<PAGE>
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
(MARK ONE)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
       THE SECURITIES EXCHANGE ACT OF 1934
 
       FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
 
                                       OR
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE SECURITIES EXCHANGE ACT OF 1934
 
      FOR THE TRANSITION PERIOD FROM __________ TO __________
 
                        Commission file number: 1-14267
 
                            REPUBLIC SERVICES, INC.
             (Exact Name of Registrant as Specified in its Charter)
 

<Table>
<S>                                                    <C>
                      DELAWARE                                              65-0716904
              (State of Incorporation)                         (I.R.S. Employer Identification No.)
 
               REPUBLIC SERVICES, INC.                                         33301
           110 S.E. 6TH STREET, 28TH FLOOR                                  (Zip Code)
              FORT LAUDERDALE, FLORIDA
      (Address of Principal Executive Offices)
</Table>

 
      Registrant's telephone number, including area code:  (954) 769-2400
 
          Securities registered pursuant to Section 12(b) of the Act:
 

<Table>
<S>                                                    <C>
                 Title of Each Class                         Name of Each Exchange on which Registered
       COMMON STOCK, PAR VALUE $.01 PER SHARE                       THE NEW YORK STOCK EXCHANGE
</Table>

 
        Securities registered pursuant to Section 12(g) of the Act: NONE
 
     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]     No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
 
     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X]     No [ ]
 
     As of June 28, 2002, the aggregate market value of the shares of the Common
Stock held by non-affiliates of the registrant was approximately $3,150,628,043.
 
     As of March 21, 2003, the registrant had outstanding 161,261,590 shares of
Common Stock.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 

Part III Portions of the Registrant's Proxy Statement relative to the 2003
Annual Meeting of Stockholders.
Part IV Portions of previously filed reports and registration statements.
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<PAGE>
 
                                     INDEX
                                  TO FORM 10-K
 

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<Caption>
                                                                          PAGE NUMBER
                                                                          -----------
<S>         <C>                                                           <C>
Item 1.     Business....................................................       1
Item 2.     Properties..................................................      18
Item 3.     Legal Proceedings...........................................      19
Item 4.     Submission of Matters to a Vote of Security Holders.........      19
Item 5.     Market for the Registrant's Common Equity and Related
              Stockholder Matters.......................................      20
Item 6.     Selected Financial Data.....................................      21
Item 7.     Management's Discussion and Analysis of Financial Condition
              and Results of Operations (including Item 7A).............      22
Item 8.     Financial Statements and Supplementary Data.................      48
Item 9.     Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure..................................      80
Item 10.    Directors and Executive Officers of the Registrant..........      81
Item 11.    Executive Compensation......................................      81
Item 12.    Security Ownership of Certain Beneficial Owners and
              Management................................................      81
Item 13.    Certain Relationships and Related Transactions..............      81
Item 14.    Controls and Procedures.....................................      81
Item 15.    Exhibits, Financial Statement Schedule and Reports on Form
              8-K.......................................................      82
            Signatures and Certifications...............................      85
</Table>


<PAGE>
 

                                     PART I
 

ITEM 1.  BUSINESS
 
COMPANY OVERVIEW
 
     We are a leading provider of services in the domestic non-hazardous solid
waste industry. We provide non-hazardous solid waste collection services for
commercial, industrial, municipal and residential customers through 142
collection companies in 22 states. We also own or operate 90 transfer stations,
56 solid waste landfills and 33 recycling facilities.
 
     As of December 31, 2002, our operations were organized into five regions
whose boundaries may change from time to time: Eastern, Central, Southern,
Southwestern and Western. Each region is organized into several operating areas
and each area contains a group of operating locations. Each of our regions and
substantially all our areas provide collection, transfer, recycling and disposal
services. We believe that this organizational structure facilitates the
integration of our operations within each region, which is a critical component
of our operating strategy. See Note 10 of the Notes to Consolidated Financial
Statements for further discussion of operating segments.
 
     We had revenue of $2,365.1 million and $2,257.5 million and operating
income of $459.5 million and $283.5 million for the years ended December 31,
2002 and 2001, respectively. The $107.6 million, or 4.8%, increase in revenue
from 2001 to 2002 is primarily attributable to the successful execution of our
operating and growth strategies described below. The $176.0 million, or 62.1%,
increase in operating income from 2001 to 2002 is primarily attributable to a
charge of $132.0 million on a pre-tax basis that we recorded during the fourth
quarter of 2001 related to completed and planned divestitures and closings of
certain core and non-core businesses, asset impairments, downsizing our compost,
mulch and soil business and related inventory adjustments, an increase in
self-insurance reserves and an increase in bad debt expense related to the
economic slowdown. The remaining increase in operating income of $44.0 million
is primarily attributable to the elimination of $43.0 million of goodwill
amortization upon adoption of Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets."
 
     Our presence in high growth markets throughout the Sunbelt, including
Florida, Georgia, Nevada, California and Texas, and in other domestic markets
that have experienced higher than average population growth during the past
several years, supports our internal growth strategy. We believe that our
presence in these markets positions our company to experience growth at rates
that are generally higher than the industry's overall growth rate.
 
     While we believe that we are well positioned to continue to increase our
revenue and operating income in the longer term, the economic slowdown has had a
negative impact on certain aspects of our business. However, the aspects of our
business that we believe are "recession resilient" have continued to perform
well. These include our residential and commercial collection operations which
are flat-rate businesses and are not subject to the volatility we experience in
our industrial collection and disposal businesses. We continue to focus on
enhancing stockholder value by implementing our financial, operating and growth
strategies as described below.
 
INDUSTRY OVERVIEW
 
     Based on analysts' reports and industry trade publications, we believe that
the United States non-hazardous solid waste services industry generates annual
revenue of approximately $43.0 billion, of which approximately 47% is generated
by publicly-owned waste companies, 29% is generated by privately-held waste
companies, and 24% is generated by municipal and other local governmental
authorities. Three companies generate the substantial majority of the
publicly-owned companies' total revenue. However, according to industry data,
the domestic non-hazardous waste industry remains highly fragmented as
privately-held companies and municipal and other local governmental authorities
generate approximately 53% of total industry revenue. In general, growth in the
solid waste industry is proportional to growth in the overall economy.
 
                                        1

<PAGE>
 
     The solid waste industry has experienced a period of rapid consolidation.
During this time we were able to grow significantly through acquisitions.
However, growth in the industry by virtue of acquisitions has slowed
considerably since late 1999. Despite this, we believe that the opportunity to
grow through acquisitions still exists, albeit at a slower pace than experienced
in previous years, as a result of the following factors:
 
          Subtitle D Regulation.  Subtitle D of the Resource Conservation and
     Recovery Act of 1976, as currently in effect, and similar state regulations
     have significantly increased the amount of capital, technical expertise,
     operating costs and financial assurance obligations required to own and
     operate a landfill and other solid waste facilities. Many of the smaller
     participants in our industry have found these costs difficult, if not
     impossible, to bear. Large publicly-owned companies, like our company, have
     greater access to, and a lower cost of, the capital necessary to finance
     such increased capital expenditures and costs relative to many of the
     privately-owned companies in the industry. Additionally, the required
     permits for landfill development, expansion or construction have become
     more difficult, time-consuming and costly to acquire. Consequently, many
     smaller, independent operators have decided to either close their
     operations or sell them to larger operators that have greater access to
     capital.
 
          Integration of Solid Waste Businesses.  By being able to control the
     waste stream in a market through the collection, transfer and disposal
     process, integrated solid waste companies gain a further competitive
     advantage over non-integrated operators. The ability of the integrated
     companies to both collect and dispose of solid waste, coupled with access
     to significant capital resources necessary for acquisitions, has created an
     environment in which large publicly-owned, integrated companies can operate
     more cost effectively and competitively than non-integrated operators.
 
          Municipal Privatization.  The trend toward consolidation in the solid
     waste services industry is further supported by the increasing tendency of
     a number of municipalities to privatize their waste disposal operations.
     Privatization of municipal waste operations is often an attractive
     alternative to funding the changes required by Subtitle D.
 
     These developments, as well as the fact that there are a limited number of
viable exit strategies for many of the owners and principals of numerous
privately-held companies in the industry, have contributed to the overall
consolidation trend in the solid waste industry.
 
FINANCIAL STRATEGY
 
     A key component of our financial strategy is our ability to generate free
cash flow. Our definition of free cash flow is cash provided by operating
activities less purchases of property and equipment plus proceeds from the sale
of equipment as presented in our consolidated statement of cash flows. We
believe that free cash flow is the best measure of our financial performance
because strong, sustainable free cash flow is indicative of high quality
earnings. Consequently, we have developed incentive programs and we conduct
monthly field operating reviews that help focus our entire company on the
importance of increasing free cash flow.
 
     We manage our free cash flow primarily by ensuring that capital
expenditures and operating asset levels are appropriate in light of our existing
business and growth opportunities and by closely managing our working capital
which consists primarily of accounts receivable and accounts payable.
 
     We have used and will continue to use our cash flow to maximize stockholder
value as well as our return on investment. This includes the following:
 
     - CUSTOMER SERVICE.  We will continue to reinvest in our existing fleet of
       vehicles, equipment, landfills and facilities to ensure a high level of
       service to our customers.
 
     - INTERNAL GROWTH.  Growth through increases in our customer base and
       services provided is the most capital efficient means for us to build our
       business. This includes not only investing in trucks and containers, but
       also includes investing in information tools and training needed to
       ensure high productivity and quality service throughout all functional
       areas of our business.
 
     - STRATEGIC ACQUISITIONS.  We have and will continue to pursue strategic
       acquisitions that augment our existing business platform.
                                        2

<PAGE>
 
     - SHARE REPURCHASE.  If we are unable to identify opportunities that
       satisfy our growth strategy, we intend to use our free cash flow to
       repurchase shares of our common stock at prices that provide value to our
       stockholders. As of December 31, 2002, we repurchased a total of 17.2
       million shares, or approximately 10% of our common stock outstanding at
       the commencement of our share repurchase program in 2000, for $300.1
       million. In October 2002, our board of directors authorized the
       repurchase of up to an additional $150.0 million of our common stock. We
       believe that our share repurchase program will continue to enhance
       stockholder value.
 
     - DIVIDENDS.  Depending upon the availability of strategic acquisitions, in
       addition to using our free cash flow to repurchase shares of our common
       stock, we may consider declaring a cash dividend if we believe that it
       will enhance stockholder value.
 
     - MINIMIZE BORROWINGS.  To the extent that the opportunities to enhance
       stockholder value mentioned above are not available, we also intend to
       continue to use our free cash flow to minimize our borrowings.
 
     Another key component of our financial strategy includes maintaining an
investment grade rating on our senior debt. This has allowed us to secure
favorable, long-term, fixed-rate financing that reduces our exposure to changing
interest rates. This has also allowed us, and will continue to allow us, to
readily access capital markets.
 
     For certain risks related to our financial strategy, see "Risk Factors."
 
OPERATING STRATEGY
 
     We seek to leverage existing assets and revenue growth to increase
operating margins and enhance stockholder value. Our operating strategy to
accomplish this goal is to:
 
     - utilize the extensive industry knowledge and experience of our executive
       management,
 
     - utilize a decentralized management structure in overseeing day-to-day
       operations,
 
     - integrate waste operations,
 
     - improve operating margins through economies of scale, cost efficiencies
       and asset utilization,
 
     - achieve high levels of customer satisfaction, and
 
     - utilize systems to improve consistency in financial and operational
       performance.
 
