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The following is an excerpt from a 10-K SEC Filing, filed by WASTE MANAGEMENT INC on 3/31/1999.
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WASTE MANAGEMENT INC - 10-K - 19990331 - NOTES_TO_FINANCIAL_STATEMENT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND FINANCIAL STATEMENTS

Business -- Waste Management, Inc. and Subsidiaries (the "Company") provides integrated waste management services throughout North America consisting of collection, transfer, disposal (including landfill disposal of hazardous waste), recycling and resource recovery services as well as other hazardous waste services, and low-level and other radioactive waste services to commercial, industrial, municipal and residential customers. Additionally, the Company is a developer, owner and operator of waste-to-energy and waste-fuel powered independent power facilities. The Company also operates throughout Europe, the Pacific Rim, South America and other select international markets. Internationally, the Company collects and transports solid, hazardous and medical wastes and recyclables from customers and operates solid and hazardous waste landfills and municipal and hazardous waste incinerators, water and wastewater treatment facilities, hazardous waste treatment facilities and constructs treatment or disposal facilities for third parties.

Principles of consolidation -- The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after elimination of all material intercompany balances and transactions. Investments in affiliated companies in which the Company owns 50% or less are accounted for under the equity method or cost method of accounting, as appropriate.

WM Holdings Merger -- On July 16, 1998, the Company, then known as USA Waste Services, Inc., completed a merger with Waste Management, Inc., which was subsequently renamed Waste Management Holdings, Inc. ("WM Holdings") (the "WM Holdings Merger"). WM Holdings was previously the largest publicly traded solid waste company in the United States, providing integrated solid waste management and hazardous waste management services in North America and comprehensive waste management and related services, including solid and hazardous waste management services, internationally. At the effective time of the WM Holdings Merger, the Company changed its name to "Waste Management, Inc." See Note 3.

Eastern Merger -- On December 31, 1998, the Company consummated a merger transaction with Eastern Environmental Services, Inc. ("Eastern") accounted for using the pooling of interests method of accounting. Accordingly, the financial statements have been restated from previously reported financial statements to include the accounts and operations of Eastern for all periods presented. See Note 3.

Use of estimates -- The preparation of the 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents -- Cash and cash equivalents consist primarily of cash on deposit, certificates of deposit, money market accounts, and investment grade commercial paper purchased with original maturities of three months or less.

Short-term investments -- As part of its cash management program, the Company from time to time maintains a portfolio of marketable investment securities. The securities have an investment grade and a term to earliest maturity generally of less than one year, and include tax exempt securities, certificates of deposit and Eurodollar time deposits. These securities are carried at cost, which approximates market.

Short-term investments also include marketable securities classified as "trading," which are carried at market price with unrealized gains and losses included in other income in the accompanying consolidated statements of operations. At December 31, 1998, no "trading" securities were held by the Company. At December 31, 1997, this category included certain other equity securities classified as "trading" as well as a related price collar. These securities and a related collar in 1998 were disposed with no gain or loss.

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WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Restricted funds held by trustees -- Restricted funds held by trustees of $153,030,000 and $190,030,000 at December 31, 1998 and 1997, respectively, are included in other non-current assets and consist principally of funds deposited in connection with landfill final closure and post-closure obligations, insurance escrow deposits, and amounts held for landfill and other construction arising from industrial revenue financings. These amounts are principally invested in fixed income securities of federal, state, and local governmental entities and financial institutions. The Company considers its landfill final closure, post-closure, and construction escrow investments to be held to maturity. At December 31, 1998 and 1997, the aggregate fair value of these investments approximates their amortized costs, and substantially all of these investments mature within one year. The Company's insurance escrow funds are invested in pooled investment accounts that hold debt and equity securities and are considered to be available for sale. The market value of those pooled accounts approximates their aggregate cost at December 31, 1998 and 1997.

Concentrations of credit risk -- Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high quality financial institutions and limits the amount of credit exposure with any one institution. Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company's customer base, thus spreading the trade credit risk. At December 31, 1998 and 1997, no single group or customer represents greater than 10% of total accounts receivable. The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs credit evaluations for commercial and industrial customers and performs ongoing credit evaluations of its customers, but generally does not require collateral to support accounts receivable.

Derivative financial instruments -- From time to time, the Company uses derivatives to manage interest rate and currency risk. The Company has, in the past, engaged in hedging of fuel and equity price risk; however, it had no such financial instruments outstanding at December 31, 1998. The Company's policy is to use derivatives for risk management purposes only, and it does not enter into such contracts for trading purposes. The Company enters into derivatives only with counterparties which are financial institutions having credit ratings of at least A- or A3, to minimize credit risk. The amount of gains or losses from the use of derivative financial instruments have not been and are not expected to be material to the Company's consolidated financial statements.

Instruments used as hedges must be effective at managing risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Accordingly, changes in market values or cash flows of hedge instruments must have a high degree of inverse correlation with changes in market values or cash flows of the underlying hedged items. Derivatives that meet the hedge criteria are accounted for under the deferral or accrual method as discussed in Note 8.

Property and equipment -- Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives for significant property and equipment categories are as follows (in years):

                                                   OCTOBER 1, 1997      PRIOR TO
                                                   AND THEREAFTER    OCTOBER 1, 1997
                                                   ---------------   ---------------
Vehicles.........................................      3 to 10           3 to 12
Machinery and equipment..........................      3 to 20           3 to 20
Commercial and roll-off containers...............      8 to 12           8 to 20
Buildings and improvements.......................     10 to 40          10 to 40

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WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of October 1, 1997, and thereafter, the Company assumed no salvage value for its depreciable North American fixed assets. Prior to October 1, 1997, WM Holdings assigned salvage value to certain fixed asset categories as described in Note 4.

Disposal sites are stated at cost and amortized ratably using the units-of-production method over the estimated useful life of the site as airspace of the landfill is consumed. For those sites that the Company believes permit expansion is probable, the expansion airspace and the projected costs related to developing the expansion airspace is included in the airspace amortization rate calculation. Disposal site amortization rates are determined periodically (not less than annually) for each disposal site based on estimates provided by the Company's engineers and accountants. Disposal site costs include expenditures for the acquisition of land and related airspace, engineering and permitting costs, direct site improvement costs, and capitalized interest. Disposal site amortization rate calculations consider information provided by aerial and ground surveys and other density measures. Factors in determining probable expansions on a site-by-site basis include secured rights to required land, status of legal, environmental, regulatory and political issues, and the extent to which the permit application process has proceeded.

Business combinations -- The Company assesses each business combination to determine whether the pooling of interests or the purchase method of accounting is appropriate. For those business combinations accounted for under the pooling of interests method, the financial statements are combined with those of the Company at their historical amounts, and, if material, all periods presented are restated as if the combination occurred on the first day of the earliest year presented. For those acquisitions accounted for using the purchase method of accounting, the Company allocates the cost of the acquired business to the assets acquired and the liabilities assumed based on estimates of fair values thereof. These estimates are revised during the allocation period as necessary when, and if, information regarding contingencies becomes available to define and quantify assets acquired and liabilities assumed. The allocation period varies but does not exceed one year. To the extent contingencies such as preacquisition environmental matters, litigation and related legal fees are resolved or settled during the allocation period, such items are included in the revised allocation of the purchase price. After the allocation period, the effect of changes in such contingencies is included in results of operations in the periods in which the adjustments are determined. The Company does not believe potential deviations between its fair value estimates and actual fair values will be material.

In certain business combinations, the Company agrees to pay additional amounts to sellers contingent upon achievement by the acquired businesses of certain negotiated goals, such as targeted revenue levels, targeted disposal volumes, or the issuance of permits for expanded landfill airspace. Contingent payments, when incurred, are recorded as purchase price adjustments or compensation expense, as appropriate, based on the nature of each contingent payment.

Excess of cost over net assets of acquired businesses -- The excess of cost over net assets of acquired businesses is amortized on a straight-line basis over a period not greater than 40 years commencing on the dates of the respective acquisitions. Accumulated amortization was $813,638,000 and $703,656,000 at December 31, 1998 and 1997, respectively.

Other intangible assets -- Other intangible assets consist primarily of customer lists, covenants not to compete, licenses, permits, and contracts. Other intangible assets are recorded at cost and amortized on a straight-line basis. Customer lists are generally amortized over five to seven years. Covenants not to compete are amortized over the term of the agreement, which is generally three to five years. Licenses, permits, and contracts are amortized over the shorter of the definitive terms of the related agreements or 40 years. Accumulated amortization was $113,312,000 and $110,760,000 at December 31, 1998 and 1997, respectively.

Long-lived assets -- Long-lived assets consist primarily of property and equipment, excess of cost over net assets of acquired businesses, and other intangible assets. The recoverability of long-lived assets is evaluated at the operating unit level by an analysis of operating results and consideration of other significant

63

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

events or changes in the business environment. If an operating unit has indications of impairment, such as current operating losses, the Company will evaluate whether impairment exists on the basis of undiscounted expected future cash flows from operations before interest for the remaining amortization period. If impairment exists, the carrying amount of the long-lived assets is reduced to its estimated fair value.

Contracts in process -- Contracts in process relate to contracts involving a substantial construction component. Such contracts primarily relate to activities performed by international operations. The status of the Company's contracts in process as of the dates indicated is as follows (in thousands):

                                                           DECEMBER 31,
                                                     -------------------------
                                                        1998          1997
                                                     -----------   -----------
Costs and estimated earnings on uncompleted
  contracts........................................  $ 1,312,158   $ 1,511,710
Less billings on uncompleted contracts.............   (1,213,795)   (1,374,100)
                                                     -----------   -----------
          Total contracts in progress..............  $    98,363   $   137,610
                                                     ===========   ===========

Contracts in process are included in the accompanying consolidated balance sheets under the following captions:

                                                             DECEMBER 31,
                                                          -------------------
                                                            1998       1997
                                                          --------   --------
Costs and estimated earnings in excess of billings on
  uncompleted contracts.................................  $127,975   $158,610
Billings in excess of costs and estimated earnings on
  uncompleted contracts (included in deferred
  revenue)..............................................   (29,612)   (21,000)
                                                          --------   --------
          Total contracts in process....................  $ 98,363   $137,610
                                                          ========   ========

All contracts in process are expected to be billed and collected within five years.

Income taxes -- Deferred income taxes are determined based on the difference between the financial reporting and tax bases of assets and liabilities. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities, net of the effect of acquisitions and dispositions. Deferred tax assets include tax loss and credit carryforwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Foreign currency -- The functional currency of the majority of the Company's foreign operations is the local currency of the country in which the Company operates. Adjustments resulting from the translation of financial information are included in comprehensive income.

Revenue recognition -- The Company recognizes revenues on service contracts as services are provided. Amounts billed and collected prior to services being performed are included in deferred revenues. Results from long-term contracts involving a substantial construction component are recorded on the percentage-of-completion basis. Changes in project performance and conditions, estimated profitability and final contract settlements may result in future revisions to long-term construction contract costs and income.

Capitalized interest -- Interest is capitalized on certain projects under development including greenfield landfill projects and probable landfill expansion projects, and on certain assets under construction, including operating landfills and waste-to-energy facilities. The capitalization of interest for operating landfills is based on the costs incurred on discrete cell construction projects, plus an allocated portion of the common site costs. The common site costs include the development costs of a greenfield site or the purchase price of an operating landfill, and the ongoing infrastructure costs benefiting the life cycle of the landfill. Cell construction costs

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WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

include the construction of cell liners and construction of final capping during the operating life of the site. During 1998, 1997, and 1996, total interest costs were $722,958,000, $606,952,000, and $582,213,000, respectively, of which $41,501,000, $51,376,000, and $56,873,000, were capitalized, respectively.

New accounting pronouncements -- In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and derivatives used for hedging purposes. SFAS No. 133 requires that entities recognize all derivative financial instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for the Company in 2000. Management is currently assessing the impact that the adoption of SFAS No. 133 will have on the Company's consolidated financial statements.

In April 1998, the Company adopted the American Institute of Certified Public Accountants Statement of Position 98-5, Accounting for the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 requires all costs of start-up activities to be expensed as incurred. Start-up activities are defined as those one-time activities related to opening a new facility, introducing a new product or service, conducting business in a new territory, conducting business with a new class of customer or beneficiary, initiating a new process in an existing facility, or commencing some new operation. Activities related to mergers or acquisitions are not considered start-up activities, and therefore SOP 98-5 does not change the accounting for such items. The impact of SOP 98-5 was not material to the Company's consolidated financial statements.

Effective January 1, 1997, the Company adopted the American Institute of Certified Public Accountants Statement of Position 96-1, Environmental Remediation Liabilities ("SOP 96-1"). SOP 96-1 provides that environmental remediation liabilities should be accrued when the criteria of the FASB Statement of Financial Accounting Standards No. 5, Accounting for Contingencies ("SFAS No. 5"), are met. SOP 96-1 also provides that the accrual for such liabilities should include future costs for those employees expected to devote a significant amount of time directly to the management of remediation liabilities. The adoption of SOP 96-1 during 1997 resulted in an increase to operating costs and expenses of approximately $49,900,000 for that period.

3. BUSINESS COMBINATIONS

1998 Poolings of Interests Transactions

On December 31, 1998, the Company consummated a merger with Eastern accounted for as a pooling of interests (the "Eastern Merger"), and accordingly, the accompanying consolidated financial statements have been restated to include the accounts and operations of Eastern for all periods presented. Under the terms of the Eastern Merger, the Company issued 0.6406 of a share of its common stock for each share of Eastern outstanding common stock. Prior to the Eastern Merger, the Company owned approximately 1.3% of Eastern's outstanding shares, which were canceled on the effective date of the Eastern Merger. The Eastern Merger increased the Company's outstanding shares of common stock by approximately 24,460,000 shares, and the Company assumed Eastern's stock options equivalent to approximately 2,255,000 underlying shares of the Company's common stock.

The consolidated balance sheets at December 31, 1998 and 1997 reflect the combining of (i) the Company prior to consummation of the Eastern Merger ("Waste Management") and (ii) Eastern as of those dates. Combined and separate results of operations for the two years ended December 31, 1997, and the nine

65

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

months ended September 30, 1998, of Waste Management and Eastern for the restated periods are as follows (in thousands):

                                             WASTE
                                          MANAGEMENT    EASTERN     COMBINED
                                          -----------   --------   -----------
Nine months ended September 30, 1998
  (unaudited):
  Operating revenues....................  $ 9,236,544   $227,821   $ 9,464,365
  Income (loss) from continuing
     operations before income taxes.....     (931,295)    34,121      (897,174)
  Net income (loss).....................     (851,670)    17,483      (834,187)
Year ended December 31, 1997:
  Operating revenues....................  $11,802,350   $170,148   $11,972,498
  Income (loss) from continuing
     operations before income taxes.....     (668,513)     6,016      (662,497)
  Net income (loss).....................     (943,034)     4,139      (938,895)
Year ended December 31, 1996:
  Operating revenues....................  $10,874,767   $123,835   $10,998,602
  Income (loss) from continuing
     operations before income taxes.....      778,069     (3,837)      774,232
  Net income (loss).....................       28,152     (3,921)       24,231

Prior to December 31, 1997, Eastern reported on a June 30 fiscal year-end. Therefore, the accounts of Eastern for its 1997 and 1996, fiscal years have been consolidated with the accounts of the Company as of and for the years ended December 31, 1997 and 1996, respectively. Operating revenues and net income for Eastern for the six-month period ended December 31, 1997, were approximately $119,526,000 and $5,319,000, respectively. Accordingly, an adjustment is included in the Company's 1998 consolidated financial statements for this six-month period. In addition, Eastern issued shares of its common stock in connection with acquisitions and a public offering during the six-month period.

On July 16, 1998, the Company consummated a merger with WM Holdings, which was accounted for as a pooling of interests and, accordingly, the accompanying consolidated financial statements include the accounts and operations of WM Holdings for all periods presented. Under the terms of the WM Holdings Merger, the Company issued 0.725 of a share of its common stock for each share of WM Holdings outstanding common stock. The WM Holdings Merger increased the Company's outstanding shares of common stock by approximately 354,000,000 shares, and the Company assumed WM Holdings' stock options equivalent to approximately 16,000,000 underlying shares of the Company's common stock. Any unvested WM Holdings options granted prior to March 10, 1998 vested upon consummation of the Merger due to change of control provisions.

The results of operations for WM Holdings prior to consummation of the WM Holdings Merger for the restated periods are as follows (in thousands):

                                                          YEARS ENDED DECEMBER 31,
                                     THREE MONTHS ENDED   -------------------------
                                       MARCH 31, 1998        1997          1996
                                     ------------------   -----------   -----------
                                        (UNAUDITED)
Operating revenues.................      $2,131,621       $9,188,582    $9,225,636
Income (loss) from continuing
  operations before income taxes...         170,968       (1,053,673)      660,467
Net income (loss)..................          74,417       (1,176,104)      (39,307)

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WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the WM Holdings Merger and the Eastern Merger, the Company incurred significant charges in the third and fourth quarters of 1998. Additionally, the Company expects to incur additional costs throughout 1999 that are transitional in nature and not accruable until incurred or committed. The table below reflects the amounts charged to merger costs related to the WM Holdings Merger and the Eastern Merger, as well as merger costs expected to be incurred in future periods for the respective transactions (in thousands):

                                                   WM HOLDINGS                        EASTERN
                                          ------------------------------   ------------------------------
                                          CHARGES IN   CHARGES EXPECTED    CHARGES IN   CHARGES EXPECTED
                                             1998      IN FUTURE PERIODS      1998      IN FUTURE PERIODS
                                          ----------   -----------------   ----------   -----------------
                                                          (UNAUDITED)                      (UNAUDITED)
Transaction or deal costs, primarily
  professional fees and filing fees.....  $  124,100       $     --         $ 14,300         $    --
Employee severance, separation and
  transitional costs....................     323,900         28,500           25,500           9,700
Restructuring charges relating to the
  consolidation and relocation of
  operations, and the transition and
  implementation of information
  systems...............................     166,900         71,800           20,500           3,200
Estimated loss on the sale of:
  Assets to comply with governmental
     orders.............................     255,000             --           32,200              --
  Duplicate facilities and related
     leasehold improvements.............     188,900             --           29,300              --
  Duplicate revenue producing assets....      26,200             --           32,400              --
Provision for the abandonment of:
  Revenue producing assets..............     126,600             --            3,000              --
  Non-revenue producing assets,
     consisting of landfill projects and
     leasehold improvements which were
     determined to be duplicative assets
     from the related merger............     263,000             --            6,500              --
  Other assets, consisting primarily of
     computer hardware and software
     costs which have no future value...     150,300             --            1,500              --
                                          ----------       --------         --------         -------
          Total.........................  $1,624,900       $100,300         $165,200         $12,900
                                          ==========       ========         ========         =======

Included in the charges above, are estimates for anticipated losses related to the sales of assets pursuant to governmental orders. These anticipated losses have been estimated based on the Company's assessment of relevant facts and circumstances, including consideration of the various provisions of asset sale agreements. In certain instances, the asset sale agreements contain contingencies, the resolution of which are uncertain and could materially change the proceeds which the Company will ultimately receive. Accordingly, dependent upon actual future experience and the resolution of certain contingencies, the amount of losses ultimately recorded by the Company could materially differ from the amounts recorded by the Company.

Additionally, the Company recorded merger costs of approximately $17,235,000 related to other poolings of interests transactions consummated during 1998.

Furthermore, the Company recorded certain unusual charges of $864,063,000 in 1998 that were primarily, yet indirectly related to the WM Holdings Merger as discussed in Note 14.

67

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1997 Pooling of Interests Transactions

On August 26, 1997, the Company consummated a merger with United Waste Systems, Inc. ("United") accounted for as a pooling of interests (the "United Merger") and, accordingly, the accompanying consolidated financial statements include the accounts and operations of United for all periods presented. Under the terms of the United Merger, the Company issued 1.075 shares of its common stock for each outstanding share of United common stock. Additionally, at the effective date of the United Merger, United stock options, whether or not such stock options had vested or had become exercisable, were canceled in exchange for shares of the Company's common stock equal in market value to the fair value of such United stock options, as determined by an independent third party. The United Merger increased the Company's outstanding shares of common stock by approximately 51,900,000 shares, which includes approximately 1,900,000 shares exchanged for the United stock options. In the third quarter of 1997, the Company incurred approximately $89,152,000 in merger costs associated with the United Merger. Of this amount, $17,566,000 related to transaction costs, $26,198,000 for severance and other termination benefits, $21,629,000 for integration of operations, and $23,759,000 for the disposal of duplicate facilities and impaired assets as a result of the United Merger. The results of operations for United prior to consummation of the United Merger for the restated periods are as follows (in thousands):

                                       SIX MONTHS ENDED      YEAR ENDED
                                        JUNE 30, 1997     DECEMBER 31, 1996
                                       ----------------   -----------------
                                         (UNAUDITED)
Operating revenues...................      $216,619           $335,743
Net income...........................        23,849             35,393

1996 Pooling of Interests Transactions

On August 30, 1996, the Company consummated a merger with Sanifill, Inc.
("Sanifill") accounted for as a pooling of interests (the "Sanifill Merger")
and, accordingly, the accompanying consolidated financial statements include the accounts and operations of Sanifill for all periods presented. Under the terms of the Sanifill Merger, the Company issued 1.70 shares of its common stock for each share of Sanifill outstanding common stock. The Sanifill Merger increased the Company's outstanding shares of common stock by approximately 43,414,000 shares and the Company assumed Sanifill's options and warrants equivalent to approximately 4,361,000 underlying shares of the Company's common stock. In the third quarter of 1996, the Company incurred approximately $80,000,000 in merger costs associated with the Sanifill Merger. The $80,000,000 of merger costs includes $9,500,000 of transaction costs, $20,000,000 of relocation, severance, and other termination benefits, $13,000,000 relating to integrating operations, and $37,500,000 relating to the disposal of duplicate facilities. The results of operations for Sanifill prior to consummation of the Sanifill Merger for the restated periods are as follows (in thousands):

                                                       SIX MONTHS ENDED
                                                        JUNE 30, 1996
                                                       ----------------
                                                         (UNAUDITED)
Operating revenues..................................       $181,406
Net income..........................................         18,964

On May 7, 1996, the Company consummated a merger with Western Waste Industries ("Western") accounted for as a pooling of interests (the "Western Merger") and, accordingly, the accompanying consolidated financial statements include the accounts and operations of Western for all periods presented. Under the terms of the Western Merger, the Company issued 1.50 shares of its common stock for each share of Western outstanding common stock. Prior to the Western Merger, the Company owned approximately 4.1% of Western's outstanding shares (634,900 common shares), which were canceled on the effective date of the Western Merger. The Western Merger increased the Company's outstanding shares of common stock by

68

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximately 22,028,000 shares and the Company assumed options under Western's stock option plans equivalent to approximately 5,200,000 underlying Company shares of common stock. In the second quarter of 1996, the Company incurred approximately $35,000,000 in merger costs associated with the Western Merger and approximately $4,800,000 in benefits related to Western's pre-merger retirement program. The $35,000,000 of merger costs include $6,800,000 of transaction costs, $15,000,000 of severance and other termination benefits, and $13,200,000 of costs related to integrating operations. The results of operations for Western prior to consummation of the Western Merger for the restated periods are as follows (in thousands):

                                                     THREE MONTHS ENDED
                                                       MARCH 31, 1996
                                                     ------------------
                                                        (UNAUDITED)
Operating revenues................................        $68,441
Net income........................................          4,703

1998 and 1997 Purchase Acquisitions and Acquisitions of Minority Interests

On November 30, 1998, the Company acquired the 49% interest of Waste Management International plc's ("WMI plc") United Kingdom operations that was previously owned by Wessex Water Plc for 205 million pounds, which is equivalent to $342,000,000.

On November 3, 1998, the Company acquired the publicly owned shares of its subsidiary, WMI plc. Under the agreement, the Company paid approximately $443,000,000 in the aggregate, to the holders of the approximately 20% of the outstanding shares of WMI plc not previously owned by WM Holdings and its subsidiaries. The Company liquidated WMI plc after the acquisition in an effort to simplify the corporate structure and provide enhanced tax planning opportunities.

On June 18, 1998, the Company acquired the solid waste businesses of American Waste Systems, Inc. for approximately $150,000,000 in cash. The businesses acquired include three landfills and one collection operation located in Ohio.

On March 31, 1998, the Company acquired the remaining outstanding shares of Wheelabrator Technologies Inc. ("WTI"), which it did not already own for $876,200,000 in cash.

On January 14, 1998, the Company acquired the solid waste divisions of City Management Holdings Trust ("City Management") for approximately $810,000,000 consisting primarily of cash and assumed debt. The businesses acquired include 20 collection operations, ten landfills, and 12 transfer stations, located primarily in Michigan.

On April 1, 1997, the Company acquired substantially all of the assets of Mid-American Waste Systems, Inc. for approximately $201,000,000, consisting primarily of cash and assumed debt. The assets acquired include 11 collection operations, 11 landfills, six transfer stations, and three recycling operations.

On March 12, 1997, the Company acquired substantially all of the Canadian solid waste subsidiaries of Allied Waste Industries, Inc. for approximately $518,000,000 in cash. Those businesses represented 41 collection operations, seven landfills, and eight transfer stations in Alberta, British Columbia, Manitoba, Ontario, Quebec, and Saskatchewan.

In addition to the above purchase acquisitions, the Company consummated numerous other acquisitions that were accounted for under the purchase method of accounting. Results of operations of companies that were acquired and subject to purchase accounting are included from the dates of such acquisitions.

The total cost of acquisitions accounted for under the purchase method of accounting, excluding the purchases of minority interests, was approximately $2,452,690,000 and $2,150,975,000 in 1998 and 1997, respectively.

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WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The pro forma information set forth below assumes acquisitions in 1998 and 1997 accounted for as purchases had occurred at the beginning of 1997. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated at that time (in thousands, except per share amounts):

                                                             YEARS ENDED DECEMBER 31,
                                                             -------------------------
                                                                1998          1997
                                                             -----------   -----------
                                                             (UNAUDITED)   (UNAUDITED)
Operating revenues.........................................  $13,137,758   $13,431,884
Income (loss) from continuing operations...................     (735,939)     (938,850)
Net income (loss)..........................................     (739,839)     (851,907)
Basic earnings (loss) per common share:
  Income (loss) from continuing operations.................        (1.25)        (1.66)
  Net income (loss)........................................        (1.26)        (1.51)
Diluted earnings (loss) per common share:
  Income (loss) from continuing operations.................        (1.25)        (1.66)
  Net income (loss)........................................        (1.26)        (1.51)

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

                                                           DECEMBER 31,
                                                     -------------------------
                                                        1998          1997
                                                     -----------   -----------
Land and landfills.................................  $ 8,384,077   $ 7,160,129
Vehicles...........................................    2,797,137     2,676,433
Machinery and equipment............................    3,072,162     3,078,799
Containers.........................................    1,844,904     1,637,023
Buildings and improvements.........................    1,632,006     1,664,572
Furniture and fixtures.............................      505,527       544,035
                                                     -----------   -----------
                                                      18,235,813    16,760,991
Less accumulated depreciation and amortization.....   (6,598,074)   (5,572,461)
                                                     -----------   -----------
                                                     $11,637,739   $11,188,530
                                                     ===========   ===========

Depreciation and amortization expense for property and equipment was $1,314,568,000, $1,242,061,000 and $1,102,260,000 for 1998, 1997, and 1996, respectively.

Effective October 1, 1997, the Board of Directors of WM Holdings approved a revision to WM Holdings' North American collection fleet management policy. Under the revised policy, WM Holdings replaced front-end loaders after eight years, and rear-end loaders and roll-off trucks after ten years. The previous policy was to not replace front-end loaders before they were a minimum of ten years old and other heavy collection vehicles before they were a minimum of 12 years old. As a result of this decision, the Company recognized an impairment writedown of $70,900,000 in the fourth quarter of 1997 for those vehicles scheduled for replacement in the next two years under the new policy. Depreciable lives were adjusted for the WM Holdings fleet commencing in the fourth quarter of 1997 to reflect the new policy. Also effective October 1, 1997, WM Holdings reduced depreciable lives on containers from 15 and 20 years to 12 years, and ceased assigning salvage value in computing depreciation on North American collection vehicles or containers. These changes in estimates resulted in an increase in depreciation expense of $33,700,000 in the fourth quarter of 1997. Upon consummation of the WM Holdings Merger, WM Holdings' replacement policies were conformed with that of the Company, which are materially consistent with the revised WM Holdings policy stated above.

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Also effective October 1, 1997, WM Holdings changed its process of evaluating the probability that landfill airspace from expansions will be permitted. This change in estimate decreased the useful lives of certain WM Holdings landfills and increased depreciation and amortization and the provision for final closure and post-closure by $15,800,000 in the fourth quarter of 1997.

5. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

                                                                    DECEMBER 31,
                                                              ------------------------
                                                                 1998          1997
                                                              -----------   ----------
Bank borrowings.............................................  $ 1,903,100   $  485,500
Commercial paper, average interest of 5.7% in 1998, and 6.1%
  in 1997...................................................      840,108      356,327
Senior notes and debentures, interest of 6 1/8% to 8 3/4%,
  due 1999 to 2028..........................................    5,959,884    5,224,119
4% Convertible subordinated notes due 2002..................      535,275      535,275
4 1/2% Convertible subordinated notes due 2001..............      148,370      149,500
5% Convertible subordinated debentures due 2006.............      114,445      115,000
5.75% Convertible subordinated notes due 2005...............      453,680      450,182
Tax-exempt and project bonds, principal payable in periodic
  installments, maturing through 2021, fixed and variable
  interest rates ranging from 3.53% to 9.25% at December 31,
  1998......................................................    1,220,634    1,307,793
Installment loans and notes payable, interest to 14%,
  maturing through 2017.....................................      491,533      779,709
Other.......................................................       30,914       76,556
                                                              -----------   ----------
                                                               11,697,943    9,479,961
Less current maturities.....................................      583,742    1,598,012
                                                              -----------   ----------
                                                              $11,114,201   $7,881,949
                                                              ===========   ==========

The aggregate estimated payments, including scheduled minimum maturities, of long-term debt outstanding at December 31, 1998, for the following five years and thereafter are as follows (in thousands).

1999...................................................   $   583,742
2000...................................................     2,706,367
2001...................................................       760,401
2002...................................................     2,394,956
2003...................................................       626,455
Thereafter.............................................     4,626,022
                                                          -----------
                                                          $11,697,943
                                                          ===========

Upon consummation of the WM Holdings Merger, the Company entered into a $3,000,000,000 syndicated loan facility (the "Syndicated Facility") which was in addition to the Company's existing $2,000,000,000 senior revolving credit facility (the "Credit Facility"). The Syndicated Facility requires annual renewal by the lender and provides for a one-year term option at the Company's request in the event of non-renewal. The Syndicated Facility is available for borrowings, including up to $800,000,000 of standby letters of credit and to support the issuance of commercial paper; accordingly, commercial paper has been classified as non-current for financial reporting purposes. The applicable interest rate and facility fee for the Syndicated Facility are similar to those contained in the Company's then existing Credit Facility (which was amended to

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provide for the WM Holdings Merger). The covenant restrictions for the Syndicated Facility and Credit Facility include, among others, interest coverage and debt capitalization ratios, and limitations on dividends, additional indebtedness, liens, and asset sales. The Syndicated Facility and Credit Facility are used to refinance existing bank loans and letters of credit, to fund acquisitions, and for working capital purposes. At December 31, 1997, the committed capacity under the Credit Facility was $2,000,000,000, including standby letters of credit of up to $650,000,000. At December 31, 1997, the applicable interest rate was 6.1% per annum and the facility fee was 0.1125% per annum, with the Company having borrowed $430,000,000 and issued letters of credit of $467,029,000 under the Credit Facility. Principal reductions are not required during the five-year term of the Credit Facility, which was entered into on August 7, 1997. At December 31, 1998, the applicable interest rate on the syndicated Facility was 5.46% and there were no borrowings outstanding under the Credit Facility. The facility fee was 0.10% and 0.125% per annum, under the Syndicated Facility and Credit Facility, respectively, at December 31, 1998. The Company had borrowed $1,545,000,000 and had issued letters of credit of $1,253,361,000 under the Syndicated Facility and Credit Facility at December 31, 1998.

In November 1998, the Company entered into two multi-currency credit facilities totaling EURO 300,000,000, with a syndicate of banks. The facilities provide for borrowings in several currencies and are renewable annually. The outstanding balance as of December 31, 1998 was EURO 228,176,000 (equivalent to $267,400,000). The applicable interest rate is determined by LIBOR or PIBOR plus margin and mandatory costs as defined per the agreement. The interest rates on the two outstanding loans at December 31, 1998, were 7.03% and 3.87%.

On July 17, 1998, the Company issued $600,000,000 of 7% senior notes, due on July 15, 2028 (the "7% Notes") and $600,000,000 of 6 1/8% mandatorily tendered senior notes, due on July 15, 2011 (the "6 1/8% Notes"). The 7% Notes are redeemable, in whole or in part, at the option of the Company at any time and from time to time at the redemption price, as defined in the indenture. The 6 1/8% Notes are subject to certain mandatory tender features as described in the indenture, which may require the purchase by the Company of a portion of or all of the outstanding notes on July 15, 2001. The proceeds from the 7% Notes and 6 1/8% Notes were used to repay outstanding indebtedness under the Company's bank borrowings. Interest on the 7% Notes and 6 1/8% Notes is payable semi-annually on January 15 and July 15.

In May 1998, the Company retired approximately $40,000,000 of certain debt with an average interest rate of 9.0% with proceeds from the Credit Facility. In connection with this debt retirement, the Company incurred prepayment penalties and other fees of $1,811,000 and wrote off the remaining unamortized discounts and debt offering costs of $4,689,000, which were recorded as an extraordinary item.

On December 17, 1997, the Company issued $350,000,000 of 6 1/2% senior notes due December 15, 2002, and $150,000,000 of 7 1/8% senior notes due December 15, 2017. The senior notes constitute senior and unsecured obligations of the Company ranking equal in right of payment with all other senior and unsecured obligations of the Company, as defined in the indenture. The 6 1/2% senior notes due December 15, 2002, are not redeemable. The $150,000,000 of 7 1/8% senior notes due December 15, 2017, are redeemable, in whole or in part, at the option of the Company at any time and from time to time at a redemption price defined in the indenture. Interest is payable semi-annually on December 15 and June 15. The proceeds were used to repay debt under the Company's bank borrowings.

On September 12, 1997, the Company issued $300,000,000 of 7% senior notes due October 1, 2004, and $300,000,000 of 7 1/8% senior notes due October 1, 2007. The senior notes constitute senior and unsecured obligations of the Company, ranking equal in right of payment with all other senior and unsecured obligations of the Company, as defined in the indenture. The senior notes are redeemable at the option of the Company at any time and from time to time at the principal amount of such notes, plus accrued interest. Interest is payable semi-annually on October 1 and April 1. The proceeds were used to repay debt under the Company's bank borrowings.

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During August 1997 and September 1997, the Company prepaid the holders of certain privately placed senior note an aggregate amount of $182,500,000 with proceeds from its Credit Facility. Interest on these privately placed senior notes ranged from 7.29% to 8.44%. In connection with this transaction, the Company was required to pay prepayment penalties of $7,975,000 and wrote off the remaining unamortized deferred offering costs of approximately $1,311,000, which was recorded as an extraordinary item in the third quarter of 1997.

On February 7, 1997, the Company issued $535,275,000 of 4% convertible subordinated notes, due on February 1, 2002. Interest is payable semi-annually in February and August. The notes are convertible by the holders into shares of the Company's common stock at any time at a conversion price of $43.56 per share. The notes are subordinated in right of payment to all existing and future senior indebtedness, as defined in the indenture. The notes are redeemable after February 1, 2000 at the option of the Company at 101.6% of the principal amount, declining to 100.8% of the principal amount on February 1, 2001 and thereafter until maturity, at which time the notes will be redeemed at par, plus accrued interest. The proceeds were primarily used to repay debt under the Company's bank borrowings, to fund acquisitions, and for general corporate purposes.

On June 5, 1996, United issued $150,000,000 of 4 1/2% convertible subordinated notes, due June 1, 2001. Interest is payable semi-annually in June and December. The notes are convertible into shares of the Company's common stock at a conversion price of $30.23 per share. The notes are subordinated in right of payment to all existing and future senior indebtedness, as defined in the indenture. The notes are redeemable after June 1, 1999, at the option of the Company at 101.8% of the principal amount, declining annually to par on June 1, 2001, plus accrued interest.

On March 4, 1996, Sanifill issued $115,000,000 of 5% convertible subordinated debentures, due on March 1, 2006. Interest is payable semi-annually in March and September. The debentures are convertible into shares of the Company's common stock at a conversion price of $28.31 per share. The debentures are subordinated in right of payment to all existing and future senior indebtedness, as defined in the indenture. In March 1999, these debentures were called by the Company and subsequently converted into equity by the debenture holders. See Note 20.

The 5.75% convertible subordinated notes due 2005 are subordinated to all existing and future senior indebtedness of the Company. Each note bears cash interest at the rate of two percent per annum of the $1,000 principal amount at maturity, payable semi-annually. The difference between the principal amount at maturity of $1,000 and the $717.80 stated issue price of each note represents the stated discount. At the option of the holder, each note can be purchased for cash by the Company on March 15, 2000, at $843.03. Accrued unpaid interest to those dates will also be paid. The notes will be callable by the Company on and after March 15, 2000, for cash, at the stated issue price plus accrued stated discount and accrued but unpaid interest through the date of redemption. In addition, each note is convertible at any time prior to maturity into approximately 18.9 shares of the Company's common stock, subject to adjustment upon the occurrence of certain events. Upon any such conversion, the Company will have the option of paying cash equal to the market value of the shares which would otherwise be issuable.

6. ENVIRONMENTAL LIABILITIES

The Company has material financial commitments for the costs associated with its future obligations for final closure, which is the closure of the final cell of a landfill or the regulatory required costs associated with existing operations at a hazardous waste treatment, storage or disposal facility which are subject to Toxic Substances Central Act ("TSCA") or Subtitle D of the Resource Conservation and Recovery Act ("RCRA") hazardous waste treatment, storage, or disposal facility, and post-closure of those facilities. For landfills, the final closure and post-closure liabilities are accrued and charged to expense as airspace is consumed such that the total estimated final closure and post-closure cost will be fully accrued for each

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landfill at the time the site discontinues accepting waste and is closed. Estimates for final closure and post-closure costs are developed using input from the Company's engineers and accountants and are reviewed by management (typically not less than once per year). The estimates are based on the Company's interpretation of current requirements and proposed regulatory changes. In the U.S., the final closure and post-closure requirements are established under the standards of the U.S. Environmental Protection Agency's Subtitle C and D regulations, as implemented and applied on a state-by-state basis. Such costs may increase in the future as a result of legislation or regulation. Final closure and post-closure accruals consider estimates for the final cap and cover for the site, methane gas control, leachate management and groundwater monitoring, and other operational and maintenance costs to be incurred after the site discontinues accepting waste, which is generally expected to be for a period of up to thirty years after final site closure. For purchased disposal sites, the Company assesses and records a final closure and post-closure liability at the time the Company assumes closure responsibility based upon the estimated final closure and post-closure costs and the percentage of airspace utilized as of such date. Thereafter, the difference between the final closure and post-closure costs accrued and the total estimated closure and post-closure costs to be incurred is accrued and charged to expense as airspace is consumed. Such costs for foreign landfills are estimated based on compliance with local laws, regulations and customs. For other facilities, final closure and post-closure costs are determined in consideration of regulatory requirements.

