site
consists of approximately 30 acres which PECO had leased to various companies
over the years. In 1989, the Company acquired by merger a public company named
ChemClear Inc., which operated a hazardous waste treatment facility on
approximately eight acres of the Chester site leased from PECO. The Company
ceased operations at the Chester site, decontaminated the plant and equipment,
engaged an independent engineer to certify closure, and obtained final approval
from the Pennsylvania regulatory authorities, certifying final closure of the
facility. In 1993, the EPA ordered PECO to perform a RCRA corrective action
investigation at the Chester site. PECO asked the Company to participate in the
site studies, and in October 1994, the Company agreed to be responsible for
seventy-five percent of the cost of these studies, which is estimated to be in
the range of $1,000,000 to $2,000,000, by, among other things, performing field
service work and analytical services required to complete the site studies and
providing other environmental services to PECO at discounted rates.

While the final scopes of the work to be performed at these facilities have
not yet been agreed upon, the Company believes, based upon information known to
date about the nature and extent of contamination at these sites, that such
costs will not have a material effect on its results of operations or its
financial position, and that it will be able to finance from operating revenues
any additional corrective action required at its facilities.

Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Costs incurred to obtain or renew required
permits are capitalized to the related permit account as incurred and are
amortized over the permit's remaining life. Costs incurred to remediate
properties owned by the Company are capitalized in property, plant and equipment
only if the costs extend the life, increase the capacity or improve the safety
or efficiency of the property or the costs mitigate or prevent environmental
contamination that has yet to occur and that otherwise may result from future
operations or activities. Remediation costs incurred in excess of the fair
market value of the property being remediated are expensed as incurred.

(c) Other Contingencies

The Company is subject to various regulatory requirements, including the
procurement of requisite licenses and permits at its facilities. These licenses
and permits are subject to periodic renewal without which the Company's
operations would be adversely affected. The Company anticipates that, once a
license or permit is issued with respect to a facility, the license or permit
will be renewed at the end of its term if the facility's operations are in
compliance with the applicable regulatory requirements.

Under the Company's insurance programs, coverage is obtained for
catastrophic exposures, as well as those risks required to be insured by law or
contract. It is the policy of the Company to retain a significant portion of
certain expected losses related primarily to workers' compensation, physical
loss to property, and

36

38

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

comprehensive general and vehicle liability. Provisions for losses expected
under these programs are recorded based upon the Company's estimates of the
aggregate liability for claims.

(d) Other Commitments

In January 1995, the Company entered into a definitive agreement with
ChemWaste to lease a site previously leased by ChemWaste which adjoins the
Company's Chicago facility. During November 1995, the Company acquired the
existing improvements on the ChemWaste site in exchange for agreeing to share
the costs of dismantling an existing hazardous waste incinerator and cleaning up
the site. The improvements on the ChemWaste site allowed the Company to
implement the CleanEXPRESS(TM) program. Under the sharing arrangement with
ChemWaste, the Company will manage the RCRA corrective action investigation at
the site and over a period of 15 years could be required to contribute up to a
maximum of $2,000,000 for dismantling and decontaminating the incinerator and
other equipment and up to a maximum of $7,000,000 for studies and cleanup of the
site. Any additional costs beyond those contemplated by the sharing arrangement
during this time period would be borne by ChemWaste.

(9)  FINANCING ARRANGEMENTS

On September 6, 1996, the Company refinanced its $45,000,000 revolving
credit and term loan agreement (the "Loan Agreement") with a financial
institution by (i) amending the Loan Agreement to reduce the maximum credit
thereunder from $45,000,000 to $35,000,000, and (ii) guaranteeing $10,000,000 of
10.75% Economic Development Revenue Bonds due September 1, 2026 issued by the
City of Kimball, Nebraska (the "Bonds"). The Company used the net proceeds from
the sale of the Bonds to repay a portion of its outstanding debt under the Loan
Agreement. That portion was originally incurred for acquisition costs associated
with the acquisition of the Kimball incinerator (the "Facility"), including the
costs relating to insurance premiums. In connection with the issuance of the
Bonds, the Company entered into a facilities lease with the City of Kimball
whereby the City acquired a leasehold interest in the Facility and the Company
leased the Facility back from the City. The Company retains title to the
Facility.

The Bonds were issued at 100% of their principal value. The Bonds are not
redeemable prior to September 1, 2006. From that date until September 1, 2008,
the Bonds are redeemable at a premium. After September 1, 2008, the Bonds are
redeemable at par. Sinking fund payments begin on September 1, 1999 in the
amount of $100,000 annually until the year 2008 when the sinking fund payments
will gradually increase annually. The Bonds provide for certain covenants
relating to, among others, incurrence of additional debt, debt service coverage,
earnings before income taxes, depreciation and amortization ("EBITDA") coverage
and the ratio of EBITDA to total debt. Certain of these covenants do not become
effective until September 30, 1997. If for any fiscal quarter ending on or after
September 30, 1997, the debt service coverage ratio is less that 1.25 to 1, the
Company will be required to pay in six equal monthly installments into a debt
service reserve fund held by the Trustee for the Bonds a total amount equal to
the maximum annual debt service for one year on the Bonds.