     For certain risks related to our operating strategy, see "Risk Factors."
 
     - EXPERIENCED EXECUTIVE MANAGEMENT TEAM.  We believe that we have one of
       the most experienced executive management teams in the solid waste
       industry.
 
          James E. O'Connor, who has served as our Chief Executive Officer since
     December 1998 and became our Chairman in January 2003, also worked at Waste
     Management, Inc. from 1972 to 1978 and from 1982 to 1998. During that time,
     he served in various management positions, including Senior Vice President
     in 1997 and 1998, and Area President of Waste Management of Florida, Inc.
     from 1992 to 1997. Mr. O'Connor has over 28 years of experience in the
     solid waste industry.
 
          Michael J. Cordesman, who has served as our Chief Operating Officer
     since March 2002 and also as our President since February 2003, has over 22
     years of experience in the solid waste industry. He joined us in June 2001
     as our Eastern Region Vice President. From 1999 to 2001, Mr. Cordesman
     served as Vice President of the Central Region for Superior Services Inc.
     From 1980 to 1999, he served in various positions with Waste Management,
     including Vice President of the Mid-Atlantic Region from 1992 to 1999.
 
          The other corporate officers with responsibility for our operations
     have an average of over 20 years of management experience in the solid
     waste industry. Our five regional vice presidents and our 23 area
     presidents have an average of 22 years of experience in the industry.
                                        3

<PAGE>
 
          In addition, our former Chairman and a current Director, H. Wayne
     Huizenga, has over 28 years of experience in the solid waste industry.
     After several years of owning and operating private waste collection
     companies in Florida, he co-founded Waste Management in 1971. From 1971 to
     1984, he served in various executive capacities with Waste Management,
     including President and Chief Operating Officer. By then, Waste Management
     had become the world's largest integrated solid waste services company.
     Furthermore, Harris W. Hudson, who has served as our Vice Chairman since
     our initial public offering, has over 38 years of experience in the solid
     waste industry, including 11 years with Waste Management and 19 years with
     private waste collection companies.
 
     - DECENTRALIZED MANAGEMENT STRUCTURE.  We maintain a relatively small
       corporate headquarters staff, relying on a decentralized management
       structure to minimize administrative overhead costs and to manage our
       day-to-day operations more efficiently. Our local management has
       extensive industry experience in growing, operating and managing solid
       waste companies and has substantial experience in their local geographic
       markets. In early 2001, we added a sales, maintenance and operations
       manager to each of our regional management teams, which previously
       consisted of a regional vice president and a regional controller. We
       believe that strengthening our regional management teams allows us to
       more effectively and efficiently drive our company's initiatives and
       helps ensure consistency throughout our organization. Our regional
       management teams and our area presidents have extensive authority,
       responsibility and autonomy for operations within their respective
       geographic markets. Compensation for regional and area management teams
       is primarily based on the improvement in operating income produced and
       the cash flow generated in each manager's geographic area of
       responsibility. In addition, through long-term incentive programs,
       including stock options, we believe we have one of the lowest turnover
       levels in the industry for our local management teams. As a result of
       retaining experienced managers with extensive knowledge of and
       involvement in their local communities, we are proactive in anticipating
       our customers' needs and adjusting to changes in our markets. We also
       seek to implement the best practices of our various regions and areas
       throughout our operations to improve operating margins.
 
     - INTEGRATED OPERATIONS.  We seek to achieve a high rate of internalization
       by controlling waste streams from the point of collection through
       disposal. We expect that our fully integrated markets generally will have
       a lower cost of operations and more favorable cash flows than our
       non-integrated markets. Through acquisitions and other market development
       activities, we create market-specific, integrated operations typically
       consisting of one or more collection companies, transfer stations and
       landfills. We consider acquiring companies that own or operate landfills
       with significant permitted disposal capacity and appropriate levels of
       waste volume. We also seek to acquire solid waste collection companies in
       markets in which we own or operate landfills. In addition, we generate
       internal growth in our disposal operations by developing new landfills
       and expanding our existing landfills from time to time in markets in
       which we have significant collection operations or in markets that we
       determine lack sufficient disposal capacity. During the three months
       ended December 31, 2002, approximately 53% of the total volume of waste
       that we collected was disposed of at landfills we own or operate. In a
       number of our larger markets, we and our competitors are required to take
       waste to government-controlled disposal facilities. This provides us with
       an opportunity to effectively compete in these markets without investing
       in landfill capacity. Because we do not have landfill facilities or
       government-controlled disposal facilities for all markets in which we
       provide collection services, we believe that through landfill and
       transfer station acquisitions and development we have the opportunity to
       increase our waste internalization rate and further integrate our
       operations. By further integrating operations in existing markets through
       acquisitions and development of landfills and transfer stations, we are
       able to reduce our disposal costs.
 
     - ECONOMIES OF SCALE, COST EFFICIENCIES AND ASSET UTILIZATION. To improve
       operating margins, our management focuses on achieving economies of scale
       and cost efficiencies. The consolidation of acquired businesses into
       existing operations reduces costs by decreasing capital and expenses used
       for routing, personnel, equipment and vehicle maintenance, inventories
       and back-office administration. Generally, we consolidate our acquired
       administrative centers to reduce our general and administrative
 
                                        4

<PAGE>
 
       costs. Our goal is to maintain our selling, general and administrative
       costs in the range of 10% of revenue which we feel is appropriate given
       our existing business platform. In addition, our size allows our company
       to negotiate volume discounts for certain purchases, including waste
       disposal rates at landfills operated by third parties. Furthermore, we
       have taken steps to increase utilization of our assets. For example, to
       reduce the number of collection vehicles and maximize the efficiency of
       our fleet, we have instituted a grid productivity program which allows us
       to benchmark the performance of all of our drivers. In our larger
       markets, we also use a route optimization program to minimize drive times
       and improve operating density. By using assets more efficiently,
       operating expenses can be significantly reduced.
 
     - HIGH LEVELS OF CUSTOMER SATISFACTION.  Our goal of maintaining high
       levels of customer satisfaction complements our operating strategy. Our
       personalized sales process is oriented towards maintaining relationships
       and ensuring that service is being properly provided.
 
     - UTILIZE SYSTEMS TO IMPROVE CONSISTENCY IN FINANCIAL AND OPERATIONAL
       REPORTING. We continue to focus on systems and training initiatives that
       complement our operating strategy. These initiatives include contact
       management, billing, productivity, maintenance and general ledger
       systems. These systems provide us with detailed information, prepared in
       a consistent manner, that will allow us to quickly analyze and act upon
       trends in our business.
 
GROWTH STRATEGY
 
     Our strategy focuses on increasing revenue, gaining market share and
enhancing stockholder value through internal growth and acquisitions. For
certain risks related to our growth strategy, see "Risk Factors."
 
     - INTERNAL GROWTH.  Our internal growth strategy focuses on retaining
       existing customers and obtaining commercial, municipal and industrial
       customers through our well-managed sales and marketing activities.
 
          Long-Term Contracts.  We seek to obtain long-term contracts for
     collecting solid waste in high-growth markets. These include exclusive
     franchise agreements with municipalities as well as commercial and
     industrial contracts. By obtaining such long-term agreements, we have the
     opportunity to grow our contracted revenue base at the same rate as the
     underlying population growth in these markets. For example, we have secured
     exclusive, long-term franchise agreements in high-growth markets such as
     Los Angeles, Orange and Contra Costa Counties in California, Las Vegas,
     Nevada, Arlington, Texas and many areas of Florida. We believe that this
     positions our company to experience internal growth rates that are
     generally higher than our industry's overall growth rate. In addition, we
     believe that by securing a base of long-term recurring revenue in growth
     markets, we are better able to protect our market position from competition
     and our business may be less susceptible to downturns in economic
     conditions.
 
          Sales and Marketing Activities.  We seek to manage our sales and
     marketing activities to enable our company to capitalize on our leading
     positions in many of the markets in which we operate. We currently have
     approximately 500 sales and marketing employees in the field, who are
     compensated using a commission structure that is focused on generating high
     levels of quality revenue. For the most part, these employees directly
     solicit business from existing and prospective commercial, industrial,
     municipal and residential customers. We emphasize our rate and cost
     structures when we train new and existing sales personnel. In addition, we
     utilize a contact management system that assists our sales people in
     tracking leads. It also tracks renewal periods for potential commercial,
     industrial and franchise contracts.
 
     - ACQUISITION GROWTH.  During the late 1990's, the solid waste industry
       experienced a period of rapid consolidation. We were able to grow
       significantly through acquisitions during this period. However, the rate
       of consolidation in the industry has slowed considerably. Despite this,
       we continue to look to acquire businesses that complement our existing
       business platform. Our acquisition growth strategy focuses on
       privately-held solid waste companies and municipal and other local
       governmental authorities. We believe that our ability to acquire
       privately-held companies is enhanced by increasing competition in the
       solid waste industry, increasing capital requirements as a result of
       changes in solid
 
                                        5

<PAGE>
 
       waste regulatory requirements, and the limited number of exit strategies
       for these privately-held companies' owners and principals. We also seek
       to acquire operations and facilities from municipalities that are
       privatizing, which occurs for many of the same reasons that
       privately-held companies sell their solid waste businesses. In addition,
       we will continue to evaluate opportunities to acquire operations and
       facilities that may be divested by other publicly-owned waste companies.
       In sum, our acquisition growth strategy focuses on:
 
          - acquiring businesses that position our company for growth in
            existing and new markets,
 
          - acquiring well-managed companies and, when appropriate, retaining
            local management,
 
          - acquiring operations and facilities from municipalities that are
            privatizing and publicly-owned companies that are divesting of
            assets.
 
          For certain risks involved with our acquisition growth strategy, see
     "Risk Factors -- We may be unable to execute our acquisition growth
     strategy," " -- We may be unable to manage our growth effectively," and
     " -- Businesses we acquire may have undisclosed liabilities."
 
          Acquire Businesses Positioning the Company for Growth.  In making
     acquisitions, we principally target high quality businesses that will allow
     our company to be, or provide our company favorable prospects of becoming,
     a leading provider of integrated solid waste services in markets with
     favorable demographic growth. Generally, we have acquired, and will
     continue to seek to acquire, solid waste collection, transfer and disposal
     companies that:
 
          - have strong operating margins,
 
          - are in growth markets,
 
          - are among the largest or have a significant presence in their local
            markets, and
 
          - have long-term contracts or franchises with municipalities and other
            customers.
 
     Once we have a base of operations in a particular market, we focus on
     acquiring trucks and routes of smaller businesses that also operate in that
     market and surrounding markets, which are typically referred to as
     "tuck-in" acquisitions. We seek to consolidate the operations of such
     tuck-in businesses into our existing operations in that market. We also
     seek to acquire landfills, transfer stations and collection companies that
     operate in markets that we are already servicing in order to fully
     integrate our operations from collection to disposal. In addition, we have
     in the past and may continue in the future to exchange businesses with
     other solid waste companies if by doing so there is a net benefit to our
     business platform. These activities allow us to increase our revenue and
     market share, lower our cost of operations as a percentage of revenue, and
     consolidate duplicative facilities and functions to maximize cost
     efficiencies and economies of scale.
 