The Company has also established procedures to evaluate its potential remedial liabilities at closed sites which it owns or operates, or to which it transported waste, including 88 sites listed on the Superfund National Priorities List ("NPL") as of December 31, 1998. The majority of situations involving NPL sites relate to allegations that subsidiaries of the Company (or their predecessors) transported waste to the facilities in question, often prior to the acquisition of such subsidiaries by the Company. The Company routinely reviews and evaluates sites that require remediation, including NPL sites, giving consideration to the nature (e.g., owner, operator, transporter, or generator), and the extent (e.g., amount and nature of waste hauled to the location, number of years of site operation by the Company, or other relevant factors) of the Company's alleged connection with the site, the accuracy and strength of evidence connecting the Company to the location, the number, connection and financial ability of other named and unnamed potentially responsible parties ("PRPs"), and the nature and estimated cost of the likely remedy. Cost estimates are based on management's judgment and experience in remediating such sites for the Company as well as for unrelated parties, information available from regulatory agencies as to costs of remediation, and the number, financial resources and relative degree of responsibility of other PRPs who are jointly and severally liable for remediation of a specific site, as well as the typical allocation of costs among PRPs. These estimates are sometimes a range of possible outcomes. In such cases, the Company provides for the amount within the range which constitutes its best estimate. If no amount within the range appears to be a better estimate than any other amount, then the Company provides for the minimum amount within the range in accordance with the SFAS No. 5. The Company believes that it is "reasonably possible," as that term is defined in SFAS No. 5 ("more than remote but less than likely"), that its potential liability, at the high end of such ranges, would be approximately $233,000,000 higher on a discounted basis in the aggregate than the estimate that has been recorded in the consolidated financial statements as of December 31, 1998.

Estimates of the extent of the Company's degree of responsibility for remediation of a particular site and the method and ultimate cost of remediation require a number of assumptions and are inherently difficult, and the ultimate outcome may differ from current estimates. However, the Company believes that its extensive experience in the environmental services business, as well as its involvement with a large number of sites, provides a reasonable basis for estimating its aggregate liability. As additional information becomes available, estimates are adjusted as necessary. While the Company does not anticipate that any such adjustment would be material to its consolidated financial statements, it is reasonably possible that technological, regulatory or enforcement developments, the results of environmental studies, the existence and ability of other PRPs to

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contribute to the settlements of such liabilities, or other factors could necessitate the recording of additional liabilities which could be material.

Where the Company believes that both the amount of a particular environmental liability and the timing of the payments are reliably determinable, the cost in current dollars is inflated at 2% (3% at December 31, 1997) until expected time of payment and then discounted to present value at 5.5% (6% at December 31, 1997). The portion of the Company's recorded environmental liabilities that is not inflated or discounted was approximately $492,339,000 and $344,700,000 at December 31, 1998 and 1997, respectively. Had the Company not discounted any portion of its liability, the amount recorded would have been increased by approximately $308,262,000 at December 31, 1998.

The Company's liabilities for final closure, post-closure monitoring and environmental remediation costs were as follows (in thousands):

                                                            DECEMBER 31,
                                                       -----------------------
                                                          1998         1997
                                                       ----------   ----------
Current portion, included in accrued liabilities.....  $  150,592   $  129,611
Non-current portion..................................     971,507    1,038,049
                                                       ----------   ----------
          Total recorded.............................   1,122,099   $1,167,660
                                                                    ==========
Amount to be provided over remaining life of active
  sites, including discount of $308,262 related to
  recorded amounts...................................   1,806,966
                                                       ----------
Expected aggregate environmental liabilities based on
  current cost.......................................  $2,929,065
                                                       ==========

Anticipated payments (based on current costs) of environmental liabilities at December 31, 1998, are as follows (in thousands):

1999....................................................   $  150,592
2000....................................................      101,499
2001....................................................       73,053
2002....................................................       57,216
2003....................................................       47,415
Thereafter..............................................    2,499,290
                                                           ----------
          Total.........................................   $2,929,065
                                                           ==========

In addition to the amounts above, at a certain site, the Company has perpetual care obligations aggregating approximately $1,527,000 per year.

From time to time, the Company and certain of its subsidiaries are named as defendants in personal injury and property damage lawsuits, including purported class actions, on the basis of a Company subsidiary having allegedly owned, operated or transported waste to a disposal facility which is alleged to have contaminated the environment or, in certain cases, conducted environmental remediation activities at such sites. While the Company believes it has meritorious defenses to these lawsuits, their ultimate resolution is often substantially uncertain due to a number of factors, and it is possible such matters could have a material adverse impact on the Company's earnings for one or more quarters or years.

The Company has filed suit against numerous insurance carriers seeking reimbursement for past and future remedial, defense and tort claim costs at a number of sites. Carriers involved in these matters have typically denied coverage and are defending against the Company's claims. While the Company is vigorously

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pursuing such claims, it regularly considers settlement opportunities when appropriate terms are offered. Settlements to date ($46,600,000 in 1998, $94,300,000 in 1997, and $60,300,000 in 1996) have been included in operating costs and expenses as an offset to environmental expenses.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value amounts have been determined by the Company using available market information and commonly accepted valuation methodologies. However, considerable judgement is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company or holders of the instruments could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair values. The fair value estimates presented herein are based on information available to management as of December 31, 1998 and 1997. Such amounts have not been revalued since those dates, and current estimates of fair value may differ significantly from the amounts presented herein.

The carrying values of cash and cash equivalents, short-term investments, restricted funds held by trustees, trade accounts receivable, trade accounts payable, financial instruments included in notes and other receivables, financial instruments included in other assets, and derivative financial instruments approximate their fair values principally because of the short-term maturities of these instruments.

The fair values of the Company's outstanding indebtedness is as follows (in thousands):

                                                         DECEMBER 31,
                                       -------------------------------------------------
                                                1998                      1997
                                       -----------------------   -----------------------
                                                    ESTIMATED                 ESTIMATED
                                        CARRYING       FAIR       CARRYING       FAIR
                                         AMOUNT       VALUE        AMOUNT       VALUE
                                       ----------   ----------   ----------   ----------
Senior notes and debentures..........  $5,959,884   $6,202,556   $5,224,119   $5,345,490
4% Convertible subordinated notes due
  2002...............................     535,275      641,795      535,275      592,148
4 1/2% Convertible subordinated notes
  due 2001...........................     148,370      232,985      149,500      214,906
5% Convertible subordinated
  debentures due 2006................     114,445      188,489      115,000      170,631
5.75% Convertible subordinated notes
  due 2005...........................     453,680      442,928      450,182      467,821
Tax-exempt and project bonds.........   1,220,634    1,320,841    1,307,793    1,371,871
Other borrowings.....................   3,265,655    3,303,520    1,698,092    1,706,129

8. DERIVATIVE FINANCIAL INSTRUMENTS

Interest rate agreements -- The Company and its subsidiaries have entered into interest rate swap agreements to balance fixed and floating rate debt in accordance with management's criteria. The agreements are contracts to exchange fixed and floating interest rate payments periodically over a specified term without the exchange of the underlying notional amounts. The agreements provide only for the exchange of interest on the notional amounts at the stated rates, with no multipliers or leverage. Differences paid or received are accrued in the consolidated financial statements as a part of interest expense on the underlying debt over the

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life of the agreements and the swap is not recorded on the balance sheet. As of December 31, 1998, interest rate agreements in notional amounts and with terms as set forth in the following table were outstanding:

                              NOTIONAL
CURRENCY                       AMOUNT      RECEIVE      PAY          DURATION OF AGREEMENTS
--------                     -----------   --------   --------       ----------------------
U.S. Dollar................   50,000,000   Floating   Fixed      June 1997 to June 1999
U.S. Dollar................   24,000,000   Floating   Fixed      November 1994 to September 1999
U.S. Dollar................   15,000,000   Floating   Fixed      November 1996 to November 1999
Dutch Guilder..............  115,000,000   Floating   Fixed      November 1996 to January 2000
German Deutschemark........  150,000,000   Floating   Fixed      March 1996 to January 2000
French Franc...............  200,000,000   Fixed      Floating   December 1998 to December 2002
U.S. Dollar................   33,750,000   Floating   Fixed      January 1998 to January 2003
U.S. Dollar................   23,772,000   Floating   Fixed      April 1997 to April 2012

Currency agreements -- From time to time, the Company and certain of its subsidiaries use foreign currency derivatives to seek to mitigate the impact of translation on foreign earnings and income from foreign investees. Typically these have taken the form of purchased put options or collars. The Company receives or pays, based on the notional amount of the option, the difference between the average exchange rate of the hedged currency against the base currency and the average (strike price) contained in the option. Complex instruments involving multipliers or leverage are not used. Although the purpose for using such derivatives is to mitigate currency risk, they do not qualify for hedge accounting under generally accepted accounting principles and, accordingly, must be adjusted to market value at the end of each accounting period with gains or losses included in other income. There were no currency derivatives of this type outstanding at December 31, 1998. From time to time, the Company also uses foreign currency forward contracts to hedge committed transactions when the terms of such a transaction are known and there is a high probability that the transaction will occur.

Commodity agreements -- Prior to the WM Holdings Merger, WM Holdings utilized derivatives to seek to mitigate the impact of fluctuations in the price of fuel used by its vehicles. Quantities hedged did not exceed anticipated fuel purchases in any period. Gains or losses were recognized in operating expenses, as cost of fuel purchases, when paid or received. The primary instruments used were collars, swaps and swaptions. Collars consist of the purchase of call options along with a corresponding sale of put options at a lower price, with the effect of establishing a "cap" and a "floor" with respect to the price of specified quantities of fuel. A swap is an agreement with a counterparty whereby WM Holdings would pay a fixed price and would receive a floating price for specified quantities during a given period. In a swaption, WM Holdings would be paid a premium by the counterparty for the right, but not the obligation, at the end of the option period (usually 90 to 180 days) to enter into a swap with respect to a specified quantity in a given period in the future. All such derivatives were terminated following the WM Holdings Merger, and no fuel hedging transactions were outstanding at December 31, 1998.

9. CAPITAL STOCK

The Board of Directors is authorized to issue preferred stock in series, and with respect to each series, to fix its designation, relative rights (including voting, dividend, conversion, sinking fund, and redemption rights), preferences (including dividends and liquidation), and limitations. The Company currently has no issued or outstanding preferred stock.

In June 1998, Eastern completed the registration and sale of 8,625,000 shares of its common stock at $26.375 per share (equivalent to 5,525,175 shares of the Company's common stock at $41.17 per share). This public offering included the sale of 500,000 shares of Eastern common stock by selling shareholders (equivalent to 320,300 shares of the Company's common stock). The net proceeds after deducting fees and

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related costs, were approximately $205,000,000 and were primarily used to repay debt under Eastern's credit facility and for general corporate purposes.

As a condition to completing the WM Holdings Merger, during June 1998, WM Holdings sold 20,000,000 shares of its common stock from its treasury (equivalent to 14,500,000 shares of the Company's common stock) in an offering to the public. The net proceeds of approximately $607,000,000 were used by WM Holdings to retire outstanding debt under its credit facilities.

In June 1997, prior to the WM Holdings Merger, the Company acquired a majority of the Canadian solid waste businesses of WM Holdings in a purchase business combination for consideration that included 1,705,757 shares of the Company's common stock. WM Holdings sold its shares of the Company's common stock on the open market during December 1997 for approximately $65,000,000. Because the WM Holdings Merger was accounted for as a pooling of interests, WM Holdings' sale of its shares of the Company's common stock is treated as an equity offering to the public for financial accounting and reporting purposes.

On March 3, 1997, prior to its becoming a wholly-owned subsidiary of the Company, United completed a public offering in which it issued 3,450,000 shares of its common stock, priced at $36.50 per share (equivalent to 3,708,750 shares of the Company's common stock, priced at $33.95 per share). The net proceeds of approximately $119,000,000 were used to repay debt under United's credit facility, to fund acquisitions, and for general corporate purposes.

On February 7, 1997, the Company completed a public offering of 11,500,000 shares of its common stock, priced at $35.125 per share. The net proceeds of approximately $387,438,000 were primarily used to repay bank borrowing.

In February 1997, the board of directors of WM Holdings authorized the repurchase of up to 50,000,000 shares of its own common stock (equivalent to 36,250,000 shares of the Company's common stock) in the open market, in privately negotiated transactions, or through issuer tender offers. WM Holdings repurchased 30,000,000 shares of its own common stock (equivalent to 21,750,000 shares of the Company's common stock) through a "Dutch auction" tender offer in the second quarter of 1997.

During 1994 through 1996, WM Holdings sold put options on 42,300,000 shares of its common stock (equivalent to 30,700,000 shares of the Company's common stock). The put options gave the holders the right at maturity to require WM Holdings to repurchase shares of its common stock at specified prices. Proceeds from the sale of put options were credited to additional paid-in capital. The amount WM Holdings would be obligated to pay to repurchase shares of its common stock if all outstanding put options were exercised was reclassified to a temporary equity account. In the event the options were exercised, WM Holdings had the right to pay the holder in cash the difference between the strike price and the market price of WM Holdings' shares, in lieu of repurchasing the stock. Options on 32,500,000 shares expired unexercised, as the price of WM Holdings' stock was in excess of the strike price at maturity. WM Holdings repurchased 3,100,000 shares of its common stock at a cost of $107,500,000, and 6,700,000 options were settled for cash of $13,600,000. There were no put options outstanding at and subsequent to December 31, 1997.

As of December 31, 1998, the Company is limited in its ability to pay dividends pursuant to its current credit agreements of amounts not to exceed $100,000,000 per year. The Company declared cash dividends of approximately $93,810,000, $309,577,000, and $308,265,000, to its shareholders during 1998, 1997, and 1996, respectively. Based on the Company's weighted average common shares outstanding, the cash dividends per common share are $0.16, $0.56, and $0.57 for the years ended December 31, 1998, 1997, and 1996, respectively.

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10. COMMON STOCK OPTIONS AND WARRANTS

In accordance with the Company's 1990 Stock Option Plan (the "1990 Plan"), options to purchase 900,000 shares of the Company's common stock may be granted to officers, directors, and key employees. In accordance with the Company's 1993 Stock Option Incentive Plan, as amended (the "1993 Plan"), options to purchase 26,500,000 shares of the Company's common stock may be granted to officers, directors, and key employees. Options are granted under both the 1990 Plan and the 1993 Plan at an exercise price which equals or exceeds the fair market value of the common stock on the date of grant, with various vesting periods, and expire up to ten years from the date of grant. No options are available for future grant under the 1990 Plan.

Under the Company's 1996 Stock Option Plan for Non-Employee Directors ("1996 Directors Plan"), its directors who are not officers, full-time employees, or consultants of the Company receive an annual grant of 12,500 options on each January 1 (amended to 10,000 options effective January 1, 1999). In accordance with the 1996 Directors Plan, options to purchase up to 1,400,000 shares of the Company's common stock may be granted, with five year vesting periods (amended to one year effective January 1, 1999), and expiration dates ten years from the date of grant. Options may be granted at an exercise price which equals fair market value of the common stock on the date of grant.

In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"). SFAS No. 123 prescribes a fair value based method of determining compensation expense related to stock-based awards granted to employees. The recognition provisions of SFAS No. 123 are optional; however, entities electing not to adopt the recognition provisions of SFAS No. 123 are required to make disclosures of pro forma net income and earnings per share as if the recognition provisions of SFAS No. 123 had been applied, as well as disclosures regarding assumptions utilized in determining the pro forma amounts. The Company did not adopt the recognition provisions of SFAS No. 123, however, the required disclosures are included below.

Stock options granted by the Company in 1998, 1997, and 1996 have ten year terms. Stock options granted by Eastern and Western became fully vested upon consummation of the respective mergers. Stock options granted by Sanifill continue to vest under varying vesting periods ranging from immediate vesting to five years following the date of grant. At the effective date of the United Merger, United stock options, whether or not such stock options had vested or had become exercisable, were canceled in exchange for shares of the Company's common stock equal in market value to the fair value of such United stock options, as determined by an independent third party. Stock options granted by WM Holdings prior to March 10, 1998, became fully vested upon consummation of the WM Holdings Merger, and certain of those include put provision benefits for up to a one year period from the date of the WM Holdings Merger (See Note 14). WM Holdings options granted after March 10, 1998, continue to vest in accordance with their original vesting schedule of 3 years.

79

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes common stock option and warrant transactions under the aforementioned plans and various predecessor plans for 1998, 1997, and 1996:

                                                    OPTIONS AND   WEIGHTED AVERAGE
                                                     WARRANTS      EXERCISE PRICE
                                                    -----------   ----------------
                                                    (IN 000'S)
Outstanding at December 31, 1995..................    33,728           $25.00
  Granted.........................................    12,368            28.17
  Assumed in acquisitions.........................       373            24.94
  Exercised.......................................    (7,411)           16.31
  Forfeited.......................................    (1,147)           44.03
                                                      ------
Outstanding at December 31, 1996..................    37,911            27.13
  Granted.........................................    10,424            35.20
  Exercised.......................................    (8,023)           17.26
  Forfeited.......................................    (2,681)           43.99
                                                      ------
Outstanding at December 31, 1997..................    37,631            30.46
  Granted.........................................    10,645            43.92
  Assumed in acquisitions.........................     1,986            36.77
  Exercised.......................................    (8,593)           34.17
  Forfeited.......................................      (859)           45.33
                                                      ------
Outstanding at December 31, 1998..................    40,810            32.72
                                                      ======
Exercisable at December 31, 1996..................    20,546            27.20
Exercisable at December 31, 1997..................    20,440            30.34
Exercisable at December 31, 1998..................    23,994            29.25

The common stock options and warrants outstanding at December 31, 1998, include approximately 21,247,000, common stock options and warrants granted by Western, Sanifill, United, WM Holdings, and Eastern, of which approximately 17,470,000 are exercisable.

The weighted average fair value of common stock options and warrants granted during 1998, 1997 and 1996 were $18.61, $11.92 and $9.59, respectively. The fair value of each common stock option or warrant granted to employees or directors by the Company during 1998, 1997 and 1996 is estimated utilizing the Black-Scholes option-pricing model. The following weighted average assumptions were used: dividend yield of 0% to 2%, risk-free interest rates which vary for each grant and range from 5.06% to 7.67%, expected life of three to seven years for all grants, and stock price volatility primarily ranging from 25.2% to 31.3% for all grants.

Outstanding and exercisable stock options and warrants at December 31, 1998, were as follows (in thousands):

                                             OUTSTANDING                               EXERCISABLE
                          -------------------------------------------------   ------------------------------
                          OPTIONS AND   WEIGHTED AVERAGE   WEIGHTED AVERAGE   OPTIONS AND   WEIGHTED AVERAGE
EXERCISE PRICE             WARRANTS      EXERCISE PRICE     REMAINING TERM     WARRANTS      EXERCISE PRICE
--------------            -----------   ----------------   ----------------   -----------   ----------------
$ 2.25 to $ 10.00.......     3,428           $ 6.71           3.1 years          3,426           $ 6.71
$10.01 to $ 20.00.......     5,885            13.84           5.8 years          4,845            13.47
$20.01 to $ 30.00.......     6,985            24.82           7.0 years          3,793            24.19
$30.01 to $ 40.00.......    10,156            35.06           8.1 years          3,583            35.88
$40.01 to $ 50.00.......     9,274            45.20           6.5 years          6,907            44.48
$50.01 to $140.16.......     5,082            55.57           7.6 years          1,440            59.73
                            ------                                              ------
$ 2.25 to $140.16.......    40,810            32.72           6.7 years         23,994            29.25
                            ======                                              ======

80

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

If the Company applied the recognition provisions of SFAS No. 123, the Company's net income (loss) and earnings (loss) per common share for 1998, 1997, and 1996 would approximate the pro forma amounts shown below (in thousands, except per share amounts):

                                                 YEARS ENDED DECEMBER 31,
                                              -------------------------------
                                                1998        1997       1996
                                              ---------   ---------   -------
Net income (loss):
  As reported...............................  $(770,702)  $(938,895)  $24,231
  Pro forma.................................   (833,014)   (978,831)   (1,042)
Basic earnings (loss) per common share:
  As reported...............................      (1.32)      (1.68)     0.05
  Pro forma.................................      (1.43)      (1.76)       --
Diluted earnings (loss) per common share:
  As reported...............................      (1.32)      (1.68)     0.04
  Pro forma.................................      (1.43)      (1.76)       --

The effects of applying SFAS No. 123 in this pro forma disclosure are not necessarily indicative of future amounts.

Beginning in 1996, WM Holdings made grants of restricted stock. Compensation expense for grants of restricted shares was recognized ratably over the vesting period (generally five to ten years) and amounted to approximately $759,000 in 1998 through the date of the WM Holdings Merger, and $2,400,000 and $100,000 in 1997 and 1996, respectively. The unamortized restricted stock of $9,209,000 vested upon consummation of the WM Holdings Merger, and accordingly was included in merger costs in 1998.

In September 1998, two senior executives were granted an aggregate of 1,700,000 shares under the 1993 Plan. The options granted vest according to certain performance goals in lieu of the normal vesting schedules. All such options fully vest no later than eight years from the date of grant.

11. EMPLOYEE BENEFIT PLANS

Principally through the USA Waste Services, Inc. Employee's Savings Plan, the Waste Management Retirement Savings Plan, and the Wheelabrator-Rust Savings and Retirement Plan, the Company has established qualified defined contribution retirement plans covering substantially all domestic employees other than those employees who are covered under collective bargaining agreements which do not provide for coverage under the plans. In previous years, certain of the plans provided for annual contributions by the Company as determined by their respective boards of directors. In 1998, the primary feature of plans covering the majority of participants was the Company match of employee contributions of amounts as specified in the applicable plan.

Effective January 1, 1999, the Waste Management Retirement Savings Plan and the Wheelabrator-Rust Savings and Retirement Plan were merged into the USA Waste Services, Inc. Employee's Savings Plan, which was then renamed the Waste Management Retirement Savings Plan ("Savings Plan"). The Savings Plan covers employees (except those working subject to a collective bargaining agreement which do not provide for coverage under the plans) following a 90 day waiting period after hire, and allows eligible employees to contribute up to 15% of their annual compensation, as limited by IRS regulations. Under the Savings Plan, the Company matches employee contributions up to 3% of their eligible compensation, and matches 50% of employee contributions in excess of 3% but less than 6% of eligible compensation. Both employee and Company contributions vest immediately. Charges to operations for these plans were $69,721,000, $42,335,000 and $29,648,000 during 1998, 1997 and 1996, respectively.

81

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Certain of the Company's foreign subsidiaries participate in both defined benefit and defined contribution retirement plans for its employees in those countries. The projected benefit obligation, plan assets and unfunded liability of the defined benefit plans are not material. In addition to the pension plan for certain employees under collective bargaining agreements established at the end of 1998 (see below), other Company subsidiaries participate in various multi-employer pension plans covering certain employees not covered under the Company's pension plan. These multi-employer plans are generally defined benefit plans; however, in many cases, specific benefit levels are not negotiated with or known by the employer contributors. Contributions of $25,800,000, $18,600,000 and $16,500,000 for subsidiaries' defined benefit plans were made and charged to income in 1998, 1997 and 1996, respectively.

The Company had a qualified defined benefit pension plan for all eligible non-union domestic employees of WM Holdings which, as discussed below, was terminated as of December 31, 1998 in conjunction with the WM Holdings Merger. Throughout the life of the plan, benefits were based on the employee's years of service and compensation during the highest five consecutive years out of the last ten years of employment. The Company's funding policy was to contribute annually an amount determined in consultation with its actuaries, approximately equal to pension expense, except as may be limited by the requirements of the Employee Retirement Income Security Act ("ERISA"). An actuarial valuation report was prepared for the plan as of September 30 each year and used, as permitted by the FASB's Statement of Financial Accounting Standards No. 87, Employers Accounting for Pensions ("SFAS No. 87"), for the year-end disclosures.

In conjunction with the WM Holdings Merger, the Company decided to terminate the defined benefit pension plan as of December 31, 1998, and liquidate the plan's assets and settle its obligations to participants in 1999, except as related to certain employees participating under collective bargaining agreements, whose benefits were transferred to a newly created plan effective October 1, 1998. As required under the FASB's Statement of Financial Accounting Standard No. 88, Employer's Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, this decision has resulted in a curtailment expense charge in unusual items of $34,716,000 in 1998, and is currently estimated to result in an approximate net cash settlement charge in unusual items in 1999 of $125,000,000. To the extent that this termination benefit has not yet been charged to expense and funded, additional minimum pension liability has been recorded as a charge to other comprehensive income. The Company expects to record this amount in 1999, at which time it will result in an adjustment to other comprehensive income. The amount of the 1999 settlement is inversely sensitive to changing interest rates. This sensitivity is approximately $20,000,000 for every 25 basis point fluctuation in interest rates.

Also in conjunction with the WM Holdings Merger, the Company has terminated certain non-qualified supplemental benefit plans for certain officers and non-officer managers, the most significant plan being the Supplemental Executive Retirement Plan (collectively the "Supplemental Plans"). The curtailment and settlement loss related to these plans of $61,987,000 was recorded in unusual items in 1998. A substantial portion of these benefits was paid to participants by December 31, 1998, and unpaid amounts are accrued at December 31, 1998.

WM Holdings and certain of its subsidiaries provided post-retirement health care and other benefits to eligible employees. In conjunction with the WM Holdings Merger, the Company has decided to limit participation in these plans to participating retired employees as of December 31, 1998.

82

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables provide a reconciliation of the changes in the plans' benefit obligations and the fair value of assets over the two-year period ending December 31, 1998, and a statement of the funded status as of December 31 of both years (in thousands):

                                              PENSION BENEFITS       OTHER BENEFITS
                                            --------------------   -------------------
                                              1998        1997       1998       1997
                                            ---------   --------   --------   --------
Change in benefit obligation:
  Benefit obligation at beginning of
     period...............................  $ 328,892   $257,677   $ 64,482   $ 59,126
  Service cost............................     17,892     14,720      1,783      1,212
  Interest cost...........................     23,944     20,877      4,535      4,538
  Plan participants' contributions........         --         --        300        721
  Amendments..............................     23,372      3,060    (24,188)     3,890
  Actuarial (gain) loss...................     90,346     44,654      4,651       (230)
  Benefits paid...........................    (11,928)   (12,096)    (1,925)    (4,775)
  Curtailments............................     52,209         --      4,085         --
  Settlements.............................    (52,959)        --         --         --
                                            ---------   --------   --------   --------
  Benefit obligation at end of period.....  $ 471,768   $328,892   $ 53,723   $ 64,482
                                            =========   ========   ========   ========
Change in plan assets:
  Fair value of plan assets at beginning
     of period............................  $ 264,870   $193,722   $     --   $     --
  Actual return on plan assets............     29,310     50,357         --         --
  Employer contributions..................     89,985     32,887      1,625      4,054
  Plan participants' contributions........         --         --        300        721
  Benefits paid...........................    (11,928)   (12,096)    (1,925)    (4,775)
  Settlements.............................    (52,959)        --         --         --
                                            ---------   --------   --------   --------
  Fair value of plan assets at end of
     period...............................  $ 319,278   $264,870   $     --   $     --
                                            =========   ========   ========   ========
Funded status:
  Funded status at December 31............  $(152,490)  $(64,022)  $(53,723)  $(64,482)
  Unrecognized transition (asset)
     obligation...........................     (1,430)    (2,860)        --        (73)
  Unrecognized net actuarial (gain)
     loss.................................    123,554     67,176        469     (8,640)
  Unrecognized prior service cost.........        (10)       953    (20,576)     3,890
                                            ---------   --------   --------   --------
  Net amount recognized...................  $ (30,376)  $  1,247   $(73,830)  $(69,305)
                                            =========   ========   ========   ========

The following table provides the amounts recognized in the consolidated balance sheets as of December 31 of both years (in thousands):

                                              PENSION BENEFITS       OTHER BENEFITS
                                            --------------------   -------------------
                                              1998        1997       1998       1997
                                            ---------   --------   --------   --------
Prepaid benefit cost......................  $   8,220   $ 32,139   $     --   $     --
Accrued benefit liability.................    (38,596)   (30,892)   (73,830)   (69,305)
Minimum pension liability.................   (118,871)   (10,139)        --         --
Intangible asset..........................         --      1,184         --         --
Accumulated other comprehensive income
  before tax benefit......................    118,871      8,955         --         --
                                            ---------   --------   --------   --------
Net amount recognized.....................  $ (30,376)  $  1,247   $(73,830)  $(69,305)
                                            =========   ========   ========   ========

83

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table provides the components of net periodic benefit cost for the years ended 1998, 1997, and 1996 (in thousands):

                                              PENSION BENEFITS               OTHER BENEFITS
                                       ------------------------------   ------------------------
                                         1998       1997       1996      1998     1997     1996
                                       --------   --------   --------   ------   ------   ------
Components of net periodic benefit
  cost:
  Service cost.......................  $ 17,892   $ 14,720   $ 15,309   $1,783   $1,212   $1,118
  Interest cost......................    23,944     20,877     16,610    4,535    4,538    4,375
  Expected return on plan assets.....   (20,954)   (17,084)   (13,818)      --       --       --
  Amortization of transition asset...    (1,430)    (1,430)    (1,430)      --       --       --
  Amortization of prior-service
     cost............................       (35)       202        621      278       --       --
  Amortization of net (gain) loss....     8,450      4,772      3,609     (445)    (253)    (313)
                                       --------   --------   --------   ------   ------   ------
  Net periodic benefit cost..........    27,867     22,057     20,901    6,151    5,497    5,180
  Curtailment loss (included in asset
     impairments and unusual
     items)..........................    53,208         --         --       --       --       --
  Settlement loss (included in asset
     impairments and unusual
     items)..........................    43,495         --         --       --       --       --
                                       --------   --------   --------   ------   ------   ------
  Net periodic benefit cost after
     curtailments and settlements....  $124,570   $ 22,057   $ 20,901   $6,151   $5,497   $5,180
                                       ========   ========   ========   ======   ======   ======

The assumptions used in the measurement of the Company's benefit obligations are shown in the following table (weighted average assumptions as of December 31):

                                                 PENSION BENEFITS     OTHER BENEFITS
                                                 -----------------    --------------
                                                  1998       1997     1998     1997
                                                 ------     ------    -----    -----
Discount rate..................................   6.25%      7.25%    6.50%    7.00%
Expected return on plan assets.................   9.00%      9.00%     n/a      n/a
Rate of compensation...........................   3.50%      3.50%     n/a      n/a

The principal element of the Other Benefits referred to above is the post-retirement health care plan. Participants in the WM Holdings plan contribute to the cost of the benefit, and for retirees since January 1, 1992, the Company's contribution is capped at between $0 and $600 per month per retiree, based on years of service. For measurement purposes, a 7.1% annual rate of increase in the per capita cost of covered health care claims was assumed for 1998 (being an average of the rate used by all plans); the rate was assumed to decrease to 6% in 2001 and remain at that level thereafter. A 1% change in assumed health care cost trend rates would have the following effects (in thousands):

                                                        1% INCREASE   1% DECREASE
                                                        -----------   -----------
Effect on total of service and interest components of
  net periodic post-retirement health care benefit
  cost................................................    $  290        $  (273)
Effect on the health care component of the accumulated
  post-retirement benefit obligation..................    $3,938        $(3,673)

In 1998, WM Holdings merged the Employee Stock Ownership Plan that was initially established for eligible WM Holdings' employees in 1988 into its Retirement Savings Plan. During 1994, WM Holdings established an Employee Stock Benefit Trust ("Trust") and sold 12,600,000 shares of its treasury stock to the Trust in return for a 30-year, 7.33% note with interest payable quarterly and principal due at maturity. WM Holdings has agreed to contribute to the Trust each quarter funds sufficient, when added to dividends on the shares held by the Trust, to pay interest on the note as well as principal outstanding at maturity. At the direction of an administrative committee, the trustee will use the shares or proceeds from the sale of shares to

84

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

pay employee benefits, and to the extent of such payments by the Trust, the Company will forgive principal and interest on the note. The shares of common stock issued to the Trust are not considered to be outstanding in the computation of earnings per share until the shares are utilized to fund obligations for which the trust was established. Changes in the market value of these shares are reflected as adjustments in additional paid-in capital.

12. INCOME TAXES

For financial reporting purposes, income (loss) from continuing operations before income taxes, showing domestic and international sources, is as follows (in thousands):

                                               1998        1997        1996
                                             ---------   ---------   --------
Domestic...................................  $(896,875)  $(865,783)  $757,537
International..............................    196,996     203,286     16,695
                                             ---------   ---------   --------
          Income (loss) from continuing
            operations.....................  $(699,879)  $(662,497)  $774,232
                                             =========   =========   ========

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

                                                 YEARS ENDED DECEMBER 31,
                                             --------------------------------
                                               1998        1997        1996
                                             ---------   ---------   --------
Current:
  Federal..................................  $ 356,056   $ 569,935   $216,814
  State....................................     88,484      83,592     57,860
  Foreign..................................     72,541      85,357     22,875
                                             ---------   ---------   --------
                                               517,081     738,884    297,549
                                             ---------   ---------   --------
Deferred:
  Federal..................................   (463,635)   (369,408)    86,654
  State....................................    (51,889)    (27,271)    26,936
  Foreign..................................     65,366      21,136     75,561
                                             ---------   ---------   --------
                                              (450,158)   (375,543)   189,151
                                             ---------   ---------   --------
          Provision for income taxes.......  $  66,923   $ 363,341   $486,700
                                             =========   =========   ========

85

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The federal statutory rate is reconciled to the effective rate as follows:

                                                    YEARS ENDED DECEMBER 31,
                                                    -------------------------
                                                     1998      1997     1996
                                                    ------    ------    -----
Income taxes (benefit) at federal statutory
  rate............................................  (35.00)%  (35.00)%  35.00%
State and local income taxes, net of federal
  income tax benefit..............................    3.23      5.51     7.11
Nondeductible costs relating to acquired
  intangibles.....................................   16.85     30.88     7.55
Nondeductible merger costs........................    8.22      1.40     1.33
Writedown of investments in subsidiary............      --      6.46     7.66
Minority interest.................................    0.82      2.40     1.87
Gain on sale of foreign subsidiary................      --        --     2.26
Deferred tax valuation and other tax reserves.....    8.79     40.11     0.90
Federal tax on foreign income.....................    4.35      0.30     1.20
Nonconventional fuel tax credit...................   (3.61)    (2.80)   (1.99)
Other.............................................    5.91      5.59    (0.07)
                                                    ------    ------    -----
  Provision for income taxes......................    9.56%    54.85%   62.82%
                                                    ======    ======    =====

The components of the net deferred tax assets (liabilities) are as follows (in thousands):

                                                           DECEMBER 31,
                                                     -------------------------
                                                        1998          1997
                                                     -----------   -----------
Deferred tax assets:
  Net operating loss, capital loss and tax credit
     carryforwards.................................  $   322,129   $   287,384
  Environmental and other reserves.................      670,502       754,195
  Reserves not deductible until paid...............      178,608       291,168
                                                     -----------   -----------
          Subtotal.................................    1,171,239     1,332,747
Deferred tax liabilities:
  Property, equipment, intangible assets, and
     other.........................................   (1,072,138)   (1,567,579)
Valuation allowance................................     (331,592)     (232,800)
                                                     -----------   -----------
          Net deferred tax liabilities.............  $  (232,491)  $  (467,632)
                                                     ===========   ===========

At December 31, 1998, the Company's subsidiaries have approximately $200,599,000 of federal net operating loss ("NOL") carryforwards, $1,007,749,000 of state NOL carryforwards, and $598,930,000 of foreign NOL carryforwards. Foreign NOL carryforwards of approximately $535,530,000 may be carried forward indefinitely; the remaining NOL carryforwards have expiration dates through 2013. The Company's subsidiaries have $16,062,000 of alternative minimum tax credit carryforwards that may be used indefinitely; state tax credit carryforwards of $5,039,000; federal investment tax credit carryforwards of $381,000; and foreign tax credit carryforwards of $32,614,000. Valuation allowances have been established for uncertainties in realizing the benefit of tax loss and credit carryforwards. While the Company expects to realize the deferred tax assets, net of the valuation allowances, changes in estimates of future taxable income or in tax laws may alter this expectation.

During 1997, the valuation allowance increased approximately $101,056,000, composed of increases to allowances due to the uncertainty of realizing alternative minimum tax credits, tax benefits from certain asset impairment writedowns (primarily land), foreign tax credits, and NOL carryforwards partially offset by reductions in allowances attributable primarily to foreign net operating loss carryforwards. In 1998, the

86

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

valuation allowance increased approximately $98,792,000 primarily due to the uncertainty of realizing foreign NOL carryforwards.

The Company does not provide for U.S. income taxes on unremitted earnings of foreign subsidiaries as it is the present intention of management to reinvest the unremitted earnings in its foreign operations. Unremitted earnings of foreign subsidiaries are approximately $498,000,000 at December 31, 1998. It is not practicable to determine the amount of U.S. income taxes that would be payable upon remittance of the assets that represent those earnings.

13. SEGMENT AND RELATED INFORMATION

The Company's North American solid waste management operations represents 80.5% of operating revenues, 98.7% of earnings before interest and tax ("EBIT"), and 77.3% of total assets in 1998, and is the Company's principal reportable segment under Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information ("SFAS No. 131"). This segment provides integrated waste management services consisting of collection, transfer, disposal (solid waste landfill, hazardous waste landfill and waste-to-energy), recycling, and other miscellaneous services to commercial, industrial, municipal and residential customers in North America. Similar operations in international markets outside of North America are disclosed as a separate segment. The Company's other reportable segment consists of non-solid waste services, aggregated as a single segment for this reporting presentation as permitted under SFAS No. 131. The non-solid waste segment includes other hazardous waste services such as chemical waste management services and low-level and other radioactive waste services, the Company's independent power projects, and other non-solid waste services to commercial, industrial and government customers, and includes business lines that are being actively marketed. No single customer accounted for as much as 10% of consolidated revenue in any year.

Certain of the services provided by the Company are subject to extensive and evolving federal, state, and local environmental laws and regulations in the U.S. and elsewhere that have been enacted in response to technological advances and the public's increased concern over environmental issues. Refer to Notes 6 and 17 for a further discussion of regulatory issues.

Summarized financial information concerning the Company's reportable segments for the respective years ended December 31, is shown in the following table. Prior period information has been restated to conform to the segments described above, which are based on the structure and internal organization of the Company as of December 31, 1998 (in thousands):

                                NORTH AMERICAN   INTERNATIONAL    NON-SOLID     CORPORATE
                                 SOLID WASTE     WASTE SERVICES     WASTE      FUNCTIONS(A)      TOTAL
                                --------------   --------------   ----------   ------------   -----------
1998
  Net operating revenues(b)...   $10,220,478       $1,533,635     $  949,356    $       --    $12,703,469
  Earnings before interest and
     taxes (EBIT)(c), (d).....     2,478,733          132,937        103,443      (204,043)     2,511,070
  Depreciation and
     amortization.............     1,241,330          169,051         43,579        44,752      1,498,712
  Capital expenditures........     1,438,458          166,035         34,605        12,391      1,651,489
  Total assets(d).............    17,553,957        3,107,968      1,003,035     1,050,238     22,715,198
1997
  Net operating revenues(b)...   $ 9,244,910       $1,789,988     $  937,600    $       --    $11,972,498
  Earnings before interest and
     taxes (EBIT)(c), (d).....     1,790,027          187,619         96,082      (413,814)     1,659,914
  Depreciation and
     amortization.............     1,086,547          181,353         55,258        68,652      1,391,810
  Capital expenditures........     1,128,904          150,908         29,337        23,058      1,332,207
  Total assets(d).............    15,067,951        3,055,634      1,222,464       810,375     20,156,424

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                                NORTH AMERICAN   INTERNATIONAL    NON-SOLID     CORPORATE
                                 SOLID WASTE     WASTE SERVICES     WASTE      FUNCTIONS(A)      TOTAL
                                --------------   --------------   ----------   ------------   -----------
1996
  Net operating revenues(b)...   $ 8,097,860       $1,913,793     $  986,949    $       --    $10,998,602
  Earnings before interest and
     taxes (EBIT)(c), (d).....     1,654,154          216,198        132,267      (148,927)     1,853,692
  Depreciation and
     amortization.............       949,570          195,944         52,631        66,051      1,264,196
  Capital expenditures........     1,248,623          214,103         27,769        28,777      1,519,272
  Total assets(d).............    13,938,513        4,103,273      2,118,313       567,425     20,727,524


(a) Corporate functions include the corporate treasury function (except for limited amounts of locally negotiated and managed project debt), administration of corporate tax function, the corporate insurance function and management of closed landfill and related insurance recovery functions, along with other typical administrative functions.