As amended, the Company has a $35,000,000 Loan Agreement with a financial
institution. The Loan Agreement provides for a $24,500,000 revolving credit
portion (the "Revolver") and a $10,500,000 term promissory note (the "Term
Note"). The Term Note has monthly principal payments of $250,000. The Revolver
allows the Company to borrow up to $35,000,000 in cash and letters of credit.
Letters of credit may not exceed $20,000,000 at any one time. The Revolver
requires the Company to pay a line fee of one half of one percent on the unused
portion of the line. The Revolver has a three-year term with an option to renew
annually.

At December 31, 1996, the balance of the Term Note was $9,750,000, the
Revolver balance was $2,216,000, and the letters of credit outstanding were
$6,870,000. At December 31, 1995, the balance of the

37

39

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Term Note was $8,833,000, the Revolver balance was $12,553,000, and the letters
of credit outstanding were $7,535,000.

The Loan Agreement allows for up to 80% of the outstanding balance of the
combined Revolver and Term Note to bear interest at the Eurodollar rate plus
three percent; the remaining balance bears interest at a rate equal to the
"prime" rate plus one and one-half percent. The Loan Agreement is collateralized
by substantially all of the Company's assets. The Loan Agreement provides for
certain covenants including, among others, minimum levels of working capital and
adjusted net worth. The Company must also maintain borrowing availability of not
less than $4,500,000 for sixty consecutive days prior to paying principal and
interest on its other indebtedness and dividends in cash on its preferred stock.

On August 4, 1994, the Company issued $50,000,000 of 12.50% Senior Notes
due May 15, 2001 (the "Senior Notes"). The Company used the net proceeds to
prepay $22,500,000 of outstanding principal of 13.25% Senior Subordinated Notes,
at par plus a prepayment premium of 4.417%; to prepay the $1,800,000 outstanding
principal amount of a subordinated note to a financial institution; to prepay
the $489,000 outstanding principal amount of two junior subordinated notes to
the former owners of Mr. Frank, Inc.; and to reduce the balance under its
$55,000,000 Revolving Credit Agreement with three banks (the "Revolver") by
approximately $21,800,000.

The Senior Notes are not collateralized. The Senior Note indenture does not
provide for the maintenance of certain financial covenants, although it does
limit, among other things, the issuance of additional debt by the Company or its
subsidiaries and the payment of dividends on, and redemption of, capital stock
of the Company and its subsidiaries. Interest is paid twice each year on the
Senior Notes.

In connection with the sale of the Senior Notes, the Company amended the
terms of two 8% subordinated convertible notes, in the amounts of $3,500,000 and
$1,500,000, respectively. The two notes were collateralized by liens on certain
Company assets, and are convertible into common stock at $15 and $10 per share,
respectively. The holder of these two notes agreed to exchange such notes for
new 10% Senior Convertible Notes, with less restrictive covenants than the prior
notes. The new notes rank pari passu with the Senior Notes and have covenants
identical to the Senior Note covenants. Principal of the two Senior Convertible
Notes is payable in five equal installments of $1,000,000, which began on
October 31, 1995 and end on October 31, 1999. Such notes are convertible into
common stock at $25 per share.

On June 30, 1992, the Company acquired all of the outstanding shares of
Connecticut Treatment Corporation ("CTC"), a hazardous waste treatment, storage
and disposal facility located in Bristol, Connecticut, from Southdown
Environmental Treatment Systems in exchange for $500,000 in cash and a
promissory note in the amount of $1,883,000. The first principal installment on
the note was $376,600, which was paid on June 30, 1993, with installments of
$94,150 due at the end of each quarter thereafter, until the remaining balance
is paid in full. The note bears interest at the corporate base rate announced by
The First National Bank of Boston (the "Bank") (8.0% at December 31, 1996) plus
2%.

38

40

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table is a summary of the Company's long-term debt
obligations reflecting the transactions discussed above.

Long-term obligations consist of the following (in thousands):

DECEMBER 31,
-------------------
1996        1995
-------     -------

Economic development revenue bonds at 10.75%.............................  $10,000          --
Revolving credit with a finance company, bearing interest at the
Eurodollar Rate (5.25% at December 31, 1996) plus 3.0%, or the "prime"
rate (8.25% at December 31, 1996) plus 1.50%, collateralized by
substantially all assets...............................................    2,216     $12,553
Term note payable, bearing interest at the Eurodollar rate (5.25% at
December 31, 1996) plus 3.0%...........................................    9,750       8,833
Senior notes payable, bearing interest at 12.50%.........................   50,000      50,000
Senior convertible notes bearing interest at 10%.........................    3,000       4,000
Junior subordinated note payable to Southdown Environmental Treatment
Systems, Inc. bearing interest at the Bank's base rate plus 2%.........      188         565
Junior subordinated notes to the former owners of Mr. Frank, Inc. bearing
interest at the Bank's base rate plus 1%...............................       21          48
Obligations under capital leases.........................................      198         399
-------     -------
75,373      76,398
Less -- current maturities...............................................    4,370       3,605
Less -- unamortized financing costs......................................    2,335       2,402
-------     -------
Long-term obligations...............................................  $68,668     $70,391
=======     =======

Below is a summary of minimum payments due under the Company's long-term
obligations (in thousands), exclusive of obligations under capital leases
discussed in Note 10:

YEAR                              AMOUNT
-----------------------------------------------------------  -------

1997.......................................................  $ 4,210
1998.......................................................    6,215
1999.......................................................    4,000
2000.......................................................      750
2001.......................................................   50,000
Thereafter.................................................   10,000
-------
Total minimum payments due under long-term obligations
including current maturities.............................  $75,175
=======

(10)  LEASES

(a) Capital Leases

The Company possesses certain equipment under capital leases. The
obligations of the Company under such leases are collateralized by the leased
equipment. The capitalized cost of this equipment was $1,417,000 and $1,417,000
with related accumulated amortization of $1,142,000 and $908,000 at December 31,
1996 and 1995, respectively.