          Acquire Well-Managed Companies.  We also seek to acquire businesses
     that have experienced management teams that are willing to join the
     management of our company. We generally seek to maintain continuity in
     management of larger acquired companies in order to capitalize on their
     local market knowledge, community relations and name recognition, and to
     instill their entrepreneurial drive at all levels of our operations. By
     furnishing the local management of such acquired companies with our
     financial and marketing resources and technical expertise, we believe that
     the acquired companies are better able to secure additional municipal
     franchises and other contracts.
 
          Privatize Municipal Operations and Acquire Divested Operations. We
     also seek to acquire solid waste collection operations, transfer stations
     and landfills that municipalities and other governmental authorities are
     privatizing. Many municipalities are seeking to outsource or sell these
     types of solid waste operations, as they lack the capital, technical
     expertise and/or operational resources necessary to comply with
     increasingly stringent regulatory standards and/or to compete effectively
     with private-sector companies. In addition, we have acquired, and will
     continue to seek to acquire, operations and facilities that may be divested
     by other publicly-owned waste companies.
 
                                        6

<PAGE>
 
OPERATIONS
 
     Our operations primarily consist of the collection and disposal of
non-hazardous solid waste.
 
     Collection Services.  We provide solid waste collection services to
commercial, industrial, municipal and residential customers in 22 states through
142 collection companies. In 2002, 75% of our revenue was derived from
collection services consisting of approximately 30% from services provided to
municipal and residential customers, 39% from services provided to commercial
customers and 31% from services provided to industrial and other customers.
 
     Our residential collection operations involve the curbside collection of
refuse from small containers into collection vehicles for transport to transfer
stations or directly to landfills. Residential solid waste collection services
are typically performed under contracts with municipalities, which we generally
secure by competitive bid and which give our company exclusive rights to service
all or a portion of the homes in their respective jurisdictions. These contracts
or franchises usually range in duration from one to five years, although some of
our exclusive franchises are for significantly longer periods. Residential solid
waste collection services may also be performed on a subscription basis, in
which individual households contract directly with our company. The fees
received for subscription residential collection are based primarily on market
factors, frequency and type of service, the distance to the disposal facility
and cost of disposal. In general, subscription residential collection fees are
paid quarterly in advance by the residential customers receiving the service.
 
     In our commercial and industrial collection operations, we supply our
customers with waste containers of varying sizes. We also rent compactors to
large waste generators. Commercial collection services are generally performed
under one- to three-year service agreements, and fees are determined by such
considerations as:
 
     - market factors,
 
     - collection frequency,
 
     - type of equipment furnished,
 
     - the type and volume or weight of the waste collected,
 
     - the distance to the disposal facility and
 
     - the cost of disposal.
 
     We rent waste containers to construction sites and also provide waste
collection services to industrial and construction facilities on a contractual
basis with terms generally ranging from a single pickup to one year or longer.
We collect the containers or compacted waste and transport the waste either to a
landfill or a transfer station for disposal.
 
     We own or operate 90 transfer stations. We deposit waste at these stations,
as do other private haulers and municipal haulers, for compaction and transfer
to trailers for transport to disposal sites or recycling facilities.
 
     Also, we currently provide recycling services in certain markets primarily
to comply with local laws or obligations under our franchise agreements. These
services include the curbside collection of residential recyclable waste and the
provision of a variety of recycling services to commercial and industrial
customers.
 
     Disposal Services.  As of December 31, 2002, we owned or operated 56
landfills, which had approximately 7,697 permitted acres and total available
permitted and probable expansion disposal capacity of approximately 1.7 billion
in-place cubic yards. The in-place capacity of our landfills is subject to
change based on engineering factors, requirements of regulatory authorities and
the ability to expand our sites successfully. Some of our landfills accept
non-hazardous special waste, including utility ash, asbestos and contaminated
soils. See "-- Properties."
 
     Most of our existing landfill sites have the potential for expanded
disposal capacity beyond the currently permitted acreage. We monitor the
availability of permitted disposal capacity at each of our landfills and
evaluate whether to pursue expansion at a given landfill based on estimated
future waste volumes and prices, market needs, remaining capacity and likelihood
of obtaining an expansion. To satisfy future disposal demand,
 
                                        7

<PAGE>
 
we are currently seeking to expand permitted capacity at certain of our
landfills, although no assurances can be made that all future expansions will be
permitted as designed.
 
     Other Services.  We have 33 materials recovery facilities and other
recycling operations, which are generally required to fulfill our obligations
under long-term municipal contracts for residential collection services. These
facilities primarily sort recyclable paper, aluminum, glass and other materials.
Most of these recyclable materials are internally collected by our residential
collection operations. In some areas, we receive commercial and industrial solid
waste that is sorted at our facilities into recyclable materials and non-
recyclable waste. The recyclable materials are salvaged, repackaged and sold to
third parties and the non-recyclable waste is disposed of at landfills or
incinerators. Wherever possible, our strategy is to reduce our exposure to
fluctuations in recyclable commodity prices by utilizing third party facilities,
thereby minimizing our recycling investment.
 
     We provide remediation and other heavy construction services primarily
through our subsidiary located in Missouri. During March 2001, this subsidiary
agreed to act as a subcontractor on a project awarded by the Army Corps of
Engineers to dredge a portion of the Blue River. Revenue from this contract,
which was completed in 2002, was approximately $9.0 million. During 2002, our
subsidiary was awarded a contract to assist on the Riverside Levy Project in
Missouri. Revenue from this project, which is scheduled to be completed in 2004,
is expected to be approximately $50.0 million of which approximately $17.0 has
already been recorded.
 
     We also have a Texas based compost, mulch and soil business at which yard,
mill and other waste is processed, packaged and sold as various products.
 
SALES AND MARKETING
 
     We seek to provide quality services that will enable our company to
maintain high levels of customer satisfaction. We derive our business from a
broad customer base which we believe will enable our company to experience
stable growth. We focus our marketing efforts on continuing and expanding
business with existing customers, as well as attracting new customers.
 
     We employ approximately 500 sales and marketing employees. Our sales and
marketing strategy is to provide high-quality, comprehensive solid waste
collection, recycling, transfer and disposal services to our customers at
competitive prices. We target potential customers of all sizes, from small
quantity generators to large "Fortune 500" companies and municipalities.
 
     Most of our marketing activity is local in nature. However, in 2000 we
initiated a national accounts program in response to our customers' needs.
 
     We generally do not change the tradenames of the local businesses we
acquire, and therefore we do not operate nationally under any one mark or
tradename. Rather, we rely on the goodwill associated with the acquired
companies' local tradenames as used in each geographic market in which we
operate.
 
CUSTOMERS
 
     We provide services to commercial, industrial, municipal and residential
customers. No one customer has individually accounted for more than 10% of the
consolidated revenue of any of our reportable segments in any of the last three
years.
 
COMPETITION
 
     We operate in a highly competitive industry. Entry into our business and
the ability to operate profitably in the industry requires substantial amounts
of capital and managerial experience.
 
     Competition in the non-hazardous solid waste industry comes from a few
large, national publicly-owned companies, including Waste Management and Allied
Waste Industries, several regional publicly- and privately-owned solid waste
companies, and thousands of small privately-owned companies. Some of our
competitors have significantly larger operations, and may have significantly
greater financial resources, than
                                        8

<PAGE>
 
we do. In addition to national and regional firms and numerous local companies,
we compete with municipalities that maintain waste collection or disposal
operations. These municipalities may have financial advantages due to the
availability of tax revenues and tax-exempt financing.
 
     We compete for collection accounts primarily on the basis of price and the
quality of our services. From time to time, our competitors may reduce the price
of their services in an effort to expand market share or to win a competitively
bid municipal contract. This may have an impact on our future revenue and
profitability.
 
     In each market in which we own or operate a landfill, we compete for
landfill business on the basis of disposal costs, geographical location and
quality of operations. Our ability to obtain landfill business may be limited by
the fact that some major collection companies also own or operate landfills to
which they send their waste. There also has been an increasing trend at the
state and local levels to mandate waste reduction at the source and to prohibit
the disposal of certain types of wastes, such as yard wastes, at landfills. This
may result in the volume of waste going to landfills being reduced in certain
areas, which may affect our ability to operate our landfills at their full
capacity and/or affect the prices that we can charge for landfill disposal
services. In addition, most of the states in which we operate landfills have
adopted plans or requirements that set goals for specified percentages of
certain solid waste items to be recycled.
 
REGULATION
 
     Our facilities and operations are subject to a variety of federal, state
and local requirements that regulate the environment, public health, safety,
zoning and land use. Operating and other permits, licenses and other approvals
are generally required for landfills and transfer stations, certain solid waste
collection vehicles, fuel storage tanks and other facilities that we own or
operate, and these permits are subject to revocation, modification and renewal
in certain circumstances. Federal, state and local laws and regulations vary,
but generally govern wastewater or stormwater discharges, air emissions, the
handling, transportation, treatment, storage and disposal of hazardous and
non-hazardous wastes, and the remediation of contamination associated with the
release or threatened release of hazardous substances. These laws and
regulations provide governmental authorities with strict powers of enforcement,
which include the ability to obtain injunctions and/or impose fines or penalties
in the case of violations, including criminal penalties. The U.S. Environmental
Protection Agency and various other federal, state and local environmental,
public and occupational health and safety agencies and authorities administer
these regulations, including the Occupational Safety and Health Administration
of the U.S. Department of Labor.
 
     We strive to conduct our operations in compliance with applicable laws and
regulations. However, in the existing climate of heightened environmental
concerns, from time to time, we have been issued citations or notices from
governmental authorities that have resulted in the need to expend funds for
remedial work and related activities at various landfills and other facilities.
There is no assurance that citations and notices will not be issued in the
future despite our regulatory compliance efforts. We have established a reserve
that we believe, based on currently available information, will be adequate to
cover any potential regulatory costs. However, we cannot assure you that actual
costs will not exceed our reserve.
 
     Federal Regulation.  The following summarizes the primary environmental,
public and occupational health and safety-related statutes of the United States
that affect our facilities and operations:
 
          (1) The Solid Waste Disposal Act, as amended, including the Resource
     Conservation and Recovery Act.  RCRA and its implementing regulations
     establish a framework for regulating the handling, transportation,
     treatment, storage and disposal of hazardous and non-hazardous solid
     wastes, and require states to develop programs to ensure the safe disposal
     of solid waste in sanitary landfills.
 
          Subtitle D of RCRA establishes a framework for regulating the disposal
     of municipal solid waste. Regulations under Subtitle D currently include
     minimum comprehensive solid waste management criteria and guidelines,
     including location restrictions, facility design and operating criteria,
     closure and post-closure requirements, financial assurance standards,
     groundwater monitoring requirements and corrective action standards, many
     of which had not commonly been in effect or enforced in the past in
     connection with municipal solid waste landfills. Each state was required to
     submit to the U.S. EPA a
 
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<PAGE>
 
     permit program designed to implement Subtitle D regulations by April 9,
     1993. All of the states in which we operate have implemented permit
     programs pursuant to RCRA and Subtitle D. These state permit programs may
     include landfill requirements which are more stringent than those of
     Subtitle D.
 