(b) Non-Solid Waste revenues are net of inter-segment revenue with North American Solid Waste of $122,400,000, $86,400,000 and $69,100,000 in 1998, 1997 and 1996, respectively. There are no other significant sales between segments.

(c) For those items included in the determination of EBIT, (the earnings measurement used by management to evaluate operating performance) the accounting policies of the segments are generally the same as those described in the summary of significant accounting policies.

(d) There are no material asymmetrical allocations of EBIT versus assets between segments or corporate. Certain asset impairments and unusual items reported in the reconciliation of EBIT to reported net income below, however, have resulted in adjustments to assets ultimately reflected on segment balance sheets. Assets are net of inter-segment receivables and investments.

The reconciliation of total EBIT reported above to net income is as follows (in thousands):

                                                 YEARS ENDED DECEMBER 31,
                                           -------------------------------------
                                              1998         1997          1996
                                           ----------   -----------   ----------
EBIT, as reported above..................  $2,511,070   $ 1,659,914   $1,853,692
(Plus) less:
  Merger costs...........................   1,807,245       112,748      126,626
  Asset impairments and unusual items....     864,063     1,771,145      529,768
  Income (loss) from continuing
     operations held for sale............         151         9,930         (315)
  Interest expense.......................     681,457       555,576      525,340
  Interest income........................     (26,829)      (45,214)     (34,603)
  Minority interest......................      24,254        45,442       41,289
  Other income, net......................    (139,392)     (127,216)    (108,645)
                                           ----------   -----------   ----------
Income (loss) from continuing operations
  before income taxes....................    (699,879)     (662,497)     774,232
Provision for income taxes...............      66,923       363,341      486,700
                                           ----------   -----------   ----------
Income (loss) from continuing
  operations.............................    (766,802)   (1,025,838)     287,532
Discontinued operations..................          --       (95,688)     263,301
Extraordinary loss.......................       3,900         6,809           --
Cumulative effect of change in accounting
  principle..............................          --         1,936           --
                                           ----------   -----------   ----------
          Net income (loss)..............  $ (770,702)  $  (938,895)  $   24,231
                                           ==========   ===========   ==========

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Foreign operations in 1998 were conducted in seven countries in Europe, seven countries in the Pacific Rim, Canada, Mexico, Brazil, Israel and Argentina. Operating revenues and property and equipment (net) relating to the Company's operations by significant geographic area is as follows (in thousands):

                                               YEARS ENDED DECEMBER 31,
                                        ---------------------------------------
                                           1998          1997          1996
                                        -----------   -----------   -----------
Operating revenues:
  United States.......................  $10,681,924   $ 9,707,546   $ 8,897,002
  Europe..............................    1,264,209     1,406,026     1,523,347
  Canada..............................      425,531       412,633       150,837
  Other foreign.......................      331,805       446,293       427,416
                                        -----------   -----------   -----------
          Total.......................  $12,703,469   $11,972,498   $10,998,602
                                        ===========   ===========   ===========
Property and equipment, net:
  United States.......................  $ 9,785,845   $ 9,187,923   $ 9,385,496
  Europe..............................      841,418       903,174     1,135,720
  Canada..............................      840,887       906,142       231,928
  Other foreign.......................      169,589       191,291       212,797
                                        -----------   -----------   -----------
          Total.......................  $11,637,739   $11,188,530   $10,965,941
                                        ===========   ===========   ===========

The Company operates facilities in Hong Kong which are owned by the Hong Kong government. The Hong Kong economy has been impacted by the economic uncertainty associated with many of the countries in the region. High and volatile interest rates have resulted from speculation regarding its currency. The Company also has operations in Indonesia, Thailand and Brazil. These countries have experienced illiquidity, volatile currency exchange rates and interest rates, and reduced economic activity. The Company will be affected for the foreseeable future by economic conditions in this region, although it is not possible to determine the extent of such impact. At December 31, 1998, the Company has $114,749,000 revenue, $41,403,000 property and equipment, net, and $104,103,000 total investment in the above Asian countries (including Hong Kong). The Company has a total investment of $38,900,000 in Brazil which is primarily investments accounted for under the equity method of accounting. Income from continuing operations before income taxes from Hong Kong was $21,200,000 in 1998. Income from Indonesia, Thailand and Brazil has not been significant to date.

14. ASSET IMPAIRMENTS AND UNUSUAL ITEMS

In 1998, 1997, and 1996, the Company recorded certain charges for asset impairments and unusual items resulting from reviews of business integration and operating plans. Such reviews were generally performed in connection with the Company's merger activities. In addition, the 1997 consolidated financial statements include a significant accounting charge resulting from a comprehensive review performed by the management of WM Holdings of its operations and investments in the fourth quarter of 1997. Similarly, the 1996 consolidated financial statements include accounting charges recorded by WM Holdings for certain operational and management restructuring activities and assets that had become impaired.

Fair values for asset impairment losses was determined for landfills, hazardous waste facilities, recycling investments and other facilities, primarily based on future cash flow projections discounted back using discount rates appropriate for the risks involved with the specific assets. For surplus real estate, market opinions and appraisals were used. In determining fair values for abandoned projects and vehicles to be sold, recoverable salvage values were determined using market estimates. Impaired assets to be sold are primarily businesses to be sold (see Note 18) and surplus real estate. The Company provides for losses in connection with long-term waste service contracts where an obligation exists to perform services and when it becomes

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evident the projected direct and incremental contract costs will exceed the related contract revenues. In general, these losses relate to contracts with remaining average duration of five years.

The following is a summary of asset impairments and unusual items that are reflected in the Company's consolidated financial statements for the year ended December 31, 1998 (in millions):

Provision for losses on contractual commitments.............  $115.6
Changes in estimates relating to the reassessment of
  ultimate losses for certain legal and remediation
  issues....................................................   331.9
Write-down to estimated net sales proceeds of businesses to
  be sold...................................................   195.1
Curtailment and settlement costs of terminating the defined
  benefit pension plan (Note 11)............................    34.7
Compensation charges for the liquidation of WM Holdings'
  Supplemental Executive Retirement Plan (Note 11) and other
  supplemental plans........................................    72.2
Put provisions of certain WM Holdings' stock options as a
  result of change in control provisions....................   114.6
                                                              ------
          Total.............................................  $864.1
                                                              ======

In 1998, the Company increased its reserves for certain legal and environmental remediation issues as a result of management's emphasis to resolve and settle certain issues relating primarily to WM Holdings, including a class action securities litigation against WM Holdings.

Certain WM Holdings' employee stock option plans included change of control provisions that were activated as a result of the WM Holdings Merger whereby the option holder received certain put rights that require charges to earnings through the put periods. The charge to pre-tax earnings as a result of these put rights was $114,600,000 in the third quarter of 1998. To the extent the future market value of the Company's common stock exceeds $54.34 per share, the Company will be required to record additional charges to earnings through July 16, 1999, at which time all put rights expire. The expense related to these stock option put rights has no impact to equity as the offset is a direct increase to additional paid-in capital, as these put rights will be satisfied by the issuance of stock.

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The following is a summary of asset impairments and unusual items reflected in the Company's consolidated financial statements for the year ended December 31, 1997 (in millions):

Asset impairments:
  Landfills, related primarily to management decisions to
     abandon expansions and development projects due to
     political or competitive factors, which will result in
     closure earlier than previously expected (includes
     $233.8 for hazardous waste sites)......................  $  592.9
  Hazardous waste facilities, resulting from continuing
     market deterioration, increased competition, excess
     capacity and changing regulation.......................     131.4
  Goodwill, primarily related to landfills and hazardous
     waste facilities impaired (including $411.0 related to
     hazardous waste business)..............................     433.4
  Write-down of WTI long-lived assets, including $47.1
     related to a wood waste burning independent power
     production facility....................................      57.2
  Recycling investments, related primarily to continued
     pricing, overcapacity and competitive factors..........      21.5
  Write-down to estimated net realizable value of trucks to
     be sold as a result of new fleet management policy
     (Note 4)...............................................      70.9
  Write-down to estimated net sales proceeds of businesses
     to be sold (Note 18)...................................     122.2
  Abandoned equipment and facilities........................      37.3
  Surplus real estate.......................................      38.2
Provisions for losses on contractual commitments............     120.2
Severance for terminated employees..........................      41.6
Special charge for WM International, primarily costs of
  demobilization in Argentina following the expiration of
  the City of Buenos Aires contract, divestiture or closure
  of underperforming businesses (primarily in Italy and
  Germany) and abandonment of projects (primarily in
  Germany)..................................................     104.3
                                                              --------
          Total.............................................  $1,771.1
                                                              ========

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The following is a summary of asset impairments and unusual items reflected in the Company's consolidated financial statements for the year ended December 31, 1996 (in millions):

Asset impairments:
  Landfills, related primarily to management decisions to
     abandon expansion projects due to political or
     competitive factors, which will result in closure
     earlier than previously expected.......................  $   20.4
  Recycling investments, related primarily to pricing,
     overcapacity and competitive factors...................      47.8
  Other, primarily equipment to be scrapped.................       2.0
  Surplus real estate.......................................       1.5
Write-down to estimated net sales proceeds of businesses to
  be sold...................................................      28.9
Reserves for certain litigation and for reengineering of
  finance and administrative functions......................     154.1
Provisions for losses on contractual commitments............      53.6
Western retirement benefits.................................       4.8
Special charge for WM International:
  Loss on sale of investment in Wessex Water Plc............      47.1
  Revaluation of investments in France, Austria, and Spain
     in contemplation of exiting all or part of these
     markets or forming joint ventures and write-off of a
     hazardous waste disposal facility in Germany with
     volumes adversely affected by regulatory changes.......     169.6
                                                              --------
          Total.............................................  $  529.8
                                                              ========

15. EARNINGS PER SHARE

The following reconciles the number of common shares outstanding at December 31 of each year to the weighted average number of common shares outstanding and the weighted average number of common and dilutive potential common shares outstanding for the purposes of calculating basic and dilutive earnings per common share, respectively (in thousands):

                                                   YEARS ENDED DECEMBER 31,
                                                  ---------------------------
                                                   1998      1997      1996
                                                  -------   -------   -------
Number of common shares outstanding.............  600,351   556,546   541,071
Effect of using weighted average common shares
  outstanding...................................  (16,050)    1,129    (3,802)
                                                  -------   -------   -------
Weighted average number of common shares
  outstanding...................................  584,301   557,675   537,269
Dilutive effect of common stock options and
  warrants......................................       --        --     9,647
                                                  -------   -------   -------
Weighted average number of common and dilutive
  potential common shares outstanding...........  584,301   557,675   546,916
                                                  =======   =======   =======

Diluted earnings per common share for the years ended December 31, 1998, 1997, and 1996 has been calculated excluding the effects of the Company's convertible subordinated notes and debentures as inclusion of such items would be anti-dilutive for these periods.

At December 31, 1998, there were approximately 73,600,000 common shares potentially issuable with respect to stock options, warrants, and convertible debt, which could dilute basic earnings per share in the future.

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16. COMPREHENSIVE INCOME

Comprehensive income is defined as the change in equity of a business enterprise from transactions and other events and circumstances from nonowner sources and includes all changes in equity except those resulting from investments by owners and distributions to owners. The components of accumulated other comprehensive income are as follows for the periods indicated (in thousands):

                                            FOREIGN       MINIMUM      ACCUMULATED
                                           CURRENCY       PENSION         OTHER
                                          TRANSLATION    LIABILITY    COMPREHENSIVE
                                          ADJUSTMENT     ADJUSTMENT      INCOME
                                          -----------    ----------   -------------
Balance, December 31, 1996..............   $ (95,056)     $(18,885)     $(113,941)
  Current-period change.................    (180,744)       11,492       (169,252)
                                           ---------      --------      ---------
Balance, December 31, 1997..............    (275,800)       (7,393)      (283,193)
  Current-period change.................     (77,842)      (59,769)      (137,611)
                                           ---------      --------      ---------
Balance, December 31, 1998..............   $(353,642)     $(67,162)     $(420,804)
                                           =========      ========      =========

17. COMMITMENTS AND CONTINGENCIES

Operating leases -- The Company leases many of its operating and office facilities for various terms. Lease expense aggregated $194,846,000, $189,873,600, and $186,270,000 during 1998, 1997 and 1996, respectively. These amounts include rents under long-term leases, short-term cancelable leases and rents charged as a percentage of revenue, but are exclusive of financing leases capitalized for accounting purposes.

The long-term rental obligations as of December 31, 1998, are due as follows (in thousands):

First year...............................................  $  142,397
Second year..............................................     133,069
Third year...............................................     127,206
Fourth year..............................................     155,341
Fifth year...............................................     104,568
Sixth through tenth years................................     431,114
Eleventh year and thereafter.............................     143,004
                                                           ----------
                                                           $1,236,699
                                                           ==========

Financial instruments -- Letters of credit, performance bonds and other guarantees have been provided by the Company supporting tax-exempt bonds, performance of final landfill closure and post-closure requirements, insurance contracts, and other contracts. Total letters of credit, performance bonds, insurance policies, and other guarantees outstanding at December 31, 1998, aggregated approximately $3,940,719,000. The insurance policies are issued by a wholly-owned insurance company subsidiary, the sole business of which is to issue such policies to customers of the Company and its subsidiaries. Because virtually no claims have been made against these financial instruments in the past, management does not expect these instruments will have a material effect on the Company's consolidated financial statements.

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk, such as bank letters of credit, performance bonds and other guarantees, which are not reflected in the consolidated balance sheets. Such financial instruments are to be valued based on the amount of exposure under the instrument and the likelihood of performance being required. In the Company's experience, virtually no claims have been made against those financial instruments. Management does not expect any material losses to result from these off-balance sheet instruments.

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Environmental matters -- The continuing business in which the Company is engaged is intrinsically connected with the protection of the environment. As such, a significant portion of the Company's operating costs and capital expenditures could be characterized as costs of environmental protection. Such costs may increase in the future as a result of legislation or regulation, however, the Company believes that in general it tends to benefit when environmental regulation increases, which may increase the demand for its services, and that it has the resources and experience to manage environmental risk.

As part of its ongoing operations, the Company provides for estimated final closure and post-closure monitoring costs over the estimated operating life of disposal sites as airspace is consumed. The Company has also established procedures to evaluate potential remedial liabilities at closed sites which it owns or operated or to which it transported, waste including 88 sites listed on the NPL as of December 31, 1998. Where the Company concludes that it is probable that a liability has been incurred, provision is made in the financial statements.

Estimates of the extent of the Company's degree of responsibility for remediation of a particular site and the method and ultimate cost of remediation require a number of assumptions and are inherently difficult, and the ultimate outcome may differ from current estimates. However, the Company believes that its extensive experience in the environmental services industry, as well as its involvement with a large number of sites, provides a reasonable basis for estimating its aggregate liability. As additional information becomes available, estimates are adjusted as necessary. While the Company does not anticipate that any such adjustment would be material to its financial statements, it is reasonably possible that technological, regulatory or enforcement developments, the results of environmental studies, the existence and ability of other potentially responsible third parties to contribute to the settlements of such liabilities, or other factors could necessitate the recording of additional liabilities which could be material.

Litigation -- In November and December 1997, several alleged purchasers of WM Holdings securities (including but not limited to WM Holdings common stock), who allegedly bought their securities between 1996 and 1997, brought 14 purported class action lawsuits against WM Holdings and several of its former officers in the United States District Court for the Northern District of Illinois. Each of these lawsuits asserted that the defendants violated the federal securities laws by issuing allegedly false and misleading statements in 1996 and 1997 about WM Holdings' financial condition and results of operations. Among other things, the plaintiffs alleged that WM Holdings employed accounting practices that were improper and that caused its publicly filed financial statements to be materially false and misleading. The lawsuits demanded, among other relief, unspecified compensatory damages, pre- and post-judgement interest, attorneys' fees, and the costs of conducting the litigation. In January 1998, the 14 putative class actions were consolidated before one judge. On May 29, 1998, the plaintiffs filed a consolidated amended complaint against WM Holdings and four of its former officers. The consolidated amended complaint seeks recovery on behalf of a proposed class of all purchasers of WM Holdings securities between May 29, 1995, and October 30, 1997. The consolidated amended complaint alleges, among other things, that WM Holdings filed false and misleading financial statements beginning in 1991 and continuing through October 1997 and seeks recovery for alleged violations of the federal securities laws between May 1995 and October 1997. In December 1998, the Company announced an agreement to settle the consolidated action against all defendants and the establishment of a settlement fund of $220,000,000 for the class of open market purchasers of WM Holdings equity securities between November 3, 1994, and February 24, 1998. The settlement agreement with the plaintiffs is subject to various conditions, including preliminary approval by the Court, notice to the class and final approval by the Court after a hearing. There can be no assurances that the Court will find the settlement to be fair to the class or that, because members of the class may opt out of the lawsuit, WM Holdings will not be a party to additional lawsuits or claims brought by individuals.

The Company is aware of another action arising out of the same set of facts alleging a cause of action under Illinois state law. Additionally, there are several other actions and claims arising out of the same set of

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facts, including one purported class action brought by business owners who received WM Holdings shares in the sales of their businesses to WM Holdings that alleges breach of contract causes of action on the basis of allegedly false representation and warranties. A purported derivative action has also been filed by an alleged former shareholder of WM Holdings against certain former officers and directors of WM Holdings and nominally against WM Holdings to recover damages caused to WM Holdings as a result of the matter described in this paragraph. It is not possible at this time to predict the impact this litigation may have on WM Holdings or the Company nor is it possible to predict whether any other suits or claims arising out of these matters may be brought in the future. However, it is reasonably possible that the outcome of any present or future litigation may have a material adverse impact on their respective financial condition or results of operations in one or more future periods. WM Holdings intends to defend itself vigorously in the litigation.

The Company is also aware that the Securities and Exchange Commission has commenced a formal investigation with respect to the WM Holdings previously filed financial statements (which were subsequently restated) and related accounting policies, procedures and system of internal controls. The Company intends to cooperate with such investigation. The Company is unable to predict the outcome or impact of this investigation at this time.

On March 12, 1998, a stockholder of WM Holdings filed a purported class action suit in the Chancery Court of the State of Delaware in the New Castle County against WM Holdings and certain of its former directors. The complaint alleges, among other things, that (i) the Merger was the product of unfair dealing and the price paid to members of the purported class for their WM Holdings common stock was unfair and inadequate, (ii) the WM Holdings Merger will prevent members of the purported class from receiving their fair portion of the value of WM Holdings' assets and business and from obtaining the real value of their equity ownership of WM Holdings, (iii) defendants breached their fiduciary duties owed to the members of the purported class by putting their personal interests ahead of the interests of WM Holdings' public stockholders and (iv) the members of the class action will suffer irreparable damage unless the defendants are enjoined from breaching their fiduciary duties. The complaint seeks equitable relief that would rescind the WM Holdings Merger and monetary damages from the defendants for unlawfully gained profits and special benefits. The Company believes the suit to be without merit and intends to contest it vigorously.

In the ordinary course of conducting its business activities, the Company becomes involved in judicial and administrative proceedings involving governmental authorities at the foreign, federal, state and local level, including, in certain instances, proceedings instituted by citizens or local governmental authorities seeking to overturn governmental action where governmental officials or agencies are named as defendants together with the Company or one or more of its subsidiaries, or both. In the majority of the situations where proceedings are commenced by governmental authorities, the matters involved relate to alleged technical violations of licenses or permits pursuant to which the Company operates or is seeking to operate or laws or regulations to which its operations are subject or are the result of different interpretations of the applicable requirements. From time to time, the Company pays fines or penalties in environmental proceedings relating primarily to waste treatment, storage or disposal facilities. The Company believes that these matters will not have a material adverse effect on its results of operations or financial condition. However, the outcome of any particular proceeding cannot be predicted with certainty, and the possibility remains that technological, regulatory or enforcement developments, the results of environmental studies or other factors could materially alter this expectation at any time.

From time to time, the Company and certain of its subsidiaries are named as defendants in personal injury and property damage lawsuits, including purported class actions, on the basis of a Company subsidiary's having owned, operated or transported waste to a disposal facility which is alleged to have contaminated the environment or, in certain cases, conducted environmental remediation activities at sites. Some of such lawsuits may seek to have the Company or its subsidiaries pay the costs of groundwater monitoring and health care examinations of allegedly affected persons for a substantial period of time even where no actual damage is

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proven. While the Company believes it has meritorious defenses to these lawsuits, their ultimate resolution is often substantially uncertain due to the difficulty of determining the cause, extent and impact of alleged contamination (which may have occurred over a long period of time), the potential for successive groups of complainants to emerge, the diversity of the individual plaintiffs' circumstances, and the potential contribution or indemnification obligations of co-defendants or other third parties, among other factors. Accordingly, it is possible such matters could have a material adverse impact on the Company's consolidated financial statements.

The Company has been advised by the U.S. Department of Justice that Laurel Ridge Landfill, Inc., a wholly-owned subsidiary of the Company as a result of the Company's acquisition of United, is a target of a federal investigation relating to alleged violations of the Clean Water Act at the Laurel Ridge Landfill in Kentucky. The investigation relates to a period prior to the Company's acquisition of United in August 1997. The Company is attempting to negotiate a resolution with the government which may include a guilty plea to a criminal misdemeanor, a fine and in-kind services. The Company believes that the ultimate outcome of this matter will not have a material adverse effect on the Company's consolidated financial statements.

In June 1996, an indictment was brought against All-Waste Systems, Inc. ("All-Waste"), an indirect subsidiary of the Company acquired in December 1998 in connection with the Eastern Merger, thirteen other corporations and seven individuals in the Southern District of New York. In September 1997 nineteen of the defendants entered guilty pleas and collectively agreed to pay $17,000,000 in restitution to the IRS and Westchester County, fines and civil forfeitures. All-Waste pled guilty to mail fraud, which arose out of an alleged bid-rigging scheme for the Town of New Windsor, paid an $85,000 fine and was sentenced to a five year probation period. The probation period was terminated upon the closing of the sale of All-Waste to Eastern in June 1998.

In March 1999, the Company was notified that All-Waste and two other indirect subsidiaries acquired in the Eastern Merger as well as a current employee of the Company were suspended from future contracting with any agency in the executive branch of the U.S. Government pending proceedings. The suspension and potential debarment are based on the September 1997 conviction of All-Waste and activities that occurred prior to ownership of the entities by Eastern. The Company is attempting to remove the three entities from the suspension and proposed debarment list. The Company believes that the ultimate outcome of this matter will not have a material adverse effect on the Company's consolidated financial statements.

In February 1999, a San Bernardino County, California grand jury returned an amended felony indictment against the Company, certain of its subsidiaries and their current or former employees, and a County employee. The proceeding is based on events that allegedly occurred prior to the WM Holdings Merger in connection with a WM Holdings landfill development project. The indictment includes allegations that certain of the defendants engaged in conduct involving fraud, wiretapping, theft of a trade secret and manipulation of computer data, and that they engaged in a conspiracy to do so. If convicted, the most serious of the available sanctions against the corporate defendants would include substantial fines and forfeitures. The Company believes that meritorious defenses exist to each of the allegations, and the defendants are vigorously contesting them. The Company believes that the ultimate outcome of this matter will not have a material adverse effect on the Company's consolidated financial statements.

The Company has brought suit against a substantial number of insurance carriers in an action entitled Waste Management, Inc. et al. v. The Admiral Insurance Company, et al. pending in the Superior Court in Hudson County, New Jersey. In this action the Company is seeking a declaratory judgment that environmental liabilities asserted against the Company or its subsidiaries, or that may be asserted in the future, are covered by insurance policies purchased by the Company or its subsidiaries. The Company is also seeking to recover defense costs and other damages incurred as a result of the assertion of environmental liabilities against the Company or its subsidiaries for events occurring over at least the last 25 years at approximately 140 sites and the defendant insurance carriers' denial of coverage of such liabilities. While the

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Company has reached settlements with some of the carriers, the remaining defendants have denied liability to the Company and have asserted various defenses, including that environmental liabilities of the type for which the Company is seeking relief are not risks covered by the insurance policies in question. The remaining defendants are contesting these claims vigorously. Discovery is nearly complete as to the 12 sites in the first phase of the case and discovery is expected to continue for several years as to the remaining sites. Currently, trial dates have not been set. The Company is unable at this time to predict the outcome of this proceeding. No amounts have been recognized in the Company's consolidated financial statements for potential recoveries. See Note 6.

Several purported class action lawsuits and one purported derivative lawsuit seeking injunctive relief and unspecified money damages were filed in the Chancery Court in and for New Castle County, Delaware against the Company, WTI, and individual directors of WTI in connection with the June 20, 1997, proposal by WM Holdings to acquire all of the shares of WTI common stock which WM Holdings did not own. WM Holdings subsequently consummated a merger in which WTI's stockholders received $16.50 in cash per share of WTI's common stock. The lawsuits, which have since been consolidated into a single action, allege, among other things, that the defendants breached fiduciary duties to WTI's minority stockholders because the merger consideration contemplated by the proposal was inadequate and unfair. The Company believes that the defendants' actions in connection with the proposal were in accordance with Delaware law and, on that basis, has agreed to a settlement providing for the dismissal of all of the lawsuits against all defendants. The settlement agreement with the plaintiffs is subject to various conditions, including notice to the putative class and approval by the Court after a hearing.

The Company and certain of its subsidiaries are also currently involved in other civil litigation and governmental proceedings relating to the conduct of their business. While the outcome of any particular lawsuit or governmental investigation cannot be predicted with certainty, the Company believes that these matters will not have a material adverse effect on its consolidated financial statements.

Tax Matters -- During the first quarter of 1995, WMI Sellbergs AB, a Swedish subsidiary, received an assessment from the Swedish Tax Authority of approximately 417,000,000 Krona (approximately $52,000,000) plus interest from the date of the assessment, relating to a transaction completed in 1990. On November 4, 1998, the County Court of the County of Stockholm ruled in favor of WMI Sellbergs AB. However, the Swedish Tax Authority has appealed that decision. The Company believes that all appropriate tax returns and disclosures were properly filed at the time of the transaction and intends to vigorously contest the appeal.

Insurance -- The Company carries a broad range of insurance coverages, which management considers prudent for the protection of the Company's assets and operations. Some of these coverages are subject to varying retentions of risk by the Company. The casualty policies provide for $2,000,000 per occurrence coverage for primary commercial general liability and $1,000,000 per accident coverage primary automobile liability (including coverage for pollution exposure arising out of trucking operations) supported by $400,000,000 in umbrella insurance protection. The property policy provides insurance coverage for all of the Company's real and personal property on a replacement cost basis, including California earthquake perils. The Company also carries $200,000,000 in aircraft liability protection.

The Company maintains workers' compensation insurance in accordance with laws of the various states and countries in which it has employees. The Company also currently has an environmental impairment liability ("EIL") insurance policy for certain of its landfills, transfer stations, and recycling facilities that provides coverage for property damages and/or bodily injuries to third parties caused by off-site pollution emanating from such landfills, transfer stations, or recycling facilities. At December 31, 1998, this policy provides $10,000,000 of coverage per loss with a $20,000,000 aggregate limit.

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WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Through the date of the WM Holdings Merger, certain of WM Holdings' auto, general liability, environmental impairment liability, and workers' compensation risks were self-insured up to $5,000,000 per accident. For such programs, a provision was made in each accounting period for estimated losses, including losses incurred but not reported, and the related reserves are adjusted as additional claim information becomes available. Claim reserves are discounted at 5.5% and 6% at December 31, 1998 and 1997, respectively. The self-insurance reserve included in the accompanying consolidated balance sheets is $277,400,000 and $226,700,000 at December 31, 1998 and 1997, respectively.

To date, the Company has not experienced any difficulty in obtaining insurance. However, if the Company in the future is unable to obtain adequate insurance, or decides to operate without insurance, a partially or completely uninsured claim against the Company, if successful and of sufficient magnitude, could have a material adverse effect on the Company's financial condition, results of operations or cash flows. Additionally, continued availability of casualty and EIL insurance with sufficient limits at acceptable terms is an important aspect of obtaining revenue-producing waste service contracts.

18. ASSETS AND OPERATIONS HELD FOR SALE

Assets Held for Sale

The Company is disposing of certain assets to comply with governmental orders related to the WM Holdings Merger and Eastern Merger and certain other assets as a result of implementing the business strategy related to the WM Holdings Merger. These businesses' results of operations are fully included in revenues and expenses in the accompanying statements of operations, and generated third party operating revenues of approximately $372,596,000 and earnings before interest and taxes of approximately $20,600,000 in 1998. In addition, as a result of the WM Holdings Merger, various real estate became duplicative and surplus, and will be sold. As discussed in Notes 3 and 14, the Company has recorded charges to write down these assets to fair value, less costs to sell. These charges are based on estimates and certain contingencies that could materially differ from actual results and resolution of any such contingencies.

Operations Held for Sale

In the fourth quarter of 1995, the Company approved a plan to sell or otherwise discontinue the process engineering, construction, specialty contracting and similar lines of business of Rust International, Inc. ("Rust"), a subsidiary owned 60% by WM Holdings and 40% by WTI. At December 31, 1996, management also classified as discontinued and planned to sell Rust's domestic environmental and infrastructure engineering and consulting business and Chemical Waste Management, Inc.'s ("CWM") high organic waste fuel blending services business. Also, WTI classified certain of its water process systems and equipment manufacturing businesses (sold in 1996) and its water and wastewater facility operations and privatization business (sold in 1997) as discontinued businesses in 1996. Operating revenues from the discontinued business were $84,800,000 in 1997, and $734,500,000 in 1996. Results of their operations in 1997 were included in the reserve for loss on disposition provided previously, and such results were not material.

In 1997, management reclassified the CWM business back into continuing operations, and classified certain of its sites as operations held for sale. The Rust dispositions were not completed within one year, and accordingly, this business was reclassified back into continuing operations held for sale, at December 31, 1997, though management continued its efforts to market these businesses. Because these business were reclassified to continuing operations, the remaining provision for loss on disposal ($95,000,000 after tax -- $87,000,000 related to Rust and $8,000,000 related to CWM) was reversed in discontinued operations and an impairment loss for Rust of $122,200,000 was recorded in continuing operations in the fourth quarter of 1997. Prior year financial statements were restated. The majority of these assets were sold during the second and third quarters of 1998, respectively, for amounts approximately equal to their recorded net book values. Information

98

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

regarding the businesses presented in the consolidated statement of operations as net assets of continuing operations held for sale is as follows (in thousands):

                                                  YEARS ENDED DECEMBER 31,
                                               ------------------------------
                                                 1998       1997       1996
                                               --------   --------   --------
Operating revenues...........................  $238,108   $350,400   $361,500
Income (loss) before tax after minority
  interest...................................      (151)    (9,930)       315
Net income (loss)............................      (376)    (6,700)       100

The remaining assets and liabilities of these businesses were not material at December 31, 1998. At December 31, 1997, related amounts are included in net assets of continuing operations held for sale (long-term) in the accompanying consolidated balance sheets, and consists of the following (including 73,300,000 of surplus real estate) (in thousands):

Current assets..........................................   $ 118,600
Land, property and equipment and other noncurrent
  assets................................................     238,000
Current liabilities.....................................     (41,000)
Noncurrent liabilities..................................    (161,216)
                                                           ---------
Net assets of continuing operations held for sale.......   $ 154,384
                                                           =========

19. SELECTED QUARTERLY FINANCIAL DATA, UNAUDITED

The following table summarizes the unaudited consolidated quarterly results of operations for 1998 and 1997 (in thousands, except per share amounts):

                                         FIRST        SECOND       THIRD        FOURTH
                                        QUARTER      QUARTER      QUARTER      QUARTER
                                       ----------   ----------   ----------   ----------
1998
  Operating revenues.................  $2,969,433   $3,250,731   $3,244,201   $3,239,104
  Operating income(loss).............     452,248      569,247   (1,545,744)     363,860
  Income (loss) from continuing
     operations......................     181,416      246,770   (1,258,473)      63,485
  Net income (loss)..................     181,416      242,870   (1,258,473)      63,485
  Earnings (loss) from continuing
     operations per common share:
     Basic...........................        0.32         0.43        (2.11)        0.11
     Diluted.........................        0.31         0.42        (2.11)        0.10
  Earnings (loss) per common share:
     Basic...........................        0.32         0.42        (2.11)        0.11
     Diluted.........................        0.31         0.41        (2.11)        0.10
1997
  Operating revenues.................  $2,699,541   $3,031,015   $3,154,383   $3,087,559
  Operating income(loss).............     337,229      471,707      284,836   (1,327,681)
  Income (loss) from continuing
     operations......................     170,419      137,117       56,511   (1,389,885)
  Net income (loss)..................     171,066      144,678       50,422   (1,305,061)
  Earnings (loss) from continuing
     operations per common share:
     Basic...........................        0.31         0.25         0.10        (2.50)
     Diluted.........................        0.30         0.24         0.10        (2.50)
  Earnings (loss) per common share:
     Basic...........................        0.31         0.26         0.09        (2.34)
     Diluted.........................        0.30         0.25         0.09        (2.34)

99

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Basic and diluted earnings per common share for each of the quarters presented above is based on the respective weighted average number of common and dilutive potential common shares outstanding for each period and the sum of the quarters may not necessarily be equal to the full year basic and diluted earnings per common share amounts.

Amounts presented above are restated for certain pooling of interests transactions as discussed in Note 3, and are different from amounts originally reported. The results of operations for 1998 and 1997 include certain charges for merger costs, asset impairments and unusual items, as disclosed in Notes 3 and 14. In 1998, such charges were $7,602,000, $7,361,000, $2,231,116,000, and $425,229,000 in the first, second, third, and fourth quarters, respectively. Such items charged to expense in the first, second, third and fourth quarters of 1997 were $27,660,000, $52,922,000, $158,113,000 and $1,645,198,000, respectively.

20. SUBSEQUENT EVENTS

Financing Transactions

In March 1999 the Company called its 5% convertible subordinated debentures (due March 1, 2006). These debentures were subsequently converted into shares of the Company's stock by the debentures holders. If the subordinated debenture conversion occurred on January 1, 1998, diluted earnings per share would have been increased by $0.01 for 1998.

100

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this Item is set forth under the caption "Election of Directors" in the Company's definitive Proxy Statement for its 1999 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1999 Proxy Statement"), and is incorporated herein by reference. Information concerning the executive officers of the Company is set forth above under "Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is set forth under the caption "Election of Directors -- Executive Compensation" in the 1999 Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is set forth under the caption "Election of Directors -- Beneficial Ownership of Waste Management Common Stock" in the 1999 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is set forth under the caption "Election of Directors -- Certain Relationships and Related Transactions" in the 1999 Proxy Statement and is incorporated herein by reference.

101

PART IV

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

(a)(1) Consolidated Financial Statements:

Report of Independent Public Accountants

Report of Independent Accountants

Consolidated Balance Sheets as of December 31, 1998 and 1997

Consolidated Statements of Operations for the years ended December 31, 1998, 1997, and 1996

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997, and 1996

Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997, and 1996

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

(a)(2) Consolidated Financial Statement Schedules:

Schedule II -- Valuation and Qualifying Accounts

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

(a)(3) Exhibits:

EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
   2.1           -- Agreement and Plan of Merger, dated as of June 22, 1996,
                    by and among the Registrant, Quatro Acquisition Corp. and
                    Sanifill, Inc. [Incorporated by reference to Annex A in
                    the Registrant's Registration Statement on Form S-4, File
                    No. 333-08161].
   2.2           -- Amendment No. 1, dated as of July 18, 1996, to Agreement
                    and Plan of Merger, by and among the Registrant, Quatro
                    Acquisition Corp. and Sanifill, Inc. [Incorporated by
                    reference to Annex A in the Registrant's Registration
                    Statement on Form S-4, File No. 333-08161].
   2.3           -- Agreement and Plan of Merger, dated as of April 13, 1997,
                    by and among the Registrant, Riviera Acquisition
                    Corporation and United Waste Systems, Inc. [Incorporated
                    by reference to Appendix A in the Registrant's
                    Registration Statement on Form S-4, File No. 333-31979].
   2.4           -- Agreement and Plan of Merger, dated March 10, 1998, by
                    and among the Registrant, Dome Merger Subsidiary, Inc.
                    and Waste Management, Inc. [Incorporated by reference to
                    Exhibit 99.1 of the Registrant's Current Report on Form
                    8-K dated March 10, 1998].
   2.5           -- Agreement and Plan of Merger, dated as of February 16,
                    1998, by and among the Registrant, C&S Ohio Corp. and
                    American Waste Services, Inc. [Incorporated by reference
                    to Exhibit 10.70 to American Waste Services' Current
                    Report on Form 8-K, dated February 6, 1998].
   2.6           -- Agreement and Plan of Merger, dated as of August 16,
                    1998, by and among the Registrant, Ocho Acquisition
                    Corporation and Eastern Environmental Services, Inc.
                    [Incorporated by reference to Annex A in the Registrant's
                    Registration Statement on Form S-4, File No 333-64239].

102

EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
   2.7           -- Scheme of Arrangement between Waste Management
                    International plc and the Holders of the Scheme Shares
                    dated September 7, 1998 [Incorporated by reference to the
                    Registrant's Schedule 13E-3 Transaction Statement dated
                    September 7, 1998]
   2.8           -- Agreement and Plan of Merger by and among the Registrant,
                    TransAmerican Acquisition Corp., and TransAmerican Waste
                    Industries, Inc. dated January 1998 [Incorporated by
                    reference to the Registrant's Registration Statement on
                    Form S-4, File No. 333-49253]
   2.9           -- Agreement and Plan of Merger by and among Waste
                    Management, Inc., WMI Merger Sub, Inc. and Wheelabrator
                    Technologies Inc. dated December 8, 1997 [Incorporated by
                    reference to Exhibit A of WTI's Proxy Statement on
                    Schedule 14A filed on March 3, 1998]
   3.1           -- Restated Certificate of Incorporation, as amended
                    [Incorporated by reference to Exhibit 3.2 of the
                    Registrant's current Report on Form 8-K dated July 16,
                    1998].
   3.2           -- Bylaws [Incorporated by reference to Exhibit 3.2 to the
                    Post-Effective Amendment No. 1 to the Registrant's
                    Registration Statement on Form S-4, File No. 33-60103].
   4.1           -- Specimen Stock Certificate.
   4.2           -- Indenture for Subordinated Debt Securities dated February
                    1, 1997, among the Registrant and Texas Commerce Bank
                    National Association, as trustee [Incorporated by
                    reference to Exhibit 4.1 of the Registrant's Current
                    Report on Form 8-K dated February 7, 1997].
   4.3           -- Supplemental Indenture, dated as of August 26, 1997,
                    among the Registrant, United Waste Systems, Inc. and
                    Bankers Trust Company relating to United Waste Systems,
                    Inc.'s 4 1/2% Convertible Subordinated Notes due June 1,
                    2001 [Incorporated by reference to Exhibit 10.2 of the
                    Registrant's Current Report on Form 8-K dated August 26,
                    1997].
   4.4           -- Indenture for Senior Debt Securities dated September 10,
                    1997, among the Registrant and Texas Commerce Bank
                    National Association, as trustee [Incorporated by
                    reference to Exhibit 4.1 of the Registrant's Current
                    Report on Form 8-K dated September 10, 1997].
  10.1           -- 1990 Stock Option Plan [Incorporated by reference to
                    Exhibit 10.1 of the Registrant's Annual report on Form
                    10-K for the year ended December 31, 1990].
  10.2           -- Conformed copy of 1993 Stock Incentive Plan, as amended
                    and restated.
  10.3           -- Conformed copy of 1996 Stock Option Plan for Non-Employee
                    Directors, as amended.
  10.4           -- Envirofil, Inc. 1993 Stock Incentive Plan [Incorporated
                    by reference to Exhibit 4.1 of the Registrant's
                    Registration Statement on Form S-8, File No. 33-84990].
  10.5           -- Western Waste Industries Amended and Restated 1983
                    Incentive Stock Option Plan [Incorporated by reference to
                    Exhibit 99.1 of the Registrant's Registration Statement
                    on Form S-8, File No. 333-02181].
  10.6           -- Western Waste Industries 1983 Non-Qualified Stock Option
                    Plan [Incorporated by reference to Exhibit 99.2 of the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-02181].
  10.7           -- Western Waste Industries 1992 Option Plan [Incorporated
                    by reference to Exhibit 99.3 of the Registrant's
                    Registration Statement on Form S-8, File No. 333-02181].