39

41

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments under capital leases are as follows (in
thousands):

YEAR                               AMOUNT
--------------------------------------------------------------  ----

1997..........................................................  $171
1998..........................................................    37
1999..........................................................    --
2000..........................................................    --
2001..........................................................    --
Thereafter....................................................    --
----
Total minimum lease payments..................................  $208
Less -- amounts representing interest.......................    10
----
Present value of minimum lease payments.......................  $198
====

(b) Operating Leases

The Company leases facilities and personal property under certain operating
leases in excess of one year. Some of these lease agreements contain an
escalation clause for increased taxes and operating expenses and are renewable
at the option of the Company. Future minimum lease payments under operating
leases are as follows (in thousands):

YEAR                              AMOUNT
-----------------------------------------------------------  -------

1997.......................................................  $ 2,745
1998.......................................................    2,022
1999.......................................................    1,686
2000.......................................................    1,443
2001.......................................................    1,160
Thereafter.................................................    2,846
-------
$11,902
=======

During the years 1996, 1995 and 1994 rent expense was approximately
$12,501,000, $14,120,000, and $14,182,000, respectively. The Company has an
agreement to sublease its Bedford, Massachusetts facility. See Note 17 below.

(11)  FEDERAL AND STATE INCOME TAXES

The provision for income taxes consists of the following (in thousands):

1996        1995        1994
-------     -------     ------

Federal:   Current.......................................  $  (911)    $    --     $1,941
Deferred......................................   (1,359)     (3,057)      (699)
State:     Current.......................................      405          --        721
Deferred......................................     (910)       (138)      (344)
-------     -------     ------
Net provision for (benefit from) income taxes.......  $(2,775)    $(3,195)    $1,619
=======     =======     ======

SFAS 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.

40

42

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The sources of significant timing differences which gave rise to deferred
taxes were as follows (in thousands):

1996        1995        1994
-------     -------     -------

Depreciation..........................................  $  (227)    $    --     $  (508)
Provision for doubtful accounts.......................       (8)        181         (54)
Vacation accrual......................................       --          --          67
Rent holiday..........................................      (68)         --        (107)
Insurance reserves....................................     (596)        302        (163)
Litigation............................................      348        (228)         57
Tax attributes, net of valuation allowance............   (1,378)     (2,582)       (271)
Permits...............................................     (224)       (224)       (242)
Other.................................................     (116)       (644)        178
-------     -------     -------
Total deferred tax provision (benefit)...........  $(2,269)    $(3,195)    $(1,043)
=======     =======     =======

The effective income tax rate varies from the amount computed using the
statutory federal income tax rate as follows:

1996        1995        1994
-----       -----       -----

Statutory rate..........................................  (34.0)%     (34.0)%      34.0%
Increase (decrease) in taxes resulting from:
State income taxes, net of federal benefit............   (0.8)       (0.9)        7.0
Goodwill amortization.................................    2.6         2.0         7.4
Other permanent differences...........................    3.6         1.2          .5
-----       -----       -----
Net provision for (benefit from) income taxes......  (28.6)%     (31.7)%      48.9%
=====       =====       =====

The components of the total deferred tax asset at December 31, 1996 and
1995 were as follows (in thousands):

1996        1995
-------     -------

Current:
Provision for doubtful accounts................................  $   425     $   418
Litigation accruals............................................      144         655
Health insurance accrual.......................................      350          --
Miscellaneous..................................................    1,253         922
Tax credits....................................................      980          --
-------     -------
Total current deferred tax asset............................  $ 3,152     $ 1,995
-------     -------
Deferred:
Accrued rent holiday...........................................       68          --
Insurance reserve..............................................      627         471
Other..........................................................      214         175
Various tax attributes.........................................    9,078       8,681
Valuation allowance............................................     (779)       (779)
-------     -------
Total long-term deferred tax asset..........................  $ 9,208     $ 8,548
-------     -------
Total deferred tax asset....................................  $12,360     $10,543
=======     =======

41

43

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the total deferred tax liability at December 31, 1996 and
1995 were as follows (in thousands):

1996       1995
------     ------

Current:
Permits..........................................................  $  224     $  224
------     ------
Deferred:
Permits..........................................................   1,990      2,214
Property, plant and equipment....................................   5,463      5,690
------     ------
Total long-term deferred tax liability........................   7,453      7,904
------     ------
Total deferred tax liability..................................  $7,677     $8,128
------     ------
Net deferred tax asset........................................  $4,683     $2,415
======     ======

Realization of the deferred tax assets is dependent on generating
sufficient taxable income to offset the assets in the foreseeable future.
Although realization is not assured, management believes it is more likely than
not that a majority of the deferred tax assets will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income are reduced.

For federal income tax purposes at December 31, 1996, as a result of the
acquisition of ChemClear, the Company has regular tax net operating loss
carryforwards of $3,333,000 and alternative minimum tax net operating loss
carryforwards of $2,712,000, which may be used to offset future taxable income,
if any, of the former ChemClear entities, subject to certain limitations. These
net operating loss carryforwards expire commencing in 2002.