          All of our planned landfill expansions or new landfill development
     projects have been engineered to meet or exceed Subtitle D requirements.
     Operating and design criteria for existing operations have been modified to
     comply with these new regulations. Compliance with Subtitle D regulations
     has resulted in increased costs and may in the future require substantial
     additional expenditures in addition to other costs normally associated with
     our waste management activities.
 
          (2) The Comprehensive Environmental Response, Compensation and
     Liability Act of 1980, as amended.  CERCLA, among other things, provides
     for the cleanup of sites from which there is a release or threatened
     release of a hazardous substance into the environment. CERCLA may impose
     strict, joint and several liability for the costs of cleanup and for
     damages to natural resources upon current owners and operators of the site,
     parties who were owners or operators of the site at the time the hazardous
     substances were disposed of, parties who transported the hazardous
     substances to the site and parties who arranged for the disposal of the
     hazardous substances at the site. Under the authority of CERCLA and its
     implementing regulations, detailed requirements apply to the manner and
     degree of investigation and remediation of facilities and sites where
     hazardous substances have been or are threatened to be released into the
     environment. Liability under CERCLA is not dependent upon the existence or
     disposal of only "hazardous wastes" but can also be based upon the
     existence of small quantities of more than 700 "substances" characterized
     by the U.S. EPA as "hazardous," many of which may be found in common
     household waste.
 
          Among other things, CERCLA authorizes the federal government to
     investigate and remediate sites at which hazardous substances have been or
     are threatened to be released into the environment or to order (or offer an
     opportunity to) persons potentially liable for the cleanup of the hazardous
     substances to do so. In addition, the U.S. EPA has established a National
     Priorities List of sites at which hazardous substances have been or are
     threatened to be released and which require investigation or cleanup.
 
          Liability under CERCLA is not dependent upon the intentional disposal
     of hazardous wastes or hazardous substances. It can be founded upon the
     release or threatened release, even as a result of unintentional,
     non-negligent or lawful action, of thousands of hazardous substances,
     including very small quantities of such substances. Thus, even if our
     landfills have never knowingly received hazardous wastes as such, it is
     possible that one or more hazardous substances may have been deposited or
     "released" at our landfills or at other properties which we currently own
     or operate or may have owned or operated. Therefore, we could be liable
     under CERCLA for the cost of cleaning up such hazardous substances at such
     sites and for damages to natural resources, even if those substances were
     deposited at our facilities before we acquired or operated them. The costs
     of a CERCLA cleanup can be very expensive. Given the difficulty of
     obtaining insurance for environmental impairment liability, such liability
     could have a material impact on our business and financial condition. For a
     further discussion, see "--Liability Insurance and Bonding."
 
          (3) The Federal Water Pollution Control Act of 1972, as amended. This
     Act regulates the discharge of pollutants from a variety of sources,
     including solid waste disposal sites, into streams, rivers and other waters
     of the United States. Point source runoff from our landfills and transfer
     stations that is discharged into surface waters must be covered by
     discharge permits that generally require us to conduct sampling and
     monitoring, and under certain circumstances, reduce the quantity of
     pollutants in those discharges. Storm water discharge regulations under
     this Act require a permit for certain construction activities and
     discharges from industrial operations and facilities, which may affect our
     operations. If a landfill or transfer station discharges wastewater through
     a sewage system to a publicly-owned treatment works, the facility must
     comply with discharge limits imposed by that treatment works. In addition,
     states may adopt groundwater protection programs under this Act or the Safe
     Drinking Water Act that could affect solid waste landfills. Furthermore,
     development which alters or affects wetlands must generally be permitted
 
                                        10

<PAGE>
 
     prior to such development commencing, and certain mitigation requirements
     may be required by the permitting agencies.
 
          (4) The Clean Air Act, as amended.  The Clean Air Act imposes
     limitations on emissions from various sources, including landfills. In
     March 1996, the U.S. EPA promulgated regulations that require large
     municipal solid waste landfills to install landfill gas monitoring systems.
     These regulations apply to landfills that commenced construction,
     reconstruction or modification on or after May 30, 1991, and, principally,
     to landfills that can accommodate 2.5 million cubic meters or more of
     municipal solid waste. The regulations apply whether the landfill is active
     or closed. The date by which each affected landfill is required to have a
     gas collection and control system installed and made operational varies
     depending upon calculated emission rates at the landfill. Many state
     regulatory agencies also currently require monitoring systems for the
     collection and control of certain landfill gas. We do not expect that
     compliance with any new state regulations will have a material effect on
     us.
 
          (5) The Occupational Safety and Health Act of 1970, as amended.  This
     Act authorizes the Occupational Safety and Health Administration of the
     U.S. Department of Labor to promulgate occupational safety and health
     standards. A number of these standards, including standards for notices of
     hazardous chemicals and the handling of asbestos, apply to our facilities
     and operations.
 
     State Regulation.  Each state in which we operate has its own laws and
regulations governing solid waste disposal, water and air pollution, and, in
most cases, releases and cleanup of hazardous substances and liability for such
matters. States also have adopted regulations governing the design, operation,
maintenance and closure of landfills and transfer stations. Our facilities and
operations are likely to be subject to these types of requirements. In addition,
our solid waste collection and landfill operations may be affected by the trend
in many states toward requiring the development of solid waste reduction and
recycling programs. For example, several states have enacted laws that require
counties or municipalities to adopt comprehensive plans to reduce, through solid
waste planning, composting, recycling or other programs, the volume of solid
waste deposited in landfills. Additionally, laws and regulations restricting the
disposal of certain wastes, including yard waste, newspapers, beverage
containers, unshredded tires, lead-acid batteries and household appliances, in
solid waste landfills have been promulgated in several states and are being
considered in others. Legislative and regulatory measures to mandate or
encourage waste reduction at the source and waste recycling also are or have
been under consideration by the U.S. Congress and the U.S. EPA, respectively.
 
     In order to construct, expand and operate a landfill, one or more
construction or operating permits, as well as zoning and land use approvals,
must be obtained. These are difficult and time-consuming to obtain, are often
opposed by neighboring landowners and citizens' groups, may be subject to
periodic renewal and are subject to modification and revocation by the issuing
agency. In connection with our acquisition of existing landfills, it may be and
on occasion has been necessary for our company to expend considerable time,
effort and money to bring the acquired facilities into compliance with
applicable requirements and to obtain the permits and approvals necessary to
increase their capacity.
 
     Many of our facilities own and operate underground storage tanks which are
generally used to store petroleum-based products. These tanks are generally
subject to federal, state and local laws and regulations that mandate their
periodic testing, upgrading, closure and removal, and that, in the event of
leaks, require that polluted groundwater and soils be remediated. We believe
that all of our underground storage tanks currently meet all applicable
regulations. If underground storage tanks we own or operate leak, and the
leakage migrates onto the property of others, we could be liable for response
costs and other damages to third parties. We are unaware of facts indicating
that issues of compliance with regulations related to underground storage tanks
will have a material adverse effect on our business or financial condition.
 
     Finally, with regard to our solid waste transportation operations, we are
subject to the jurisdiction of the Surface Transportation Board and are
regulated by the Federal Highway Administration, Office of Motor Carriers, and
by regulatory agencies in each state. Various states have enacted or
promulgated, or are considering enacting or promulgating, laws and regulations
that would restrict the interstate transportation and processing of solid waste.
In 1978, the U.S. Supreme Court ruled that a law that restricts the importation
of out-of-state solid waste was unconstitutional; however, states have attempted
to distinguish proposed laws
                                        11

<PAGE>
 
from that involved in and implicated by that ruling. In 1994, the Supreme Court
ruled that a flow control law, which attempted to restrict solid waste from
leaving its place of generation, imposed an impermissible burden upon interstate
commerce, and, therefore, was unconstitutional; however, states have also
attempted to distinguish proposed laws from that involved in and implicated by
that ruling. In response to these Supreme Court rulings, the U.S. Congress has
considered passing legislation authorizing states and local governments to
restrict the free movement of solid waste in interstate commerce. If federal
legislation authorizing state and local governments to restrict the free
movement of solid waste in interstate commerce is enacted, such legislation
could adversely affect our operations.
 
     We have established a reserve for landfill and environmental costs, which
includes landfill site closure and post-closure costs. We periodically reassess
such costs based on various methods and assumptions regarding landfill airspace
and the technical requirements of Subtitle D of RCRA and adjust our rates used
to expense closure and post-closure costs accordingly. Based on current
information and regulatory requirements, we believe that our reserves for such
landfill and environmental expenditures are adequate. However, environmental
laws may change, and there can be no assurance that our reserves will be
adequate to cover requirements under existing or new environmental laws and
regulations, future changes or interpretations of existing laws and regulations
or the identification of adverse environmental conditions previously unknown to
us. See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Landfill and Environmental Matters" and "Risk
Factors -- Compliance with environmental regulation may impede our growth."
 
LIABILITY INSURANCE AND BONDING
 
     The nature of our business exposes our company to the risk of liabilities
arising out of our operations, including possible damages to the environment.
Such potential liabilities could involve, for example, claims for remediation
costs, personal injury, property damage and damage to the environment in cases
where we may be held responsible for the escape of harmful materials; claims of
employees, customers or third parties for personal injury or property damage
occurring in the course of our operations; or claims alleging negligence in the
planning or performance of work. We could also be subject to fines and civil and
criminal penalties in connection with alleged violations of regulatory
requirements. Because of the nature and scope of the possible environmental
damages, liabilities imposed in environmental litigation can be significant. Our
solid waste operations have third party environmental liability insurance with
limits in excess of those required by permit regulations, subject to certain
limitations and exclusions. However, we cannot assure you that the limits of
such environmental liability insurance would be adequate in the event of a major
loss, nor can we assure you that we would continue to carry excess environmental
liability insurance should market conditions in the insurance industry make such
coverage costs prohibitive.
 
     We have general liability, vehicle liability, employment practices
liability, pollution liability, directors and officers liability, worker's
compensation and employer's liability coverage, as well as umbrella liability
policies to provide excess coverage over the underlying limits contained in
these primary policies. We also carry property insurance. Although we try to
operate safely and prudently and while we have, subject to limitations and
exclusions, substantial liability insurance, no assurance can be given that we
will not be exposed to uninsured liabilities which could have a material adverse
effect on our financial condition, results of operations or cash flows.
 
     Our insurance programs for worker's compensation, general liability,
vehicle liability and employee-related health care benefits are effectively
self-insured. Claims in excess of self-insurance levels are fully insured
subject to policy limits. Accruals are based on claims filed and estimates of
claims incurred but not reported.
 
     In the normal course of business, we may be required to post performance
bonds, insurance policies, letters of credit and/or cash deposits in connection
with municipal residential collection contracts, the operation, closure or
post-closure of landfills, certain remediation contracts, certain environmental
permits, and certain business licenses and permits. Bonds issued by surety
companies operate as a financial guarantee
 
                                        12

<PAGE>
 
of our performance. To date, we have satisfied financial responsibility
requirements by making cash deposits or by obtaining bank letters of credit,
insurance policies or surety bonds.
 