103

EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
  10.8           -- Sanifill, Inc. 1994 Long-Term Incentive Plan
                    [Incorporated by reference to Exhibit 99.1 of the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-08161].
  10.9           -- Sanifill, Inc. 1989 Stock Option Plan [Incorporated by
                    reference to Exhibit 99.2 of the Registrant's
                    Registration Statement on Form S-8, File No. 333-08161].
  10.10          -- Waste Management, Inc. 1997 Equity Incentive Plan
                    [Incorporated by reference to Exhibit A to Waste
                    Management Holdings' Proxy Statement for its 1997 Annual
                    Meeting of Shareholders].
  10.11          -- WMX Technologies, Inc. 1996 Replacement Stock Option Plan
                    [Incorporated by reference to Exhibit 4.13 to Waste
                    Management Holdings' Registration Statement on Form S-8,
                    File No. 333-01325].
  10.12          -- WMX Technologies, Inc. 1992 Stock Option Plan
                    [Incorporated by reference to Exhibit 10.31 to Waste
                    Management Holdings' Registration Statement on Form S-1,
                    File No. 33-44849].
  10.13          -- WMX Technologies, Inc. 1992 Stock Option Plan for
                    Non-Employee Directors [Incorporated by reference to
                    Exhibit 10.23 to Waste Management Holdings' 1996 Annual
                    Report on Form 10-K].
  10.14          -- Waste Management, Inc. 1982 Stock Option Plan, as amended
                    to March 11, 1988 [Incorporated by reference to Exhibit
                    10.3 to Waste Management Holdings' 1988 Annual Report on
                    Form 10-K].
  10.15          -- Wheelabrator Technologies Inc. 1992 Stock Option Plan
                    [Incorporated by reference to Exhibit 10.45 to the 1991
                    Annual Report on Form 10-K of Wheelabrator Technologies
                    Inc.].
  10.16          -- Wheelabrator Technologies Inc. 1988 Stock Plan for
                    Executive Employees of WTI and its Subsidiaries
                    [Incorporated by reference to Exhibit 28.1 to Amendment
                    No. 1 to the Registration Statement of Wheelabrator
                    Technologies Inc. on Form S-8, File No. 33-31523].
  10.17          -- Chemical Waste Management, Inc. 1992 Stock Option Plan
                    [Incorporated by reference to Exhibit 10.19 to the 1991
                    Annual Report on Form 10-K of Chemical Waste Management,
                    Inc.].
  10.18          -- 1991 Stock Option Plan for Non-Employee Directors of
                    Wheelabrator Technologies, Inc. [Incorporated by
                    reference to Exhibit 19.04 WTI's Quarterly Report for the
                    quarterly period ended June 30, 1991].
  10.19          -- Amendments dated as of September 7, 1990 to the WTI 1988
                    Stock Plan [Incorporated by reference to Exhibit 19.02 to
                    the 1990 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.20          -- Amendment dated as of November 1, 1990 to the WTI 1988
                    Stock Plan [Incorporated by reference to Exhibit 19.04 to
                    the 1990 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.21          -- Amendment dated as of November 1, 1990 to the WTI 1986
                    Stock Plan [Incorporated by reference to Exhibit 19.03 to
                    the 1990 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.22          -- Amendment dated as of December 6, 1991 to the WTI 1986
                    Stock Plan [Incorporated by reference to Exhibit 19.01 to
                    the 1991 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].

104

EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
  10.23          -- Amendment dated as of December 6, 1991 to the WTI 1988
                    Stock Plan [Incorporated by reference to Exhibit 19.02 to
                    the 1991 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.24          -- 1997 Employee Stock Purchase Plan [Incorporated by
                    reference to Exhibit 10.10 of the Registrant's Annual
                    Report on Form 10-K for the year ended December 31,
                    1997].
  10.25          -- 401(k) Restoration Plan [Incorporated by reference to
                    Exhibit 10.11 of the Registrant's Annual Report on Form
                    10-K for the year ended December 31, 1997].
  10.26          -- TransAmerican Waste Industries, Inc. Amended and Restated
                    1990 Stock Incentive Plan [Incorporated by reference to
                    Exhibit 99.1 of the Registrant's Registration Statement
                    on Form S-8, File No. 333-51975].
  10.27          -- TransAmerican Waste Industries, Inc. 1997 Non-Employee
                    Director Stock Option Plan [Incorporated by reference to
                    Exhibit 99.2 of the Registrant's Registration Statement
                    on Form S-8, File No. 333-51975].
  10.28          -- Eastern Environmental Services, Inc. 1997 Stock Option
                    Plan [Incorporated by reference to Exhibit 4.1 to the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-70055].
  10.29          -- Eastern Environmental Services, Inc. Amended and Restated
                    1996 Stock Option Plan [Incorporated by reference to
                    Exhibit 4.2 to the Registrant's Registration Statement on
                    Form S-8, File No. 333-70055].
  10.30          -- Eastern Environmental Services, Inc. 1991 Stock Option
                    Plan [Incorporated by reference to Exhibit 4.3 to the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-70055].
  10.31          -- Form of Employment Agreement by and between the
                    Registrant and its Executive Officers.
  10.32          -- Second Amended and Restated Revolving Credit Agreement,
                    dated as of July 16, 1998 among the Registrant, Bank of
                    America National Trust and Savings Association, Morgan
                    Guaranty Trust Company of New York and other financial
                    institutions [Incorporated by reference to Exhibit 10.3
                    of the Registrant's Quarterly Report on Form 10-Q/A for
                    the quarterly period ended June 30, 1998].
  10.33          -- Loan Agreement dated as of July 16, 1998, among the
                    Registrant, Bank of America National Trust and Savings
                    Association, Chase Bank of Texas, N.A., Deutsche Bank AG,
                    New York Branch, Morgan Guaranty Trust Company of New
                    York and other financial institutions [Incorporated by
                    reference to Exhibit 10.4 of the Registrant's Quarterly
                    Report on Form 10-Q/A for the quarterly period ended June
                    30, 1998].
  12.1           -- Computation of Ratio of Earnings to Fixed Charges.
  21.1           -- Subsidiaries of the Registrant.
  23.1           -- Consent of Arthur Andersen LLP.
  23.2           -- Consent of PricewaterhouseCoopers LLP.
  27             -- Financial Data Schedule.
  27.1           -- Restated Financial Data Schedule.
  27.2           -- Restated Financial Data Schedule.
  27.3           -- Restated Financial Data Schedule.

105


* In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the Registrant's file number under that Act is 1-12154. Waste Management Holdings' file number under the Exchange Act is 1-7327, Chemical Waste Management, Inc.'s file number is 1-9253 and Wheelabrator Technologies Inc.'s file number is 0-14246.

(b) Reports on Form 8-K:

During the last quarter of the period covered by this report, the Company filed a Current Report on Form 8-K dated October 8, 1998 to report the Company's public announcement reaffirming its earnings outlook for the second half of 1998 and for 1999.

106

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.

WASTE MANAGEMENT, INC.

                                            By:      /s/ JOHN E. DRURY
                                              ----------------------------------
                                                        John E. Drury,
                                                   Chief Executive Officer

Date: March 30, 1999

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 date indicated.

                      SIGNATURE                                      TITLE                        DATE
                      ---------                                      -----                        ----
                  /s/ JOHN E. DRURY                    Chief Executive Officer and           March 30, 1999
-----------------------------------------------------    Director (Principal Executive
                    John E. Drury                        Officer)

                 /s/ RODNEY R. PROTO                   President, Chief Operating Officer    March 30, 1999
-----------------------------------------------------    and Director
                   Rodney R. Proto

                /s/ EARL E. DEFRATES                   Executive Vice President and Chief    March 30, 1999
-----------------------------------------------------    Financial Officer (Principal
                  Earl E. DeFrates                       Financial Officer)

                 /s/ BRUCE E. SNYDER                   Vice President and Chief              March 30, 1999
-----------------------------------------------------    Accounting Officer (Principal
                   Bruce E. Snyder                       Accounting Officer)

                /s/ H. JESSE ARNELLE                   Director                              March 30, 1999
-----------------------------------------------------
                  H. Jesse Arnelle

            /s/ PASTORA SAN JUAN CAFFERTY              Director                              March 30, 1999
-----------------------------------------------------
              Pastora San Juan Cafferty

                  /s/ RALPH F. COX                     Director                              March 30, 1999
-----------------------------------------------------
                    Ralph F. Cox

               /s/ RICHARD J. HECKMANN                 Director                              March 30, 1999
-----------------------------------------------------
                 Richard J. Heckmann

                /s/ RODERICK M. HILLS                  Director                              March 30, 1999
-----------------------------------------------------
                  Roderick M. Hills

107

                      SIGNATURE                                      TITLE                        DATE
                      ---------                                      -----                        ----
                /s/ RICHARD D. KINDER                  Director                              March 30, 1999
-----------------------------------------------------
                  Richard D. Kinder

                /s/ ROBERT S. MILLER                   Non-Executive Chairman of the         March 30, 1999
-----------------------------------------------------    Board and Director
                  Robert S. Miller

                /s/ PAUL M. MONTRONE                   Director                              March 30, 1999
-----------------------------------------------------
                  Paul M. Montrone

                  /s/ JOHN C. POPE                     Director                              March 30, 1999
-----------------------------------------------------
                    John C. Pope

               /s/ STEVEN G. ROTHMEIER                 Director                              March 30, 1999
-----------------------------------------------------
                 Steven G. Rothmeier

               /s/ RALPH V. WHITWORTH                  Director                              March 30, 1999
-----------------------------------------------------
                 Ralph V. Whitworth

                 /s/ JEROME B. YORK                    Director                              March 30, 1999
-----------------------------------------------------
                   Jerome B. York

108

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

We have audited in accordance with generally accepted auditing standards, the financial statements of Waste Management, Inc. and Subsidiaries included in this Annual Report on Form 10-K and have issued our report thereon dated February 25, 1999, in which we expressed an unqualified opinion based upon our audits and the report of other auditors. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. Schedule II has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

Arthur Andersen LLP

Houston, Texas
February 25, 1999

S-1

WASTE MANAGEMENT, INC.

CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

(IN THOUSANDS)

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                                                                             ACCOUNTS                 EFFECT OF
                                                     BALANCE    CHARGED    WRITTEN OFF/                FOREIGN     BALANCE
                                                    BEGINNING      TO         USE OF                  CURRENCY      END OF
                                                     OF YEAR     INCOME      RESERVE      OTHER(A)   TRANSLATION     YEAR
                                                    ---------   --------   ------------   --------   -----------   --------
1996 -- Reserve for doubtful accounts(B)(C).......  $ 84,615    $ 60,505    $ (74,507)     $6,294      $  (245)    $ 76,662
1997 -- Reserve for doubtful accounts(B)(C).......    76,662      69,592      (56,586)      7,336       (2,605       94,399
1998 -- Reserve for doubtful accounts(B)(C).......    94,399      70,727      (51,657)      4,164        1,284      118,917
1996 -- Merger and restructuring accruals(D)......    28,936     106,600      (65,693)         --           --       69,843
1997 -- Merger and restructuring accruals(D)......    69,843     160,528     (109,039)         --           --      121,332
1998 -- Merger and restructuring accruals(D)......   121,332     675,200     (536,401)         --        1,106      261,237


(A) Reserves for doubtful accounts of business combinations accounted for as purchases.

(B) Includes reserves for doubtful long-term notes receivable.

(C) Excludes discontinued operations.

(D) Accruals are included in accrued liabilities and other liabilities. These accruals represent transaction or deal costs, employee severance, separation and transitional costs and restructuring charges.

S-2

INDEX TO EXHIBITS

EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
   2.1           -- Agreement and Plan of Merger, dated as of June 22, 1996,
                    by and among the Registrant, Quatro Acquisition Corp. and
                    Sanifill, Inc. [Incorporated by reference to Annex A in
                    the Registrant's Registration Statement on Form S-4, File
                    No. 333-08161].
   2.2           -- Amendment No. 1, dated as of July 18, 1996, to Agreement
                    and Plan of Merger, by and among the Registrant, Quatro
                    Acquisition Corp. and Sanifill, Inc. [Incorporated by
                    reference to Annex A in the Registrant's Registration
                    Statement on Form S-4, File No. 333-08161].
   2.3           -- Agreement and Plan of Merger, dated as of April 13, 1997,
                    by and among the Registrant, Riviera Acquisition
                    Corporation and United Waste Systems, Inc. [Incorporated
                    by reference to Appendix A in the Registrant's
                    Registration Statement on Form S-4, File No. 333-31979].
   2.4           -- Agreement and Plan of Merger, dated March 10, 1998, by
                    and among the Registrant, Dome Merger Subsidiary, Inc.
                    and Waste Management, Inc. [Incorporated by reference to
                    Exhibit 99.1 of the Registrant's Current Report on Form
                    8-K dated March 10, 1998].
   2.5           -- Agreement and Plan of Merger, dated as of February 16,
                    1998, by and among the Registrant, C&S Ohio Corp. and
                    American Waste Services, Inc. [Incorporated by reference
                    to Exhibit 10.70 to American Waste Services' Current
                    Report on Form 8-K, dated February 6, 1998].
   2.6           -- Agreement and Plan of Merger, dated as of August 16,
                    1998, by and among the Registrant, Ocho Acquisition
                    Corporation and Eastern Environmental Services, Inc.
                    [Incorporated by reference to Annex A in the Registrant's
                    Registration Statement on Form S-4, File No 333-64239].
   2.7           -- Scheme of Arrangement between Waste Management
                    International plc and the Holders of the Scheme Shares
                    dated September 7, 1998 [Incorporated by reference to the
                    Registrant's Schedule 13E-3 Transaction Statement dated
                    September 7, 1998]
   2.8           -- Agreement and Plan of Merger by and among the Registrant,
                    TransAmerican Acquisition Corp., and TransAmerican Waste
                    Industries, Inc. dated January 1998 [Incorporated by
                    reference to the Registrant's Registration Statement on
                    Form S-4, File No. 333-49253]
   2.9           -- Agreement and Plan of Merger by and among Waste
                    Management, Inc., WMI Merger Sub, Inc. and Wheelabrator
                    Technologies Inc. dated December 8, 1997 [Incorporated by
                    reference to Exhibit A of WTI's Proxy Statement on
                    Schedule 14A filed on March 3, 1998]
   3.1           -- Restated Certificate of Incorporation, as amended
                    [Incorporated by reference to Exhibit 3.2 of the
                    Registrant's current Report on Form 8-K dated July 16,
                    1998].
   3.2           -- Bylaws [Incorporated by reference to Exhibit 3.2 to the
                    Post-Effective Amendment No. 1 to the Registrant's
                    Registration Statement on Form S-4, File No. 33-60103].
   4.1           -- Specimen Stock Certificate.
   4.2           -- Indenture for Subordinated Debt Securities dated February
                    1, 1997, among the Registrant and Texas Commerce Bank
                    National Association, as trustee [Incorporated by
                    reference to Exhibit 4.1 of the Registrant's Current
                    Report on Form 8-K dated February 7, 1997].


EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
   4.3           -- Supplemental Indenture, dated as of August 26, 1997,
                    among the Registrant, United Waste Systems, Inc. and
                    Bankers Trust Company relating to United Waste Systems,
                    Inc.'s 4 1/2% Convertible Subordinated Notes due June 1,
                    2001 [Incorporated by reference to Exhibit 10.2 of the
                    Registrant's Current Report on Form 8-K dated August 26,
                    1997].
   4.4           -- Indenture for Senior Debt Securities dated September 10,
                    1997, among the Registrant and Texas Commerce Bank
                    National Association, as trustee [Incorporated by
                    reference to Exhibit 4.1 of the Registrant's Current
                    Report on Form 8-K dated September 10, 1997].
  10.1           -- 1990 Stock Option Plan [Incorporated by reference to
                    Exhibit 10.1 of the Registrant's Annual report on Form
                    10-K for the year ended December 31, 1990].
  10.2           -- Conformed copy of 1993 Stock Incentive Plan, as amended
                    and restated.
  10.3           -- Conformed copy of 1996 Stock Option Plan for Non-Employee
                    Directors, as amended.
  10.4           -- Envirofil, Inc. 1993 Stock Incentive Plan [Incorporated
                    by reference to Exhibit 4.1 of the Registrant's
                    Registration Statement on form S-8, File No. 33-84990.
  10.5           -- Western Waste Industries Amended and Restated 1983
                    Incentive Stock Option Plan [Incorporated by reference to
                    Exhibit 99.1 of the Registrant's Registration Statement
                    on Form S-8, File No. 333-02181].
  10.6           -- Western Waste Industries 1983 Non-Qualified Stock Option
                    Plan [Incorporated by reference to Exhibit 99.2 of the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-02181].
  10.7           -- Western Waste Industries 1992 Option Plan [Incorporated
                    by reference to Exhibit 99.3 of the Registrant's
                    Registration Statement on Form S-8, File No. 333-02181].
  10.8           -- Sanifill, Inc. 1994 Long-Term Incentive Plan
                    [Incorporated by reference to Exhibit 99.1 of the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-08161].
  10.9           -- Sanifill, Inc. 1989 Stock Option Plan [Incorporated by
                    reference to Exhibit 99.2 of the Registrant's
                    Registration Statement on Form S-8, File No. 333-08161].
  10.10          -- Waste Management, Inc. 1997 Equity Incentive Plan
                    [Incorporated by reference to Exhibit A to Waste
                    Management Holdings' Proxy Statement for its 1997 Annual
                    Meeting of Shareholders].
  10.11          -- WMX Technologies, Inc. 1996 Replacement Stock Option Plan
                    [Incorporated by reference to Exhibit 4.13 to Waste
                    Management Holdings' Registration Statement on Form S-8,
                    File No. 333-01325].
  10.12          -- WMX Technologies, Inc. 1992 Stock Option Plan
                    [Incorporated by reference to Exhibit 10.31 to Waste
                    Management Holdings' Registration Statement on Form S-1,
                    File No. 33-44849].
  10.13          -- WMX Technologies, Inc. 1992 Stock Option Plan for
                    Non-Employee Directors [Incorporated by reference to
                    Exhibit 10.23 to Waste Management Holdings' 1996 Annual
                    Report on Form 10-K].
  10.14          -- Waste Management, Inc. 1982 Stock Option Plan, as amended
                    to March 11, 1988 [Incorporated by reference to Exhibit
                    10.3 to Waste Management Holdings' 1988 Annual Report on
                    Form 10-K].


EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
  10.15          -- Wheelabrator Technologies Inc. 1992 Stock Option Plan
                    [Incorporated by reference to Exhibit 10.45 to the 1991
                    Annual Report on Form 10-K of Wheelabrator Technologies
                    Inc.].
  10.16          -- Wheelabrator Technologies Inc. 1988 Stock Plan for
                    Executive Employees of WTI and its Subsidiaries
                    [Incorporated by reference to Exhibit 28.1 to Amendment
                    No. 1 to the Registration Statement of Wheelabrator
                    Technologies Inc. on Form S-8, File No. 33-31523].
  10.17          -- Chemical Waste Management, Inc. 1992 Stock Option Plan
                    [Incorporated by reference to Exhibit 10.19 to the 1991
                    Annual Report on Form 10-K of Chemical Waste Management,
                    Inc.].
  10.18          -- 1991 Stock Option Plan for Non-Employee Directors of
                    Wheelabrator Technologies, Inc. [Incorporated by
                    reference to Exhibit 19.04 WTI's Quarterly Report for the
                    quarterly period ended June 30, 1991].
  10.19          -- Amendments dated as of September 7, 1990 to the WTI 1988
                    Stock Plan [Incorporated by reference to Exhibit 19.02 to
                    the 1990 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.20          -- Amendment dated as of November 1, 1990 to the WTI 1988
                    Stock Plan [Incorporated by reference to Exhibit 19.04 to
                    the 1990 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.21          -- Amendment dated as of November 1, 1990 to the WTI 1986
                    Stock Plan [Incorporated by reference to Exhibit 19.03 to
                    the 1990 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.22          -- Amendment dated as of December 6, 1991 to the WTI 1986
                    Stock Plan [Incorporated by reference to Exhibit 19.01 to
                    the 1991 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.23          -- Amendment dated as of December 6, 1991 to the WTI 1988
                    Stock Plan [Incorporated by reference to Exhibit 19.02 to
                    the 1991 Annual Report on Form 10-K of Wheelabrator
                    Technologies Inc.].
  10.24          -- 1997 Employee Stock Purchase Plan [Incorporated by
                    reference to Exhibit 10.10 of the Registrant's Annual
                    Report on Form 10-K for the year ended December 31,
                    1997].
  10.25          -- 401(k) Restoration Plan [Incorporated by reference to
                    Exhibit 10.11 of the Registrant's Annual Report on Form
                    10-K for the year ended December 31, 1997].
  10.26          -- TransAmerican Waste Industries, Inc. Amended and Restated
                    1990 Stock Incentive Plan [Incorporated by reference to
                    Exhibit 99.1 of the Registrant's Registration Statement
                    on Form S-8, File No. 333-51975].
  10.27          -- TransAmerican Waste Industries, Inc. 1997 Non-Employee
                    Director Stock Option Plan [Incorporated by reference to
                    Exhibit 99.2 of the Registrant's Registration Statement
                    on Form S-8, File No. 333-51975].
  10.28          -- Eastern Environmental Services, Inc. 1997 Stock Option
                    Plan [Incorporated by reference to Exhibit 4.1 to the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-70055].
  10.29          -- Eastern Environmental Services, Inc. Amended and Restated
                    1996 Stock Option Plan [Incorporated by reference to
                    Exhibit 4.2 to the Registrant's Registration Statement on
                    Form S-8, File No. 333-70055].


EXHIBIT
  NO.*                                   DESCRIPTION
-------                                  -----------
  10.30          -- Eastern Environmental Services, Inc. 1991 Stock Option
                    Plan [Incorporated by reference to Exhibit 4.3 to the
                    Registrant's Registration Statement on Form S-8, File No.
                    333-70055].
  10.31          -- Form of Employment Agreement by and between the
                    Registrant and its Executive Officers.
  10.32          -- Second Amended and Restated Revolving Credit Agreement,
                    dated as of July 16, 1998 among the Registrant, Bank of
                    America National Trust and Savings Association, Morgan
                    Guaranty Trust Company of New York and other financial
                    institutions [Incorporated by reference to Exhibit 10.3
                    of the Registrant's Quarterly Report on Form 10-Q/A for
                    the quarterly period ended June 30, 1998].
  10.33          -- Loan Agreement dated as of July 16, 1998, among the
                    Registrant, Bank of America National Trust and Savings
                    Association, Chase Bank of Texas, N.A., Deutsche Bank AG,
                    New York Branch, Morgan Guaranty Trust Company of New
                    York and other financial institutions [Incorporated by
                    reference to Exhibit 10.4 of the Registrant's Quarterly
                    Report on Form 10-Q/A for the quarterly period ended June
                    30, 1998].
  12.1           -- Computation of Ratio of Earnings to Fixed Charges.
  21.1           -- Subsidiaries of the Registrant.
  23.1           -- Consent of Arthur Andersen LLP.
  23.2           -- Consent of PricewaterhouseCoopers LLP.
  27             -- Financial Data Schedule.
  27.1           -- Restated Financial Data Schedule.
  27.2           -- Restated Financial Data Schedule.
  27.3           -- Restated Financial Data Schedule.


* In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the Registrant's file number under that Act is 1-12154. Waste Management Holdings' file number under the Exchange Act is 1-7327, Chemical Waste Management, Inc.'s file number is 1-9253 and

Wheelabrator Technologies Inc.'s file number is 0-14246.


EXHIBIT 4.1

057591
                       INCORPORATED UNDER THE LAWS                                                           COMMON STOCK
                        OF THE STATE OF DELAWARE                                                        PAR VALUE $.01 PER SHARE


       NUMBER
  WM                                                        [GRAPHIC]                                                 SHARES


                                                                                                CUSIP 94106L 10 9
             THIS CERTIFICATE IS TRANSFERABLE IN
                 CHICAGO, IL OR NEW YORK, NY                                                    SEE REVERSE FOR CERTAIN DEFINITIONS

                                                       WASTE MANAGEMENT, INC.



                       THIS CERTIFIES THAT





                       IS THE OWNER OF


                                        FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF

                                                       CERTIFICATE OF STOCK

Waste Management, Inc. ("Corporation") transferable on the books of the Corporation by the holder hereof in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed.  This Certificate and the shares represented hereby are
issued and shall be subject to all of the provisions of the Certificate of Incorporation of the Corporation and of the amendments
therein, to all of which the holder, by acceptance hereof, assents.  This Certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.

        Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

                                                                                                                   [SEAL]
                                                                                    Dated:


             /s/ [ILLEGIBLE]
             CHIEF EXECUTIVE OFFICER                                                COUNTERSIGNED AND REGISTERED:
                                                                                          HARRIS TRUST AND SAVINGS BANK
            /s/ [ILLEGIBLE]                                                                                      TRANSFER AGENT
            SECRETARY                                                                                             AND REGISTRAR

                                                                                    BY   /s/ [ILLEGIBLE]
                                            [WASTE MANAGEMENT LOGO]                      AUTHORIZED SIGNATURE


[WASTE MANAGEMENT, INC. LOGO]

The Corporation will furnish, without charge to each stockholder who so requests, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such requests may be made to the Corporation's Secretary at the principal office of the Corporation

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

TEN COM -- as tenants in common                 UNIF GIFT MIN ACT -- _____________ Custodian ___________
TEN ENT -- as tenants by the entireties                                 (Cust)                  (Minor)
JT TEN  -- as joint tenants with right of                            under Uniform Gifts to Minors
           survivorship and not as tenants                           Act __________________
           in common                                                           (State)

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

For value received, __________________ hereby sell, assign and transfer unto:

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]


(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)


________________________________________________________________________ Shares of the Stock represented by the within Certificate and do hereby irrevocably constitute and appoint ___________________________________________, Attorney, to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises.

Dated _______________________________

X ___________________________________________
(SIGNATURE)

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

X ___________________________________________
(SIGNATURE)


THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.

SIGNATURE(S) GUARANTEED BY:



EXHIBIT 10.2

WASTE MANAGEMENT, INC.

1993 STOCK INCENTIVE PLAN

(AS AMENDED AND RESTATED)

JULY 6, 1998


TABLE OF CONTENTS

                                                                                          PAGE
ARTICLE I.  GENERAL.........................................................................1
         Section 1.1.   Purpose.............................................................1
         Section 1.2.   Administration......................................................1
         Section 1.3.   Eligibility for Participation.......................................2
         Section 1.4.   Types of Awards Under Plan..........................................2
         Section 1.5.   Aggregate Limitation on Awards......................................2
         Section 1.6.   Effective Date and Term of Plan.....................................3

ARTICLE II.  STOCK OPTIONS..................................................................4
         Section 2.1.   Award of Stock Options..............................................4
         Section 2.2.   Stock Option Agreements.............................................4
         Section 2.3.   Stock Option Price..................................................4
         Section 2.4.   Term and Exercise...................................................4
         Section 2.5.   Manner of Payment...................................................4
         Section 2.6.   Delivery of Shares..................................................5
         Section 2.7.   Death, Retirement and Termination of Employment of Optionee.........5
         Section 2.8.   Tax Election........................................................5
         Section 2.9.   Effect of Exercise..................................................6

ARTICLE III.  INCENTIVE STOCK OPTIONS.......................................................6
         Section 3.1.   Award of Incentive Stock Options....................................6
         Section 3.2.   Incentive Stock Option Agreements...................................6
         Section 3.3.   Incentive Stock Option Price........................................6
         Section 3.4.   Term and Exercise...................................................6
         Section 3.5.   Maximum Amount of Incentive Stock Option Grant......................7
         Section 3.6.   Death of Optionee...................................................7
         Section 3.7.   Retirement or Disability............................................7
         Section 3.8.   Termination for Other Reasons.......................................7
         Section 3.9.   Applicability of Stock Options Sections.............................7

ARTICLE IV.  RELOAD OPTIONS.................................................................8
         Section 4.1.   Authorization of Reload Options.....................................8
         Section 4.2.   Reload Option Amendment.............................................8
         Section 4.3.   Reload Option Price.................................................8
         Section 4.4.   Term and Exercise...................................................8
         Section 4.5.   Termination of Employment...........................................8
         Section 4.6.   Applicability of Stock Options Sections.............................9

ARTICLE V.  ALTERNATE APPRECIATION RIGHTS...................................................9
         Section 5.1.   Award of Alternate Appreciation Rights..............................9
         Section 5.2.   Alternate Appreciation Rights Agreement.............................9

i

         Section 5.3.   Exercise............................................................9
         Section 5.4.   Amount of Payment...................................................9
         Section 5.5.   Form of Payment.....................................................9
         Section 5.6.   Effect of Exercise..................................................10
         Section 5.7.   Termination of Employment, Retirement, Death or Disability..........10

ARTICLE VI.  LIMITED RIGHTS.................................................................10
         Section 6.1.   Award of Limited Rights.............................................10
         Section 6.2.   Limited Rights Agreement............................................10
         Section 6.3.   Exercise Period.....................................................10
         Section 6.4.   Amount of Payment...................................................10
         Section 6.5.   Form of Payment.....................................................11
         Section 6.6.   Effect of Exercise..................................................11
         Section 6.7.   Retirement or Disability............................................11
         Section 6.8.   Death of Optionee or Termination for Other Reasons..................11
         Section 6.9.   Termination Related to a Change in Control..........................11

ARTICLE VII.  SUBSTITUTION AWARDS...........................................................12

ARTICLE VIII.  BONUS STOCK AWARDS...........................................................12
         Section 8.1.   Award of Bonus Stock................................................12
         Section 8.2.   Stock Bonus Agreements..............................................12

ARTICLE IX.  MISCELLANEOUS..................................................................12
         Section 9.1.   General Restriction.................................................12
         Section 9.2.   Non-Assignability...................................................13
         Section 9.3.   Withholding Taxes...................................................13
         Section 9.4.   Right to Terminate Employment.......................................13
         Section 9.5.   Non-Uniform Determination...........................................13
         Section 9.6.   Rights as a Shareholder.............................................13
         Section 9.7.   Definitions.........................................................14
         Section 9.8.   Leaves of Absence...................................................15
         Section 9.9.   Newly Eligible Employees............................................15
         Section 9.10.  Adjustments.........................................................15
         Section 9.11.  Changes in the Company's Capital Structure..........................16
         Section 9.12.  Change in Control...................................................17
         Section 9.13.  Amendment of the Plan...............................................18
         Section 9.14.  Effective Date......................................................18

ii

WASTE MANAGEMENT, INC.

1993 STOCK INCENTIVE PLAN

ARTICLE I. GENERAL

Section 1.1. Purpose. The purposes of this Stock Incentive Plan (the "Plan") are to: (1) closely associate the interests of the employees and consultants of Waste Management, Inc. and its Subsidiaries and Affiliates (collectively referred to as the "Company") with the shareholders to generate an increased incentive to contribute to the Company's future success and prosperity, thus enhancing the value of the Company for the benefit of its stockholders; (2) provide employees and consultants with a proprietary ownership interest in the Company commensurate with Company performance, as reflected in increased shareholder value; (3) maintain competitive compensation levels thereby attracting and retaining highly competent and talented employees and consultants; and (4) provide an incentive to employees and consultants for continuous employment with or services to the Company.

Section 1.2. Administration.

(a) The Plan shall be administered by a committee of non-employee directors appointed by the Board of Directors of the Company (the "Committee"), as constituted from time to time.

(b) The Committee shall have the authority, in its sole discretion and from time to time to:

(i) designate the employees and consultants or classes of employees of and consultants to the Company eligible to participate in the Plan;

(ii) grant awards ("Awards") provided in the Plan in such form and amount as the Committee shall determine;

(iii) impose such limitations, restrictions, and conditions, not inconsistent with this Plan, upon any such Award as the Committee shall deem appropriate; and

(iv) interpret the Plan and any agreement, instrument, or other document executed in connection with the Plan; adopt, amend, and rescind rules and regulations relating to the Plan; and make all other determinations and take all other action necessary or advisable for the implementation and administration of the Plan.

1

(c) Decisions and determinations of the Committee on all matters relating to the Plan shall be in its sole discretion and shall be final, conclusive, and binding upon all persons, including the Company, any participant, any stockholder of the Company, and any employee or consultant. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Award thereunder.

Section 1.3. Eligibility for Participation. Participants in the Plan ("Participants") shall be selected by the Committee from the employees of and consultants to the Company who are responsible for or contribute to the management, growth, success and, profitability of the Company. In making this selection and in determining the form and amount of Awards, the Committee shall consider any factors deemed relevant, including the individual's functions, responsibilities, value of services to the Company, and past and potential contributions to the Company's profitability and growth.

Section 1.4 Types of Awards Under Plan. Awards under the Plan may be in the form of any one or more of the following:

(i) Stock Options, as described in Article II;

(ii) Incentive Stock Options, as described in Article III;

(iii) Reload Options, as described in Article IV;

(iv) Alternate Appreciation Rights, as described in Article V;

(v) Limited Rights, as described in Article VI;

(vi) Alternate Stock Awards, as described in Article VII; and/or

(vii) Stock Bonus Awards, as described in Article VIII. Awards under the Plan shall be evidenced by an Award Agreement between the Company and the recipient of the Award, in form and substance satisfactory to the Committee, and not inconsistent with this Plan.

Section 1.5. Aggregate Limitation on Awards.

(a) Shares of stock which may be issued under the Plan shall be authorized and unissued or treasury shares of Common Stock $.01 par value, of the Company ("Common Stock"). Subject to the further provisions of this Section 1.5 and Section 9.10, the maximum number of shares of Common Stock which may be issued under the Plan shall be 26,500,000.

2

(b) For purposes of calculating the maximum number of shares of Common Stock that may be issued under the Plan:

(i) all the shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when cash is used as full payment for shares issued upon exercise of a Stock Option, Incentive Stock Option, or Reload Option;

(ii) only the shares issued (including the shares, if any, withheld for tax withholding requirements) as a result of an exercise of Alternate Appreciation Rights shall be counted; and

(iii) only the net shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when shares of Common Stock or another Award under the Plan are used or withheld as full or partial payment for shares issued upon exercise of a Stock Option, Incentive Stock Option, or Reload Option;

provided, however, in all events the maximum number of shares of Common Stock that may be issued pursuant to Incentive Stock Options is 26,500,000.

(c) In addition to shares of Common Stock actually issued pursuant to the exercise of Stock Options, Incentive Stock Options, Reload Options, or Alternate Appreciation Rights, there shall be deemed to have been issued a number of shares equal to the number of shares of Common Stock in respect of which Limited Rights (as described in Article VI) shall have been exercised.

(d) Shares tendered by a Participant or withheld as payment for shares issued upon exercise of a Stock Option, Incentive Stock Option, or Reload Option shall be available for issuance under the Plan. Any shares of Common Stock subject to a Stock Option, Incentive Stock Option, or Reload Option that for any reason is terminated unexercised or expires shall again be available for issuance under the Plan, but shares subject to a Stock Option, Incentive Stock Option, or Reload Option that are not issued as a result of the exercise of Limited Rights shall not again be available for issuance under the Plan.

(e) The maximum number of shares of Common Stock with respect to which any Participant may receive Awards in any calendar year is 1,500,000.

Section 1.6. Effective Date and Term of Plan.

(a) The Plan became effective on the date it was approved by the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the 1993 Annual Meeting of shareholders of the Company.

3

(b) No Awards shall be made under the Plan after the tenth anniversary of the effective date of this Plan; provided, however, that the Plan and all Awards made under the Plan prior to such date shall remain in effect until such Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.

ARTICLE II. STOCK OPTIONS

Section 2.1. Award of Stock Options. The Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant in the Plan one or more options to purchase the number of shares of Common Stock ("Stock Options") allotted by the Committee. The date a Stock Option is granted shall mean the date selected by the Committee as of which the Committee allots a specific number of shares to a Participant pursuant to the Plan.

Section 2.2. Stock Option Agreements. The grant of a Stock Option shall be evidenced by a written Award Agreement, executed by the Company and the holder of the Stock Option (the "Optionee"), stating the number of shares of Common Stock subject to the Stock Option evidenced thereby, and in such form as the Committee may from time to time determine.

Section 2.3. Stock Option Price. The Option Price per share of Common Stock deliverable upon the exercise of a Stock Option shall be an amount selected by the Committee and shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Stock Option is granted.

Section 2.4. Term and Exercise. A Stock Option shall not be exercisable prior to six months from the date of its grant unless a shorter period is provided by the Committee or by another Section of this Plan, and may be exercised during the period established by the Committee, but not after ten years from the date of grant thereof (the "Option Term"). No Stock Option shall be exercisable after the expiration of its Option Term.

Section 2.5. Manner of Payment. Each Award Agreement providing for Stock Options shall set forth the procedure governing the exercise of the Stock Option granted thereunder, and shall provide that, upon such exercise in respect of any shares of Common Stock subject thereto, the Optionee shall pay to the Company, in full, the Option Price for such shares with cash, which may be pursuant to a "cashless-broker" exercise pursuant to procedures established by the Committee from time to time, or with previously owned Common Stock, or at the discretion of the Committee, in whole or in part with, the surrender of another Award under the Plan, the withholding of shares of Common Stock issuable upon exercise of such Stock Option, other property, or any combination thereof (each based on the Fair Market Value of such Common Stock, Award or other property on the date the Stock Option is exercised as determined by the Committee).

4

Section 2.6. Delivery of Shares. As soon as practicable after receipt of payment, the Committee shall deliver to the Optionee a certificate or certificates for such shares of Common Stock. The Optionee shall become a shareholder of the Company with respect to Common Stock represented by share certificates so issued and as such shall be fully entitled to receive dividends, to vote and to exercise all other rights of a shareholder.

Section 2.7. Death, Retirement and Termination of Employment of Optionee. Unless otherwise provided in an Award Agreement or otherwise agreed to by the Committee:

(a) Upon the death of the Optionee, any rights to the extent exercisable by the Optionee on the date of termination of employment or consulting, as the case may be, may be exercised by the Optionee's estate, or by a person who acquires the right to exercise such Stock Option by bequest or inheritance or by reason of the death of the Optionee, provided that such exercise occurs within both the remaining effective term of the Stock Option and one year after the Optionee's death. The provisions of this Section shall apply notwithstanding the fact that the Optionee's employment may have terminated prior to death.

(b) Upon termination of the Optionee's employment by reason of retirement or permanent disability (as each is determined by the Committee), the Optionee may, within 36 months from the date of termination, exercise any Stock Options to the extent such Stock Options are exercisable on the date of such termination of employment.

(c) Except as provided in Subsections (a) and (b) of this Section 2.7, or except as otherwise determined by the Committee, all Stock Options shall terminate three months after the date of the termination of the Optionee's employment or consulting, as the case may be, and shall be exercisable during such period only to the extent exercisable on the date of termination of employment or consulting.