(12)  STOCKHOLDERS' EQUITY

(a) Stock Option Plans

In 1987, the Company adopted a nonqualified stock option plan (the "1987
Plan"). In 1992, the Company adopted a nonqualified equity incentive plan which
provides for a variety of incentive awards, including stock options (the "1992
Plan"). As of December 31, 1996, all awards under the 1992 Plan were in the form
of nonqualified stock options. These options generally become exercisable after
a period of one to five years from the date of grant, subject to certain
employment requirements, and terminate ten years from the date of grant. At
December 31, 1996, the Company had reserved 955,600 and 800,000 shares of common
stock for issuance under the 1987 and 1992 Plans, respectively.

Under the terms of the 1987 and 1992 Plans, as amended, options may be
granted to purchase shares of common stock at an exercise price less than the
fair market value on the date of grant. The difference between the exercise
price and fair market value at the date of grant is charged to operations
ratably over the option vesting period. No options were granted during 1996,
1995 and 1994 with exercise prices lower than the fair market value of the
common stock at the date of grant.

On December 19, 1996, the Compensation and Stock Option Committee of the
Board of Directors approved a plan whereby the stock options previously granted
to all employees at prices of $2.70 to $6.75 per share be repriced at then fair
market value ($2.125 per share) with the same vesting period commencing upon the
date of the award of their original option agreement, except for 61,945 options
for which the option life was extended five years.

On October 10, 1994, the Board of Directors approved a plan whereby all
employees (excluding senior management) who previously were awarded stock
options at prices of $6.50 to $15.00 per share be given the

42

44

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

opportunity to surrender those options in exchange for new options awarded at
fair market value ($6.00 per share) with the same vesting period commencing upon
the date of the award of their original option agreement.

(b) Supplemental Disclosures for Stock-Based Compensation

The Company applies APB Opinion No. 25 and related Interpretations in
accounting for the Plans. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123"), issued in 1995, defined
a fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period. The Company elected to
continue to apply the accounting provisions of APB Opinion No. 25 for stock
options. The required disclosures under SFAS 123 as if the Company had applied
the new method of accounting are made below.

Activity under the Plans for the year ended December 31, 1996 is as
follows:

NUMBER OF     WEIGHTED AVERAGE
SHARES        EXERCISE PRICE
---------     ----------------

Outstanding at December 31, 1993.........................    889,921          $ 8.85
Granted................................................    462,138            6.36
Forfeited..............................................   (284,729)           8.74
Exercised..............................................     (5,453)           5.13
---------          ------
Outstanding at December 31, 1994.........................  1,061,877            6.36
Granted................................................    362,120            3.12
Forfeited..............................................   (131,450)           6.85
Exercised..............................................     (5,556)           2.70
---------          ------
Outstanding at December 31, 1995.........................  1,286,991            5.42
Granted................................................    597,350            2.54
Forfeited..............................................   (417,393)           5.64
Exercised..............................................         --              --
---------          ------
Outstanding at December 31, 1996.........................  1,466,948          $ 2.52
=========          ======

Summarized information about stock options outstanding at December 31, 1996
is as follows:

EXERCISABLE
WEIGHTED                    ----------------------
AVERAGE       WEIGHTED                   WEIGHTED
NUMBER OF       REMAINING      AVERAGE                    AVERAGE
RANGE OF           OPTIONS       CONTRACTUAL     EXERCISE     NUMBER OF     EXERCISE
EXERCISE PRICES     OUTSTANDING        LIFE          PRICE        OPTIONS       PRICE
- ---------------     -----------     -----------     --------     ---------     --------

$ 2.13 -  3.38      1,369,857          8.0          $ 2.14       412,889       $ 2.17
6.00 - 13.50         97,091          5.0            7.88        95,891         7.81

Options exercisable at December 31, 1994, 1995 and 1996 were 337,941,
468,458 and 508,780, respectively.

The fair value of each option granted during 1996 and 1995 is estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions:

1996     1995
----     ----

Dividend yield.........................................................  none     none
Expected volatility....................................................  64.4%    64.4%
Risk-free interest rate................................................   5.6%     5.9%
Expected life..........................................................   6.1      6.8

43

45

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Weighted average fair value of options granted at fair value during:

1996.................................................................  $0.97
=====
1995.................................................................  $2.14
=====

Had compensation cost for the Company's 1996 and 1995 stock option grants
been determined consistent with SFAS 123, the Company's net income and net
income per share would approximate the pro forma amounts below:

NET LOSS
PER FULLY
NET LOSS       DILUTED SHARE
-----------     -------------

As reported:
1996......................................................  $(6,943,000)       $ (0.77)
1995......................................................   (6,893,000)         (0.77)
Pro forma:
1996......................................................  $(7,251,000)       $ (0.81)
1995......................................................   (6,922,000)         (0.78)

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards made prior to
1995. Additional awards in future years are anticipated.

(c) Employee Stock Purchase Plan

In May of 1995, the Company's stockholders approved an Employee Stock
Purchase Plan (the "ESPP"), which is a qualified employee stock purchase plan
under Section 423 of the Internal Revenue Code of 1986, as amended, through
which employees of the Company are given the opportunity to purchase shares of
common stock. According to the ESPP, a total of one million shares of common
stock has been reserved for offering to employees over a period of five years,
in quarterly offerings of 50,000 shares each plus any shares not issued in any
previous quarter, commencing on July 1, 1995 and on the first day of each
quarter thereafter through April 1, 2000. Employees who elect to participate in
an offering may utilize up to 10% of their payroll for the purchase of common
stock at 85% of the closing price of the stock on the first day of such
quarterly offering or, if lower, 85% of the closing price on the last day of the
offering. As of December 31, 1996 and 1995, 65,000 and 59,000 shares,
respectively, of common stock had been purchased under the ESPP. The weighted
average fair values of the options granted at fair value under the ESPP during
1996 and 1995 were $0.72 and $0.84, respectively.