EMPLOYEES
 
     As of December 31, 2002, we employed approximately 12,700 full-time
employees, approximately 3,300 of whom were covered by collective bargaining
agreements. Our management believes that we have good relations with our
employees.
 
COMPENSATION
 
     We believe that our compensation program effectively aligns our field and
corporate management team with the company's overall goal of generating
increasing amounts of free cash flow while achieving targeted earnings and
returns on invested capital. This is done by utilizing simple and measurable
metrics on which incentive pay is based. At the field level, these metrics are
based upon free cash flow, earnings and return on invested capital for each
manager's geographic area of responsibility. Great effort is taken to ensure
that these individual goals agree to the overall goals of the company. Incentive
compensation at the corporate level is based on the obtainment of our company's
overall goals. In addition, certain field and corporate employees also
participate in a long-term incentive program. We believe this program aligns our
company's short- and long-term goals and helps ensure that the long-term success
of our company is not sacrificed for the obtainment of short-term goals.
 
CORPORATE HISTORY
 
     We were incorporated as a Delaware corporation in 1996 by our former parent
company, AutoNation, Inc. In 1998, AutoNation separated its non-hazardous solid
waste services division from its other businesses and we completed an initial
public offering of shares of our common stock. In 1999, AutoNation sold
substantially all of its remaining interest in our company in a secondary public
offering.
 
AVAILABILITY OF REPORTS AND OTHER INFORMATION
 
     Our corporate website is http://www.republicservices.com. We make available
on this website, free of charge, access to our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on
Schedule 14A and amendments to those materials filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 as soon as
reasonably practicable after we electronically submit such material to the
Securities and Exchange Commission. In addition, the Commission's website is
http://www.sec.gov. The Commission makes available on this website, free of
charge, reports, proxy and information statements, and other information
regarding issuers, such as us, that file electronically with the Commission.
Information on our website or the Commission's website is not part of this
document.
 
RISK FACTORS
 
     This Annual Report on Form 10-K includes "forward-looking statements'
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, including, in particular, certain statements about our plans,
strategies and prospects. Although we believe that our plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, we cannot assure you that such plans, intentions or expectations
will be achieved. Important factors that could cause our actual results to
differ materially from our forward-looking statements include those set forth in
this Risk Factors section. All forward-looking statements attributable to us or
any persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements set forth below. Unless the context requires
otherwise, all references to the "company," "we," "us" or "our" include Republic
Services, Inc. and its subsidiaries.
 
     If any of the following risks, or other risks not presently known to us or
that we currently believe to not be significant, develop into actual events,
then our business, financial condition, results of operations, cash flows or
prospects could be materially adversely affected.
                                        13

<PAGE>
 
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY AND MAY BE UNABLE TO COMPETE
EFFECTIVELY.
 
     We operate in a highly competitive business environment. Some of our
competitors have significantly larger operations and may have significantly
greater financial resources than we do. In addition, the solid waste industry is
constantly changing as a result of rapid consolidation which may create
additional competitive pressures in our business environment.
 
     We also compete with municipalities that maintain their own waste
collection or disposal operations. These municipalities may have a financial
advantage over us as a result of the availability of tax revenue and tax-exempt
financing.
 
     We compete for collection accounts primarily on the basis of price and the
quality of services. From time to time our competitors may reduce the price of
their services in an effort to expand their market share or to win a
competitively bid municipal contract.
 
     In each market in which we own or operate a landfill, we compete for solid
waste volume on the basis of disposal or "tipping" fees, geographical location
and quality of operations. Our ability to obtain solid waste volume for our
landfills may be limited by the fact that some major collection companies also
own or operate landfills to which they send their waste. In markets in which we
do not own or operate a landfill, our collection operations may operate at a
disadvantage to fully integrated competitors.
 
     As a result of these factors, we may have difficulty competing effectively
from time to time.
 
ECONOMIC CONDITIONS MAY CONTINUE TO ADVERSELY AFFECT OUR BUSINESS, OPERATIONS
AND INTERNAL GROWTH.
 
     During 2001, the economic slowdown reduced recycling commodity prices which
negatively impacted our operating margins. The economic slowdown also negatively
impacted the portion of our business servicing the manufacturing sector and the
non-residential construction industry. Landfill volumes attributable to
manufacturing and construction activity began to weaken. Furthermore, the
portion of our business that services the residential construction industry was
negatively impacted toward the latter part of 2001. During 2002, landfill
volumes attributable to manufacturing and construction activity continued to
weaken. A continued slowdown in the economy could further adversely affect
volumes, pricing and operating margins in our collection, transfer and disposal
operations.
 
AN INCREASE IN THE PRICE OF FUEL MAY ADVERSELY AFFECT OUR BUSINESS.
 
     Our operations are dependent upon fuel, which we purchase in the open
market on a daily basis. During 2000, we experienced an increase in the cost of
fuel. A portion of this increase was passed on to our customers. To date in
2003, we have experienced a significant increase in the cost of fuel. However,
because of the competitive nature of the waste industry, there can be no
assurances that we will be able to pass on the recent or any future increases in
fuel prices to our customers. Due to prospects of war and political instability
in oil producing countries, fuel prices may continue to increase significantly
in 2003. A significant increase in fuel costs could adversely affect our
business.
 
WE MAY BE UNABLE TO EXECUTE OUR FINANCIAL STRATEGY.
 
     Our ability to execute our financial strategy is dependent upon our ability
to maintain an investment grade rating on our senior debt. The credit rating
process is contingent upon a number of factors, many of which are beyond our
control.
 
     Our financial strategy is also dependent upon our ability to generate
sufficient cash flow to reinvest in our existing business, to fund our internal
growth, to acquire other solid waste businesses, repurchase shares of our common
stock, minimize our borrowings and take other actions to enhance stockholder
value. We cannot assure you that we will generate sufficient cash flow to
execute our financial strategy, that we will be able to repurchase our common
stock or that we will declare any cash dividends.
 
                                        14

<PAGE>
 
WE MAY BE UNABLE TO EXECUTE OUR ACQUISITION GROWTH STRATEGY.
 
     Our ability to execute our growth strategy still depends in part on our
ability to identify and acquire desirable acquisition candidates as well as our
ability to successfully consolidate acquired operations into our business. The
consolidation of our operations with the operations of acquired companies,
including the consolidation of systems, procedures, personnel and facilities,
the relocation of staff, and the achievement of anticipated cost savings,
economies of scale and other business efficiencies, presents significant
challenges to our management, particularly if several acquisitions occur at the
same time. In short, we cannot assure you that:
 
     - desirable acquisition candidates exist or will be identified,
 
     - we will be able to acquire any of the candidates identified,
 
     - we will effectively consolidate companies which are acquired and fully or
       timely realize the expected cost savings, economies of scale or business
       efficiencies, or
 
     - any acquisitions will be profitable or accretive to our earnings.
 
     Additional factors may negatively impact our acquisition growth strategy.
Our acquisition strategy requires spending significant amounts of capital. If we
are unable to obtain additional needed financing on acceptable terms, we may
need to reduce the scope of our acquisition growth strategy, which could have a
material adverse effect on our growth prospects. The intense competition among
our competitors pursuing the same acquisition candidates may increase purchase
prices for solid waste businesses and increase our capital requirements and/or
prevent us from acquiring certain acquisition candidates. If any of the
aforementioned factors force us to alter our growth strategy, our financial
condition, results of operations and growth prospects could be adversely
affected.
 
WE MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY.
 
     Our growth strategy places significant demands on our financial,
operational and management resources. In order to continue our growth, we will
need to add administrative and other personnel, and make additional investments
in operations and systems. We cannot assure you that we will be able to find and
train qualified personnel, or do so on a timely basis, or expand our operations
and systems to the extent, and in the time, required.
 
BUSINESSES WE ACQUIRE MAY HAVE UNDISCLOSED LIABILITIES.
 
     In pursuing our acquisition strategy, our investigations of the acquisition
candidates may fail to discover certain undisclosed liabilities of the
acquisition candidates. If we acquire a company having undisclosed liabilities,
as a successor owner we may be responsible for such undisclosed liabilities. We
typically try to minimize our exposure to such liabilities by obtaining
indemnification from each seller of the acquired companies, by deferring payment
of a portion of the purchase price as security for the indemnification and by
acquiring only specified assets. However, we cannot assure you that we will be
able to obtain indemnifications or that they will be enforceable, collectible or
sufficient in amount, scope or duration to fully offset any undisclosed
liabilities arising from our acquisitions.
 
WE DEPEND ON KEY PERSONNEL.
 
     Our future success depends on the continued contributions of several key
employees and officers. We do not maintain key man life insurance policies on
any of our officers. The loss of the services of key employees and officers,
whether such loss is through resignation or other causes, or the inability to
attract additional qualified personnel, could have a material adverse effect on
our financial condition, results of operations and growth prospects.
 
                                        15

<PAGE>
 
COMPLIANCE WITH ENVIRONMENTAL AND OTHER LAWS AND REGULATIONS MAY IMPEDE OUR
GROWTH.
 
     We may need to spend considerable time, effort and capital to keep our
facilities in compliance with federal, state and local requirements regulating
health, safety, environment, zoning, land use and transportation. In addition,
some of our waste operations that cross state boundaries could be adversely
affected if the federal government, or the state or locality in which these
waste operations are located, imposes fees on, or otherwise limits or prohibits,
the transportation or disposal of solid waste. If environmental laws become more
stringent, our environmental capital expenditures and costs for environmental
compliance may increase in the future. In addition, due to the possibility of
unanticipated events or regulatory developments, the amounts and timing of
future environmental expenditures could vary substantially from those we
currently anticipate. Because of the nature of our operations, we have in the
past, currently are, and may in the future be named as a potentially responsible
party in connection with the investigation or remediation of environmental
conditions. We cannot assure you that the resolution of any such investigations
will not have a material adverse effect on our financial condition, results of
operations or cash flows. A significant judgment or fine against our company, or
our loss of significant permits or licenses, could have a material adverse
effect on our financial condition, results of operations, cash flows or
prospects.
 
REGULATORY APPROVAL TO DEVELOP OR EXPAND OUR LANDFILLS AND TRANSFER STATIONS MAY
BE DELAYED OR DENIED.
 
     Our plans include developing new landfills and transfer stations, as well
as expanding the disposal and transfer capacities of certain of our landfills
and transfer stations, respectively. Various parties, including citizens' groups
and local politicians, sometimes challenge these projects. Responding to these
challenges has, at times, increased our costs and extended the time associated
with establishing new facilities and expanding existing facilities. In addition,
failure to receive regulatory approval may prohibit us from establishing new
facilities and expanding existing facilities.
 
OUR FINANCIAL STATEMENTS ARE BASED UPON ESTIMATES AND ASSUMPTIONS THAT MAY
DIFFER FROM ACTUAL RESULTS.
 
     Our financial statements have been prepared in accordance with accounting
principles generally accepted in the United States and necessarily include
amounts based on estimates and assumptions made by us. Actual results could
differ from these amounts. Significant items subject to such estimates and
assumptions include the carrying value of long-lived assets, the depletion and
amortization of landfill development costs, accruals for closure and
post-closure costs, valuation allowances for accounts receivable, liabilities
for potential litigation, claims and assessments, and liabilities for
environmental remediation, deferred taxes and self-insurance.
 