Section 2.8. Tax Election. Recipients of Stock Options who are directors or executive officers of the Company or who own more than 10% of the Common Stock of the Company ("Section 16(a) Option Holders") at the time of exercise of a Stock Option may elect, in lieu of paying to the Company an amount required to be withheld under applicable tax laws in connection with the exercise of a Stock Option in whole or in part, to have the Company withhold shares of Common Stock having a fair market value equal to the amount required to be withheld. Such election may not be made prior to six months following the grant of the Stock Option, except in the event of a Section 16(a) Option Holders's death or disability. The election may be made at the time the Stock Option is exercised by notifying the Company of the election, specifying the amount of such withholding and the date on which the number of shares to be withheld is to be determined ("Tax Date"), which shall be either (i) the date the Stock Option is exercised or (ii) a date six months after the Stock Option was granted, if later. The number of shares of Common Stock to be withheld to satisfy the tax obligation shall be the amount

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of such tax liability divided by the fair market value of the Common Stock on the Tax Date (or if not a business day, on the next closest business day). If the Tax Date is not the exercise date, the Company may issue the full number of shares of Common Stock to which the Section 16(a) Option Holders is entitled, and such option holder shall be obligated to tender to the Company on the Tax Date a number of such shares necessary to satisfy the withholding obligation. Certificates representing such shares of Common Stock shall bear a legend describing such Section 16(a) Option Holders obligation hereunder.

Section 2.9. Effect of Exercise. The exercise of any Stock Option shall cancel that number of related Alternate Appreciation Rights and/or Limited Rights, if any, that is equal to the number of shares of Common Stock purchased pursuant to said option unless otherwise agreed by the Committee in an Award Agreement or otherwise.

ARTICLE III. INCENTIVE STOCK OPTIONS

Section 3.1. Award of Incentive Stock Options. The Committee may, from time to time and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, grant to any employee of The Company or a Subsidiary one or more "incentive stock options" (intended to qualify as such under the provisions of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") ("Incentive Stock Options") to purchase the number of shares of Common Stock allotted by the Committee. The date an Incentive Stock Option is granted shall mean the date selected by the Committee as of which the Committee allots a specific number of shares to a participant pursuant to the Plan.

Section 3.2. Incentive Stock Option Agreements. The grant of an Incentive Stock Option shall be evidenced by a written Award Agreement, executed by the Company and the holder of an Incentive Stock Option (the "Optionee"), stating the number of shares of Common Stock subject to the Incentive Stock Option evidenced thereby, and in such form as the Committee may from time to time determine.

Section 3.3. Incentive Stock Option Price. The Option Price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option shall be at least 100% of the Fair Market Value of a share of Common Stock on the date the Incentive Stock Option is granted; provided, however, the Option Price per share of Common Stock deliverable upon the exercise of an Incentive Stock Option granted to any owner of 10% or more of the total combined voting power of all classes of stock of the Company and its subsidiaries shall be at least 110% of the fair market value of a share of Common Stock on the date the Incentive Stock Option is granted.

Section 3.4. Term and Exercise. Each Incentive Stock Option shall not be exercisable prior to six months from the date of its grant unless a shorter period is provided by the Committee or another Section of this Plan, and may be exercised during the period established by the Committee, but not after ten years from the date of grant thereof (the "Option Term"). No Incentive Stock Option shall be exercisable after the expiration of its Option Term.

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Section 3.5. Maximum Amount of Incentive Stock Option Grant. To the extent that the aggregate Fair Market Value (determined at the time the respective Incentive Stock Option is granted) of Common Stock with respect to which Incentive Stock Options granted are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds $100,000, such Incentive Stock Options shall be treated as Options which do not constitute Incentive Stock Options.

Section 3.6. Death of Optionee. Unless otherwise provided in an Award Agreement:

(a) Upon the death of the Optionee, any Incentive Stock Option exercisable by the Optionee on the date of termination of employment may be exercised by the Optionee's estate or by a person who acquires the right to exercise such Incentive Stock Option by bequest or inheritance or by reason of the death of the Optionee, provided that such exercise occurs within both the remaining option term of the Incentive Stock Option and one year after the Optionee's death.

(b) The provisions of this Section shall apply notwithstanding the fact that the Optionee's employment may have terminated prior to death.

Section 3.7. Retirement or Disability. Unless otherwise provided in an Award Agreement, upon the termination of the Optionee's employment by reason of permanent disability or retirement (as each is determined by the Committee), the Optionee may, within 36 months from the date of such termination of employment, exercise any Incentive Stock Options to the extent such Incentive Stock Options were exercisable at the date of such termination of employment. Notwithstanding the foregoing, the tax treatment available pursuant to Section 422 of the Code upon the exercise of an Incentive Stock Option will not be available to an Optionee who exercises any Incentive Stock Options more than (i) 12 months after the date of termination of employment due to permanent disability or (ii) three months after the date of termination of employment due to retirement.

Section 3.8. Termination for Other Reasons. Except as provided in Sections 3.6 and 3.7 or except as otherwise determined by the Committee, all Incentive Stock Options shall terminate three months after the date of the termination of the Optionee's employment and shall be exercisable during such period only to the extent exercisable on the date of termination of employment.

Section 3.9. Applicability of Stock Options Sections. Sections 2.5, Manner of Payment; 2.6, Delivery of Shares; 2.8, Tax Elections and 2.9, Effect of Exercise,

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applicable to Stock Options, shall apply equally to Incentive Stock Options. Such Sections are incorporated by reference in this Article III as though fully set forth herein.

ARTICLE IV. RELOAD OPTIONS

Section 4.1. Authorization of Reload Options. Concurrently with or subsequent to the award of Stock Options to any Participant in the Plan, the Committee may authorize reload options ("Reload Options") to purchase shares of Common Stock. The number of Reload Options shall equal (i) the number of shares of Common Stock used to pay the exercise price of the underlying Stock Options or Incentive Stock Options and (ii) to the extent authorized by the Committee, the number of shares of Common Stock withheld by the Company in payment of the exercise price underlying the Stock Option or Incentive Stock Option or used to satisfy any tax withholding requirement incident to the exercise of the underlying Stock Options or Incentive Stock Options. The grant of a Reload Option will become effective upon the exercise of underlying Stock Options, Incentive Stock Options, or Reload Options through the use of shares of Common Stock held by the Optionee or the withholding of shares by the Company in payment of the exercise price of the underlying Stock Option or Incentive Stock Option held by the Optionee. Notwithstanding the fact that the underlying option may be an Incentive Stock Option, a Reload Option is not intended to qualify as an "incentive stock option" under Section 422 of the Code.

Section 4.2. Reload Option Amendment. Each Award Agreement shall state whether the Committee has authorized Reload Options with respect to the Stock Options and/or Incentive Stock Options covered by such Award Agreement. Upon the exercise of an underlying Stock Option, Incentive Stock Option, or other Reload Option, the Reload Option will be evidenced by an amendment to the underlying Award Agreement in such form as the Committee shall approve.

Section 4.3. Reload Option Price. The Option Price per share of Common Stock deliverable upon the exercise of a Reload Option shall be the Fair Market Value of a share of Common Stock on the date the grant of the Reload Option becomes effective.

Section 4.4. Term and Exercise. Each Reload Option is fully exercisable six months from the effective date of grant. The term of each Reload Option shall be equal to the remaining option term of the underlying Stock Option and/or Incentive Stock Option.

Section 4.5. Termination of Employment. Unless otherwise determined by the Committee in an Award Agreement or otherwise, no additional Reload Options shall be granted to Optionees when Stock Options, Incentive Stock Options, and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Optionee's employment.

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Section 4.6. Applicability of Stock Options Sections. Sections 2.5, Manner of Payment; 2.6 Delivery of Shares; 2.7, Death, Retirement and Termination of Employment of Optionee; 2.8, Tax Elections; and 2.9, Effect of Exercise, applicable to Stock Options, shall apply equally to Reload Options. Such Sections are incorporated by reference in this Article IV as though fully set forth herein.

ARTICLE V. ALTERNATE APPRECIATION RIGHTS

Section 5.1. Award of Alternate Appreciation Rights. Concurrently with or subsequent to the award of any Stock Option, Incentive Stock Option, or Reload Option to purchase one or more shares of Common Stock, the Committee may, subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, award to the Optionee with respect to each share of Common Stock covered by an Option, a related alternate appreciation right permitting the Optionee to be paid the appreciation on the Option in lieu of exercising the Option ("Alternate Appreciation Right").

Section 5.2. Alternate Appreciation Rights Agreement. Alternate Appreciation Rights shall be evidenced by written Award Agreements in such form as the Committee may from time to time determine.

Section 5.3. Exercise. An Optionee who has been granted Alternate Appreciation Rights may, from time to time, in lieu of the exercise of an equal number of Options, elect to exercise one or more Alternate Appreciation Rights and thereby become entitled to receive from the Company payment in Common Stock of the number of shares determined pursuant to Section 5.4 and 5.5. Alternate Appreciation Rights shall be exercisable only to the same extent and subject to the same conditions as the Options related thereto are exercisable, as provided in this Plan. The Committee may, in its discretion, prescribe additional conditions to the exercise of any Alternate Appreciation Rights.

Section 5.4. Amount of Payment. The amount of payment to which an Optionee shall be entitled upon the exercise of each Alternate Appreciation Right shall be equal to 100% of the amount, if any, by which the Fair Market Value of a share of Common Stock on the exercise date exceeds the Option Price per share on the Option related to such Alternate Appreciation Right. A Section
16(a) Option Holder may elect to withhold shares of Common Stock issued under this Section to pay taxes as described in Section 2.8.

Section 5.5. Form of Payment. The number of shares to be paid shall be determined by dividing the amount of payment determined pursuant to Section 5.4 by the Fair Market Value of a share of Common Stock on the exercise date of such Alternate Appreciation Rights. As soon as practicable after exercise, the Company shall deliver to the Optionee a certificate or certificates for such shares of Common Stock.

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Section 5.6. Effect of Exercise. Unless otherwise provided in an Award Agreement or agreed to by the Committee, the exercise of any Alternate Appreciation Rights shall cancel an equal number of Stock Options, Incentive Stock Options, Reload Options, and Limited Rights, if any, related to said Alternate Appreciation Rights.

Section 5.7. Termination of Employment, Retirement, Death or Disability. Unless otherwise provided in an Award Agreement or agreed to by the Committee:

(a) Upon termination of the Optionee's employment (including employment as a director of the Company after an Optionee terminates employment as an employee of the Company) by reason of permanent disability or retirement (as each is determined by the Committee) or consulting, the Optionee may, within six months from the date of such termination, exercise any Alternate Appreciation Rights to the extent such Alternate Appreciation Rights are exercisable during such six-month period.

(b) Except as provided in Section 5.7(a), all Alternate Appreciation Rights shall terminate three months after the date of the termination of the Optionee's employment, consulting or upon the death of the Optionee.

ARTICLE VI. LIMITED RIGHTS

Section 6.1. Award of Limited Rights. Concurrently with or subsequent to the award of any Stock Option, Incentive Stock Option, Reload Option, or Alternate Appreciation Right, the Committee may, subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, award to the Optionee with respect to each share of Common Stock covered by an Option, a related limited right permitting the Optionee, during a specified limited time period, to be paid the appreciation on the Option in lieu of exercising the Option ("Limited Right").

Section 6.2. Limited Rights Agreement. Limited Rights granted under the Plan shall be evidenced by written Award Agreements in such form as the Committee may from time to time determine.

Section 6.3. Exercise Period. Limited Rights are exercisable in full for a period of seven months following the date of a Change in Control of the Company (the "Exercise Period"); provided, however, that Limited Rights may not be exercised under any circumstances until the expiration of the six-month period following the date of grant.

Section 6.4. Amount of Payment. The amount of payment to which an Optionee shall be entitled upon the exercise of each Limited Right shall be equal to 100% of the amount, if any, which is equal to the difference between the Option Price per share of Common Stock covered by the related Option and the Market Price of a share of such Common Stock. "Market Price" is defined to be the greater of (i) the highest price per

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share of the Company's Common Stock paid in connection with any Change in Control and (ii) the highest price per share of the Company's Common Stock reflected in the consolidated trading tables of The Wall Street Journal (presently the New York Stock Exchange - Composite Transactions) during the 60-day period prior to the Change in Control.

Section 6.5. Form of Payment. Payment of the amount to which an Optionee is entitled upon the exercise of Limited Rights, as determined pursuant to Section 6.4, shall be made solely in cash.

Section 6.6. Effect of Exercise. If Limited Rights are exercised, the Stock Options, Incentive Stock Options, Reload Options, and Alternate Appreciation Rights, if any, related to such Limited Rights shall cease to be exercisable to the extent of the number of shares with respect to which the Limited Rights were exercised. Upon the exercise or termination of the Stock Options, Incentive Stock Options, Reload Options, and Alternate Appreciation Rights, if any, related to such Limited Rights, the Limited Rights granted with respect thereto terminate to the extent of the number of shares as to which the related options and Alternate Appreciation Rights were exercised or terminated.

Section 6.7. Retirement or Disability. Upon termination of the Optionee's employment (including employment as a director of the Company after an Optionee terminates employment as an employee of the Company) by reason of permanent disability or retirement (as each is determined by the Committee) or consulting, the Optionee may, within six months from the date of such termination, exercise any Limited Right to the extent such Limited Right is exercisable during such six-month period.

Section 6.8. Death of Optionee or Termination for Other Reasons. Except as provided in Sections 6.7 and 6.9, or except as otherwise determined by the Committee, all Limited Rights granted under the Plan shall terminate upon the termination of the Optionee's employment, consulting or upon the death of the Optionee.

Section 6.9. Termination Related to a Change in Control. The requirement that an Optionee be terminated by reason of retirement or permanent disability or be employed by the Company at the time of exercise pursuant to Sections 6.7 and 6.8, respectively, is waived during the Exercise Period as to an Optionee who (i) was employed by the Company at the time of the Change in Control and (ii) is subsequently terminated by the Company other than for just cause or who voluntarily terminates if such termination was the result of a good faith determination by the Optionee that as a result of the Change in Control he is unable to effectively discharge his present duties or the duties of the position which he occupied just prior to the Change in Control. As used herein "just cause" shall mean willful misconduct or dishonesty or conviction of or failure to contest prosecution for a felony, or excessive absenteeism unrelated to illness.

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ARTICLE VII. SUBSTITUTION AWARDS

Section 7.1. Awards may be granted under the Plan from time to time in substitution for stock options held by individuals employed by corporations who become employees of the Company as a result of a merger or consolidation of the employing corporation with the Company, or the acquisition by the Company of the assets of the employing corporation, or the acquisition by the Company of stock of the employing corporation with the result that such employing corporation becomes a Subsidiary or an Affiliate.

ARTICLE VIII. BONUS STOCK AWARDS

Section 8.1. Award of Bonus Stock. The Committee may from time to time, and subject to the provisions of this Plan and such other terms and conditions as the Committee may prescribe, grant to any Participant in the Plan shares of Common Stock ("Stock Bonus"). A Stock Bonus shall vest (i) in the case of performance-based vesting criteria, no sooner than one year following the date of the Stock Bonus grant, and (ii) in the case of time-based vesting criteria, no sooner than one-third of the grant on each subsequent anniversary of the date of grant. Notwithstanding the foregoing, the Committee may grant a fully vested Stock Bonus in lieu of an earned cash bonus.

Section 8.2. Stock Bonus Agreements. The grant of a Stock Bonus shall be evidenced by a written Award Agreement, executed by the Company and the recipient of a Stock Bonus, in such form as the Committee may from time to time determine, providing for the terms of such grant, including any vesting schedule, restrictions on the transfer of such Common Stock or other matters.

ARTICLE IX. MISCELLANEOUS

Section 9.1. General Restriction. Each Award under the Plan shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration, or qualification of the shares of Common Stock subject to or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the grantee of an Award with respect to the disposition of shares of Common Stock, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the issue or purchase of shares of Common Stock thereunder, such Award may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee.

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Section 9.2. Non-Assignability. Except as provided below, no Award under the Plan shall be assignable or transferable by the recipient thereof, except by will or by the laws of descent and distribution, and during the life of the recipient, such Award shall be exercisable only by such person or by such person's guardian or legal representative.

Notwithstanding the foregoing, as provided by the Committee in an Award Agreement, Awards (other than Incentive Stock Options) may be transferred
(in whole or in part in a form approved by the Company) by a Participant to (i)
the spouse, children or grandchildren of the Participant ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of the Immediate Family Members and, if applicable, the Participant, or (iii) a partnership in which such Immediate Family Members and, if applicable, the Participant are the only partners. Following any such transfer, the Award shall continue to be subject to the same terms and conditions as were applicable to the Award immediately prior to the transfer. A transferee of an Award may not transfer the Award except to an Immediate Family Member or the Participant.

Section 9.3. Withholding Taxes. Whenever the Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Company shall have the right to require the grantee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificates for such shares. Alternatively, the Company may issue or transfer such shares of the Company net of the number of shares sufficient to satisfy the withholding tax requirements. For withholding tax purposes, the shares of Common Stock shall be valued on the date the withholding obligation is incurred.

Section 9.4. Right to Terminate Employment. Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any Participant the right to continue in the employment of, or consulting to, the Company or effect any right which the Company may have to terminate the employment or consulting relationship of such Participant.

Section 9.5. Non-Uniform Determination. The Committee's determinations under the Plan (including without limitation determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated.

Section 9.6. Rights as a Shareholder. The recipient of any Award under the Plan shall have no right as a shareholder with respect thereto unless and until certificates for shares of Common Stock are issued to him.

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Section 9.7. Definitions. In this Plan the following definitions shall apply:

(a) "Subsidiary" means any corporation of which, at the time more than 50% of the shares entitled to vote generally in an election of directors are owned directly or indirectly by the Company or any subsidiary thereof.

(b) "Affiliate" means any person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company.

(c) "Fair Market Value" as of any date and in respect or any share of Common Stock means the lowest reported trading price on such date or on the next business day, if such date is not a business day, of a share of Common Stock reflected in the consolidated trading tables of The Wall Street Journal (presently the New York Stock Exchange - Composite Transactions) or any other publication selected by the Committee, provided that, if shares of Common Stock shall not have been quoted on the New York Stock Exchange for more than 10 days immediately preceding such date or if deemed appropriate by the Committee for any other reason, the fair market value of shares of Common Stock shall be as determined by the Committee in such other manner as it may deem appropriate. In no event shall the Fair Market Value of any share of Common Stock be less than its par value.

(d) "Option" means Stock Option, Incentive Stock Option, or Reload Option.

(e) "Option Price" means the purchase price per share of the Common Stock deliverable upon the exercise of a Stock Option, Incentive Stock Option, or Reload Option.

(f) "Change in Control" means the occurrence, at any time during the specified term of an Option granted under the Plan, of any of the following events:

(i) The Company is merged or consolidated or reorganized into or with another corporation or other legal person (an "Acquiror") and as a result of such merger, consolidation or reorganization less than 75% of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization, other than the Acquiror or any corporation or other legal person controlling, controlled by or under common control with the Acquiror;

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(ii) The Company sells all or substantially all of its business and/or assets to an Acquiror, of which less than 75% of the outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such sale, other than any corporation or other legal person controlling, controlled by or under common control with the Acquiror;

(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person or group (as the terms "person" and "group" are used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgated thereunder) has become the beneficial owner (as the term "beneficial owner") is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 20% or more of the issued and outstanding shares of voting securities of the Company; or

(iv) During any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director of the Company was approved by a vote of at least two-thirds of such directors of the Company then still in office who were directors of the Company at the beginning of any such period.

Section 9.8. Leaves of Absence. The Committee shall be entitled to make such rules, regulations, and determinations as it deems appropriate under the Plan in respect of any leave of absence taken by the recipient of any Award. Without limiting the generality of the foregoing, the Committee shall be entitled to determine (i) whether or not any such leave of absence shall constitute a termination of employment within the meaning of the Plan and (ii) the impact, if any, of any such leave of absence on Awards under the Plan theretofore made to any recipient who takes such leave of absence.

Section 9.9. Newly Eligible Employees. The Committee shall be entitled to make such rules, regulations, determinations and awards as it deems appropriate in respect of any employee who becomes eligible to participate in the Plan or any portion thereof after the commencement of an award or incentive period.

Section 9.10. Adjustments. In any event of any change in the outstanding Common Stock by reason of a stock dividend or distributions, recapitalization, merger, consolidation, split-up, combination, exchange of shares or the like, the Committee may appropriately adjust the number of shares of Common Stock that may be issued under the

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Plan, the number of shares of Common Stock subject to Options theretofore granted under the Plan, and any and all other matters deemed appropriate by the Committee.

Section 9.11. Changes in the Company's Capital Structure.

(a) The existence of outstanding Options, Alternative Appreciation Rights, or Limited Rights shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

(b) If, while there are outstanding Options, the Company shall effect a subdivision or consolidation of shares or other increase or reduction of the number of shares of the Common Stock outstanding without receiving compensation therefor in money, services or property, then (i) in the event of an increase in the number of such shares outstanding, the number of shares of Common Stock then subject to Options hereunder shall be proportionately increased; and (ii) in the event of a decrease in the number of such shares outstanding the number of shares then available for Option hereunder shall be proportionately decreased.

(c) After a merger of one or more corporations into the Company, or after a consolidation of the Company and one or more corporations in which the Company shall be the surviving corporation, each holder of an outstanding Option shall, at no additional cost, be entitled upon exercise of such Option to receive (subject to any required action by stockholders) in lieu of the number of shares as to which such Option shall then be so exercisable, the number and class of stock or other securities to which such holder would have been entitled to receive pursuant to the terms of the agreement of merger or consolidation if, immediately prior to such merger or consolidation, such holder had been the holder of record of a number of shares of the Company equal to the number of shares as to which such Option had been exercisable.

(d) If the Company is merged into or consolidated with another corporation or other entity under circumstances where the Company is not the surviving corporation, or if the Company sells or otherwise disposes of substantially all of its assets to another corporation or other entity while unexercised Options remain outstanding, then the Committee may direct that any of the following shall occur:

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(i) If the successor entity is willing to assume the obligation to deliver shares of stock or securities after the effective date of the merger, consolidation or sale of assets, as the case may be, each holder of an outstanding Option shall be entitled to receive, upon the exercise of such Option and payment of the Option Price, in lieu of shares of Common Stock, such shares of stock or other securities as the holder of such Option would have been entitled to receive had such Option been exercised immediately prior to the consummation of such merger, consolidation or sale, and any related Alternate Appreciation Right and Limited Right associated with such Option shall apply as nearly as practicable to the shares of stock or other securities purchasable upon exercise of the Option following such merger, consolidation or sale of assets.

(ii) The Committee may waive any limitations set forth in or imposed pursuant to this Plan or any Award Agreement with respect to such Option and any related Alternate Appreciation Right or Limited Option such that such Option and related Alternate Appreciation Right and Limited Right shall become exercisable prior to the record or effective date of such merger, consolidation or sale of assets.

(iii) The Committee may cancel all outstanding Options and Alternate Appreciation Rights (but not Limited Rights) as of the effective date of any such merger, consolidation, or sale of assets provided that prior notice of such cancellation shall be given to each holder of an Option at least 30 days prior to the effective date of such merger, consolidation, or sale of assets, and each holder of an Option shall have the right to exercise such Option and any related Alternate Appreciation Right in full during a period of not less than 30 days prior to the effective date of such merger, consolidation, or sale of assets. No action taken by the Committee under this subsection shall have the effect of terminating, and nothing in this subsection shall permit the Committee to terminate, any Limited Right held by an Optionee.

(c) Except as herein provided, the issuance by the Company of Common Stock or any other shares of capital stock or services convertible into shares of capital stock, for cash property, labor done or other consideration, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock then subject to outstanding Options.

Section 9.12. Change in Control. Any Award granted under the Plan prior to the date of a Change in Control shall be immediately exercisable in full on such date, without regard to any times of exercise established under its Award Agreement; provided, however, in no event shall Stock Options or Incentive Stock Options be exercisable after the tenth anniversary of their respective grant dates.

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Section 9.13. Amendment of the Plan.

(a) The Committees may without further action by the shareholders and without receiving further consideration from the Participants, amend this Plan or condition or modify Awards under this Plan in response to changes in securities or other laws or rules, regulations or regulatory interpretations thereof applicable to this Plan or to comply with stock exchange rules or requirements.

(b) The Committee may at any time and from time to time terminate or modify or amend the Plan in any respect, except that without shareholder approval the Committee may not (i) increase the maximum number of shares of Common Stock which may be issued under the Plan (other than increases pursuant to Section 9.10), (ii) extend the period during which any Award may be granted or exercised, (iii) extend the term of the Plan, (iv) change the class of eligible Participants in the Plan, or (v) materially increase benefits available to Participants under the Plan if such increase would require shareholder approval pursuant to the listed company rules of the New York Stock Exchange, Inc. as such rules may be amended from time to time. The termination or any modification or amendment of the Plan, except as provided in subsection (a), shall not, without the consent of a Participant, affect his or her rights under an Award previously granted to him or her.

Section 9.14. Effective Date. The Plan, as amended as of July 6, 1998, shall become effective as of July 6, 1998.

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EXHIBIT 10.3

WASTE MANAGEMENT, INC.
1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED - NOVEMBER 10, 1998)

CONFORMED COPY

1. PURPOSE. The principal purpose of this 1996 Stock Option Plan for Non-Employee Directors (the "Plan") is to benefit WASTE MANAGEMENT, INC. (the "Company") and its subsidiaries through offering its directors who are not officers or full-time employees of the Company or any of its subsidiaries an opportunity to become holders of stock in the Company, thereby giving them a stake in the growth and prosperity of the Company, in order to enable them to represent the viewpoint of other stockholders of the Company more effectively and to encourage them to continue serving as directors of the Company.

2. ADMINISTRATION. The Plan shall be administered by the Executive Committee of the Board of Directors (the "Committee"), whose interpretation of the terms and provisions of the Plan and whose determination of matters pertaining to options granted under the Plan shall be final and conclusive."

3. ELIGIBILITY. Options shall be granted under this Plan only to members of the Board of Directors who are not officers or full-time employees of the Company or any of its subsidiaries (each such director receiving options granted under the Plan and each other person entitled to exercise an option granted under the Plan is referred to herein as an "Optionee").

4. GRANT OF OPTIONS. (a) An option under which a total of 10,000 shares of the common stock of the Company may be purchased from the Company shall be automatically granted to each eligible director of the Company on the first business day of January of each year in which such eligible director is still serving as a director (whether or not such director's term has been continuous). Notwithstanding the foregoing, the Committee may provide for an annual option grant for the purchase of a different number of Company shares and for such additional grants to eligible persons under this Plan as the Committee may in its discretion determine. The aggregate number of shares which shall be available to be so optioned under this Plan shall be 1,400,000 shares. Such number of shares, and the number of shares subject to options outstanding under the Plan, shall be subject in all cases to adjustment as provided in Paragraph 10 hereof. No option shall be granted under the Plan subsequent to January 1, 2006.

(b) Notwithstanding any of the foregoing to the contrary, in the event an option expires or is terminated or canceled unexercised as to any shares of common stock, such released shares may again be the subject of an option granted under the Plan. Shares subject to options may be made available from unissued or reacquired shares of common stock.

(c) Nothing contained in the Plan or in any option granted pursuant thereto shall in itself confer upon any Optionee any right to continue serving as a director of the Company or interfere in any way with any right of the Board of Directors or stockholders of the Company to remove such director pursuant to the restated certificate of incorporation or by-laws of the Company or applicable law.


5. OPTION PRICE. Subject to adjustment under Paragraph 10 hereof, the option price shall be the fair market value, on the date as of which the option is granted, of the stock subject to the option, which shall be, for purposes of this Paragraph, the lowest trading price of the Company's common stock on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Southwest Edition) (or, if the Company's common stock is not then traded on the New York Stock Exchange, on the principal market where such common stock is actively traded) on the date as of which the option is granted.

6. DURATION OF OPTIONS; VESTING. Subject to the provisions of Paragraph 8 hereof, each option shall be for a term of ten years. Each option shall become exercisable with respect of 100% of the total number of shares subject to the option on the first anniversary of the date of grant.

7. EXERCISE OF OPTION. (a) An option may be exercised by giving written notice to the Company, attention of the Secretary, specifying the number of shares to be purchased, accompanied by the full purchase price for the shares to be purchased in cash, by check, or a "cashless-broker" exercise pursuant to procedures established by the Committee from time to time, by a promissory note in the form specified by the Company and payable to the Company 15 business days after the date of exercise of the option, by shares of the Company's common stock or by a combination of these methods of payment. For this purpose, the per share value of the Company's common stock shall be the fair market value on the date of exercise (or if the date of exercise is not a trading day on the trading day next preceding the date of exercise), which shall be, for purposes of this Paragraph, the average of the highest and lowest sales price of the Company's common stock on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Southwest Edition) (or, if the Company's common stock is not then traded on the New York Stock Exchange, on the principal market where such common stock is actively traded) on such date.

(b) At the time of any exercise of any option, the Company may, if it shall determine it necessary or desirable for any reason, require the Optionee (or his or her heirs, legatees or legal representatives, as the case may be) as a condition upon the exercise thereof, to deliver to the Company a written representation of present intention to purchase the shares for investment and not for distribution. In the event such representation is required to be delivered, an appropriate legend may be placed upon each certificate delivered to the Optionee upon his or her exercise of part or all of the option and a stop transfer order may be placed with the transfer agent. Each option shall also be subject to the requirement that, if at any time the Company determines, in its discretion, that the listing, registration or qualification of the shares subject to the option upon any securities exchange or under any state, federal or foreign law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in consideration with, the issue or purchase of shares thereunder, the option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company.

8. TERMINATION-EXERCISE THEREAFTER. (a) In the event an Optionee ceases to be a director of the Company for any reason other than death, permanent disability, resignation or

2

retirement, such Optionee's option shall expire and all rights to purchase shares pursuant thereto shall terminate immediately.

(b) In the event of death, permanent disability (as the term is defined in the Social Security Act, as now in effect or as it shall be subsequently amended), resignation or retirement, the vesting of any unvested options shall accelerate and such options may be exercised in full by the Optionee or, if the Optionee is not living, by the Optionee's heirs, legatees, or legal representatives, as the case may be, at any time during its specified term after the date of death, permanent disability, resignation or retirement.

9. TRANSFERABILITY. (a) Except as provided in subparagraph (b) below, no Option will be transferable by an Optionee other than by will or the laws of descent and distribution and Options will be exercisable during the lifetime of the Optionee only by the Optionee or by the Optionee's legal representative.

(b) Notwithstanding the foregoing, Options may be transferred (in whole or in part in a form approved by the Company) by an Optionee to (i) the spouse, children or grandchildren of the Optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of the Immediate Family Members and, if applicable, the Optionee, or (iii) a partnership in which such Immediate Family Members and, if applicable, the Optionee are the only partners. Following any such transfer, the Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately prior to the transfer. A transferee of an Option may not transfer the Option except to an Immediate Family Member or the Optionee.

10. ADJUSTMENT. The number of shares subject to the Plan and to options granted under the Plan shall be adjusted as follows: (a) in the event that the Company's outstanding common stock is changed by any stock dividend, stock split or combination of shares, the number of shares subject to the Plan and to options granted thereunder shall be proportionately adjusted, (b) in the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there shall be substituted on an equitable basis as determined by the Board of Directors, for each share of common stock then subject to the Plan and for each share of common stock then subject to an option granted under the Plan, the number and kind of shares of stock, other securities, cash or other property to which the holders of common stock of the Company will be entitled pursuant to the transaction, and (c) in the event of any other relevant change in the capitalization of the Company, the Board of Directors shall provide for an equitable adjustment in the number of shares of common stock then subject to the Plan and to each share of common stock then subject to an option granted under the Plan. In the event of any such adjustment, the exercise price per share shall be proportionately adjusted.

11. CHANGE IN CONTROL. (a) Any option granted under the Plan prior to the date of a "Change in Control" shall be immediately exercisable in full on such date, without regard to any times of exercise established under the Paragraph 6 hereof. The term "Change in Control" shall mean the occurrence, at any time during the specified term of an option granted under the Plan, of any of the following events:

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(i) The Company is merged or consolidated or reorganized into or with another corporation or other legal person (an "Acquiror") and as a result of such merger, consolidation or reorganization less than 75% of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such merger, consolidation or reorganization, other than the Acquiror or any corporation or other legal person controlling, controlled by or under common control with the Acquiror;

(ii) The Company sells all or substantially all of its business and/or assets to an Acquiror, of which less than 75% of the outstanding voting securities or other capital interests are owned in the aggregate by the stockholders of the Company, directly or indirectly, immediately prior to such sale, other than any corporation or other legal person controlling, controlled by or under common control with the Acquiror;

(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person or group (as the terms "person" and "group" are used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act and the rules and regulations promulgated thereunder) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 20% or more of the issued and outstanding shares of voting securities of the Company; or

(iv) During any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director of the Company was approved by a vote of at least two-thirds of such directors of the Company then still in office who were directors of the Company at the beginning of any such period.

12. AMENDMENT OF PLAN. The Board of Directors of the Company or any authorized committee thereof may amend or discontinue the Plan at any time, provided, however, that the Plan may not be amended more than once every six months except to comport with the changes in the Internal Revenue Code, the Employee Retirement Income Security Act of 1976, as amended, or the rules and regulations under each, and provided further, that no such amendment or discontinuance shall (a) without the consent of the Optionee change or impair any option previously granted, or (b) without the approval of the holders of a majority of the shares of voting common stock of the Company which are present or represented at a duly held stockholders' meeting, (i) increase the maximum number of shares which may be purchased by all eligible directors pursuant to the Plan, (ii) change the purchase price, or (iii) change the option period or increase the time limitations on the grant of options.

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EXHIBIT 10.31

EMPLOYMENT AGREEMENT

WASTE MANAGEMENT, INC. (the "Company"), and _____________________ (the "Executive") hereby enter into this EMPLOYMENT AGREEMENT ("Agreement") dated as of _____________, 19____, as follows:

1. EMPLOYMENT.

The Company shall employ Executive, and Executive shall be employed by the Company upon the terms and subject to the conditions set forth in this Agreement.

2. TERM OF EMPLOYMENT.

The period of Executive's employment under this Agreement shall begin as of _____________, 19____, and shall be for continuously renewing [five (5)] [three
(3)] year terms, unless Executive's employment is terminated in accordance with
Section 5 below.

3. DUTIES AND RESPONSIBILITIES.

(a) Executive shall serve as ___________________, and report to ____________________. In such capacity, Executive shall perform such duties as may be assigned to Executive from time to time by the Board of Directors of the Company or the Chief Executive Officer of the Company.

(b) Executive shall faithfully serve the Company, and/or its affiliated corporations, devote Executive's full working time, attention and energies to the business of the Company, and/or its affiliated corporations, and perform the duties under this Agreement to the best of Executive's abilities. Executive may make and manage his personal investments, provided such investments in other activities do not violate, in any material respect, the provisions of Section 8 of this Agreement.

(c) Executive shall (i) comply with all applicable laws, rules and regulations, and all requirements of all applicable regulatory, self-regulatory, and administrative bodies; (ii) comply with the Company's rules, procedures, policies, requirements, and directions; and (iii) not engage in any other business or employment without the written consent of the Company except as otherwise specifically provided herein.

4. COMPENSATION AND BENEFITS.

(a) BASE SALARY. During the Employment Term, the Company shall pay Executive a base salary at the annual rate of ($________) dollars per year or such higher rate as may be determined from time to time by the Company ("Base Salary"). Such Base Salary shall be paid in accordance with the Company's standard payroll practice for senior executives.


(b) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse Executive for the ordinary and necessary business expenses incurred by Executive in the performance of the duties hereunder in accordance with the Company's customary practices applicable to senior executives, provided that such expenses are incurred and accounted for in accordance with the Company's policy.

(c) BENEFIT PLANS. Executive shall be eligible to participate in or receive benefits under any pension plan, profit sharing plan, medical and dental benefits plan, life insurance plan, short-term and long-term disability plans, supplemental and/or incentive compensation plans, or any other fringe benefit plan, generally made available by the Company to [senior executives] [executive working pursuant to this form of Agreement (hereinafter referred to as "similarly situated executives")].

(d) EMPLOYEE'S EXPENSES. All costs and expenses (including reasonable legal, accounting and other advisory fees) incurred by the Executive to (i) defend the validity of this Agreement, (ii) contest any determination by the Company concerning the amounts payable (or reimbursable) by the Company to the Executive under this Agreement,
(iii) determine in any tax year of the Executive, the tax consequences to the Executive of any amount payable (or reimbursable) under Section 7(b) or 7(c) hereof, or (iv) prepare responses to an Internal Revenue Service audit of, and to otherwise defend, his personal income tax return for any year which is the subject of any such audit, or an adverse determination, administrative proceedings or civil litigation arising therefrom that is occasioned by or related to any audit by the Internal Revenue Service of the Company's income tax returns, are, upon written demand by the Executive, to be promptly advanced or reimbursed to the Executive, or paid directly, on a current basis, by the Company or its successors.

5. TERMINATION OF EMPLOYMENT.

Executive's employment hereunder may be terminated under the following circumstances:

(a) DEATH. Executive's employment hereunder shall terminate upon Executive's death.

(b) TOTAL DISABILITY. The Company may terminate Executive's employment hereunder upon Executive becoming "Totally Disabled". For purposes of this Agreement, Executive shall be "Totally Disabled" if Executive is physically or mentally incapacitated so as to render Executive incapable of performing Executive's usual and customary duties under this Agreement. Executive's receipt of disability benefits under the Company's long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement; provided, however, that in the absence of Executive's receipt of such long-term disability benefits or Social Security benefits, the Company's Board of Directors may, in its reasonable discretion (but based upon appropriate medical evidence), determine that Executive is Totally Disabled.

(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate Executive's employment hereunder for "Cause" at any time after providing written notice to Executive.

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(i) For purposes of this Agreement, the term "Cause" shall mean any of the following: (A) conviction of a crime (including conviction on a nolo contendere plea) involving a felony or, in the good faith judgment of the Company's Board of Directors, fraud, dishonesty, or moral turpitude; (B) deliberate and continual refusal to perform employment duties reasonably requested by the Company or an affiliate after thirty (30) days' written notice by certified mail of such failure to perform, specifying that the failure constitutes cause (other than as a result of vacation, sickness, illness or injury); (C) fraud or embezzlement determined in accordance with the Company's normal, internal investigative procedures consistently applied in comparable circumstances; (D) gross misconduct or gross negligence in connection with the business of the Company or an affiliate which has substantial effect on the Company or the affiliate; or (E) breach of any of the covenants set forth in Section 8 hereof.

(ii) An individual will be considered to have been terminated for Cause if the Company determines that the individual engaged in an act constituting Cause at any time prior to a payment date for an award, regardless of whether the individual terminates employment voluntarily or is terminated involuntarily, and regardless of whether the individual's termination initially was considered to have been for Cause.

(iii) Any determination of Cause under this Agreement shall be made by resolution of the Company's Board of Directors adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors at a meeting called and held for that purpose and at which Executive is given an opportunity to be heard.

(d) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate employment hereunder at any time after providing ninety (90) days' written notice to the Company, or for good reason as described in Section 7 of this Agreement.

(e) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate Executive's employment hereunder without Cause at any time after providing written notice to Executive.

6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.

In the event that Executive's employment hereunder is terminated, Executive shall be entitled to the following compensation and benefits upon such termination:

(a) TERMINATION BY REASON OF DEATH. In the event that Executive's employment is terminated by reason of Executive's death, the Company shall pay the following amounts to Executive's beneficiary or estate:

(i) Any accrued but unpaid Base Salary for services rendered to the date of death, any accrued but unpaid expenses required to be reimbursed under this Agreement; a pro-rata "bonus" or incentive compensation payment to the extent payments are awarded similarly situated executives and paid at the same time as similarly situated executives are paid; and any vacation accrued to the date of death.

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(ii)     Any benefits to which Executive may be entitled pursuant to
         the plans, policies and arrangements referred to in Section
         4(c) hereof, as determined and paid in accordance with the
         terms of such plans, policies and arrangements.