(d) Warrants

In connection with the issuance of senior subordinated notes payable in May
1989, the Company issued warrants to purchase 100,000 shares of common stock at
$20.75 per share in exchange for $300,000. In April 1990, the exercise price of
the warrants was reduced to $9 per share. In February 1991, in connection with
the refinancing of the Company's short-term debt, the exercise price was further
reduced to fair market value ($5 per share). These warrants are exercisable at
any time until February 1, 2001.

In connection with the refinancing of the Company's short-term debt in
February 1991, the Company issued warrants to purchase 425,000 shares of common
stock at fair market value ($5 per share) to the three banks which provided the
Revolver. These warrants are exercisable at any time until February 6, 2001.

(e) Preferred Stock

On February 16, 1993 the Company issued 112,000 shares of Series B
Convertible Preferred Stock, $.01 par value ("Preferred Stock"), for the
acquisition of Spring Grove. The liquidation value of each preferred

44

46

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

share is the liquidation preference of $50 plus unpaid dividends. Preferred
Stock may be converted by the holder into Common Stock at a conversion rate of
$18.63. The Company had the option to redeem such Preferred Stock at liquidation
value plus a redemption premium of 5%, if the redemption occurs on or before
August 16, 1997; thereafter, the redemption premium declines 1% each year. Each
preferred share entitles its holder to receive a cumulative annual cash
dividend, which was $3.50 per share from February 16, 1993 to February 16, 1994
and $4.00 per share thereafter, or at the election of the Company, a common
stock dividend of equivalent value.

Dividends on the Preferred Stock are payable on the 15th day of January,
April, July and October, at the rate of $1.00 per share, per quarter. The
Company elected to pay the 1996 dividends in common stock with a market value
equal to the amount of the dividend payable. During 1996 the Company issued
153,359 shares of common stock to the holders of the Preferred Stock. The
Company anticipates that the Preferred Stock dividends payable through 1997 will
be paid in common stock.

(13)  EMPLOYEE BENEFIT PLAN

The Company has a profit-sharing plan under Section 401(k) of the Internal
Revenue Code covering substantially all employees. The plan allows employees to
make contributions up to a specified percentage of their compensation. The
Company modified the plan during 1996 whereby the Company has an option of
contributing to the plan. No contribution was made by the Company in 1996.
During the years 1995 and 1994, the Company's contributions aggregated
approximately $834,000 and $825,000, respectively.

(14)  RELATED PARTY TRANSACTIONS

The Company leased certain facilities from a partnership of which the
Company's principal stockholder is a limited partner. Under the terms of the
lease, the Company agreed to make aggregate lease payments of $5,633,000 from
the inception of the lease through June 1, 1996. The Company did not elect its
option to renew the lease. Total rent expense charged to operations for the
years ending December 31, 1996, 1995 and 1994 was $234,289, $703,000, and
$703,000, respectively. See Note 10 for further discussion of lease commitments.

(15)  QUARTERLY DATA (UNAUDITED)

FIRST      SECOND       THIRD      FOURTH
QUARTER     QUARTER     QUARTER     QUARTER
-------     -------     -------     -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

1996
Revenue...........................................  $45,736     $49,638     $50,738     $54,101
Income (loss) from operations.....................     (847)     (1,093)         39       1,353
Net loss..........................................   (1,642)     (2,605)     (1,742)       (954)
Net loss per common and common equivalent share...     (.18)       (.28)       (.19)       (.11)
1995
Revenue...........................................  $47,150     $54,899     $54,398     $52,803
Income (loss) from operations.....................      815       2,549         311      (5,106)(a)
Net income (loss) before extraordinary item.......     (590)        203      (1,200)     (5,306)
Net income (loss).................................     (590)        203      (1,200)     (5,306)
Net income (loss) per common and common equivalent
share..........................................     (.07)        .01        (.14)       (.57)

- ---------------
(a) Reflects a one-time charge of $4,247,000 in connection with the
re-engineering of the Company's operations and the write-down of a
non-performing asset as well as the sale of certain non-core properties.

45

47

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The above information reflects all adjustments that are necessary to fairly
state the results of the interim periods presented. Any adjustments required are
of a normal recurring nature.

(16)  EXTRAORDINARY ITEM

As described in Note 9 above, during the third quarter of 1994, the Company
completed a public offering of $50,000,000 of Senior Notes, and used the net
proceeds to prepay substantially all of the Company's debt. The refinancing
resulted in approximately $2,043,000 of expense relating to the early retirement
of outstanding debt, and an extraordinary charge of $1,220,000 ($.13 per share),
net of income tax benefit, for redemption premiums paid to the holders of the
prepaid debt and for the write-off of deferred financing costs.