     We currently accrue for landfill closure and post-closure costs based on
consumption of landfill airspace. As of December 31, 2002, assuming that all
available landfill capacity is used, we expect to expense approximately $541.3
million of landfill closure and post-closure costs over the remaining lives of
these facilities. We cannot assure you that our reserves for landfill and
environmental costs will be adequate to cover the requirements of existing
environmental regulations, future changes or interpretations of existing
regulations, or the identification of adverse environmental conditions
previously unknown to us.
 
SEASONAL CHANGES MAY ADVERSELY AFFECT OUR BUSINESS AND OPERATIONS.
 
     Our operations may be adversely affected by periods of inclement weather
which could delay the collection and disposal of waste, reduce the volume of
waste generated, or delay the construction or expansion of our landfill sites
and other facilities.
 
WE MAY BE UNABLE TO EXTEND THE MATURITY OF OUR REVOLVING SHORT-TERM CREDIT
FACILITY.
 
     We have a revolving short-term credit facility in the principal amount of
$300.0 million which expires in July 2003. We anticipate extending the maturity
of this credit facility until July 2004. However, we cannot assure you that we
will receive such extension and, if so, whether such extension will be on terms
as favorable to us as those currently contained in the credit facility.
 
                                        16

<PAGE>
 
THE OUTCOME OF AUDITS BY THE INTERNAL REVENUE SERVICE MAY ADVERSELY AFFECT OUR
COMPANY.
 
     Through the date of our initial public offering in July 1998, we filed
consolidated federal income tax returns with AutoNation. The Internal Revenue
Service is auditing AutoNation's consolidated tax returns for fiscal years 1995
through 1999. In accordance with the tax sharing agreement we have with
AutoNation, we may be liable for certain assessments imposed by the Internal
Revenue Service for the periods through June 1998 resulting from this audit. In
addition, the Internal Revenue Service is auditing our consolidated tax returns
for fiscal years 1998 and 1999. No assurance can be given with respect to the
outcome of this audit or the effect it may have on us, or that our reserves with
respect thereto are adequate. A significant assessment against us could have a
material adverse effect on our financial position, results of operations or cash
flows.
 
                                        17

<PAGE>
 

I
TEM 2.  PROPERTIES
 
     Our corporate headquarters are located in Ft. Lauderdale, Florida in leased
premises. As of December 31, 2002, we operated approximately 5,400 collection
vehicles. Certain of our property and equipment are subject to operating leases
or liens securing payment of portions of our indebtedness. We also lease certain
of our offices and equipment. We believe that our facilities are sufficient for
our current needs.
 
     The following table provides certain information regarding the 56 landfills
owned or operated by us as of December 31, 2002:
 

<Table>
<Caption>
                                                                                                                        UNUSED
                                                                                             TOTAL       PERMITTED     PERMITTED
            LANDFILL NAME                           LOCATION                   REGION     ACREAGE(2)    ACREAGE(3)    ACREAGE(4)
            -------------              -----------------------------------  ------------  -----------   -----------   -----------
<S>                                    <C>                                  <C>           <C>           <C>           <C>
545 Landfill.........................  Winter Garden, Florida               Southern            80            58             8
Apex.................................  Clark County, Nevada                 Western          2,285         1,233         1,074
Brent Run............................  Montrose, Michigan                   Central            544           106            60
Broadhurst Landfill..................  Jesup, Georgia                       Southern           900           105            65
C&T Regional.........................  Linn, Texas                          Southwestern       200            77             5
Carleton Farms.......................  Detroit, Michigan                    Central            640           388           231
Charter Waste........................  Abilene, Texas                       Southwestern       396           300           268
Cedar Trail..........................  Bartow, Florida                      Southern           392            53            --
Chiquita Canyon......................  Valencia, California                 Western            592           257            81
Cleveland Container/JMN..............  Shelby, North Carolina               Southern           179            37            --
Countywide...........................  East Sparta, Ohio                    Eastern            816            88            --
Dozit Landfill.......................  Morganfield, Kentucky                Central            231            47            28
East Carolina Landfill...............  Aulander, North Carolina             Southern           740           113            51
Elk Run..............................  Onaway, Michigan                     Central             99            40            29
Epperson Landfill....................  Williamstown, Kentucky               Central            899           100            40
Foothills Landfill(1)................  Lenior, North Carolina               Southern           231            78            56
Forest Lawn..........................  Three Oaks, Michigan                 Central            278           165            --
Front Range..........................  Denver, Colorado                     Southwestern       602           195           142
Honeygo Run..........................  Perry Hall, Maryland                 Eastern             68            39            13
Kestrel Hawk.........................  Racine, Wisconsin                    Central            218           125            13
Laughlin(1)..........................  Laughlin, Nevada                     Western             40            40            --
Mallard Ridge........................  Delavan, Wisconsin                   Central            659            42             9
Modern...............................  York, Pennsylvania                   Eastern            716           230            22
National Serv-All....................  Fort Wayne, Indiana                  Central            458           204            12
Nine Mile Road.......................  St. Augustine, Florida               Southern           354            28            --
North County.........................  Houston, Texas                       Southwestern       100            31             9
Northwest Tennessee..................  Union City, Tennessee                Central            600           120            76
Oak Grove............................  Winder, Georgia                      Southern           324            60            --
Ohio County Balefill(1)..............  Beaver Dam, Kentucky                 Central            908           178           126
Pepperhill...........................  North Charleston, South Carolina     Southern            37            22            --
Pine Grove...........................  Amanda, Ohio                         Eastern            734           112            72
Pine Ridge...........................  Griffin, Georgia                     Southern           515           196           151
Potrero..............................  Suisan, California                   Western          1,400           190            90
Presidio(1)..........................  Presidio, Texas                      Southwestern        10            10             6
Republic/Alpine(1)...................  Alpine, Texas                        Southwestern        80            74            67
Republic/CSC.........................  Avalon, Texas                        Southwestern       467           190           127
Republic/Maloy.......................  Campbell, Texas                      Southwestern       455           195           124
San Angelo(1)........................  San Angelo, Texas                    Southwestern       257           232           111
Savannah Regional....................  Savannah, Georgia                    Southern           123            56            42
Seabreeze Landfill...................  Clute, Texas                         Southwestern       846           161            23
Seagull..............................  Avalon, California                   Western              6             3            --
Southern Illinois Regional...........  DeSoto, Illinois                     Central            349           113            13
Swiftcreek Landfill..................  Macon, Georgia                       Southern           836            85            18
Tay-Ban..............................  Birch Run, Michigan                  Central             90            40             6
Tri-K Landfill.......................  Stanford, Kentucky                   Central            612            64            33
Union County.........................  Cross Anchor, South Carolina         Southern           600            83            74
United Refuse........................  Fort Wayne, Indiana                  Central            305            77            15
Upper Piedmont Environmental.........  Roxboro, North Carolina              Southern           614            70            39
Uwharrie Landfill(1).................  Mt. Gilead, North Carolina           Southern           967           118            56
Valley View Landfill.................  Sulphur, Kentucky                    Central            894           109            46
Vasco Road...........................  Livermore, California                Western            435           246            89
Victory Environmental................  Terre Haute, Indiana                 Central          1,013           303           165
Wabash Valley........................  Wabash, Indiana                      Central            303            69             7
West Contra Costa County.............  Contra Costa, California             Western            350           188            --
Whitefeather.........................  Pinconning, Michigan                 Central            639            57            26
Worthington..........................  Worthington, Indiana                 Central            338            97            28
                                                                                            ------         -----         -----
       Total.........................                                                       27,824         7,697         3,846
                                                                                            ======         =====         =====
</Table>

 
---------------
 
(1) Operated but not owned by us.
(2) Total acreage includes permitted acreage, probable expansion acreage, other
    acreage available for future disposal that has not been permitted, buffer
    land and other land owned by our company.
(3) Permitted acreage consists of all acreage at the landfill encompassed by an
    active permit to dispose of waste.
(4) Unused permitted acreage consists of all acreage at the landfill encompassed
    by an active permit on which disposal operations have not commenced.
 
                                        18

<PAGE>
 

ITEM 3.  LEGAL PROCEEDINGS
 
     We are and will continue to be involved in various administrative and legal
proceedings in the ordinary course of business. We can give you no assurance
regarding the outcome of these proceedings or the effect their outcomes may
have, or that our insurance coverages or reserves are adequate. A significant
judgment against our company, the loss of significant permits or licenses, or
the imposition of a significant fine could have a material adverse effect on our
financial position, results of operations, cash flows or prospects.
 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to our stockholders during the fourth quarter of
2002.
 
                                        19

<PAGE>
 

                                    PART II
 

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS
 
MARKET INFORMATION, HOLDERS AND DIVIDENDS
 
     Our common stock began trading on the New York Stock Exchange on July 1,
1998.
 
     The following table sets forth the range of the high and low sales prices
of our common stock for the periods indicated:
 

<Table>
<Caption>
                                                           HIGH     LOW
                                                          ------   ------
<S>                                                       <C>      <C>
2002
First Quarter...........................................  $20.00   $16.45
Second Quarter..........................................   21.77    18.60
Third Quarter...........................................   21.15    16.26
Fourth Quarter..........................................   22.26    18.76
 
2001
First Quarter...........................................  $19.10   $13.75
Second Quarter..........................................   19.95    17.45
Third Quarter...........................................   20.90    15.60
Fourth Quarter..........................................   20.60    15.25
</Table>

 
     On March 21, 2003 the last reported sales price of our common stock was
$19.86.
 
     There were approximately 91 record holders of our common stock at March 21,
2003.
 
     We did not pay cash dividends on our common stock in 2001 and 2002. We
intend to retain all earnings for use in the operation and expansion of our
business. However, if we are unable to expand our business by acquiring
businesses that satisfy our acquisition growth strategy, we intend to use a
portion of our future earnings to repurchase our common stock and we may
consider declaring a cash dividend.
 
     During 2000, 2001 and 2002, our board of directors authorized the
repurchase of up to $150.0 million, $125.0 million and $175.0 million,
respectively, of our common stock. As of December 31, 2002, we paid $300.1
million to repurchase approximately 17.2 million shares of our stock, of which
approximately 8.0 million shares were acquired during 2002 for $150.0 million.
 
     The information required by Item 201(d) of Regulation S-K is included with

Item 12 of Part III of this Form 10-K, which is incorporated by reference to our
Proxy Statement for our 2003 Annual Meeting of Stockholders.
 
                                        20

<PAGE>
 

ITEM 6.  SELECTED FINANCIAL DATA (IN MILLIONS, EXCEPT PER SHARE DATA)
 
     The following Selected Financial Data should be read in conjunction with
our Consolidated Financial Statements and notes thereto as of December 31, 2002
and 2001 and for each of the three years in the period ended December 31, 2002
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Annual Report on Form 10-K. The selected
statement of income data and the other operating data for the years 1999 and
1998 and the selected balance sheet data at December 31, 2000 and 1999 were
derived from our Consolidated Financial Statements, which have been audited by
Arthur Andersen LLP, independent certified public accountants. Certain amounts
in the historical Consolidated Financial Statements have been reclassified to
conform to the 2002 presentation. See Notes 1, 3 and 7 of the Notes to our
Consolidated Financial Statements for a discussion of basis of presentation,
business combinations and stockholders' equity and their effect on comparability
of year-to-year data.
 