(iii)    An amount equal to the Base Salary (at the rate in effect as
         of the date of Executive's death) which would have been
         payable to Executive if Executive had continued in employment
         until the end of the current Employment Term. Such amount
         shall be paid in a single lump sum cash payment within thirty
         (30) days after Executive's death.

[(iv)    As of the date of termination by reason of Executive's death,
         stock options awarded to Executive shall be fully vested and
         Executive's estate or beneficiary shall have up to one (1)
         year from the date of death to exercise all such options.]

(b) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that Executive's employment is terminated by reason of Executive's Total Disability as determined in accordance with Section 5(b), the Company shall pay the following amounts to Executive:

(i)      Any accrued but unpaid Base Salary for services rendered to
         the date of termination, any accrued but unpaid expenses
         required to be reimbursed under this Agreement, any vacation
         accrued to the date of termination. Executive shall also be
         eligible for a pro-rata bonus or incentive compensation
         payment to the extent such awards are made to similarly
         situated executives for the year in which Executive is
         terminated.

(ii)     Any benefits to which Executive may be entitled pursuant to
         the plans, policies and arrangements referred to in Section
         4(c) hereof shall be determined and paid in accordance with
         the terms of such plans, policies and arrangements.

(iii)    The Base Salary (at the rate in effect as of the date of
         Executive's Total Disability) which would have been payable
         to Executive if Executive had continued in active employment
         until the end of the current Employment Term. Payment shall
         be made at the same time and in the same manner as such
         compensation would have been paid if Executive had remained
         in active employment until the end of such period.

[(iv)    As of the date of termination by reason of Executive's total
         disability, Executive shall be fully vested in all stock
         option awards and Executive shall have up to one (1) year
         from the date of termination by reason of total disability to
         exercise all such options.]

(c) TERMINATION FOR CAUSE. In the event that Executive's employment is terminated by the Company for Cause pursuant to Section 5(c), the Company shall pay the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the date of termination.

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(ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(c) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements.

(d) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that Executive terminates employment pursuant to Section 5(d), and other than for a resignation tendered pursuant to Section 7 of this Agreement, the Company shall pay the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the date of termination.

(ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(c) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements.

(e) TERMINATION BY THE COMPANY WITHOUT CAUSE. In the event that Executive's employment is terminated by the Company pursuant to
Section 5(e) for reasons other than death, Total Disability or Cause, the Company shall pay the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the date of termination.

(ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(c) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements.

(iii) An annual amount equal to 75 percent (75%) of the average of Executive's "Total Annual Direct Compensation" for the two highest of the three most recent calendar years prior to Executive's termination. Such annual amount shall be paid during the five (5) year period beginning on the date of Executive's termination and shall be paid at the same time and in the same manner as Base Salary would have been paid if Executive had remained in active employment until the end of such period. For purposes of this Agreement, the term "Total Annual Direct Compensation" means the total of the Base Salary and other cash compensation payable to Executive attributable to a calendar year (A) including any cash compensation which would have been payable for such year but for Executive's election to defer payment of such compensation and (B) excluding any amounts recognized as compensation as a result of Executive's exercise of a stock option or receipt of a stock award.

(iv) The Company completely at its expense will continue for Executive and Executive's spouse and dependents, all health benefit plans, programs or arrangements, whether group or individual, in which Executive was entitled to participate at any time during the twelve-month period prior to the date of termination, until the earliest to occur of (A) [five]
[three] years after the date of termination; (B) Executive's death (provided

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that benefits payable to Executive's beneficiaries shall not terminate upon Executive's death); or (C) with respect to any particular plan, program or arrangement, the date Executive becomes covered by a comparable benefit by a subsequent employer. In the event that Executive's continued participation in any such plan, program, or arrangement of the Company is prohibited, the Company will arrange to provide Executive with benefits substantially similar to those which Executive would have been entitled to receive under such plan, program, or arrangement, for such period.

(v) Except to the extent prohibited by law, Executive will be 100% vested in all benefits, awards, and grants accrued but unpaid as of the date of termination under any pension plan, profit sharing plan, supplemental and/or incentive compensation plans, and stock option plans in which Executive was a participant as of the date of termination. [Executive shall have one (1) year from the date of termination to exercise stock options.] [Executive shall be able to exercise stock options for the life of the award.] Executive shall also be eligible for a bonus or incentive compensation payment, to the extent payments are made to similarly situated executives, pro-rated for the year in which the Executive is terminated.

(f) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this Agreement, under the terms of any incentive compensation, employee benefit, or fringe benefit plan applicable to Executive at the time of Executive's termination or resignation of employment, Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation.

(g) SUSPENSION OR TERMINATION OF BENEFITS AND COMPENSATION. In the event that the Company, in its sole discretion determines that, without the Company's express written consent, Executive has

(i) directly or indirectly engaged in, assisted or have any active interest or involvement whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor, or any type of principal whatsoever, in any person, firm, or business entity which is directly or indirectly competitive with the Company or any of its affiliates, or

(ii) directly or indirectly, for or on behalf of any person, firm, or business entity which is directly or indirectly competitive with the Company or any of its affiliates (A) solicited or accepted from any person or entity who is or was a client of the Company during the term of Executive's employment hereunder or during any of the twelve calendar months preceding or following the termination of Executive's employment any business for services similar to those rendered by the Company, (B) requested or advised any present or future customer of the Company to withdraw, curtail or cancel its business dealings with the Company, or (C) requested or advised any employee of the Company to terminate his or her employment with the Company;

Page 6 of 14

the Company shall have the right to suspend or terminate any or all remaining benefits payable pursuant to Section 6 of this Agreement. Such suspension or termination of benefits shall be in addition to and shall not limit any and all other rights and remedies that the Company may have against Executive.

7. RESIGNATION BY EXECUTIVE FOR GOOD REASON AND COMPENSATION PAYABLE FOLLOWING CHANGE IN CONTROL.

(a) RESIGNATION FOR GOOD REASON FOLLOWING CHANGE IN CONTROL. In the event a "Change in Control" occurs, Executive will be paid the compensation described in this Section 7 if Executive resigns or is terminated from employment with the Company at any time prior to the six (6) month anniversary of the date of the Change in Control following the occurrence of any of the following events:

(i)      without Executive's express written consent, the assignment
         to Executive of any duties inconsistent with Executive's
         positions, duties, responsibilities and status with the
         Company immediately before a Change in Control, or a change
         in Executive's reporting, responsibilities, titles or offices
         as in effect immediately before a Change in Control, or any
         removal of Executive from, or any failure to re-elect
         Executive to, any of such positions, except in connection
         with the termination of Executive's employment as a result of
         death, or by the Company for Disability or Cause, or by
         Executive other than for the reasons described in this
         Section 7(a);

(ii)     a reduction by the Company in Executive's Base Salary as in
         effect immediately before a Change in Control plus all
         increases therein subsequent thereto;

(iii)    the failure of the Company substantially to maintain and to
         continue Executive's participation in the Company's benefit
         plans as in effect immediately before a Change in Control and
         with all improvements therein subsequent thereto (other than
         those plans or improvements that have expired thereafter in
         accordance with their original terms), or the taking of any
         action which would materially reduce Executive's benefits
         under any of such plans or deprive Executive of any material
         fringe benefit enjoyed by Executive immediately before a
         Change in Control, unless such reduction or termination is
         required by law;

[(iv)    the failure of the Company to pay Executive with an
         appropriate adjustment to compensation, such as a lump sum
         relocation bonus, salary adjustment and/or housing allowance
         so that Executive can purchase comparable primary housing if
         required to relocate (it being the intention of this Section
         7[a][iv] to keep the Executive "whole" if required to
         relocate). In this regard, comparable housing shall be
         determined by comparing factors such as location (taking into
         account, by way of example, items such as the value of the
         surrounding neighborhood, reputation of the public school
         district, if applicable, security and proximity to
         Executive's place of work), quality of construction, design,
         age, size of the housing and the ratio of the monthly
         payments including principle, interest, taxes and insurance,
         to the

Page 7 of 14

         Executive's take-home-pay, to housing most recently owned by
         Executive prior to, or as of the effective date of the change
         of control;]

[(iv)    the change of Executive's principal place of employment to a
         location more than fifty (50) miles from such principal place
         of employment, except for required travel on the Company's
         business to an extent substantially consistent with
         Executive's business travel obligations immediately before a
         Change in Control;]

(v)      the failure by the Company to pay Executive any portion of
         Executive's current compensation, or any portion of
         Executive's compensation deferred under any plan, agreement
         or arrangement of or with the Company, within seven (7) days
         of the date such compensation is due; or

(vi)     the failure by the Company to obtain an assumption of, and
         agreement to perform the obligations of the Company under
         this Agreement by any successor to the Company.

(b) COMPENSATION PAYABLE. In the event that Executive terminates employment pursuant to Section 7(a), the Company shall pay the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the date of termination.

(ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(c) hereof, shall be determined and paid in accordance with the terms of such plans, policies and arrangements.

(iii) An amount equal to $1.00 less than three (3) times Executive's "base amount" within the full meaning of Section 280G of the Internal Revenue Code. Such amount shall be paid to Executive in a single lump sum cash payment within five
(5) business days after the effective date of Executive's resignation.

(iv) Executive will be 100% vested in all benefits, awards, and grants (including stock option grants) accrued but unpaid as of the date of termination under any non-qualified pension plan, supplemental and/or incentive compensation or bonus plans, in which Executive was a participant as of the date of termination. Executive shall also be eligible for a bonus or incentive compensation payment (the "bonus payment"), payable at 100% of the maximum bonus available to Executive, pro-rated as of the effective date of the termination. The bonus payment shall be payable within five (5) days after the effective date of Employee's termination. [Employee shall have until the expiration date shown on the stock option award in which to exercise the options which have vested pursuant to this section.]

Except as may be provided under this Section 7 or under the terms of any incentive compensation, employee benefit, or fringe benefit plan applicable to Executive at the time of Executive's resignation from employment, Executive shall have no right to receive any

Page 8 of 14

other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such resignation or termination.

(c) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. In the event that any portion of the benefits payable under this Agreement, and any other payments and benefits under any other agreement with, or plan of the Company to or for the benefit of the Executive (in aggregate, "Total Payments") constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code (the "Code"), then the Company shall pay the Executive as promptly as practicable following such determination an additional amount (the "Gross-up Payment") calculated as described below to reimburse the Executive on an after-tax basis for any excise tax imposed on such payments under
Section 4999 of the Code. The Gross-up Payment shall equal the amount, if any, needed to ensure that the net parachute payments (including the Gross-up Payment) actually received by the Executive after the imposition of federal and state income, employment and excise taxes (including any interest or penalties imposed by the Internal Revenue Service), are equal to the amount that the Executive would have netted after the imposition of federal and state income and employment taxes, had the Total Payments not been subject to the taxes imposed by
Section 4999. For purposes of this calculation, it shall be assumed that the Executive's tax rate will be the maximum federal rate to be computed with regard to Section 1(g) of the Code.

In the event that the Executive and the Company are unable to agree as to the amount of the Gross-up Payment, if any, the Company shall select a law firm or accounting firm from among those regularly consulted (during the twelve-month period immediately prior to a Change-in-Control) by the Company regarding federal income tax matters and such law firm or accounting firm shall determine the amount of Gross-up Payment and such determination shall be final and binding upon the Executive and the Company.

(d) CHANGE IN CONTROL. For purposes of this Agreement, "Change in Control" means the occurrence of any of the following events:

(i) Any transfer to, assignment to, or any acquisition by any person, corporation or other entity, or group thereof, of the beneficial ownership, within the meaning of Section 13(d) of the Securities Exchange Act of 1934, of any securities of the Company, which transfer, assignment or acquisition results in such person, corporation, entity, or group thereof, becoming the beneficial owner, directly or indirectly, of securities of the Company representing 25 percent (25%) or more of the combined voting power of the Company's then outstanding securities; or

(ii) As a result of a tender offer, merger, consolidation, sale of assets, or contested election, or any combination of such transactions, the persons who were directors immediately before the transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor to the Company.

Page 9 of 14

8. RESTRICTIVE COVENANTS

(a) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times during Executive's period of employment with the Company, and during the period that payments are made to Executive pursuant to Section 6 of this Agreement, Executive will not engage in, assist, or have any active interest or involvement, whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor or any type of principal whatsoever in any person, firm, or business entity which, directly or indirectly, is engaged in the same business as that conducted and carried on by the Company, without the Company's specific written consent to do so. Executive further agrees that for a period of one (1) year after the date payments made to Executive pursuant to Section 6 of this Agreement cease, or for a period of two (2) years following the date of termination, whichever is later, Executive will not, directly or indirectly, within 75 miles of any operating location of any affiliate of the Company, engage in, assist, or have any active interest or involvement, whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor or any type of principal whatsoever in any person, firm, or business entity which, directly or indirectly, is engaged in the same business as that conducted and carried on by the Company or any of its affiliated companies, without the Company's specific written consent to do so.

(b) NON-SOLICITATION. Executive covenants and agrees that at all times during Executive's period of employment with the Company, and for a period of one (1) year after the date payments made to Executive pursuant to Section 6 of this Agreement cease, or two (2) years after the date of termination of the Executive's employment, whichever date is later, whether such termination is voluntary or involuntary by wrongful discharge, or otherwise, Executive will not directly or indirectly (i) induce any customers of the Company or corporations affiliated with the Company to patronize any similar business which competes with any material business of the Company; (ii) canvass, solicit or accept any similar business from any customer of the Company or corporations affiliated with the Company; (iii) directly or indirectly request or advise any customers of the Company or corporations affiliated with the Company to withdraw, curtail or cancel such customer's business with the Company; [or] (iv) directly or indirectly disclose to any other person, firm or corporation the names or addresses of any of the customers of the Company or corporations affiliated with the Company[. or; (v) individually or through any person, firm, association or corporation with which Executive is now or may hereafter become associated, cause, solicit, entice, or induce any present or future employee of the Company, or any corporation affiliated with the Company to leave the employ of the Company, or such other corporation to accept employment with, or compensation from, the Executive or any such person, firm, association or corporation without the prior written consent of the Company.]

(c) NON-DISPARAGEMENT. Executive covenants and agrees that Executive shall not engage in any pattern of conduct that involves the making or publishing of written or oral statements or remarks (including, without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports or comments) which are disparaging, deleterious or damaging to the integrity, reputation or good will of the Company, its management, or of management of corporations affiliated with the Company.

Page 10 of 14

(d) PROTECTED INFORMATION. Executive recognizes and acknowledges that Executive has had and will continue to have access to various confidential or proprietary information concerning the Company and corporations affiliated with the Company of a special and unique value which may include, without limitation, (i) books and records relating to operation, finance, accounting, sales, personnel and management,
(ii) policies and matters relating particularly to operations such as customer service requirements, costs of providing service and equipment, operating costs and pricing matters, and (iii) various trade or business secrets, including customer lists, route sheets, business opportunities, marketing or business diversification plans, business development and bidding techniques, methods and processes, financial data and the like (collectively, the "Protected Information"). Executive therefore covenants and agrees that Executive will not at any time, either while employed by the Company or afterwards, knowingly make any independent use of, or knowingly disclose to any other person or organization (except as authorized by the Company) any of the Protected Information.

9. ENFORCEMENT OF COVENANTS.

(a) TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION. Executive agrees that any breach by Executive of any of the covenants set forth in Section 8 hereof during Executive's employment by the Company, shall be grounds for immediate dismissal of Executive and forfeiture of any accrued and unpaid salary, bonus, commissions or other compensation of such Executive as liquidated damages, which shall be in addition to and not exclusive of any and all other rights and remedies the Company may have against Executive.

(b) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the covenants set forth in Section 8 hereof will cause irreparable damage to the Company with respect to which the Company's remedy at law for damages will be inadequate. Therefore, in the event of breach of anticipatory breach of the covenants set forth in this section by Executive, Executive and the Company agree that the Company shall be entitled to the following particular forms of relief, in addition to remedies otherwise available to it at law or equity; (i) injunctions, both preliminary and permanent, enjoining or restraining such breach or anticipatory breach and Executive hereby consents to the issuance thereof forthwith and without bond by any court of competent jurisdiction; and (ii) recovery of all reasonable sums expended and costs, including reasonable attorney's fees, incurred by the Company to enforce the covenants set forth in this section.

(c) SEPARABILITY OF COVENANTS. The covenants contained in Section 8 hereof constitute a series of separate covenants, one for each applicable State in the United States and the District of Columbia, and one for each applicable foreign country. If in any judicial proceeding, a court shall hold that any of the covenants set forth in Section 8 exceed the time, geographic, or occupational limitations permitted by applicable laws, Executive and the Company agree that such provisions shall and are hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate

Page 11 of 14

covenants to be enforced in such proceeding. Executive and the Company further agree that the covenants in Section 8 shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by Executive against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants of Section 8.

10. DISPUTES AND PAYMENT OF ATTORNEY'S FEES.

If at any time during the term of this Agreement or afterwards there should arise any dispute as to the validity, interpretation or application of any term or condition of this Agreement, the Company agrees, upon written demand by Executive (and Executive shall be entitled upon application to any court of competent jurisdiction, to the entry of a mandatory injunction, without the necessity of posting any bond with respect thereto, compelling the Company) to promptly provide sums sufficient to pay on a current basis (either directly or by reimbursing Executive) Executive's costs and reasonable attorney's fees (including expenses of investigation and disbursements for the fees and expenses of experts, etc.) incurred by Executive in connection with any such dispute or any litigation, (a) provided that Executive shall repay any such amounts paid or advanced if Executive is not the prevailing party with respect to any dispute or litigation arising under Sections 5c or 8 of this Agreement, or (b) regardless of whether Executive is the prevailing party in a dispute or in litigation involving any other provision of this Agreement, provided that the court in which such litigation is first initiated determines with respect to this obligation, upon application of either party hereto, Executive did not initiate frivolously such litigation. Under no circumstances shall Executive be obligated to pay or reimburse the Company for any attorneys' fees, costs or expenses incurred by the Company. The provisions of this Section 10 shall survive the expiration or termination of this Agreement and of Executive's employment hereunder.

11. WITHHOLDING OF TAXES.

The Company may withhold from any compensation and benefits payable under this Agreement all applicable federal, state, local, or other taxes.

12. NON-DISCLOSURE OF AGREEMENT TERMS.

Executive agrees that Executive will not disclose the terms of this Agreement to any third party other than Executive's immediate family, attorney, accountants, or other consultants or advisors or except as may be required by any governmental authority.

13. SOURCE OF PAYMENTS.

All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets made, to assure payment. Executive shall have no right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligations hereunder. To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company.

Page 12 of 14

14. ASSIGNMENT.

Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns. This Agreement shall not be assignable by Executive, and shall be assignable by the Company only to any financially solvent corporation or other entity resulting from the reorganization, merger or consolidation of the Company with any other corporation or entity or any corporation or entity to or with which the Company's business or substantially all of its business or assets may be sold, exchanged or transferred, and it must be so assigned by the Company to, and accepted as binding upon it by, such other corporation or entity in connection with any such reorganization, merger, consolidation, sale, exchange or transfer (the provisions of this sentence also being applicable to any successive such transaction).

15. ENTIRE AGREEMENT; AMENDMENT.

This Agreement shall supersede any and all existing oral or written agreements, representations, or warranties between Executive and the Company or any of its subsidiaries or affiliated entities relating to the terms of Executive's employment by the Company. It may not be amended except by a written agreement signed by both parties.

16. GOVERNING LAW.

This Agreement shall be governed by and construed in accordance with the laws of the State of __________________ applicable to agreements made and to be performed in that State, without regard to its conflict of laws provisions.

17. NOTICES.

Any notice, consent, request or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by registered or certified mail, return receipt requested, or by facsimile or by hand delivery, to those listed below at their following respective addresses or at such other address as each may specify by notice to the others:

To the Company:

Waste Management, Inc.
1001 Fannin, Suite 4000
Houston, Texas 77002
Attention: Corporate Secretary

To Executive:

At the address for Executive set forth below

Page 13 of 14

18. MISCELLANEOUS.

(a) WAIVER. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

(b) SEPARABILITY. Subject to Section 9 hereof, if any term or provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such term or provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect.

(c) HEADINGS. Section headings are used herein for convenience of reference only and shall not affect the meaning of any provision of this Agreement.

(d) RULES OF CONSTRUCTION. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa.

(e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts will together constitute but one Agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

WASTE MANAGEMENT, INC.

By:
Name:
Title:
Date:

EXECUTIVE


Date:
Address:


Page 14 of 14

EXHIBIT 12.1

Waste Management, Inc.

Computation of Ratio Earnings to Fixed Charges
(in thousands, except ratios)

(unaudited)

                                                                      Years Ended December 31,
                                                              ------------------------------------------
                                                                 1998            1997            1996
                                                              ----------      ----------      ----------
Income (loss) from continuing operations before income
 taxes, undistributed earnings from affiliated companies,
 and minority interest                                        $ (678,919)     $ (609,024)     $  781,365
                                                              ----------      ----------      ----------
Fixed charges deducted from income:
 Interest expense                                                681,457         555,576         525,340
 Implicit interest in rents                                       79,108          58,869          58,949
                                                              ----------      ----------      ----------
                                                                 760,565         614,445         584,289
                                                              ----------      ----------      ----------
          Earnings available for fixed charges                $   81,646      $    5,421      $1,365,654
                                                              ==========      ==========      ==========
Interest expense                                              $  681,457      $  555,576      $  525,340
Capitalized interest                                              41,501          51,376          56,873
Implicit interest in rents                                        79,108          58,869          58,949
                                                              ==========      ==========      ==========
          Total fixed charges                                 $  802,066      $  665,821      $  641,162
                                                              ==========      ==========      ==========
Ratio of earnings to fixed charges                                  n/a (1)         n/a (2)          2.1x
                                                              ==========      ==========      ==========

(1) The ratio of earnings to fixed charges for 1998 was less than a one-to-one ratio. Additional earnings available for fixed charges of $720,420,000 were needed to have a one-to-one ratio. The earnings available for fixed charges were negatively impacted by merger cost of $1,807,245,000 and unusual items of $864,063,000 related primarily to the mergers between Waste Management, Inc. and Waste Management Holdings, Inc. in July 1998, and Waste Management, Inc. and Eastern Environmental Services, Inc. in December 1998.

(2) The ratio of earnings to fixed charges for 1997 was less than a one-to-one ratio. Additional earnings available for fixed charges of $660,399,000 were needed to have a one-to-one ratio. The earnings available for fixed charges were negatively impacted by merger costs of $112,748,000 (primarily related to the United Waste Systems, Inc. merger in August 1997), and asset impairments and unusual items of $1,771,145,000. The asset impairment and unusual items of $1,771,145,000 primarily related to a comprehensive review performed by Waste Management Holdings, Inc. of its operating assets and investments.


EXHIBIT 21.1

WASTE MANAGEMENT, INC. SUBSIDIARIES

                                                                                   STATE OR COUNTRY
                                   NAME                                            OF INCORPORATION
                                   ----                                            ----------------
1420 Chestnut Avenue Associates                                                           NJ
1420 Chestnut Avenue LLC                                                                  NJ
40th Street, Inc.                                                                         FL
709292 Alberta Ltd.                                                                       AB
730810 Alberta Ltd.                                                                       AB
740922 Alberta Ltd.                                                                       AB
762570 Alberta Ltd.                                                                       AB
A..C.T.S.  B.V.                                                                       NETHERLANDS
A.S.P.I.C.A. S.r.1.                                                                      ITALY
A-1 Compaction, Inc.                                                                      NY
         Dba United Waste Systems of West Michigan
AB Gosta M. Skoglund                                                                    SWEDEN
Action Portables, Inc.                                                                    CA
Advanced Environmental Technical Services L.L.C.                                          DE
Affordable Recycling Systems, Inc.                                                        NY
Afvalstoffen Terminal Mocrdijk B.V.                                                   NETHERLANDS
Akron Regional Landfill, Inc.                                                             OH
Alabama Waste Disposal Solutions, L.L.C.                                                  AL
Alaska Landfills, Inc.                                                                    AK
Alliance Sanitary Landfill, Inc.                                                          PA
All-Waste Recycling, Inc.                                                                 NY
All-Waste Systems, Inc.                                                                   NY
Amador County Environmental Services, Inc.                                                CA
American Landfill Gas Co.                                                                 OH
American Landfill, Inc.                                                                   OH
American Waste Control of New York, Inc.                                                  NY
Anchorage Refuse, Inc.                                                                    AK
Anderson Landfill, Inc.                                                                   DE
Anderson-Cottonwood Disposal Services, Inc.                                               CA
Anthony Dally & Sons, Inc.                                                                PA
APEX Waste Services, Inc.                                                                 PA
ARB Enterprises, Inc.                                                                     NY
Arden Landfill, Inc. (fka William H. Martin)                                              PA
Arrow Refuse, Inc.                                                                        AK
Art Spert Disposal, LLC                                                                   NY
Art-Jo Co.                                                                                NJ
Aseo S.A.                                                                              ARGENTINA
Atascadero Waste Alternatives, Inc.                                                       CA
Atlantic of New York, Inc.                                                                DE
Atlantic Transportation Services, Inc.                                                    DE
Atlantic Waste Collection, Inc.                                                           DE


Atlantic Waste Disposal, Inc.                                                             DE
Automated Container Recovery, Inc.                                                        CT
Automated Recycling Technologies, Inc. (25%)                                              NJ
Automated Salvage Transport, Inc.                                                         CT
Auxiwaste SA (FRANCE)                                                                   FRANCE
Avenal Waste Alternatives, Inc.                                                           CA
AW Bryant Ltd.                                                                        NEW ZEALAND
Azusa Land Reclamation Company, Inc. (fka American Sheds)                                 CA
B&E Cartage, Inc.                                                                         WV
B&L Disposal Co.                                                                          NV
B. Holmes (Graded Paper) Ltd.                                                       UNITED KINGDOM
B.C. Environmental Enterprises, Inc.                                                      OH
B.C.D. Disposal, Inc.                                                                     PA
Bad Bins Ltd.                                                                         NEW ZEALAND
Baltimore Environmental Recovery Group, Inc.                                              MD
Baltimore Refuse Energy Systems Company, Limited Partnership
Bayside of Marion, Inc.                                                                   FL
Belpar Chemical Services, Inc.                                                            WV
Bensinger, Inc.                                                                           TX
Big Valley Transport, Inc.                                                                WV
Bio-Energy Partners                                                                       IL
Biosolids Reuse Management (JV)                                                           CA
Blandfill, Inc. (fka United Waste Landfill of UT)                                         UT
Bluegrass Containment, Inc.                                                               KY
Bolton Road Landfill, Inc.                                                                DE
Boothscreek Sanitation, Inc.                                                              WV
Bosarge & Edmonds Contractors, Inc.                                                       MS
         Dba Robo
Boudin's Waste & Recycling, Inc.                                                          MS
Braddon Enterprises, Inc.                                                                 WV
Brand Construction Services, Inc.                                                         DE
Brazoria County Recycling Center, Inc.                                                    TX
         BCRC
         Brazoria County Recycling Center
         USA Brazoria County Landfill
         WRS Transfer Station
Brem-Air Disposal, Inc.                                                                   OR
Brent Run Landfill, Inc.                                                                  DE
Bridgeport Resco Company L.P.
Brushy Island Landfill, L.L.C.                                                            DE
Burnsville Sanitary Landfill, Inc.                                                        MN
C&D Sanitation and Recycling, LLC                                                         CT
C&L Disposal Company, Inc.                                                                CA
Caire's CKC Enterprises, Inc.                                                             CA
Cal Sanitation Services, Inc.                                                             CA
          A-1 Sanitation
Cal Sierra Disposal, Inc.                                                                 CA
Cal Sierra Transfer, Inc.                                                                 CA


California Asbestos Monofill, Inc.                                                        CA
          CAM
California Waste Recycling Systems, Inc.                                                  CA
California Waste Systems, Inc.                                                            CA
Campbell Wells Norm Corporation                                                           LA
Canadian Waste Services Holdings, Inc.                                                    ON
         Canadian Waste Services, Inc.                                                    ON
                  635952 Ontario Inc.                                                     ON
                  1263404 Ontario Inc.                                                    ON
                  3368084 Canada Inc.                                                     ON
                  Arthur Richer & Fils Inc.                                               ON
                  Bestan Inc.                                                             ON
                  Key Disposal, LTD.                                                      CDN
                  Intersan Inc.                                                           CDN
                           Location Sanico Ltee
                           Dechex Ltee
                           Centre de Tri Transit (1) Inc./Transit
         Sorting Center (1) Inc.
Canterbury Waste Services Ltd.                                                        NEW ZEALAND
Capital Sanitation Company                                                                NV
Caramella-Ballardini, Ltd.                                                                NV
Cardinal Ridge Development, Inc.                                                          OH
Carmel Marina Corporation                                                                 CA
Carolina Grading, Inc.                                                                    SC
CDF Consolidated Corporation                                                              IL
         Dba Rolling Kleen Disposal
         Dba Southern Illinois Transfer Station
Cedar Hammock Refuse Disposal Corporation                                                 FL
         Waste Management of Manatee County
         Waste Management of Sarasota County
Cedar Ridge Landfill, Inc.                                                                DE
Central Disposal Systems, Inc.                                                            IA
Central Missouri Landfill, Inc.                                                           MO
Ceriani Cave                                                                             ITALY
Chadwick Road Landfill, Inc.                                                              GA
         Dba Chadwick Road Landfill
Chambers Development Company, Inc.                                                        DE
          Monroeville Landfill
          North Huntington Hauling
Chambers Enterprises, Inc.                                                                PA
Chambers International, Inc.                                                              DE
         Chambers Development Europe B.V.                                                 FOR
         Chambers Europe B.V.                                                             FOR
Chambers Medical Technologies of South Carolina, Inc.                                     SC
         MedTec
         Medical Technologies
Chambers Medical Technologies, Inc.                                                       PA
Chambers of Delaware, Inc.                                                                DE
Chambers of Massachusetts, Inc.                                                           MA
Chambers of Mississippi, Inc.                                                             MS
Chambers of New Jersey, Inc.                                                              NJ
Chambers Services, Inc.                                                                   NY


Chemical Waste Management de Mexico, S.A. de C.V.                                       MEXICO
Chemical Waste Management Ltd.                                                        NEW ZEALAND
Chemical Waste Management of Indiana, L.L.C.                                              DE
Chemical Waste Management of New Jersey, Inc.                                             NJ
Chemical Waste Management of Pennsylvania, Inc.                                           DE
Chemical Waste Management of the Northwest, Inc.                                          WA
Chemical Waste Management, Inc.                                                           DE
         Trade Waste Incineration
Chem-Nuclear Systems, LLC                                                                 DE
Cheshire Sanitation, Inc.                                                                 NH
         Harris Trucking
         Tri-State Rubbish
Chesser Island Road Landfill, Inc.                                                        GA
Chiquita Canyon Landfill, Inc. (fka Laidlaw W. S. (Chiquita)                              CA
CID Landfill, Inc.                                                                        NY
CID MRRF, Inc.                                                                            DE
CID Refuse Service, Inc.                                                                  NY
City Disposal Services, Inc.                                                              DE
City Environmental Services Landfill, Inc. of Florida                                     FL
City Environmental Services Landfill, Inc. of Hastings                                    MI
         City Environmental Services of West Michigan
         City Express
         Hastings Sanitary Service
         Lubbers Resource Systems
City Environmental Services Landfill, Inc. of Lapeer                                      MI
         Pioneer Rock Landfill
City Environmental Services Landfill, Inc. of Panama City                                 MI
City Environmental Services Landfill, Inc. of Saginaw                                     MI
         Saginaw Valley Landfill
City Environmental Services, Inc. of Arecibo                                              MI
City Environmental Services, Inc. of Mid-Michigan                                         MI
         CES-Saginaw
         CES- West Branch
         City Express
City Environmental Services, Inc. of Northern Michigan                                    MI
         City Express
City Environmental Services, Inc. of Romulus                                              MI
         City Express
         Seagate Recycling
         Seagate Sanitation Services
City Environmental Services, Inc. of Waters                                               MI
City Environmental, Inc.                                                                  DE
City Management Corporation                                                               MI
         Adam Refuse
         Brent Run
         CES - Montrose
         City Disposal System
         City Environment
         City Environmental Contracting
         City Environmental
         City Environmental Services East
         City Environmental Services of Montrose
         City Environmental Services of Joilet
         City Equipment Company


         City Express
         City Liquid Treatment and Processing
         City Municipal Services
         City Recycling Center
         City Sand & Landfill
         City Waste Systems
         D&J Refuse Company
         G&G Disposal
         Gary's Disposal
         J.L. Smith Refuse Service
         M&M Contracting of Michigan
         M&M Holding Company, Inc.
         Metro Waste Systems
         Michigan City Management Corporation
         Moore's Disposal
         People's Garbage
         People's Garbage Disposal
         People's Garbage Disposal of Midland/Gladwin
         Pollard Disposal
         Premier Steel
         Raska Disposal
         Seymour Road Demolition
         Seymour Road Landfill
         Soave-Volpe Hauling
         Trashbusters Transfer Station, Ltd.
         United Machinery Movers and Erectors
         Universal Waste & Transit
         Whitefeather Development Company
Clarfield Recycling Ltd.                                                            UNITED KINGDOM
Clayton-Ward Company, Inc.                                                                CA
Clearview Environmental Landfill, Inc.                                                    MS
Cleburne Landfill Company Corp.                                                           AL
Cleburne Landfill Corporation                                                             MI
Clements Waste Services, Inc.                                                             PA
Cloverdale Disposal, Inc.                                                                 CA
CNS Holdings, Inc.                                                                        DE
CNSI Sub, Inc.                                                                            DE
Coast Waste Management, Inc.                                                              CA
Cocopah Landfill, Inc. (fka Southern Sanitation, Inc.)                                    CA
Codemonte Srl                                                                            ITALY
Colorado Landfill, Inc.                                                                   DE
Columbia County Drop Off Box, Inc.                                                        OR
         Forest Grove Disposal Service
         AC Trucking
Colusa Solid Waste & Recycling, Inc.                                                      CA
Condusa Srl                                                                              ITALY
Connecticut Valley Sanitary Waste Disposal, Inc.                                          MA
Conservation Services, Inc.                                                               CO
Container Recycling Alliance, L.P.                                                        DE
Contractor Container Corporation                                                          MI
Copper Mountain Landfill, Inc. (fka Copper State Recycling)                               AZ
Corgest Srl                                                                              ITALY
Corning Disposal Service, Inc.                                                            CA


Corti Fillippo Spa                                                                       ITALY
Coshocton Landfill, Inc.                                                                  OH
Cougar Landfill, Inc. (fka Cougar Holdings)                                               TX
Countryside Landfill, Inc.                                                                IL
County-Wide Disposal, Inc.                                                                CA
Cunningham Properties Limited                                                           ONTARIO
Cuyahoga Landfill, Inc. (fka CRSL)                                                        DE
CWM Cement, Inc.                                                                          DE
CWM Chemical Services, L.L.C.                                                             DE
CWM Resource Recovery, Inc.                                                               OH
D&D Container Services Company, Inc.                                                      UT
Dafter Sanitary Landfill, Inc.                                                            MI
Dakota Landfill, Inc. (fka Big Dipper Enterprises)                                        ND
Dakota Resource Recovery, Inc.                                                            MN
         United Waste Transfer
Dauphin Meadows Landfill, Inc.                                                            PA
Davie Disposal Systems, Inc.                                                              NE
Decker Disposal, Inc.                                                                     FL
Deep Valley Landfill, Inc.                                                                DE
Deer Track Park Landfill, Inc. (fka Sanifill of WI, Inc.)                                 DE
         Advance Service Corp.