(17)  NONRECURRING CHARGES

During the fourth quarter of 1995, the Company recorded a $4,247,000
nonrecurring charge in connection with the reengineering of the Company's
operations and the write-off of a non-performing asset, as well as the
anticipated losses on the sale of certain non-core properties. Under the
reengineering program, the Company has closed or downsized small, satellite
offices; reduced employment levels; downsized and relocated the laboratory to
its waste handling facility in Braintree, Massachusetts; and relocated its
corporate headquarters to a new location in Braintree, Massachusetts in the
Spring of 1996. The components of the nonrecurring charge are as follows:

Severance and related costs..............................  $1,097,000
Write-down of non-performing asset.......................   1,110,000
Real estate related charges..............................   2,040,000
----------
$4,247,000

During the fourth quarter of 1994, the Company renegotiated its lease on
its corporate headquarters in Quincy, Massachusetts, such that the lease would
terminate on or before December 31, 1995. The Company relocated its corporate
headquarters to Braintree, Massachusetts in the spring of 1995. In addition, the
Company vacated laboratory space it rents in Bedford, Massachusetts, and is
subleasing the space. As a result, the Company recorded a one-time, noncash
charge of $1,035,000 before taxes for the write-off of leasehold improvements at
the two locations.

46

48

SCHEDULE II

CLEAN HARBORS, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(IN THOUSANDS)

ADDITIONS
BALANCE      CHARGED TO     DEDUCTIONS     BALANCE
BEGINNING     OPERATING         FROM         END OF
ALLOWANCE FOR DOUBTFUL ACCOUNTS            OF PERIOD      EXPENSE       RESERVES(A)     PERIOD
- --------------------------------------------------  ---------     ----------     ----------     --------

1994..............................................   $ 1,372         $776           $653         $1,495
1995..............................................     1,495          381            831          1,045
1996..............................................     1,045          651            633          1,063

- ---------------
(a) Amounts deemed uncollectible, net of recoveries.

47

49

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

The information called for by Item 10 (Directors and Executive Officers of
the Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership
of Certain Beneficial Owners and Management) and Item 13 (Certain Relationships
and Related Transactions) is incorporated herein by reference to the
registrant's definitive proxy statement for its 1997 Annual Meeting of
Stockholders, which definitive proxy statement is expected to be filed with the
Commission not later than April 30, 1997.

For the purpose of calculating the aggregate market value of the voting
stock of the registrant held by nonaffiliates as shown on the cover page of this
report, it has been assumed that the directors and executive officers of the
registrant, as will be set forth in the Company's definitive proxy statement for
its 1997 Annual Meeting of Stockholders, are the only affiliates of the
registrant. However, this should not be deemed to constitute an admission that
all of such persons are, in fact, affiliates or that there are not other persons
who may be deemed affiliates of the registrant.

PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents Filed as a Part of this Report

PAGE
----

1.  Financial Statements:
Report of Independent Accountants........................................
Consolidated Statements of Income for the Three Years Ended December 31,
1996....................................................................
Consolidated Balance Sheets, December 31, 1996 and 1995..................
Consolidated Statements of Cash Flows for the Three Years Ended December
31, 1996................................................................
Consolidated Statements of Stockholders' Equity for the Three Years Ended
December 31, 1996.......................................................
Notes to Consolidated Financial Statements...............................

2.   Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts.........................

All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the financial
statements or notes thereto.

3.   Exhibits:

Exhibits to the Form 10-K have been included only with the copies of the
Form 10-K filed with the Commission. Upon request to the Company and payment of
a reasonable fee, copies of the individual exhibits will be furnished. The
Company undertakes to furnish to the Commission upon request copies of
instruments (in addition to the exhibits listed below) relating to the Company's
long-term debt.

LOCATION
ITEM                                                                                   ---------
NO.                                       DESCRIPTION
- ------       -----------------------------------------------------------------------    SEE NOTE:

3.1     --  Restated Articles of Organization of Clean Harbors, Inc. and amendments
thereto................................................................        (1)
3.2     --  Certificate of Vote of Directors Establishing a Series of a Class of
Stock (Series B Convertible Preferred Stock)...........................        (2)
3.4A    --  Amended and Restated By-laws of Clean Harbors, Inc.....................        (3)

48

50

LOCATION
ITEM                                                                                   ---------
NO.                                       DESCRIPTION
- ------       -----------------------------------------------------------------------    SEE NOTE:

4.1     --  Senior Note Indenture dated as of August 4, 1994, between Clean
Harbors, Inc., the Guarantor Subsidiaries of the Company, and Shawmut
Bank, N.A., as trustee for the holders of the Company's 12.50% Senior
Notes due May 15, 2001.................................................        (4)
4.2     --  Loan and Security Agreement dated May 8, 1995 by and between Congress
Financial Corporation (New England) and the Company's Subsidiaries as
Borrowers..............................................................        (5)
4.3     --  Term Promissory Note dated May 8, 1995 from the Company's Subsidiaries
as Debtors to Congress Financial Corporation (New England) in the
amount of $10,000,000..................................................        (5)
4.4     --  Guarantee dated May 8, 1995 by Clean Harbors, Inc. to Congress
Financial Corporation (New England) of the obligations of the Company's
Subsidiaries under the Financing Agreements............................        (5)
4.5     --  General Security Agreement dated May 8, 1995 by Clean Harbors, Inc. in
favor of Congress Financial Corporation (New England)..................        (5)
4.6     --  Letter Agreement dated November 21, 1995 by and between Congress
Financial Corporation (New England) and the Company's Subsidiaries as
Borrowers..............................................................        (8)
4.7     --  Second Amendment to Financing Agreements dated March 20, 1996 by and
between Congress Financial Corporation (New England), the Company's
Subsidiaries as Borrowers and Clean Harbors, Inc. as guarantor.........        (8)
4.8     --  Amended and Restated Term Promissory Note dated March 20, 1996 from the
Company's Subsidiaries as Debtors to Congress Financial Corporation
(New England) in the amount of $15,000,000.............................        (8)
4.9     --  Third Amendment to Financing Agreements dated September 6, 1996 by and
between Congress Financial Corporation (New England), the Company's
Subsidiaries as Borrowers, and Clean Harbors, Inc. as Guarantor........        (9)
10.35    --  Stock Purchase Agreement among Clean Harbors, Inc., Southdown
Environmental Treatment Systems, Inc. and Southdown, Inc. dated as of
June 23, 1992..........................................................        (2)
10.36    --  Stock Purchase Agreement among Clean Harbors, Inc., Southdown
Environmental Treatment Systems, Inc. and Southdown, Inc. dated as of
February 16, 1993......................................................        (2)
10.37    --  Clean Harbors, Inc. 1987 Stock Option Plan.............................        (6)
10.38    --  Clean Harbors, Inc. 1992 Equity Incentive Plan.........................        (6)
10.39    --  Asset Purchase Agreement among Clean Harbors of Chicago, Inc., Clean
Harbors, Inc., CWM Chemical Services, Inc. and Chemical Waste
Management, Inc. dated as of January 30, 1995..........................        (7)
10.40    --  Asset Purchase Agreement among Clean Harbors Technology Corporation,
Clean Harbors Inc. and Ecova Corporation dated as of March 31, 1995....        (5)
10.41    --  Disposal Services Agreement by and between Chemical Waste Management,
Inc. and its subsidiary and affiliated companies and Clean Harbors
Environmental Services, Inc. and its affiliated companies dated as of
October 31, 1995.......................................................        (8)
11       --  Statement re computation of Net Income (Loss) per Share................    Filed
herewith
21       --  Subsidiaries...........................................................    Filed
herewith
23       --  Consent of Independent Accountants.....................................    Filed
herewith

49

51

LOCATION
ITEM                                                                                   ---------
NO.                                       DESCRIPTION
- ------       -----------------------------------------------------------------------    SEE NOTE:

24       --  Power of Attorney for Christy W. Bell, David A. Eckert, John F. Kaslow,
Daniel J. McCarthy, John J. Preston, and Lorne R. Waxlax...............     Filed
herewith
27       --  Financial Data Schedule................................................    Filed
herewith

- ---------------
(1) Incorporated by reference to Exhibit 3.1 to the Company's Form S-1
Registration Statement (No. 33-17565).

(2) Incorporated by reference to the similarly numbered exhibit to the Company's
Form 10-K Annual Report for the Year 1992.

(3) Incorporated by reference to Exhibit 3.4A to the Company's Form 10-K Annual
Report for the Fiscal Year Ended February 28, 1991.

(4) Incorporated by reference to Exhibit 4.1 to the Company's Form S-2
Registration Statement (No. 33-54191).

(5) Incorporated by reference to the similarly numbered exhibit to the Company's
Form 10-Q Quarterly Report for the Quarterly Period Ended June 30, 1995.

(6) Incorporated by reference to the similarly numbered exhibit to the Company's
Form 10-K Annual Report for the Year 1993.

(7) Incorporated by reference to the similarly numbered exhibit to the Company's
Form 10-K Annual Report for the Year 1994.

(8) Incorporated by reference to the similarly numbered exhibit to the Company's
Form 10-K Annual Report for the Year 1995.

(9) Incorporated by reference to the similarly numbered exhibit to the Company's
Form 10-Q Quarterly Report for the Quarterly Period ended September 30,
1996.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the fourth quarter of 1996.

50

52

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 27, 1997.

CLEAN HARBORS, INC.

By: /s/        ALAN S. MCKIM
------------------------------------
Alan S. McKim
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE                                 TITLE                     DATE
- ------------------------------------------    -----------------------------    ---------------

/s/ ALAN S. MCKIM                             Chairman of the Board of          March 27, 1997
- ------------------------------------------    Directors, President and
Alan S. McKim                                 Chief Executive Officer

/s/ DONALD N. LEEF                            Vice President, Chief             March 27, 1997
- ------------------------------------------    Financial Officer and
Donald N. Leef                                Treasurer (principal
financial and accounting
officer)

*                                             Director                          March 27, 1997
- ------------------------------------------
Christy W. Bell

*                                             Director                          March 27, 1997
- ------------------------------------------
David A. Eckert

*                                             Director                          March 27, 1997
- ------------------------------------------
John F. Kaslow

*                                             Director                          March 27, 1997
- ------------------------------------------
Daniel J. McCarthy

*                                             Director                          March 27, 1997
- ------------------------------------------
John T. Preston

*                                             Director                          March 27, 1997
- ------------------------------------------
Lorne R. Waxlax

*By: /s/ ALAN S. MCKIM
-------------------------------------
Alan S. McKim
Attorney-In-Fact

51

1
EXHIBIT 11

CLEAN HARBORS, INC. AND SUBSIDIARIES

COMPUTATION OF NET INCOME (LOSS) PER SHARE For the Three
Years Ended December 31, 1996
(in thousands except per share amounts)

Fully
Type of Security          Primary  Diluted
----------------          -------  -------