<Table>
<Caption>
                                                                            YEARS ENDED DECEMBER 31,
                                                              ----------------------------------------------------
                                                                2002       2001       2000       1999       1998
                                                              --------   --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>        <C>
STATEMENT OF INCOME DATA:
Revenue.....................................................  $2,365.1   $2,257.5   $2,103.3   $1,869.3   $1,375.0
Expenses:
  Cost of operations........................................   1,472.9    1,422.5    1,271.3    1,131.9      848.6
  Depreciation, amortization and depletion..................     199.6      215.4      197.4      163.2      106.3
  Selling, general and administrative.......................     238.7      236.5      193.9      176.7      135.8
  Other charges (income)....................................      (5.6)      99.6        6.7        6.9         --
                                                              --------   --------   --------   --------   --------
Operating income............................................     459.5      283.5      434.0      390.6      284.3
Interest expense............................................     (77.0)     (80.1)     (81.6)     (64.2)     (44.7)
Interest income.............................................       4.3        4.4        1.7        3.5        1.5
Other income (expense), net.................................       (.3)       1.5        2.3       (3.4)       (.9)
                                                              --------   --------   --------   --------   --------
Income before income taxes..................................     386.5      209.3      356.4      326.5      240.2
Provision for income taxes..................................     146.9       83.8      135.4      125.7       86.5
                                                              --------   --------   --------   --------   --------
Net income..................................................  $  239.6   $  125.5   $  221.0   $  200.8   $  153.7
                                                              ========   ========   ========   ========   ========
Basic and diluted earnings per share(a).....................  $   1.44   $    .73   $   1.26   $   1.14   $   1.13
                                                              ========   ========   ========   ========   ========
Weighted average diluted common and common equivalent shares
  outstanding(a)............................................     166.7      171.1      175.0      175.7      135.6
                                                              ========   ========   ========   ========   ========
</Table>

 

<Table>
<Caption>
                                                                            YEARS ENDED DECEMBER 31,
                                                              ----------------------------------------------------
                                                                2002       2001       2000       1999       1998
                                                              --------   --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>        <C>
OTHER OPERATING DATA:
Cash flows from operating activities........................  $  569.7   $  459.2   $  461.8   $  323.8   $  271.1
Capital expenditures (b)....................................     258.6      249.3      208.0      294.5      203.6
Proceeds from the sale of equipment.........................      14.6        8.7       12.6        4.9       10.6
EBITDA(c)...................................................     659.1      498.9      631.4      553.8      390.6
EBITDA margin (d)...........................................      27.9%      22.1%      30.0%      29.6%      28.4%
</Table>

 

<Table>
<Caption>
                                                                            DECEMBER 31,
                                                              -----------------------------------------
                                                                2002       2001       2000       1999
                                                              --------   --------   --------   --------
<S>                                                           <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................  $  141.5   $   16.1   $    2.0   $   13.1
Restricted cash.............................................     175.0      142.3       84.3       10.3
Total assets................................................   4,209.1    3,856.3    3,561.5    3,288.3
Total debt..................................................   1,442.1    1,367.7    1,256.7    1,209.3
Total stockholders' equity..................................   1,881.1    1,755.9    1,674.9    1,502.7
</Table>

 
---------------
 
(a) Prior to our initial public offering on July 1, 1998, we had 100 shares of
    common stock outstanding, all of which were owned by AutoNation. Historical
    share and per share data have been retroactively adjusted for the
    recapitalization of our 100 shares of common stock into 95.7 million shares
    of common stock in July 1998.
(b) During 2002, we also paid $72.6 million to purchase equipment originally
    placed into service pursuant to an operating lease.
(c) EBITDA represents operating income plus depreciation, amortization and
    depletion. While EBITDA data should not be construed as a substitute for
    operating income, net income or cash flows from operations in analyzing our
    operating performance, financial position and cash flows, we have included
    EBITDA data, which is not a measure of financial performance calculated in
    accordance with accounting principles generally accepted in the United
    States, because we believe that this data is commonly used by certain
    investors to evaluate a company's performance in the solid waste industry.
    Due to the fact that not all companies calculate non-GAAP measures in the
    same manner, the EBITDA presentation herein may not be comparable to
    similarly titled measures reported by other companies.
(d) EBITDA margin represents EBITDA divided by revenue.
 
                                        21

<PAGE>
 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
     You should read the following discussion in conjunction with our
Consolidated Financial Statements and their Notes contained in this Annual
Report on Form 10-K.
 
2002 FINANCIAL OBJECTIVES
 
     In January 2002, we publicly announced our objectives for the year. These
objectives included the following:
 
     - Increasing free cash flow by over 10%.
 
     - Growing revenue by 1.5% to 2.0%, with 1.0% from price increases and .5%
       to 1.0% from volume growth.
 
     - Generating earnings per share of $1.37 to $1.39.
 
     - Using free cash flow to enhance shareholder value by completing strategic
       acquisitions and repurchasing up to $125.0 million of our stock.
 
2002 BUSINESS PERFORMANCE
 
     We exceeded all four of our financial objectives for 2002 despite a weak
economy.
 
     The economic slowdown which began in 2001 continued to negatively impact
the portion of our business servicing the manufacturing sector and
non-residential construction activity during 2002. Volumes attributable to
manufacturing and construction activity continued to weaken during 2002.
 
     Despite the weakness we experienced in the aspects of our business noted
above, our internal growth from core operations for 2002 was 3.0% with 1.4% from
price increases and 1.6% from volume growth. During 2002, we secured several
long-term franchise and municipal contracts. We also benefited from the
geographic mix of our business which favors high growth markets. As a result,
during 2002 we were able to exceed the internal growth objectives we established
at the beginning of the year.
 
     In addition to the impact of the economic slowdown discussed above, during
2002 our operating margins were also negatively impacted by increased costs for
risk and health insurance, increased depreciation expense primarily associated
with capital additions, and increased revenue from municipal contracts and
transfer stations which have lower margins than our other lines of business.
 
     This decrease in operating margins was partially offset by an increase in
recycling commodity prices, a decrease in fuel costs and the termination of our
operating lease facility. During 2001, we began a number of initiatives designed
to increase efficiencies and reduce costs including the implementation of a
number of management information systems such as route optimization, customer
relationship tracking and equipment maintenance software. We continued to
realize benefits from these initiatives in 2002.
 
     Notwithstanding the impact of the economic slowdown and the increase in
certain expenses, our earnings per share for the year ended December 31, 2002
was $1.42, excluding a gain on sale of certain assets, which exceeded the
objective we established at the beginning of the year. We were also able to
exceed our free cash flow objective for the year.
 
     During 2002 our board of directors increased our previously authorized
share repurchase program from $125.0 million to $150.0 million. We used our free
cash flow during 2002 to repurchase 8.0 million shares of our common stock for
$150.0 million.
 
                                        22

<PAGE>
 
2003 FINANCIAL OBJECTIVES
 
     Our financial objectives for 2003 assume no deterioration or improvement in
the overall economy from that experienced during the fourth quarter 2002.
Specific guidance is as follows:
 
     - Our goal is to generate free cash flow of approximately 90.0% of 2003 net
       income. We define free cash flow as cash provided by operating activities
       less purchases of property and equipment plus proceeds from the sale of
       equipment as presented in our Consolidated Statement of Cash Flows.
 
     - We anticipate using our free cash flow to repurchase shares of our common
       stock under our $150.0 million share repurchase program approved by our
       board of directors in October 2002.
 
     - We anticipate earnings per share of $1.46 to $1.48, including an
       estimated $.03 of additional landfill costs associated with the adoption
       of Statement of Financial Accounting Standards No. 143, "Accounting for
       Asset Retirement Obligations," and a change in accounting associated with
       methane gas collection systems.
 
     - We anticipate internal growth from core operations to be 2.0% to 3.0%,
       with approximately 1.0% to 1.5% attributable to price increases and 1.0%
       to 1.5% attributable to volume growth.
 
BUSINESS INITIATIVES
 
     Our business initiatives for 2003 are generally a continuation of those
initiated in the prior two years and are dependent on standardizing our business
processes and improving our systems. Ensuring that our people understand our
initiatives and processes and are trained on our new systems is essential to the
overall success of our initiatives. Our business initiatives for 2003 are as
follows:
 
     - Improve the quality of our revenue.  The first step in this process was
       completed in 2001 and included installing a standardized billing and
       operating system. This system enables us to, among other things, stratify
       our customers to determine how our rates compare to current market
       pricing. During 2002, we implemented the second generation of this
       software which we call RSI 1.0. RSI 1.0, our company's core business
       system, provides a variety of functionalities including customer service,
       dispatch, billing, sales analysis, account retention and route
       productivity analysis.
 
      We currently monitor our return on investment by market place and are in
      the process of instituting a return on investment pricing model. This
      model will eventually allow us to track our return on investment by
      customer.
 
      During 2001, we also implemented a customer relationship management
      system. This system improves the productivity of our sales force by
      helping to establish marketing priorities and track sales leads. It also
      tracks renewal periods for potential commercial, industrial and franchise
      contracts. Our focus during 2003 will be to ensure our sales force is
      properly trained on this system and using it as intended.
 
     - Improve the productivity of our operations.  We have instituted a grid
       productivity program that enables us to benchmark the performance of our
       drivers. In addition, in our larger markets, we use a route optimization
       program to minimize drive times and improve operational density. During
       2003, we will continue to update our disposal optimization reviews. These
       reviews determine which local disposal option maximizes our return on
       invested capital and cash flow.
 
     - Improve fleet management and procurement.  In February 2002, we selected
       Dossier as our fleet management and procurement system. Among other
       features, this system will track parts inventories, generate automatic
       quantity order points and log all maintenance work. It will allow us to
       capture and review information to ensure our preventive maintenance
       programs comply with manufacturers' warranties. In addition, the purchase
       order module within this system will allow us to cross-reference
       purchasing information with our inventory. We expect to have Dossier
       implemented at all of our hauling and landfill operations by the end of
       2003.
 
     - Enhance operational and financial reporting systems.  We currently have
       several initiatives underway aimed at improving our operational and
       financial reporting systems. The overall goal of these initiatives
                                        23

<PAGE>
 
       is to provide us with detailed information, prepared in a consistent
       manner, that will allow us to quickly analyze and act upon trends in our
       business.
 
      The most significant of these systems is our enterprise-wide general
      ledger package. We successfully converted all of our locations to Lawson
      general ledger software in 2002 and we are currently in the process of
      converting all of our locations to Lawson fixed asset software.
 
      All of the system initiatives mentioned above will provide us with more
      consistent and detailed information, thus allowing us to make quicker and
      more informed business decisions. In addition, during 2001, all of our
      significant software applications were standardized and centralized at our
      data center in Fort Lauderdale, Florida. This standardization and
      centralization provides us with consolidated information concerning our
      operations across a variety of operational and financial disciplines. It
      also significantly enhances our ability to execute our disaster recovery
      plan, if necessary.
 