DeLand Landfill, Inc.                                                                     DE
Delaware Recyclable Products, Inc.                                                        DE
Deponie Bentheim Entsorgung Verwaltungsgeskellscaft mbH                                 GERMANY
Dickinson Landfill, Inc.                                                                  DE
Disposal Service, Inc.                                                                    NV
         Disposal Services Medical Waste
Disposal Service, Inc.                                                                    WV
Diversified Scientific Services, Inc.                                                     TN
Domenick Pucillo Disposal, Inc.                                                           NJ
Donno Company, Inc.                                                                       NY
Drake's Sanitation, Inc.                                                                  AK
Duluth Waste Marketing, Inc.                                                              MN
Durachem Limited Partnership                                                              MD
Eager Beaver Sanitary Service, Inc.                                                       OR
Earthcorp, L.L.C.                                                                         DE
Earthmovers Landfill, L.L.C.                                                              DE
East Columbia C&D Landfill, Inc.                                                          SC
         (fka TNT Sands, Inc.)
East Liverpool Landfill, Inc.                                                             OH
Eastern Container Corporation                                                             DE
Eastern Environmental Services of Florida, Inc.                                           FL
Eastern Environmental Services of Indiana, Inc.                                           DE
Eastern Environmental Services, Inc.                                                      DE
Eastern of Georgia, Inc. (formerly Pearless Waste Industries)                             DE
Eastern Recycling of NJ, Inc,                                                             DE
Eastern Transfer of New York, Inc.                                                        DE


Eastern Waste of Bethlehem, Inc.                                                          DE
Eastern Waste of LI, Inc.                                                                 DE
Eastern Waste of New York, Inc.                                                           DE
Eastern Waste of NJ, Inc.                                                                 DE
Eastern Waste of Pennsylvania, Inc.                                                       DE
Eastern Waste of West Virginia, Inc.                                                      DE
EC Waste, Inc.                                                                            PR
Eco West Corporation                                                                      MT
Ecoadda                                                                                  ITALY
Ecocamuna Spa                                                                            ITALY
Ecocentro s.p.a.                                                                         ITALY
Eco-Consult s.r.l.                                                                       ITALY
Ecol S.A.                                                                              ARGENTINA
Ecologia meridoionale Srl                                                                ITALY
Ecologica Srl                                                                            ITALY
Ecology Systems, Inc.                                                                     NJ
Ecolombardia 21 Srl                                                                      ITALY
Ecopi Srl                                                                                ITALY
Ecoserve Limited                                                                       HONG KONG
Ecoservice Srl                                                                           ITALY
Ecoservizi S.p.A.                                                                        ITALY
Ecovision B.V.                                                                        NETHERLANDS
EESI Charter, Inc.                                                                        DE
Egdemere Development, Inc.                                                                NY
Eksjo Rehallning AB                                                                     SWEDEN
El Coqui de San Juan                                                                      PR
El Coqui Landfill Company, Inc.                                                           PR
El Coqui Waste Disposal, Inc.                                                             DE
El Coqui Waste Disposal, Inc.                                                             PR
                  EC Waste, Inc.                                                          PR
El Dorado Disposal Service, Inc.                                                          CA
Elk River Landfill, Inc.                                                                  MN
Elme Transport AB                                                                       SWEDEN
EMICA S.r.1.                                                                             ITALY
EMIG Trailer Sales, Inc.                                                                  PA
Empire Wrecking Corporation                                                               NJ
Envirofil, Inc.                                                                           DE
Enviroland, Incorporated                                                                  MI
Environmental Control, Inc.                                                               NM
Environmental Management Systems, Inc. (MI)                                               MI
         Sumpter II Corp.
Environmental Technologies China Ltd.                                                  HONG KONG
Environmental Transfer Corp.                                                              NJ
Environmental Transfer Corporation                                                        DE
Enviropace Ltd.                                                                        HONG KONG
Equipment Credit Corporation                                                              DE
ERC Landfill, Inc. (fka Environmental Restoration)                                        OH


ESG Entsorgungswirtschaft Soest GmbH                                                    GERMANY
Esposito Srl                                                                             ITALY
Ever Ready Drop Box                                                                       CA
Evergreen Landfill, Inc.                                                                  DE
Farmer's Landfill, Inc.                                                                   MO
Feather River Disposal, Inc.                                                              CA
Fernley Disposal, Inc.                                                                    NV
         Churchill County Refuse Service
         Fernley Sanitation
FFF, Inc.                                                                                 MN
Fibre Fuel Limited                                                                  UNITED KINGDOM
First Waste Ltd. (Guernsey)                                                         UNITED KINGDOM
Fourth Avenue Holdings                                                                    FL
Frank Stamato & Co.                                                                       NJ
Freeth & Brocks Bins Ltd.                                                             NEW ZEALAND
Front Range Landfill, Inc. (fka Sanifill of CO)                                           DE
         Best Trash
         City Disposal
         ERD Landfill
         Franklin Street Transfer
Frontier Environmental, Inc.                                                              FL
Future-Tech Environmental Services, Inc.                                                  CA
G.C. Environmental, Inc.                                                                  TX
G.I. Industries, Inc.                                                                     UT
G.S.A. Scarl Srl                                                                         ITALY
GA Landfills, Inc.                                                                        DE
Gallia Landfill, Inc.                                                                     DE
Garnet of Maryland, Inc.                                                                  MD
Gebr. Van Vliet B.V.                                                                  NETHERLANDS
Gedis Srl                                                                                ITALY
General Nuclear Systems, Inc.                                                             DE
General Sanitation Corporation                                                            FL
Georgia Waste Systems, Inc.                                                               GA
         B.J. Recycling and Disposal Facility
         Chapman Waste Disposal
         Rolling Hills Recycling and Disposal Facility
         Waste Management of Augusta- Aiken
         Waste Management of Atlanta
         Waste Management of Macon
GES Gesallschaft zur Entdorgung von Sekundaerrohstoffen mbH                             GERMANY
Gesam Gestione Servizi Ambientali S.p.A.                                                 ITALY
Gestion Des Rebuts D.M.P. Inc.                                                          QUEBEC
         WMI Mauricie Bois- Franc
         WMI Parc Hirondelles
Gestioni Ambientali, Srl                                                                 ITALY
GI Industries, Inc.                                                                       UT
Glegg Industries, Inc.                                                                  ONTARIO
Glenn County Disposal Service, Inc.                                                       CA
Glen's Sanitary Landfill, Inc.                                                            MI
Graham Road Recycling & Disposal Facility, Inc. (Sanifill of WA)                          WA


Grand Blanc Landfill, Inc.                                                                MI
Grand Central Sanitary Landfill, Inc.                                                     PA
Greater Manchester Sites Ltd.                                                       UNITED KINGDOM
Green Valley Landfill Limited                                                          HONG KONG
Greenfield WMI Transfer Limited                                                        HONG KONG
Greenhills Landfill Restoration Limited                                                HONG KONG
Grupo WMX, S.A. De C.V.                                                                 MEXICO
Guang Jia Environmental Protection Co. Ltd.                                            HONG KONG
Guyan Transfer and Sanitation Service, Inc.                                               WV
H.B.J.J., Incorporated                                                                    CA
H.S.S. Inc.                                                                               NJ
Ham Lake Haulers, Inc.                                                                    MN
Hamm's Sanitation, Inc.                                                                   NJ
Harford Disposal, Inc.                                                                    MD
Harper Employment Services, Inc.                                                          MI
Harris Sanitation, Inc.                                                                   FL
Harwood Landfill, Inc. (fka PST Reclamation)                                              MD
Hedco Landfill Limited                                                              UNITED KINGDOM
Hillsboro Landfill, Inc.                                                                  OR
Hillside Maintenance Corporation                                                          NJ
Hite Construction, Inc.                                                                   AK
Hollander Industriediensten Amsterdam BV                                              NETHERLANDS
Hollister Disposal, Inc.                                                                  CA
Holyoke Sanitary Landfill, Inc.                                                           MA
Hoot Landfill, L.L.C.                                                                     DE
Hudson Jersey Sanitation Co.                                                              NJ
Ibka Miljoservice A/S                                                                   DENMARK
Ichochema B.V.                                                                        NETHERLANDS
Icopower B.V.                                                                         NETHERLANDS
Icosloop B.V.                                                                         NETHERLANDS
Icotech                                                                               NETHERLANDS
Icova B.V.                                                                            NETHERLANDS
Icova Maltha Glasracylcing B.V.                                                       NETHERLANDS
IGM S.p.A.                                                                               ITALY
IN Landfills, L.L.C.                                                                      DE
Independent Disposal Services, Inc.                                                       CA
Independent Sanitation Company                                                            NV
         Incline Sanitation
Interport Paper Company Limited                                                     UNITED KINGDOM
Interstate Recycling Corporation                                                          NJ
IRA S.r.1.                                                                               ITALY
J Bar J Land, Inc.                                                                        NE
J&S Sanitation, Inc.                                                                      PA
J. van Loenen en Zonen B.V.                                                           NETHERLANDS
Jaarstveld Groen En Milieu B.V.                                                       NETHERLANDS
Jahner Sanitation, Inc.                                                                   ND
Jay County Landfill, L.L.C.                                                               IN


Jefferson County Landfill, L.L.C.                                                         DE
John B. & Sons, Inc.                                                                      NJ
John Smith Landfill, Inc.                                                                 CA
Johnson Canyon Road Disposal Site, Inc.                                                   CA
Jolon Road Landfill Corporation                                                           CA
Jones Sanitation, L.L.C.                                                                  DE
Junker Sanitation Services, Inc.                                                          MN
         United Waste Systems of Minnesota
Jydsk Milijoservice A/S                                                                 DENMARK
K and W Landfill, Inc.                                                                    MI
KAB-WMI Sdn. Bhd                                                                       MALAYSIA
Kahle Landfill, Inc.                                                                      MO
Keene Road Landfill, Inc.                                                                 FL
Kelley Run Hauling, Inc.                                                                  DE
Kelly Run Sanitation, Inc.                                                                PA
Kennedy & Donkin (Middle East) Limited                                                  CYPRUS
Kennedy & Donkin Africa (Botswana) Partnership                                         BOTSWANA
Kennedy & Donkin Africa (Malawi) Partnership                                            MALAWI
Kennedy & Donkin Building Services Limited                                          UNITED KINGDOM
Kennedy & Donkin Generation & Industrial Limited                                    UNITED KINGDOM
Kennedy & Donkin Information Systems Ltd.                                           UNITED KINGDOM
Kennedy & Donkin International Ltd.                                                    HONG KONG
Kennedy & Donkin Ltd.                                                               UNITED KINGDOM
Kennedy & Donkin Malaysia Ltd.                                                            DE
Kennedy & Donkin Overseas Ltd.                                                      UNITED KINGDOM
Kennedy & Donkin Power Ltd.                                                         UNITED KINGDOM
Kennedy & Donkin Quality Engineering                                                UNITED KINGDOM
Kennedy & Donkin Systems Control Ltd.                                               UNITED KINGDOM
Kennedy & Donkin Transportation Ltd.                                                UNITED KINGDOM
Ken's Pickup Service, Inc.                                                                MI
         United Waste Systems of Northern Michigan
Kershaw County Landfill, Inc.                                                             SC
         (fka USA Waste Kershaw County, Landfill, Inc.)
Kimmins Recycling Corporation                                                             FL
King George Landfill, Inc. (fka Garnet of VA)                                             VA
Klamath Disposal, Inc.                                                                    OR
Klok Containers B.V.                                                                  NETHERLANDS
Knutson Material Recovery Facility, Inc.                                                  MN
Knutson Services, Inc.                                                                    MN
         Knutson Kleen Sweep
L&K Debris Box Service                                                                    CA
         L & K Disposal
L&M Landfill, Inc.                                                                        DE
Laidlaw Waste Systems (Valley View), L.L.C.                                               DE
Land Reclamation Company, Inc.                                                            DE
         Kestrel Hawk Park Landfill
Landfill of Union County, L.L.C.                                                          DE
Landfill Services of Charleston, Inc. (fka WVA Waste Services)                            WV
Landfill Systems, Inc.                                                                    NM


         Landfill Systems
Larry's Sanitary Service, Inc.                                                            CA
Lassen Waste Lines, Inc.                                                                  CA
Lassen Waste Systems, Inc.                                                                CA
Laurel Highlands Landfill, Inc.                                                           PA
Laurel Ridge Landfill, L.L.C.                                                             DE
LCS Services, Inc.                                                                        WV
         LCS Landfill
         North Mountain Landfill
Leroy Brown Landfill, Inc. (fka Envirofil of IL)                                          IL
Lewis Road Disposal Site, Inc.                                                            CA
LFG Production (Partnership)                                                              DE
LG-Garnet of Maryland JV                                                                  DC
         (LG Industries, Inc. owns 50 % and LG-Garnet of Maryland Joint
         Venture owns 50%)
         DC U line Transfer
Liberty Landfill, L.L.C.                                                                  DE
Liquid Waste Management, Inc.                                                             CA
Living Earth Joint Venture Company Ltd.                                               NEW ZEALAND
Ljungby Renhallning & Transport AB                                                      SWEDEN
Ljusne Renhallnings AB                                                                  SWEDEN
Local Sanitation of Rowan County, L.L.C.                                                  DE
Lo-Cost Waste Disposal, Inc.                                                            ALBERTA
Lodi Sanitary City Disposal Co., Inc.                                                     CA
Longview Group, Inc.                                                                      DE
Longview of Buchanan County, Inc.                                                         MO
Longview of Kansas City, Inc.                                                             MO
Longview of Livingston County, Inc.                                                       MO
Longview of Mercer County I, Inc.                                                         NJ
Longview of Mercer County, Inc.                                                           NJ
Longview of Mid-Missouri, Inc.                                                            MO
Longview of Ocean County, Inc.                                                            NJ
Longview of Pettis County, Inc.                                                           MO
Longview of St. Joseph, Inc.                                                              MO
Loristan Services Limited                                                           UNITED KINGDOM
M&O Waste Management Limited Partnership                                                  IL
M.P.S. Medical Package Service srl                                                       ITALY
M.S.T.S. , Limited Partnership                                                            DE
M.S.T.S., Inc.                                                                            DE
Maack Enterprises                                                                         NV
Mahoning Landfill, Inc.                                                                   OH
Malardalens Tankservice AB                                                              SWEDEN
Manliba SA                                                                             ARGENTINA
Maplewood Landfill, Inc. (fka Chambers Energy)                                            VA
Marangi Brothers, Inc.                                                                    NJ
Mashor & Reym Charters Sdn. Bhd Brunei                                                NETHERLANDS
Mashor Reym Sdn Shd Malaysia                                                          NETHERLANDS
Mashr & Reym Charters Sdn Bhd                                                           BRUNEI


Massachusetts Refusetech, Inc.                                                            DE
McDaniel Landfill, Inc.                                                                   ND
McGinnes Industrial Maintenance Corp.                                                     TX
Meadowfill Landfill, Inc.                                                                 DE
Megastock, Ltd.                                                                     UNITED KINGDOM
Michigan Environs, Inc.                                                                   MI
         United  Waste Systems of Menominee
Mid Valley Portable Storage, Inc.                                                         CA
Middle Island Enterprises, Inc.                                                           WV
Middlemass Holdings Pty Limited                                                        AUSTRALIA
Middlemass Industrial Services Pty Limited                                             AUSTRALIA
Midwest Transport, Inc.                                                                   WI
Minneapolis Refuse, Incorporated (23.826%-owned)                                          MN
Missouri Disposal Partners, L.P.                                                          IL
M-L Commercial Garbage Service, Inc.                                                      WV
M-Land Corp                                                                               NY
Monmouth Processing Company                                                               NJ
Moor Refuse, Inc.                                                                         CA
Mountain Indemnity Insurance Company                                                      VT
Mountainview Landfill, Inc. (fka Chambers of MD)                                          MD
MSTS. Lizenz GmbH                                                                       GERMANY
Mull Entsorgung West GmbH & Co. KG                                                      GERMANY
Mull Entsorgung West Verwaltungs GmbH                                                   GERMANY
Municipal Waste and Service Corp.                                                         MI
Napa Garbage Service, Inc.                                                                CA
Napa Valley Disposal Service, Inc.                                                        CA
Nassjo Renhallning AB                                                                   SWEDEN
National Guaranty Insurance Company                                                       VT
National Seal Company                                                                     IL
Neal Road Landfill Corporation                                                            CA
Neotec Srl                                                                               ITALY
Nevada City Garbage Service, Inc.                                                         CA
Nevada County Transfer, Inc.                                                              CA
New England CR, Inc.                                                                      MA
New Milford Landfill, L.L.C.                                                              DE
NH/VT Energy Recovery Corporation                                                         NH
Nichols Sanitation, Inc.                                                                  FL
         Lake Placid Sanitation
North Broward County Resource Recovery Project, Inc.                                      FL
North Broward Holdings, Inc.                                                              DE
North Hennepin Recycling & Transfer Corporation                                           MN
North Valley Disposal Service, Inc.                                                       CA
Northeast Hauling Company, Inc.                                                           NJ
Northeast Waste Systems, Inc.                                                             CT
Northern Recycling, Inc.                                                                  NY
Northwestern Landfill, Inc.                                                               DE
Norwaste Limited                                                                    UNITED KINGDOM


Norwaste, Inc.                                                                            AK
NRT Realty Corp.                                                                          NY
NSC Corporation                                                                           MA
NSC Sales Corp                                                                            VA
Nu-Way Live Oak Landfill, Inc. (fka Sanifill of CA)                                       DE
NYOFCO Holdings, Inc.                                                                     DE
O.V.E.R. s.r.1.                                                                          ITALY
Oak Grove Landfill, Inc.                                                                  DE
Oakridge Landfill, Inc. (fka Chambers Oakridge LF)                                        SC
Oakwood Landfill, Inc. (fka Pinewood Recycling)                                           SC
Ocean Combustion Service, B.V.                                                        NETHERLANDS
OHM Corporation                                                                           OH
Oil & Solvent Process Company                                                             CA
Okeechobee Landfill, Inc. (fka Chambers W.S. of FL)                                       FL
Olney Sanitary System, Inc.                                                               IL
Olshan Demolishing Company, Inc.                                                          TX
Olson's Sanitation Service, Inc.                                                          WA
Olympic View Sanitary Landfill, Inc.                                                      WA
Orange County Landfill, Inc. (fka Chambers Orange Co. LF)                                 FL
Ormsby Sanitary Landfill, Inc.                                                            NV
P.I.T.E.F. S.r.1.                                                                        ITALY
Pacific Environmental Partners                                                        NEW ZEALAND
Pacific Waste Alternatives, Inc.                                                          CA
Pacific Waste Management Holdings Pty. Limited.                                        AUSTRALIA
Pacific Waste Management Ltd.                                                         NEW ZEALAND
Pacific Waste Management Pte. Ltd.                                                     SINGAPORE
Pacific Waste Management Pty Limited                                                   AUSTRALIA
Palo Alto Sanitation Company                                                              CA
Paper Recycling International, L.P.                                                       DE
Pappy, Inc.                                                                               MD
Paradise Solid Waste Systems, Inc.                                                        CA
Pearl Delta WMI Limited                                                                HONG KONG
Peerless Landfill Company                                                                 FL
Peninsula Sanitation, Inc.                                                                AK
Penn Warner Club, Inc.                                                                    DE
Pen-Rob, Inc.                                                                             AZ
Penuelas Valley Landfill, Inc.                                                            PR
People's Landfill, Inc.                                                                   DE
Peterson Demolition, Inc.                                                                 MN
Phoenix Resources, Inc.                                                                   PA
Photodigit Ltd.                                                                     UNITED KINGDOM
Piacenza Amb. Srl.                                                                       ITALY
Pikes Point Transfer Station Ltd.                                                     NEW ZEALAND
Pilmuir Waste Disposal Limited                                                      UNITED KINGDOM


Pine Bluff Landfill, Inc. (fka Sanifill/Pine Bluff LF)                                    GA
Pine Grove Hauling, Inc.                                                                  PA
Pine Grove Landfill, Inc.                                                                 DE
Pine Grove Landfill, Inc.                                                                 PA
Pine Grove, Inc.                                                                          DE
Pine Ridge Landfill, Inc.                                                                 DE
Pine Tree Acres, Inc.                                                                     MI
         S&V Disposal
PPK Environmental & Infrastructure Pty. Ltd.                                           AUSTRALIA
Practical Recycling Systems Ltd.                                                    UNITED KINGDOM
Progesam Ecosistemi Srl                                                                  ITALY
PT Prtasada Painunah Limbah Industri                                                   INDONESIA
PT Waste Management Indonesia                                                          INDONESIA
Public Sanitary Service, Inc.                                                             OR
Pucillo and Companies Environmental Recovery, Inc.                                        NJ
Pulaski Grading, Inc.                                                                     KY

Pullman Chimney of Canada Ltd.                                                          CANADA
Pullman Power Products Corporation                                                        DE
Pullman Power Products International Corporation                                          DE
Pullman Power Products of Canada Limited                                                CANADA
Pullman Power Products of Ohio, Inc.                                                      OH
PWMH Affiliates Superannuation Fund Pty Limited                                        AUSTRALIA
Quail Hollow Landfill, Inc.                                                               DE
R A Johnson (Hauliage) Ltd.                                                             ENGLAND
R&A Bender, Inc.                                                                          PA
R&B Landfill, Inc. (fka Chambers R&B LF)                                                  GA
R.S.W. Recycling, Inc.                                                                    NV
RA Johnson (Haulage) Ltd.                                                           UNITED KINGDOM
Rail-Cycle L.P.                                                                           CA
Randers Omlast Aps                                                                      DENMARK
RCC Fiber Company, Inc.                                                                   DE
RCI Hudson, Inc.                                                                          MA
         United Waste Systems of Hudson
RECO Venture, L.P. (45%)                                                                  DE
Recuperi Piemontesi Srl                                                                  ITALY
Recycle & Recover, Inc.                                                                   GA
Recycle New Zealand Ltd.                                                              NEW ZEALAND
Recycling Works, Inc.                                                                     PA
Re-Cy-Co, Inc.                                                                            MN
         United Waste Transfer
Red Bluff Disposal, Inc.                                                                  CA
Redwood Landfill, Inc.                                                                    DE
Refuse Disposal, Inc.                                                                     WV
Refuse Removal Systems, Inc.                                                              CA
Refuse Services, Inc.                                                                     FL
         Clay County Recycling and Disposal Facility
         Jacksonville Waste Control
Refuse, Inc.                                                                              NV


         Sage Street Transfer Station
         Stead Street Transfer Station
Regin B.V.                                                                            NETHERLANDS
Regional Recycling Corporation                                                            NJ
Regional Recycling, Inc.                                                                  NY
REI Holdings, Inc.                                                                        DE
Reliable Landfill, L.L.C.                                                                 DE
Reliable Trash Hauling, Inc.                                                              FL
Remote Landfill Services, Inc.                                                            TN
Reno Disposal Co.                                                                         NV
         Reno Sanitation Company
         Sparks Sanitation
Renovadan Miljoservice A/S                                                              DENMARK
Rent-a-Weld (Wirral) Ltd.                                                           UNITED KINGDOM
Resco Holdings, Inc.                                                                      DE
Residential Services, Inc.                                                                NY
Residuals Processing, Inc.                                                                CA
Residuos Industriales Multiquim, S.A. de C.V.                                           MEXICO
Resource Control Composting, Inc.                                                         MA
Resource Control, Inc.                                                                    MA
Reuter Recycling of Florida, Inc.                                                         FL
Reym B.V.                                                                             NETHERLANDS
Reym GmbH                                                                             NETHERLANDS
Richland County Landfill, Inc. (fka Chambers Richland Co. LF)                             SC
Ridge Generating Station Limited Partnership
Ri-Eco S.r.1.                                                                            ITALY
RIH Inc.                                                                                  DE
Riley Energy Systems of Lisbon Connecticut Corp.                                          CT
Riley Energy Systems of Lisbon Corporation                                                DE
RIS Risk Management Inc.                                                                  DE
Riverbend Landfill, Inc.                                                                  OR
Rolling Meadows Landfill, L.L.C.                                                          DE
Ross County Landfill, Inc.                                                                DE
RRT Design & Construction Corp                                                            DE
RRT Empire Returns Corp. of Monroe County, Inc.                                           NY
RRT of Broome, Inc.                                                                       DE
RRT of New Jersey, Inc.                                                                   NJ
RRT of Pennsylvania, Inc.                                                                 PA
RRT of Philadelphia, Inc.                                                                 DE
RRT Plastics Corporation                                                                  DE
RRT Recycling Associates of North Carolina, Inc.                                          NC
RRT-Recycle America, Inc.                                                                 DE
RTS Landfill, Inc. (fka Sanifill of GA)                                                   DE
         Del Mar Virginia District
         Plant Atkinson Transfer Station
         South Side Sanitation
         Starr Tranfer Station
Rudolph Beck & Sohne Aktiengesellschaft                                                 AUSTRIA
Rural Dispos-all Service, Inc.                                                            CA


Rust Capital Corporation                                                                  DE
Rust China Ltd                                                                            DE
Rust Controldua, S.A. De C.V.                                                             MX
Rust Engineering & Construction Inc.                                                      DE
Rust Federal Environmental Services Inc.                                                  DE
Rust Industrial Cleaning Inc.                                                             DE
Rust International Holdings Inc.                                                          DE
Rust International Inc.                                                                   DE
Rust JRP Pty Ltd.                                                                      SINGAPORE
Rust Limited                                                                        UNITED KINGDOM
Rust North America Holdings Inc.                                                          DE
Rust Remedial Services Holding Company Inc.                                               DE
Rust Sweden Holdings A B                                                                SWEDEN
S&J Landfill, Limited Partnership                                                         TX
S&L Total Waste Systems, Inc.                                                             NV
S&S Grading of Illinois, Inc.                                                             IL
S&S Grading, Inc.                                                                         WV
S.A.P. s.p.a.                                                                            ITALY
S.A.R.I. S.p.A.                                                                          ITALY
S.A.R.I. spa                                                                             ITALY
S.A.S.P.I. S.p.A.                                                                        ITALY
S.I.R.T.I.S. s.r.1.                                                                      ITALY
S.P.E.M. S.p.A.                                                                          ITALY
S.V. Farming Corp.                                                                        NJ
Sa Ge Ter Spa                                                                            ITALY
Sacagica s.r.l.                                                                          ITALY
Sacramento Valley Environmental Waste Company                                             CA
Saframa S.A.                                                                           ARGENTINA
Sakab Batteri B                                                                         SWEDEN
Salinas Disposal Service, Inc.                                                            CA
Saline County Landfill, Inc.                                                              IL
Salutec, S.A.                                                                          ARGENTINA
Sanifill Canada, Inc.                                                                     CDN
Sanifill de Mexico (US), Inc.                                                             DE
         Sanifill de Mexico, S.A. de C.V.                                                 MX
                  AceVerde S.A. de C.V.                                                   MX
                  AceVerde Servicios, S.A. de C.V.                                        MX
Sanifill Forest Products, Inc.                                                            CA
Sanifill of Florida, Inc.                                                                 FL
Sanifill of Hawaii, Inc.                                                                  DE
Sanifill of San Juan, Inc.                                                                PR
         El Coqui de San Juan (JV Partnership) (PR) (50% by
         EC Inc. and 50% by Sanifill of San Juan, Inc.)
Sanifill of Tennessee Hauling, Inc.                                                       TN
Sanifill of Tennessee, Inc.                                                               DE
Sanifill of Texas Hauling, Inc.                                                           TX
Sanifill Power Corporation                                                                DE
         RECO Ventures, L.P. (DE) (49% owned by Sanifill
         Power Corporation)


Sanifill, Inc.                                                                            DE
         Frontier Recycling
         Orange Soil Cement
         Orange Transportation
         Orange Trucking
         Orange Waste Landfill
         Orange Waste Transfer Station
         Pine Ridge Landfill
SC Holdings, Inc.                                                                         PA
         L&D Landfill
         Sanitary Landfill
SCA Services, Inc.                                                                        DE
         Mohawk Valley Sanitary Landfill
SCS Contractors Ltd.                                                                UNITED KINGDOM
Serecol Srl                                                                              ITALY
Servizi Piemonte S.r.1.                                                                  ITALY
SES Connecticut Inc.                                                                      DE
SF, Inc.                                                                                  DE
         Southern Services of TN, LLC (TN) (50% owned by
         SF, Inc.)
Shade Landfill, Inc.                                                                      DE
Shereg Schleswig Holsteinische Entsorgung u. Recycling GmbH                             GERMANY
Shore Disposal, Inc.                                                                      VA
Shoreline Disposal, Inc.                                                                  CA
SIE Srl                                                                                  ITALY
Sierra Estrella Landfill, Inc. (fka USA of Pinal County) (D)                              AZ
Signal Capital Sherman Station Inc.                                                       DE
Signal RESCO, Inc.                                                                        DE
Sir-Mas Srl                                                                              ITALY
Skaraborgs Energi-Och Mijo AB                                                           SWEDEN
SMC Smaltimenti Controllati S.p.a.                                                       ITALY
Smyrna Landfill, Inc. (fka Chambers Smyrna LF)                                            GA
Sofind Srl                                                                               ITALY
Solna Transport & Renhallnning AB                                                       SWEDEN
Sonoma Marin Waste Management, Inc.                                                       CA
Sonoma West Marin Recycling, Inc.                                                         CA
South Broward County Resource Recovery Project, Inc.                                      FL
South Broward Holdings Inc.                                                               DE
South China WMI Transfer Limited                                                       HONG KONG
Southern Alleghenies Landfill, Inc.                                                       PA
         Altoona Transfer Station
         American Recycling
Southern Plains Landfill, Inc.                                                            OK
Southern Services of TN, L.L.C.                                                           TN
Southern Services of TN, L.P. (50/50 w/Sanifill)                                          TN
Southern Waste Services, L.L.C.                                                           DE
Specialized Recycling Technologies                                                        NJ
Spruce Ridge Landfill, Inc.                                                               MN
Spruce Ridge, Inc.                                                                        MN
Star Sanitation Services, Inc.                                                            AK


Stockton Scavengers Association                                                           CA
Storey County Sanitation, Inc.                                                            NV
Strawser Disposal Services, Inc.                                                          PA
Suffolk Waste Systems, Inc.                                                               NY
Summit Environmental Group, Inc.                                                          PA
Summit Transport Group, Inc.                                                              PA
Sun Waste Alternatives, Inc.                                                              CA
Super Kwik, Inc.                                                                          PA
Svensk Avfallskonvertering AB                                                           SWEDEN
Swindell-Dressler Energy Supply Company                                                   DE
Swindell-Dressler Leasing Company                                                         DE
Sylvan & Qvibelius AB                                                                   SWEDEN
Sylvans Kemiteknik AB                                                                   SWEDEN
T. R. Walters Investments, Inc.                                                           CA
Tactical Management, Inc.                                                                 NJ
Techim S.r.1.                                                                            ITALY
The H. Sienknecht Company                                                                 TN
The Rust Engineering Company of Michigan                                                  MI
The Woodlands of Van Buren, Inc.                                                          DE
Thoroughbred Leasing, Inc.                                                                PA
TMS Recycling, Inc.                                                                       NV
Tonitown Landfill, L.L.C.                                                                 DE
Town & Country Refuse, Inc.                                                               FL
         Port-O-Let
Tra. S.E. s.p.a.                                                                         ITALY
Trade & Domestic Ltd.                                                                 NEW ZEALAND
Trade Domestic (1997) Ltd.                                                            NEW ZEALAND
Trail Ridge Landfill, Inc.                                                                FL
Transamerican Environmental, Inc.                                                         FL
Transamerican Waste Central Landfill, Inc.                                                DE
TransAmerican Waste Industries of Alabama, Inc.                                           AL
Transamerican Waste Industries of Ohio, Inc.                                              DE
Transamerican Waste Industries of Southeast, Inc.                                         DE
Transamerican Waste Industries, Inc.                                                      DE
Transamerican Waste of Houston, Inc.                                                      TX
Transmetro SA                                                                          ARGENTINA
Transportbedrijf Van Bliet B.V.                                                       NETHERLANDS
Transpsro, Inc.                                                                           NJ
TransWaste, Inc.                                                                          LA
Trash Hunters of Tunica, Inc.                                                             MS
Trash Hunters, Inc.                                                                       MS
Trepic SA                                                                              ARGENTINA
Tri-County Sanitary Landfill, L.L.C.                                                      DE
Tri-State Recycling & Fibers, Inc.                                                        NJ
TVG Transport u. Verwertungsgesellschaft                                                GERMANY
Twin City Sanitation, Inc.                                                                MN
Tyneside Waste Paper Co Ltd.                                                        UNITED KINGDOM


UK Waste Management Limited                                                         UNITED KINGDOM
Ulster County Roll-Offs, Inc.                                                             NY
Ulster Sanitation, Inc.                                                                   NY
United Waste Systems Leasing, Inc.                                                        MI
United Waste Systems of Gardner, Inc.                                                     MA
United Waste Systems of Iowa, Inc.                                                        IA
United Waste Systems of Maine, Inc.                                                       DE
United Waste Systems of Minneapolis, Inc.                                                 MN
United Waste Systems of Minnesota, Inc.                                                   MN
         Bellaire Sanitation
         Gallagher's Service
         J.J. Young Rubbish
         Lake Sanitation
         Mike's Disposal and Recycling Service
         UWS
         UWT
United Waste Systems of Onaway, Inc.                                                      MI
United Waste Systems of the Eastern UP, Inc.                                              MI
United Waste Systems of Trinity County, Inc.                                              CA
United Waste Systems, Inc. (MI)                                                           MI
United Waste Systems, Inc. (MN)                                                           MN
         Mike's Disposal & Recycling Service
United Waste Transfer, Inc.                                                               MN
Universal Assurance Corporation                                                           VT
USA Crinc, Inc.                                                                           DE
USA Landfills of Nevada, Inc.                                                             NV
USA South Hills Landfill, Inc.                                                            PA
USA Valley Facility, Inc.                                                                 DE
USA Waste Arizona Landfill, Inc. (fka Sanifill of AZ)                                     DE
USA Waste Geneva Landfill, Inc. (fka Sanifill of OH)                                      OH
         USA Waste of Ashtabula
USA Waste Hauling of Philadelphia, Inc.                                                   DE
USA Waste Industrial Services, Inc.                                                       TX
         USA Environmental Services
USA Waste Landfill Operations and Transfer, Inc. (fka Sanifill...)                        TX
USA Waste- Management Resources, L.L.C.                                                   NY
USA Waste of Alaska, Inc.                                                                 DE
USA Waste of California, Inc.                                                             DE
USA Waste of Connecticut, Inc.                                                            DE
USA Waste of DC, Inc. (fka LG Industries, Inc.)                                           DC
USA Waste of Illinois, Inc. (fka USA Illinois Newco)                                      IL
USA Waste of Kentucky, L.L.C.                                                             DE
USA Waste of Maryland, Inc. (fka Sanifill of MD)                                          MD
         A.R.D. Equipment, Inc.
         ARD Equipment Leasing Co., L.L.C.
         Debris Disposers, Ltd.
         Lowery's Trash Removal & Services
USA Waste of Massachusetts, Inc.                                                          MA
         Westcott Disposal
USA Waste of Michigan, Inc. (fka Phillips Env. (MI))                                      MI
USA Waste of Minnesota, Inc. (fka Sanifill of MN Hauling)                                 MN


         Kato Sanitation.Northwest Valley
         Meeker County Transfer Station
         West Side Hauling
USA Waste of Mississippi, Inc. (fka Chambers WS of MS)                                    MS
USA Waste of Montana, Inc. (fka Rozel Corp.)                                              MT
USA Waste of Nevada, Inc.                                                                 DE
USA Waste of New Jersey, Inc. (fka Chambers WS of NJ)                                     NJ
         Atlantic City Hauling
         Bergen County Transfer Station
         Burlington County Landfill
USA Waste of New York City, Inc                                                           DE
         Marshall's Refuse, Inc.
         North Hempstead Transfer
USA Waste of Ohio, Inc.                                                                   OH
         Johnson Disposal
         Johnson Disposal Transfer & Recycling Facility
         Mound Transfer Station
         Northern Ohio Waste Systems
         Reliable Sanitation
         Sanitary Commercial Services
USA Waste of Oregon, Inc.                                                                 OR
         Alpine Disposal & Recycling
         Energy Reclamation
         Forest Grove Transfer Station
         Klamath Disposal
         Metropolitan Disposal & Recycling
         Mt. Hood Refuse
         Sandy Transfer Station
USA Waste of Pennsylvania, Inc.                                                           PA
         Helmick's Sanitation and General Hauling
         Kittinning Transfer Station
         LeHigh Hauling
         Mainline Sanitation
         Tri-Valley Recycling
         Tri-Valley Waste Systems
         USA Waste of Harrisburg
USA Waste of Rhode Island, Inc. (fka Chambers WS of RI)                                   DE
USA Waste of Tennessee, Inc. (fka Chambers of TN)                                         TN
         Nashville Hauling
         Nashville Transfer
USA Waste of Texas Landfills, Inc.                                                        DE
USA Waste of Virginia Landfills, Inc. (fka Sanifill of VA)                                DE
         Bethel Landfill
         Bushrod Disposal Service
         James City County Transfer
         Qualla Road Landfill
USA Waste of Virginia, Inc. (fka Chambers Devlp of VA)                                    VA
USA Waste of West Virginia, Inc. (fka Chambers of WVA)                                    WV
USA Waste Recycling of New Jersey, Inc. (fka Safety Recycling)                            NJ
         Safety Recycling
USA Waste Services North Carolina Landfills, Inc.                                         DE
         Anson Road Landfill
         Coble Road Landfill
USA Waste Services of Nevada, Inc.                                                        NV
USA Waste Services of NYC, Inc.                                                           DE
USA Waste Services of Western Illinois, Inc.                                              IL


USA Waste Services-Hickory Hills, L.L.C.                                                  DE
USA Waste Transfer of New Jersey, Inc. (fka Ellesor)                                      NJ
USA Waste Transfer of Philadelphia, Inc.                                                  PA
UWS Barre, Inc.                                                                           MA
UWS of Rhode Island, Inc.                                                                 RI
         Truk-Away of R.I.
UWS Transport, Inc.                                                                       DE
         Container Service
         Waste Control
         Wasteco
V&W Investments, Inc.                                                                     CA
VAI  VA Projekt AS                                                                      SWEDEN
Valdenza Srl                                                                             ITALY
Valley Garbage Service, Inc.                                                              WA
Van Len Recycling B.V.                                                                NETHERLANDS
Van Loenen Millieu B.V.                                                               NETHERLANDS
Van Loenen Transport en Verhuur B.V.                                                  NETHERLANDS
Vanerborgs Stadbudsbyra AB                                                              SWEDEN
VAR Projekt AS                                                                          SWEDEN
VE-Part S.r.1.                                                                           ITALY
Vern's Refuse Service, Inc.                                                               ND
Vinton county Sanitary Facility, Inc.                                                     DE
Vliko B.V.                                                                            NETHERLANDS
W. van Loenen Beheer B.V.                                                             NETHERLANDS
W/W Risk Management, Inc.                                                                 DE
Wallkill Recyclable Products, Inc.                                                        DE
Wallkill/Mid-Hudson Development Co., L.L.C.                                               NY
Walters and Vann, Inc.                                                                    CA
         Winton Disposal
Warner Company                                                                            DE
         Warner West
         Warner East
Warren Waste Transfer, Inc.                                                               MI
Wasco Landfill, Inc.                                                                      DE
Washington Waste Hauling & Recycling, Inc.                                                DE
         Mountain Group-Northwest Office
         Port-O-Let
         Recycle America
         Valley Topsoil
         Waste Management-Northwest
         Waste Management of Ellensburg
         Waste Management of Greater Wenatchee
         Waste Management of Kennewick
         Waste Management of Seattle
         Waste Management of Spokane
         Waste Management of Yakima
         Waste Management-SnoKing
         Waste Management-Rainier
         WMI Services
Washington Waste Systems, Inc.                                                            WA
Wasilla Refuse, Inc.                                                                      AK
Wass Entreprenad AB                                                                     SWEDEN


Waste Away Group, Inc.                                                                    AL
         Environmental Waste Systems
         LaGrange Transfer Station
         Montgomery Transfer Station
         Phenix City Transfer
         Springhill Landfill
         Waste Management of Alabama- Central
         Waste Management of Alabama- East
         Waste Management of Alabama- North
         Waste Management of Alabama- South
Waste Clearance (Holdings) Limited                                                  UNITED KINGDOM
Waste Control Systems, Inc.                                                               MN
Waste Management (Auckland) Ltd                                                       NEW ZEALAND
Waste Management (Land) Limited                                                     UNITED KINGDOM
Waste Management (Rock Common) Limited                                              UNITED KINGDOM
Waste Management (Roxby) Limited                                                    UNITED KINGDOM
Waste Management (UK) Holdings Ltd.                                                 UNITED KINGDOM
Waste Management (W.M.) Israel Limited                                                  ISRAEL
Waste Management Asia B.V.                                                            NETHERLANDS
Waste Management Austria mbH                                                            AUSTRIA
Waste Management Collection and Recycling, Inc.                                           CA
         American Waste Systems
         Empire Waste Management
         Great Western Reclamation
         Recycle America
         SAWDCO Collection
         Sunset Environment
         Valley Waste Management
         Waste Management of Inland Valley
         Waste Management of Sacramento
         Waste Management of San Gabriel/Pomona Valley
         Waste Management of Santa Cruz County
         Waste Management of the Central Valley
         Waste Management of Woodland
Waste Management Czechoslovakia s.r.o.                                              CZECHOSLOVAKIA
Waste Management de Mexico, S.A. de C.V.                                                MEXICO
Waste Management Denmark A/S                                                            DENMARK
Waste Management Development B.V.                                                     NETHERLANDS
Waste Management Disposal Services of Arizona, Inc.                                       DE
Waste Management Disposal Services of Colorado, Inc.                                      CO
         Central Weld Sanitary Landfill
         Colorado Springs Recycling and Disposal Facility
         County Line Recycling and Disposal Facility
         Denver/Arapahoe Disposal Site
         East Weld Sanitary Landfill
         North Weld Sanitary Landfill
         Waste Management of Colorado- Landfill Division
Waste Management Disposal Services of Maine, Inc.                                         ME
         Waste Management Disposal Services of Maine- Crossroads
Waste Management Disposal Services of Maryland, Inc.                                      MD
         Sandy Hill
Waste Management Disposal Services of Massachusetts, Inc.                                 MA
Waste Management Disposal Services of Oregon, Inc.                                        DE
         Columbia Ridge Landfill and Recycling Center


         Oregon Waste Systems
Waste Management Disposal Services of Pennsylvania, Inc.                                  PA
         Burlington County Resource Recovery Facilities Complex
         G.R.O.W.S. Landfill
         Meadowlands Baler Facility
         Meadowland Recycling and Disposal Facility
         Northwest Sanitary Landfill
         Pottstown Landfill and Recycling Center
Waste Management Disposal Services of Virginia, Inc.                                      DE
         Middle Peninsula Landfill and Recycling Facility
Waste Management Disposal Services of Washington, Inc.                                    DE
         Greater Wenatchee Regional Landfill and Recycling Center
         Waste Management of Washington
Waste Management Do Brasil, Ltda                                                        BRAZIL
Waste Management Environmental Services B.V.                                          NETHERLANDS
Waste Management Federal Services of Colorado, Inc.                                       DE
Waste Management Federal Services of Hanford, Inc.                                        DE
Waste Management Federal Services of Idaho, Inc.                                          DE
Waste Management Federal Services, Inc.                                                   DE
Waste Management Financing Corp.                                                          DE
Waste Management Geotech, Inc.                                                            DE
Waste Management GmbH & Co. MVA Hamm oHG                                                GERMANY
Waste Management Greece AAE                                                             GREECE
Waste Management Holdings, Inc. (f/k/a Waste Management, Inc.)                            DE
Waste Management Inc., of Florida                                                         FL
         Atlantic Waste Management
         Broward Disposal
         Central Disposal
         Environmental Waste Systems
         Florida Environmental Waste
         Florida Disposal
         Florida Resource Management
         Gulf Coast Recycling and Disposal Facility
         Hillsborough Heights Recycling and Disposal Facility
         Medly Landfill & Recycling Center
         Rubbish Gobbler
         Southeast recycling and Disposal Facility
         Southern Sanitation Service
         South Florida Service Center
         United Sanitation Recycling and Disposal Facility
         Waste Management of Bay County
         Waste Management of Collier County
         Waste Management of Dade County
         Waste Management of Monroe County
         Waste Management of Pasco County
         Waste Management of Tampa
Waste Management Industrial Services, Inc.                                                DE
Waste Management International                                                           JAPAN
Waste Management International                                                        SWITZERLAND
Waste Management International Services Limited                                     UNITED KINGDOM
Waste Management International, Inc.                                                      DE
Waste Management International, Ltd.                                                    BERMUDA
Waste Management Italia S.r.1.                                                           ITALY