1994
----
Weighted average common stock outstanding in 1994...   9,426    9,426
Stock options exercised in 1994.....................       5        4
Stock options and warrants outstanding during 1994..     107      205
------   ------
Weighted average shares of common stock outstanding.   9,538    9,635
======   ======
Net income..........................................  $  475   $  475
Less preferred stock dividends accrued..............     441      441
------   ------
Adjusted net income.................................  $   34   $   34
======   ======
Earnings per share..................................  $  .00   $  .00
======   ======

1995
----
Weighted average common stock outstanding in 1995...   9,457    9,457
Stock options exercised in 1995.....................       3        3
Stock options and warrants outstanding during 1995..      15       15
------   ------
Weighted average shares of common stock outstanding.   9,475    9,475
======   ======
Net loss............................................ $(6,893) $(6,893)
Less preferred stock dividends accrued..............     447      447
------   ------
Adjusted net loss................................... $(7,340) $(7,340)
======   ======
Loss per share...................................... $  (.77) $  (.77)
======   ======
1996
----
Weighted average common stock outstanding in 1996...   9,653    9,653
------   ------
Weighted average shares of common stock outstanding.   9,653    9,653
======   ======
Net loss............................................ $(6,943) $(6,943)
Less preferred stock dividends accrued..............     447      447
------   ------
Adjusted net loss................................... $(7,390) $(7,390)
======   ======
Loss per share...................................... $  (.77) $  (.77)
======   ======

1
EXHIBIT 21

CLEAN HARBORS, INC. AND SUBSIDIARIES

SUBSIDIARIES

Principal
State of             Place of
Incorporation           Business
-------------           --------

Clean Harbors Environmental          MA         1501 Washington Street
Services, Inc.                                Braintree, MA 02185-0327

Clean Harbors of                     MA         1501 Washington Street
Natick, Inc.                                  Braintree, MA 02185-0327

Clean Harbors of                     MA         1501 Washington Street
Braintree, Inc.                               Braintree, MA 02185-0327

Clean Harbors                        MA         1501 Washington Street
Services, Inc.                                Braintree, MA 02185-0327

Clean Harbors of                     PA         1501 Washington Street
Baltimore, Inc.                               Braintree, MA 02185-0327

Clean Harbors of                     CT         1501 Washington Street
Connecticut, Inc.                             Braintree, MA 02185-0327

Clean Harbors Kingston               MA         1501 Washington Street
Facility Corporation                          Braintree, MA 02185-0327

Murphy's Waste Oil                   MA         1501 Washington Street
Service, Inc.                                 Braintree, MA 02185-0327

Mr. Frank, Inc.                      IL         21900 South Central Ave.
Matteson, IL 60443

Spring Grove Resource                DE         4879 Spring Grove Avenue
Recovery, Inc.                                Cincinnati, OH  45232

1
EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the
registration statements of Clean Harbors, Inc. on Form S-8 (Files
No. 33-22638, No. 33-51452 and No. 33-60187) of our report dated
February 5, 1997 on our audits of the consolidated financial
statements and the financial statement schedule of Clean Harbors,
Inc., which report is included in Item 8 of this Form 10-K.

Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 27, 1997

1
EXHIBIT 24

POWER OF ATTORNEY

(Form 10-K)

Know all men by these presents, that the individuals whose signatures
appear below constitute and appoint Alan S. McKim and Donald N. Leef, and
each of them acting alone, his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, to sign the
Clean Harbors, Inc. Form 10-K Annual Report Pursuant to Section 13 or
15(d) of the Securities and Exchange Act of 1934 for the fiscal year ended
December 31, 1996, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said substitute or substitutes
may lawfully do or cause to be done by virtue hereof.

Signature                    Title                 Date
---------                    -----                 ----

/s/ Christy W. Bell
-----------------------     Director          March 19, 1997
Christy W. Bell

/s/ David A. Eckert
-----------------------     Director          March 19, 1997
David A. Eckert

/s/ John F. Kaslow
-----------------------     Director          March 19, 1997
John F. Kaslow

/s/ Daniel J. McCarthy
-----------------------     Director          March 19, 1997
Daniel J. McCarthy

/s/ John T. Preston
-----------------------     Director          March 19, 1997
John T. Preston

/s/ Lorne R. Waxlax
-----------------------     Director          March 19, 1997
Lorne R. Waxlax

<ARTICLE> 5
<MULTIPLIER> 1,000

<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               DEC-31-1996
<CASH>                                           1,366
<SECURITIES>                                     8,190
<RECEIVABLES>                                   43,809
<ALLOWANCES>                                   (1,063)
<INVENTORY>                                      2,866
<CURRENT-ASSETS>                                61,591
<PP                                         130,068
<DEPRECIATION>                                  61,282
<TOTAL-ASSETS>                                 177,997
<CURRENT-LIABILITIES>                           47,346
<BONDS>                                         68,668
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          1
<COMMON>                                            98
<OTHER-SE>                                      53,485
<TOTAL-LIABILITY-AND-EQUITY>                   177,997
<SALES>                                        200,213
<TOTAL-REVENUES>                               200,213
<CGS>                                          154,608
<TOTAL-COSTS>                                  154,608
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               9,170
<INCOME-PRETAX>                                (9,718)
<INCOME-TAX>                                   (2,775)
<INCOME-CONTINUING>                            (6,943)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (6,943)
<EPS-PRIMARY>                                    (.77)
<EPS-DILUTED>                                        0