Waste Management Ltd.                                                               UNITED KINGDOM
Waste Management N.Z. Ltd.                                                            NEW ZEALAND
Waste Management Nederland B.V.                                                       NETHERLANDS
Waste Management of Alameda County, Inc.                                                  CA
         Altamont Landfill and Resource Recovery Facility
         Central Division
         Davis Street Station for Material Recovery and Transfer
         East Bay Disposal Co.
         Livermore Dublin Disposal
         Northern Division
         Recycle America of Northern California
         Southern Division
         Sunnyvale Recycling and Disposal Facility
         Tri-Cities Recycling and Disposal Facility
Waste Management of Arizona, Inc.                                                         CA
         Asset Recovery Group
         Butterfield Station Recycling and Disposal Facility
         Industrial Services Division
         Sky Harbor regional Transfer & Recycling Center
         27th Avenue Recycling and Disposal Facility
         Waste Management of Northern Arizona
         Waste Management of Phoenix - North
         Waste Management of Phoenix - Recycle America
         Waste Management of Phoenix - South
         Waste Management of Tucson
         Waste Management of Tucson - Recycle America
         Waste Management of Verde Valley
         WMI Services- Phoenix
Waste Management of Arkansas, Inc.                                                        DE
         Brushy Island Recycling and Disposal Facility
         Jefferson County Recycling and Disposal Facility
         Shannon Road Recycling and Disposal Facility
         Union County Recycling and Disposal Facility
         Waste Management of Arkansas North
         Waste Management of Arkansas South
Waste Management of California, Inc.                                                      CA
         Kirby Canyon recycling and Disposal Facility
         Lancaster Recycling and Disposal Facility
         Simi Valley Recycling and Disposal Facility
         Universal Refuse Removal of El Cajon
         Waste Management of Fresno County
         Waste Management of Lancaster
         Waste Management of Los Angeles
         Waste Management of Los Angeles - South
         Waste Management of North County
         Waste Management of San Diego
         Waste Management of San Fernando Valley
         Waste Management of Santa Clara County
         Waste Management of the Desert
         WMI Services
Waste Management of Carolinas, Inc.                                                       NC
         Piedmont Landfill and Recycling Center
         Waste Management of Asheville
         Waste Management of Carolinas
         Waste Management of Central Carolina
         Waste Management of Eastern Carolina
         Waste Management of the Piedmont
         Waste Management of Raleigh/Durham


         Waste Management of Wilmington
         Waste Management of the Triad
Waste Management of Central Florida, Inc.                                                 FL
         Aluchua Waste Management
Waste Management of Colorado, Inc.                                                        CO
         Canon City Disposal and Recycling
         Colorado Springs Transfer Station
         Englewood Transfer Station
         Port-O-Let
         Waste Management of Aurora
         Waste Management of Colorado - Aurora Facility
         Waste Management of Colorado - North Facility
         Waste Management of Colorado - Recycle Facility
         Waste Management of Colorado - South Facility
         Waste Management of Colorado Springs-Recycle America
         Facility
         Waste Management of Denver
         Waste Management of Denver- Recycle America
         Processing Facility
         Waste Management of Northern Colorado
         Waste Management of Pueblo
         Waste Management of the Rockies
         WMI Medical Services
Waste Management of Delaware, Inc.                                                        DE
         Waste Management of Delaware- Wilmington
         Waste Management of Delmarva
Waste Management of Five Oaks Recycling and Disposal, Inc.                                DE
Waste Management of Florida Holding Co, Inc.                                              DE
Waste Management of Georgia, Inc.                                                         GA
         Live Oak Landfill
         Superior Sanitation Landfill
         Waste Management of Savannah
         Waste Management of the Tennessee Valley
Waste Management of Grass Valley, Inc.                                                    DE
Waste Management of Hawaii, Inc.                                                          HI
         Waimanalo Gilch Recycling and Disposal Facility
         West Hawaii Landfill
Waste Management of Idaho, Inc.                                                           ID
Waste Management of Illinois, Inc.                                                        DE
         Banner/Western Disposal Service
         Chain of Rocks Recycling and Disposal Facility
         CID
         DeKalb County Recycling and Disposal Facility
         Durbin Paper Stock Company
         Five Oaks Recycling and Disposal Facility
         Greene Valley Recycling and Disposal Facility
         Kankakee recycling and Disposal Facility
         Laraway Recycling and Disposal Facility
         McLean County Disposal and recycling Services
         Milam Recycling and Disposal Facility
         Prairie Hill Recycling and Disposal Facility
         Settler's Hill recycling and Disposal Facility
         Tazewell Recycling and Disposal Facility
         TCD Services
         United Waste Systems
         Waste Management- Metro
         Waste Management- North


         Waste Management- Northwest
         Waste Management- West
         Waste Management of Metro East
         Waste Management of Peoria
         Waste Management of the South Suburbs
         Wheatland Prairie Recycling and Disposal Facility
         Woodland Recycling and Disposal Facility
Waste Management of Indiana Holdings One, Inc.                                            DE
Waste Management of Indiana Holdings Two, Inc.                                            DE
Waste Management of Indiana LLC                                                           DE
         Deercroft Recycling and Disposal Facility
         Glenwood Ridge Recycling and Disposal Facility
         Oak Ridge recycling and Disposal Facility
         Prairie View recycling and Disposal Facility
         Superior Waste Systems
         Twin Bridges Recycling and Disposal Facility
         Waste Management of Central Indiana
         Waste Management of Evansville
         Waste Management of Fort Wayne
         Waste Management of Indianapolis
         Waste Management of Indianapolis-Hamilton County
         Transfer
         Waste Management of Lafayette
         Waste Management of Muncie
         Waste Management of Northwest Indiana
         Waste Management of Warsaw
         Wheeler Recycling and Disposal Facility
Waste Management of Iowa, Inc.                                                            IA
         Solid Waste Systems
Waste Management of Kansas, Inc.                                                          KS
         Forest View recycling and Disposal Facility
         Rolling Meadows recycling & Disposal facility
         Solid Waste Systems
         Topeka Waste Systems
         Waste Management of Wichita
         Waste Management - Refuse Control
Waste Management of Kentucky Holdings, Inc.                                               DE
Waste Management of Kentucky LLC                                                          DE
         Blue Ridge Recycling and Disposal Facility
         Kramer Lane Recycling and Disposal Facility
         Lexington recycling and Disposal Facility
         Outer Loop recycling and Disposal Facility
         Waste Management of Kentucky - Gray Disposal
         Waste Management of Kentucky - Lexington
         Waste Management of Kentucky - Louisville
         Waste Management of Kentucky - Madison Disposal
         Waste Management of Kentucky - Stevens Dispos-All
         Service
Waste Management of Leon County, Inc.                                                     FL
Waste Management of Louisiana Holdings One, Inc.                                          DE
Waste Management of Louisiana Holdings Two, Inc.                                          DE
Waste Management of Louisiana LLC                                                         DE
         Acadiana Recycling and Disposal Facility
         Acadia Parish Sanitary Landfill
         Alexandria Recycling and Disposal Facility
         American Waste and Pollution Control-Algiers Residential
         American Waste and Pollution Control- Eastern New


         Orleans Residential
         American Waste and Pollution Control- Kelvin Recycling
         and Disposal Facility
         American Waste and Pollution Control- St. Bernard Parish
         Residential
         American Waste and Pollution Control- Slidell
         American Waste and Pollution Control- West Jefferson
         Residential
         Jefferson Davis Recycling and Disposal Facility
         Kelvin Recycling and Disposal Facility
         Magnolia Recycling and Disposal Facility
         Pelican Recycling and Disposal Facility
         Pelican State Environmental Services
         Waste Management of Acadiana
         Waste Management of Baton Rouge
         Waste Management of the Bayous
         Waste Management of Central Louisiana
         Waste Management of Lake Charles
         Waste Management of New Orleans
         Waste Management of Northeast Louisiana
         Waste Management of Northwest Louisiana
         Waste Management of the Pines
         Waste Management of St. Landry
         Waste Management of St. Tammany
         Waste Management of South Louisiana
         Woodside Recycling and Disposal Facility
Waste Management of Maine, Inc.                                                           ME
         Waste Management of Maine- Portland
Waste Management of Malaysia Sdn Bhd                                                   MALAYSIA
Waste Management of Maryland, Inc.                                                        MD
         Mobile Offices of Maryland
         Waste Management of Cambridge
         Waste Management of Greater Washington
         Waste Management of Maryland, Baltimore
         Waste Management of Southern Maryland
         WMI Medical Services
         WMI Services of Maryland
Waste Management of Massachusetts, Inc.                                                   MA
         Somerville Transfer Station
         Waste Management- Container Services
         Waste Management of Boston- North
         Waste Management of Central Massachusetts
         Waste Management of Massachusetts- Gloucester
         Waste Management of Massachusetts- South Shore
Waste Management of Michigan, Inc.                                                        MI
         Autumn Hills Recycling and Disposal Facility
         Cedar Ridge Recycling and Disposal Facility
         Eagle Valley Recycling and Disposal Facility
         Efficient Sanitation
         Northern Oaks Recycling and Disposal Facility
         Recycle America- Metro Detroit
         Valley Rubbish
         Venice Park recycling and Disposal Facility
         Waste Management of Detroit- Residential
         Waste Management - Metro Detroit
         Waste Management of Michigan- Alma Transfer and
         Recycling Facility
         Waste Management of Michigan- Area Disposal


         Waste Management of Michigan- Burr Oak
         Waste Management of Michigan- Central
         Waste Management of Michigan- Detroit East Recycling
         Transfer Facility
         Waste Management of Michigan- Detroit Transfer and
         Recycling Facility
         Waste Management of Michigan- Detroit MRF/Transfer
         Waste Management of Michigan- Dowagiac Transfer and
         Recycling Facility
         Waste Management of Michigan- Holland
         Waste Management of Michigan- Holland Transfer and
         Recycling Facility
         Waste Management of Michigan- Mideast
         Waste Management of Michigan- Mideast/Port Huron
         Waste Management of Michigan- Midwest
         Waste Management of Michigan- Northern
         Waste Management of Michigan- Recycle
         America/Grand Rapids
         Waste Management of Michigan- Southwest
         Waste Management of Michigan- Western
         Westside Recycling and Disposal Facility
         WMI Services- Eastern Michigan/ Northwest Ohio
         Woodland Meadows Recycling and Disposal Facility
Waste Management of Minnesota, Inc.                                                       MN
         Anoka Recycling and Disposal Facility
         Dietman Sanitation & Recycling
         Northern Waste Systems
         Recycle America of Minnesota
         Sun Prairie Recycling and Disposal Facility
         Waste Management- Blaine
         Waste Management- LeSeur
         Waste Management- Rochester
         Waste Management- Savage
         Waste Management- St. Cloud
         Waste Management of Hastings
         WMI Services of Minnesota
Waste Management of Mississippi, Inc.                                                     MS
         Pecan Grove Landfill
         Pine Ridge Landfill
         Plantation Oaks Landfill
         Prairie Bluff Landfill
         Waste Management of Central Mississippi- Jackson
         Waste Management of Central Mississippi- Kosciusko
         Waste Management of Central Mississippi- Meridian
         Waste Management of Central Mississippi- Vicksburg
         Waste Management of North Mississippi-Clarksdale
         Waste Management of North Mississippi- Columbus
         Waste Management of North Mississippi- Corinth
         Waste Management of North Mississippi- Greenville
         Waste Management of North Mississippi- Grenada
         Waste Management of North Mississippi- Tupelo
         Waste Management of South Mississippi- Gulfport
         Waste Management of South Mississippi- McComb
         Waste Management of South Mississippi- Natchez
         Waste Management of South Mississippi- Pine Belt
Waste Management of Missouri, Inc.                                                        DE
         Black Oak and Disposal Facility
         Environmental Industries


         Kahle Recycling and Disposal facility
         Meramec Hauling
         Pezold Hauling
         Rumble Recycling and Disposal Facility
         Waste Management of Kansas City
         Waste Management of Springfield
         Waste Management fo St. Loius
         Waste Management of the Ozarks
Waste Management of Montana, Inc                                                          DE
         Waste Management of Great Falls
Waste Management of Nebraska, Inc.                                                        DE
         Douglas County Recycling and Disposal Facility
Waste Management of New Hampshire, Inc.                                                   CT
         Turnkey Recycling and Environmental Enterprises
         Waste Management of New Hampshire- Londonberry
         Waste Management of New Hampshire- New Hampton
         Waste Management of New Hampshire- Rochester
         Waste Management of New Hampshire- Peterborough
Waste Management of New Jersey, Inc.                                                      DE
         Avenue A Transfer & Recycling Center
         Middle Martee Landfill
         Recycle America
         Waste Management of Camden
Waste Management of New Mexico, Inc.                                                      NM
         Environmental Waste Equipment Company
         Hobbs Recycling and Disposal Facility
         Landfill Hauling Systems
         Landfill Systems
         R&B Rubbish Removal
         Rio Rancho Recycling and Disposal Facility
         San Juan Recycling and Disposal Facility
         Seay Brothers Rolloff
         Tijeras Disposal
         United Waste Systems
         Waste Management of Albuquerque-Recycle America
         Processing Facility
         Waste Management of Four Corners
         Waste Management of Southeast New Mexico
         Waste Management of the Southwest
Waste Management of New York, L.L.C.                                                      DE
         High Acres Landfill and Recycling Facility
         Waste Management of Eastern New York
         Waste Management of Hudson Valley
         Waste Management of New York-Albion
         Waste Management of New York- Buffalo
         Waste Management of New York- Rochester
         Waste Management of New York- Syracuse
         Waste Management of New York- Utica
         Waste Management of Southwestern New York
         WMI Services of New York
Waste Management of North America, Inc.                                                   IL
Waste Management of North Dakota, Inc.                                                    DE
         Northern Waste Systems
Waste Management of Ohio, Inc.                                                            DE
         Countywide Recycling and Disposal Facility
         ELDA Recycling and Disposal Facility
         Evergreen Recycling and Disposal Facility
         Herrick Valley Recycling and Disposal Facility


         Lake County Recycling and Disposal Facility
         Pinnacle Road Recycling and Disposal Facility
         Seneca East Recycling and Disposal Facility
         Stony Hollow Recycling and Disposal facility
         Suburban Recycling and Disposal Facility
         Waste Management of Ohio- Akron
         Waste Management of Ohio- Blaylock
         Waste Management of Ohio- Cleveland Transfer and
         Recycling Facility
         Waste Management of Ohio- Cleveland West
         Waste Management of Ohio- Columbus
         Waste Management of Ohio- Columbus Transfer and
         Recycling Facility
         Waste Management of Ohio- Findlay
         Waste Management of Ohio- IWD
         Waste Management of Ohio- Koogler
         Waste Management of Ohio- Lima
         Waste Management of Ohio- Lima Transfer and Recycling
         Facility
         Waste Management of Ohio- M&M Sanitation
         Waste Management of Ohio- Newark
         Waste Management of Ohio- Northwest
         Waste Management of Ohio- Recycle America/Toledo
         Waste Management of Ohio- S.E.M.
         Waste Management of Ohio- Shelby County Transfer
         Waste Management of Ohio- Suburban Sanitation Service
         Waste Management of Ohio- Western Reserve
         Waste Management of Ohio- Youngstown
         WMI Services- Ohio
Waste Management of Oklahoma, Inc.                                                        OK
         East Oak Recycling and Disposal Facility
         Muskogee recycling and Disposal Facility
         Quarry Recycling and Disposal Facility
         Waste Management of Oklahoma City
         Waste Management of Tulsa
Waste Management of Oregon, Inc.                                                          OR
         Metro South Transfer Station
         Port-O-Let
         Waste Management of Vancouver U.S.A.
         Zero Garbage
Waste Management of Pennsylvania, Inc.                                                    PA
         Alderfer & Frank
         Lake View Landfill (Northern)
         Mid-Atlantic Recycling and Distribution Center
         Milton Grove Demolition and Tire Recycling
         Philadelphia Transfer and Recycling Station
         Pottsville Transfer Station
         Recycle America
         River Road Landfill
         Steel Valley Transfer Station
         The Forge Recycling and Resource Recovery Center
         Tully Town Resource Recovery Facility
         Waste Automation
         Waste Management - Allentown
         Waste Management- Dixon Recycling
         Waste Management of Camp Hill
         Waste Management of Delaware Valley- North
         Waste Management of Delaware Valley- South


         Waste Management of Erie
         Waste Management of Greater Lancaster
         Waste Management of Greencastle
         Waste Management of Greenville
         Waste Management of Indian Valley
         Waste Management of Laurel Valley
         Waste Management of Northeast Pennsylvania
         Waste Management of Pennsylvania- Hauling
         Waste Management of Pittsburgh
         Waste Management of Pottstown
         Waste Management of Wilkinsburg
         WMI Medical Services of New Jersey
         WMI Medical Services of New York
         WMI Medical Services of Pennsylvania
         WMI Medical Services of West Virginia
Waste Management of Rhode Island, Inc.                                                    DE
         Waste Management of Rhode Island- Newport
Waste Management of South Carolina, Inc.                                                  SC
         Charleston Landfill
         Hickory Hill Sanitary Landfill
         Palmetto Landfill
         Sandy Pines Landfill
         Waste Management of South Carolina
         Waste Management of the Low Country
Waste Management of South Dakota, Inc.                                                    SD
         Waste Management of Sioux Falls
         Waste Management of the Black Hills
Waste Management of Texas, Inc.                                                           TX
         All Waste Paper Recycling
         Atascosita Recycling and Disposal Facility
         Ausitn Community Disposal Co.
         Bluebonnet Recycling and Disposal Facility
         Centex Waste Management
         Coastal Plains Recycling and Disposal Facility
         Comal County Recycling and Disposal Facility
         Covell Gardens Landfill
         DFW Recycling and Disposal Facility
         Fogle Garbage Service
         Garbage Gobbler
         Hillside recycling and Disposal Facility
         Kingwood Garbage Service
         Lacy Lakeview Recycling and Disposal Facility
         Longhorn Disposal
         Northwest Transfer Station
         Oak Hill Recycling and Disposal Facility
         Pecan Prairie Recycling and Disposal Facility
         Recycle America- Dallas Bulk grade Division
         Recycle America- Dallas High Grade Division
         S&B trucking & Sanitation
         Security Landfill
         Skyline Recycling and Disposal Facility
         Texas Waste Management
         Waste Management of Fort Worth Recycling and Disposal
         Facility
         Waste Management - Golden Triangle
         Waste Management of Dallas- East
         Waste Management of Dallas Recycle America Processing
         Facility


         Waste Management of Dallas- West
         Waste Management of East Texas
         Waste Management of Fort Worth
         Waste Management of Fort Worth Recycling and Disposal
         Facility
         Waste Management of Houston
         Waste Management of Northeast Texas
         Waste Management of Southeast Texas
         Waste Management of Southeast Texas- Angleton
         Waste Management of Southeast Texas- Dickinson
         Waste Management of South Texas
         Waste Management of West Texas
         Westside Recycling and Disposal Facility
         Williamson County Recycling and Disposal Facility
         WMI Services of Dallas
         WMI Services of North Texas
         WMI Services of Texas
Waste Management of Utah, Inc.                                                            UT
         Waste Management of Northern Utah
         Reliable Waste Systems
         Waste Management of Salt Lake
Waste Management of Virginia, Inc.                                                        VA
         Manassas Transfer Station
         Waste Management of Hampton Roads
         Waste Management of Northern Virginia
         Waste Management of Northern Virginia- Crown Disposal
         Waste Management of the Outer Banks
         Waste Management of Richmond/Fiber Fuels
         Waste Management of Richmond Port-O-Let
         Waste Management of Richmond Recycle America
         Waste Management of Virginia- Blue Ridge
         WMI Services of Hampton Roads
         WMI Services of Virginia
Waste Management of West Virginia, Inc.                                                   DE
         Waste Management of Shenandoah Valley
Waste Management of Wisconsin, Inc.                                                       WI
         Best Disposal
         Mallard Ridge Recycling and Disposal Facility
         Metro/Stone Ridge Recycling and Disposal Facility
         Orchard Ridge Recycling and Disposal Facility
         Parkview Recycling and Disposal Facility
         Pheasant Run Recycling and Disposal Facility
         Ridgeview Recycling and Disposal Facility
         Timberline Trail Recycling and Disposal Facility
         UWS Transportation
         Valley Trail Recycling and Disposal Facility
         Waste Management- Northeast Wisconsin
         Waste Management of Fox Valley
         Waste Management of La Crosse
         Waste Management of Madison
         Waste Management of Milwaukee
         Waste Management of Muskego
         Waste Management of Rockford
         Waste Management of Wisconsin- East
         Waste Management Southwest
         Waste Management of St. Croix Valley
         Waste Management - Tri County
         WMI Services of Wisconsin


Waste Management of Wyoming, Inc.                                                         DE
Waste Management Operations Ireland Ltd.                                            UNITED KINGDOM
Waste Management Paper Recycling, Inc.                                                    DE
Waste Management Paper Stock Company, Inc.                                                DE
         Southern Sanitation Southeast - Recycle America
         Waste Management of Florida- Recycle America
         Waste Management of Sarasota- Recycle America
         Waste Management of Tampa- Recycle America
Waste Management Partners, Inc.                                                           DE
         American Refuse Systems, Inc.
         Ocmulgee Disposal, Inc.
Waste Management Partnership Holdings, Inc.                                               DE
Waste Management Plastic Products, Inc.                                                   DE
Waste Management Project Services B.V.                                                NETHERLANDS
Waste Management Queensland Pty Ltd.                                                   AUSTRALIA
Waste Management Queensland Pty. Limited                                              QUEENSLAND
Waste Management Recycling & Services Ltd                                              HONG KONG
Waste Management Remediation Services B.V.                                            NETHERLANDS
Waste Management Siam Holdings Limited                                                 THAILAND
Waste Management Siam Limited                                                          THAILAND
Waste Management South America B.V.                                                   NETHERLANDS
Waste Management Stendahl GmbH                                                          GERMANY
Waste Management Technology Center, Inc.                                                  DE
Waste Management Thailand B.V.                                                        NETHERLANDS
Waste Management, Inc. (f/k/a USA Waste Services, Inc.)                                   DE
Waste Management, Inc. of Tennessee                                                       TN
         Chestnut Ridge Landfill and Recycling Center
         Waste Management of Tennessee - Clarksville
         Waste Management of Tennessee - Jackson
         Waste Management of Tennessee - Knoxville
         Waste Management of Tennessee - Memphis
         Waste Management of Tennessee - Nashville
         West Camden Sanitary Landfill
Waste Resource Technologies, Inc.                                                         CA
Waste Resources of Tennessee, Inc.                                                        TN
Waste Services of South Florida, Inc.                                                     FL
Waste-X Services, Inc.                                                                    FL
Wastronics, Inc.                                                                          AK
Water Investments, Inc.                                                                   DE
         LJ Water Partners, L.P. (49% ownership by Water Investment,
Inc.)
Waterblast Ltd.                                                                     UNITED KINGDOM
Webster Parish Landfill, L.L.C.                                                           DE
WESI Baltimore Inc.                                                                       DE
WESI Capital Inc.                                                                         DE
WESI Peekskill Inc.                                                                       DE
WESI Westchester Inc.                                                                     DE
Wessex Waste Gas to Energy Ltd.                                                     UNITED KINGDOM
Wessex Waste Management Limited                                                     UNITED KINGDOM
West Milford Haulage, Inc.                                                                NJ


Westchester Resco Company, L.P.
Western El Dorado Recovery Systems, Inc.                                                  CA
Western Land Acquisition, Inc.                                                            RI
Western States Waste Systems, Inc.                                                        AZ
Western U.P. Landfill, Inc.                                                               MI
Western Waste Industries                                                                  CA
         Conroe Industrial Transportation
         Conroe Landfill #7
         Conroe Landfill Administration
         Fresno Transfer Station
         Inland Empire
         Redondo Beach Recycling
         Sunnydale Transfer Station
         Western Beaumont Landfill
         Western Longmont Landfill
         WW/Chino Transfer Station
         WW/Conroe Processing Plant
         WW/EL Sobrante Landfill
         Nassau Landfill
         WW/Southern California Processing
Westley Trading Ltd.                                                                UNITED KINGDOM
Wheelabrator Air Pollution Control Inc.                                                   DE
Wheelabrator Canada Inc.                                                                ONTARIO
Wheelabrator Carteret Inc.                                                                DE
Wheelabrator Cedar Creek Inc.                                                             DE
Wheelabrator Clean Water New Jersey Inc.                                                  DE
Wheelabrator Coal Services Company                                                        DE
Wheelabrator Concord Inc.                                                                 DE
Wheelabrator Connecticut Inc.                                                             DE
Wheelabrator Culm Services Inc.                                                           DE
Wheelabrator Energy Leasing Company                                                       DE
Wheelabrator Energy Systems Inc.                                                          DE
Wheelabrator Environmental Systems Inc.                                                   DE
Wheelabrator Falls Inc.                                                                   DE
Wheelabrator Frackville Energy Company Inc.                                               DE
Wheelabrator Frackville Properties Inc.                                                   DE
Wheelabrator Fuel Services Inc.                                                           DE
Wheelabrator Fuels Service Corporation                                                    DE
Wheelabrator Gloucester Inc.                                                              DE
Wheelabrator Guam Inc.                                                                    DE
Wheelabrator Hudson Energy Company Inc.                                                   DE
Wheelabrator Land Resources Inc.                                                          DE
Wheelabrator Lassen Inc.                                                                  DE
Wheelabrator Martell Inc.
Wheelabrator McKay Bay Inc.                                                               FL
Wheelabrator Millbury Inc.                                                                DE
Wheelabrator New Hampshire Inc.                                                           DE
Wheelabrator New Jersey Inc.                                                              DE
Wheelabrator NHC Inc.                                                                     DE


Wheelabrator North Broward Inc.                                                           DE
Wheelabrator North Shore Inc.                                                             DE
Wheelabrator Norwalk Energy Company Inc.                                                  DE
Wheelabrator Penacook Inc.                                                                DE
Wheelabrator Pinellas Inc.                                                                DE
Wheelabrator Polk Inc.                                                                    DE
Wheelabrator Power Marketing Inc.                                                         DE
Wheelabrator Putnam Inc.                                                                  DE
Wheelabrator Ridge Energy Inc.                                                            DE
Wheelabrator Saugus Inc.                                                                  DE
Wheelabrator Shasta Energy Company Inc.                                                   DE
Wheelabrator Sherman Station One Inc.                                                     DE
Wheelabrator Sherman Station Two Inc.                                                     DE
Wheelabrator Shrewsbury Inc.                                                              DE
Wheelabrator South Broward Inc.                                                           DE
Wheelabrator Spokane Inc.                                                                 DE
Wheelabrator Technologies Inc.                                                            DE
Wheelabrator Water Technologies Baltimore L.L.C.                                          DE
Wheelabrator Water Technologies Canada Inc.                                               DE
Wheelabrator Water Technologies Inc.                                                      MD
White Lake Landfill, Inc.                                                                 MI
Whitefeather Landfill, Inc.                                                               DE
Wildcat Refuse, Inc.                                                                      MD
Williams Disposal Service, Inc.                                                           FL
Williams Landfill, L.L.C.                                                                 DE
Wil-Mar, Inc.                                                                             CA
WM International Holdings, Inc.                                                           DE
WM Norge AS                                                                             NORWAY
WM Umwelttechnik GmbH                                                                   GERMANY
WM Ymparistopalvelut OY                                                                 FINLAND
WMD Bockmann  Fritz Ohlig GmbH                                                          GERMANY
WMD Just Entsorgung GmbH                                                                GERMANY
WMD Knab GmgH                                                                           GERMANY
WMD Knab Zwischenlager GmbH                                                             GERMANY
WMD Knoss & Anthes GmbH                                                                 GERMANY
WMD Schreiber GmbH                                                                      GERMANY
WMD Waste Management Deutschland Holding GmbH                                           GERMANY
WMI Medical Services of Ohio, Inc.                                                        OH
         WMI Medical Services- Dayton
WMI Merger Sub, Inc.                                                                      DE
WMI Mexico Holdings, Inc.                                                                 DE
WMI Quebec Inc.                                                                         QUEBEC
WMI Selbergs AB                                                                         SWEDEN
WMI Services of Nevada, Inc.                                                              NV
WMI Urban Services, Inc.                                                                  DE
WMI Waste Management of Canada Inc.                                                     CANADA
         TCL Waste Systems
         Waste Management Big Bear Services


         Waste Management Fraser Valley
         Waste Management Halton/Hamilton
         Waste Management Materials Processing- Recycle Canada
         Waste Management Materials Processing- Toronto Transfer
         Waste Management McLellan Disposal
         Waste Management of Oxford/Perth
         Waste Management of Calgary
         Waste Management of Edmonton
         Waste Management of Greater Toronto
         Waste Management of Greater Vancouver
         Waste Management of Southwestern Ontario
         Waste Management of the Okanagan
         Waste Management York/Simcoe
         West Edmonton Recycling and Disposal Facility
         WMI du Quebec
         WMI - Hull/Ottawa
         WMI Recyclage Quebec
         WMI Rive - Sud
         WMI Waste Management DuCanada
WMNA Container Recycling, Inc.                                                            DE
WMNA Rail-Cycle Sub, Inc.                                                                 DE
WR Pollard and Son Limited                                                          UNITED KINGDOM
Wright General, Inc.                                                                      AK
WTI China Holdings I, Inc.                                                          CAYMAN ISLANDS
WTI China Holdings II Inc.                                                          CAYMAN ISLANDS
WTI China One Inc.                                                                        DE
WTI China Two Inc.                                                                        DE
WTI International Energy Inc.                                                             DE
WTI International Holdings Inc.                                                           DE
WTI Qicheng LLC                                                                     CAYMAN ISLANDS
WTI Rust Holdings Inc.                                                                    DE
WTI Rust Holdings, Inc.                                                                   DE
WTI Taicang LLC.                                                                    CAYMAN ISLANDS
WTI Yingkou LLC.                                                                    CAYMAN ISLANDS
Yell County Landfill, L.L.C.                                                              DE
Zenith/Kremer Material Recovery, Inc.                                                     MN
         Suburban Recycling Service
Zenith/Kremer Waste Systems, Inc.                                                         MN
         Cecil Shykes Sanitary Service
         Home Town Garbage Service
         Kremer Disposal
         Kremer Recycling
         Suburban Sanitation Service
         Zenith Recycling
Zhong Zia Environmental Technology Co. Ltd.                                            HONG KONG


EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our report included or incorporated by reference in this Annual Report on Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (Registration Nos. 33-43619, 33-72436, 33-84988, 33-84990, 33-59807, 33-61621, 33-61625, 33-61627, 333-02181, 333-08161, 333-14115, 333-14613, 333-34819, 333-51975, 333-64239, 333-70055, 333-59247, 333-56113), previously filed Registration Statements on Form S-3 (Registration Nos. 333-00097, 333-08573, 333-32471, 333-33889, 333-52197), and previously filed Registration Statements on Form S-4 (Registration Nos. 333-31979 and 333-32805).

Arthur Andersen LLP

Houston, Texas

March 29, 1999


EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statements of Waste Management, Inc. on Form S-3 (File Nos. 333-00097, 333-08573, 333-32471, 333-33889, and 333-52197), on Form S-4 (File Nos. 333-31979 and 333-32805), and on Form S-8 (File Nos. 33-43619, 33-72436, 33-84988, 33-84990, 33-59807, 33-61621, 33-61625, 33-61627, 333-02181, 333-08161, 333-14115, 333-14613, 333-34819, 333-51975, 333-64239, 333-70055, 333-59247, and 333-56113), of our report dated March 16, 1998, on our audits of the consolidated financial statements of USA Waste Services, Inc. as of December 31, 1997, and for the years ended December 31, 1997 and 1996, which report is included in this Annual Report on Form 10-K.

PricewaterhouseCoopers LLP

Houston, Texas

March 29, 1999


ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF WASTE MANAGEMENT, INC. FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
MULTIPLIER: 1,000


PERIOD TYPE 12 MOS
FISCAL YEAR END DEC 31 1998
PERIOD START JAN 01 1998
PERIOD END DEC 31 1998
CASH 86,873
SECURITIES 1,792
RECEIVABLES 2,362,407
ALLOWANCES 116,430
INVENTORY 0
CURRENT ASSETS 3,881,397
PP&E 18,235,813
DEPRECIATION 6,598,074
TOTAL ASSETS 22,715,198
CURRENT LIABILITIES 4,293,666
BONDS 11,114,201
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 6,083
OTHER SE 4,366,413
TOTAL LIABILITY AND EQUITY 22,715,198
SALES 12,703,469
TOTAL REVENUES 12,703,469
CGS 7,383,751
TOTAL COSTS 12,863,858
OTHER EXPENSES (141,967)
LOSS PROVISION 0
INTEREST EXPENSE 681,457
INCOME PRETAX (699,879)
INCOME TAX 66,923
INCOME CONTINUING (766,802)
DISCONTINUED 0
EXTRAORDINARY (3,900)
CHANGES 0
NET INCOME (770,702)
EPS PRIMARY (1.32)
EPS DILUTED (1.32)

ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF WASTE MANAGEMENT, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
RESTATED:
MULTIPLIER: 1,000


PERIOD TYPE 9 MOS 6 MOS 3 MOS
FISCAL YEAR END DEC 31 1998 DEC 31 1998 DEC 31 1998
PERIOD START JAN 01 1998 JAN 01 1998 JAN 01 1998
PERIOD END SEP 30 1998 JUN 30 1998 MAR 31 1998
CASH 179,409 410,083 362,781
SECURITIES 994 1,462 3,053
RECEIVABLES 2,319,027 2,217,370 2,047,533
ALLOWANCES 98,346 100,116 102,682
INVENTORY 0 0 0
CURRENT ASSETS 4,098,242 3,194,590 2,897,298
PP&E 17,345,504 18,342,658 17,396,632
DEPRECIATION 6,298,377 6,020,357 5,616,731
TOTAL ASSETS 22,029,650 22,525,101 21,560,881
CURRENT LIABILITIES 4,427,297 4,442,141 5,048,621
BONDS 9,796,572 9,335,043 9,046,878
PREFERRED MANDATORY 0 0 0
PREFERRED 0 0 0
COMMON 6,054 6,141 6,033
OTHER SE 4,345,467 5,343,752 4,172,374
TOTAL LIABILITY AND EQUITY 22,029,650 22,525,101 21,560,881
SALES 9,464,365 6,220,164 2,969,433
TOTAL REVENUES 9,464,365 6,220,164 2,969,433
CGS 5,583,644 3,713,344 1,801,261
TOTAL COSTS 9,988,614 5,198,669 2,507,167
OTHER EXPENSES (130,422) (86,770) (51,254)
LOSS PROVISION 0 0 0
INTEREST EXPENSE 503,347 329,085 155,531
INCOME PRETAX (897,174) 779,180 357,989
INCOME TAX 66,887 350,994 158,841
INCOME CONTINUING (830,287) 428,186 199,148
DISCONTINUED 0 0 0
EXTRAORDINARY 3,900 3,900 0
CHANGES 0 0 0
NET INCOME (834,187) 424,286 199,148
EPS PRIMARY (1.44) 0.74 0.35
EPS DILUTED (1.44) 0.72 0.34

ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF WASTE MANAGEMENT, INC. FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
RESTATED:
MULTIPLIER: 1,000


PERIOD TYPE 12 MOS 9 MOS 6 MOS 3 MOS
FISCAL YEAR END DEC 31 1997 DEC 31 1997 DEC 31 1997 DEC 31 1997
PERIOD START JAN 01 1997 JAN 01 1997 JAN 01 1997 JAN 01 1997
PERIOD END DEC 31 1997 SEP 30 1997 JUN 30 1997 MAR 31 1997
CASH 189,942 201,653 510,786 597,241
SECURITIES 59,296 69,362 80,910 631,006
RECEIVABLES 2,066,642 2,041,170 2,018,867 1,945,215
ALLOWANCES 90,164 79,366 70,576 59,899
INVENTORY 0 0 0 0
CURRENT ASSETS 2,839,676 2,937,889 3,349,673 3,810,303
PP&E 16,760,990 17,837,010 17,467,223 16,938,840
DEPRECIATION 5,572,461 5,993,600 5,805,087 5,697,665
TOTAL ASSETS 20,156,424 21,332,276 21,482,619 21,396,873
CURRENT LIABILITIES 4,803,954 3,595,392 3,976,762 4,170,864
BONDS 7,881,949 8,925,132 8,809,762 7,915,134
PREFERRED MANDATORY 0 0 0 0
PREFERRED 0 0 0 0
COMMON 5,987 5,969 5,895 5,812
OTHER SE 3,848,942 5,319,353 5,208,716 5,914,580
TOTAL LIABILITY AND EQUITY 20,156,424 21,332,276 21,482,619 21,396,873
SALES 11,972,498 8,884,939 5,730,556 2,699,541
TOTAL REVENUES 11,972,498 8,884,939 5,730,556 2,699,541
CGS 7,482,273 5,537,598 3,559,970 1,720,129
TOTAL COSTS 12,206,407 7,791,167 4,921,620 2,362,312
OTHER EXPENSES (126,988) (75,642) (85,984) (126,845)
LOSS PROVISION 0 0 0 0
INTEREST EXPENSE 555,576 406,264 269,027 131,717
INCOME PRETAX (662,497) 763,150 625,893 332,357
INCOME TAX 363,341 399,103 318,357 161,938
INCOME CONTINUING (1,025,838) 364,047 307,536 170,419
DISCONTINUED 95,688 8,412 8,208 647
EXTRAORDINARY 6,809 6,293 0 0
CHANGES 1,936 0 0 0
NET INCOME (938,895) 366,166 315,744 171,066
EPS PRIMARY (1.68) 0.66 0.57 0.31
EPS DILUTED (1.68) 0.65 0.56 0.30

ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF WASTE MANAGEMENT, INC. FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
RESTATED:
MULTIPLIER: 1,000


PERIOD TYPE 12 MOS
FISCAL YEAR END DEC 31 1996
PERIOD START JAN 01 1996
PERIOD END DEC 31 1996
CASH 352,303
SECURITIES 319,338
RECEIVABLES 1,977,972
ALLOWANCES 72,743
INVENTORY 0
CURRENT ASSETS 3,242,109
PP&E 16,551,429
DEPRECIATION 5,585,488
TOTAL ASSETS 20,727,524
CURRENT LIABILITIES 3,500,319
BONDS 8,466,901
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 5,583
OTHER SE 5,196,027
TOTAL LIABILITY AND EQUITY 20,727,524
SALES 10,998,602
TOTAL REVENUES 10,998,602
CGS 6,564,234
TOTAL COSTS 9,800,989
OTHER EXPENSES (101,959)
LOSS PROVISION 0
INTEREST EXPENSE 525,340
INCOME PRETAX 774,232
INCOME TAX 486,700
INCOME CONTINUING 287,532
DISCONTINUED 263,301
EXTRAORDINARY 0
CHANGES 0
NET INCOME 24,231
EPS PRIMARY 0.05
EPS DILUTED 0.04
BROKERAGE PARTNERS