     - Expand our safety training programs.  As part of our ongoing emphasis on
       safe work practices and in light of the recent increase in insurance
       costs, we expanded our safety training programs in 2002. We have signed a
       multi-year agreement with DuPont Safety Resources to assist in
       successfully completing this initiative.
 
OUR BUSINESS
 
     We are a leading provider of non-hazardous solid waste collection and
disposal services in the United States. We provide solid waste collection
services for commercial, industrial, municipal and residential customers through
142 collection companies in 22 states. We also own or operate 90 transfer
stations, 56 solid waste landfills and 33 recycling facilities.
 
     We generate revenue primarily from our solid waste collection operations,
and our remaining revenue is from landfill disposal services and other services,
including recycling and compost, mulch and soil operations.
 
     The following table reflects our total revenue by source for the years
ended December 31, 2002, 2001 and 2000 (in millions):
 

<Table>
<Caption>
                                        2002               2001               2000
                                  ----------------   ----------------   ----------------
<S>                               <C>        <C>     <C>        <C>     <C>        <C>
Collection:
  Residential..................   $  530.7    22.4%  $  479.7    21.2%  $  434.6    20.6%
  Commercial...................      696.7    29.5      686.0    30.4      627.8    29.9
  Industrial...................      501.6    21.2      509.6    22.6      486.5    23.1
  Other........................       50.8     2.1       47.5     2.1       47.6     2.3
                                  --------   -----   --------   -----   --------   -----
          Total collection.....    1,779.8    75.2    1,722.8    76.3    1,596.5    75.9
                                  --------           --------           --------
Transfer and disposal..........      854.1              780.8              717.4
Less: Intercompany.............     (428.5)            (405.0)            (364.5)
                                  --------           --------           --------
  Transfer and disposal, net...      425.6    18.0      375.8    16.7      352.9    16.8
Other..........................      159.7     6.8      158.9     7.0      153.9     7.3
                                  --------   -----   --------   -----   --------   -----
          Total revenue........   $2,365.1   100.0%  $2,257.5   100.0%  $2,103.3   100.0%
                                  ========   =====   ========   =====   ========   =====
</Table>

 
     Our revenue from collection operations consists of fees we receive from
commercial, industrial, municipal and residential customers. Our residential and
commercial collection operations in some markets are based on long-term
contracts with municipalities. We generally provide industrial and commercial
collection operations to individual customers under contracts with terms up to
three years. Our revenue from landfill operations is from disposal or tipping
fees charged to third parties. In general, we integrate our recycling operations
with our collection operations and obtain revenue from the sale of recyclable
materials. No one customer has individually accounted for more than 5% of our
consolidated revenue in any of the last three years.
 
     The cost of our collection operations is primarily variable and includes
disposal, labor, fuel and equipment maintenance costs. We try to be more
efficient by controlling the movement of waste streams from the point of
 
                                        24

<PAGE>
 
collection through disposal. During the three months ended December 31, 2002,
approximately 53% of the total volume of waste we collected was disposed of at
landfills we own or operate.
 
     Our landfill cost of operations includes daily operating expenses, costs of
capital for cell development, accruals for closure and post-closure costs, and
the legal and administrative costs of ongoing environmental compliance. We
expense all indirect landfill development costs as they are incurred. We use
life cycle accounting and the units-of-consumption method to recognize certain
direct landfill costs. In life cycle accounting, certain direct costs are
capitalized or accrued, and charged to expense based upon the consumption of
cubic yards of available airspace. These costs include all costs to acquire,
construct, close and maintain a site during the post-closure period.
 
     Cost and airspace estimates are developed annually by independent engineers
together with our engineers. These estimates are used by our operating and
accounting personnel to annually adjust our rates used to expense capitalized
costs and accrue closure and post-closure costs. Changes in these estimates
primarily relate to changes in available airspace, inflation and applicable
regulations. Changes in available airspace include changes in design and changes
due to the addition of airspace lying in expansion areas that we believe has a
probable likelihood of being permitted.
 
CRITICAL ACCOUNTING POLICIES AND DISCLOSURES
 
     Our Consolidated Financial Statements have been prepared using accounting
principles generally accepted in the United States and necessarily include
certain estimates and judgments made by management. In the past, we
significantly expanded our accounting disclosures in a number of areas that
require subjective or complex judgments including landfill accounting, fixed
assets and the activity in various balance sheet accounts such as closure and
post-closure accruals, self-insurance reserves and allowance for doubtful
accounts. As part of our continuing commitment to reliable and transparent
financial reporting that allows the users of our financial statements to make
more informed decisions, we have prepared the following list of accounting
policies that we believe are the most critical in understanding our company's
financial condition, results of operations and cash flows, and may require
management to make subjective or complex judgments about matters that are
inherently uncertain.
 
     The following policies related to our landfill accounting are effective
through December 31, 2002. On January 1, 2003, certain of our policies will
change upon the adoption of Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations." See Note 2, Summary of
Significant Accounting Policies, of the Notes to our Consolidated Financial
Statements for further information.
 

<Table>
<Caption>
                                                   SUBJECTIVE OR            DISCLOSURE
POLICY                      DESCRIPTION          COMPLEX JUDGMENTS           REFERENCE
<S>                    <C>                     <C>                     <C>
LANDFILL ACCOUNTING:
Life Cycle Accounting  We use life cycle       Cost and airspace       Management's
                       accounting and the      estimates are           Discussion and
                       units-of-consumption    developed annually by   Analysis of Financial
                       method to recognize     independent and/or      Condition and Results
                       certain landfill        company engineers.      of
                       costs over the life     Changes in these        Operations -- Landfill
                       of the site. In life    estimates could         and Environmental
                       cycle accounting, all   significantly affect    Matters.
                       costs to acquire,       our amortization,
                       construct, close and    depletion, closure      Note 4, Accrued
                       maintain a site         and post-closure        Landfill,
                       during post-closure     expense.                Environmental and
                       are capitalized or                              Legal Costs in the
                       accrued, and charged                            Consolidated
                       to expense based upon                           Financial Statements.
                       the consumption of
                       cubic yards of
                       available airspace.
</Table>

 
                                        25

<PAGE>
 

<Table>
<Caption>
                                                   SUBJECTIVE OR            DISCLOSURE
POLICY                      DESCRIPTION          COMPLEX JUDGMENTS           REFERENCE
<S>                    <C>                     <C>                     <C>
Probable Expansion     We include in our       We have developed six   Management's
Airspace               calculation of total    criteria that must be   Discussion and
                       available airspace      met before an           Analysis of Financial
                       expansion areas that    expansion area is       Condition and Results
                       we believe have a       designated as           of
                       probable likelihood     probable expansion      Operations -- Landfill
                       that the expansion      airspace. We believe    and Environmental
                       area will ultimately    that satisfying each    Matters.
                       be permitted.           of these criteria
                                               demonstrates a high     Note 4, Accrued
                                               likelihood that         Landfill,
                                               expansion airspace      Environmental and
                                               that is incorporated    Legal Costs in the
                                               in our landfill         Consolidated
                                               costing will be         Financial Statements.
                                               permitted. However,
                                               because some of these
                                               criteria are
                                               judgmental, they may
                                               exclude expansion
                                               airspace that will
                                               eventually be
                                               permitted or include
                                               expansion airspace
                                               that will not be
                                               permitted. In either
                                               of these scenarios,
                                               our amortization,
                                               depletion, closure
                                               and post-closure
                                               expense could change
                                               significantly.
Closure and Post-      Costs for final         Total future costs      Management's
Closure                closure of our          for closure and         Discussion and
                       landfills and costs     post-closure are        Analysis of Financial
                       for providing           developed annually by   Condition and Results
                       required post-closure   independent and the     of
                       monitoring and          company's engineers.    Operations -- Landfill
                       maintenance are         Changes in these        and Environmental
                       charged to cost of      estimates could         Matters
                       operations based upon   affect our closure      and -- Selected
                       consumed airspace       and post- closure       Balance Sheet
                       using the units-of-     expense.                Accounts.
                       consumption method.
                       These costs are not                             Note 4, Accrued
                       inflated or                                     Landfill,
                       discounted to the                               Environmental and
                       present value of                                Legal Costs in the
                       total estimated                                 Consolidated
                       costs.                                          Financial Statements.
</Table>

 
                                        26

<PAGE>
 

<Table>
<Caption>
                                                   SUBJECTIVE OR            DISCLOSURE
POLICY                      DESCRIPTION          COMPLEX JUDGMENTS           REFERENCE
<S>                    <C>                     <C>                     <C>
SELF-INSURANCE:
                       Our insurance           Estimates of claims     Management's
                       programs for worker's   development and         Discussion and
                       compensation, general   claims incurred but     Analysis of Financial
                       liability, vehicle      not reported are        Condition and Results
                       liability and           developed by us and     of
                       employee-related        by our independent      Operations -- Selected
                       health care benefits    actuary. If actual      Balance Sheet
                       are effectively         claims experience or    Accounts.
                       self-insured.           development is
                       Self-insurance          significantly           Note 12, Commitments
                       accruals are based on   different than our      and Contingencies in
                       claims filed and        estimates, our          the Consolidated
                       estimates of claims     self-insurance          Financial Statements.
                       incurred but not        expense would change.
                       reported.
PROPERTY AND
EQUIPMENT:
Expenditures for       Expenditures for        Whether certain         Management's
Improvements, Repairs  major additions and     expenditures improve    Discussion and
and Maintenance        improvements to         an asset or lengthen    Analysis of Financial
                       facilities are          its useful life is      Condition and Results
                       capitalized. All        subject to our          of
                       expenditures for        judgment.               Operations -- Selected
                       maintenance and         Accordingly, the        Balance Sheet
                       repairs are expensed    actual useful lives     Accounts
                       when incurred.          of our assets could     and -- Property and
                                               differ from our         Equipment.
                                               estimates.
                                                                       Note 2, Summary of
                                                                       Significant
                                                                       Accounting Policies
                                                                       in the Consolidated
                                                                       Financial Statements.
Useful Lives           Property and            Our estimates           Management's
                       equipment are           regarding the useful    Discussion and
                       recorded at cost.       lives of our            Analysis of Financial
                       Depreciation and        depreciable assets      Condition and Results
                       amortization expense    are based on our        of
                       is provided over the    judgment.               Operations -- Selected
                       estimated useful        Accordingly, actual     Balance Sheet
                       lives of the            useful lives could      Accounts
                       applicable assets       differ from our         and -- Property and
                       using the               estimates.              Equipment.
                       straight-line method.
                       The estimated useful                            Note 2, Summary of
                       lives are twenty to                             Significant
                       forty years for                                 Accounting Policies
                       buildings and                                   in the Consolidated
                       improvements, five to                           Financial Statements.
                       twelve years for
                       vehicles, seven to
                       ten years for most
                       landfill equipment,
                       five to fifteen years
                       for all other
                       equipment, and five
                       to ten years for
                       furniture and
                       fixtures.
</Table>

 
                                        27

<PAGE>
 

<Table>
<Caption>
                                                   SUBJECTIVE OR            DISCLOSURE
POLICY                      DESCRIPTION          COMPLEX JUDGMENTS           REFERENCE
<S>                    <C>                     <C>                     <C>
Capitalized Interest   We capitalize           Capitalizing too        Management's
                       interest on landfill    little or too much      Discussion and
                       cell construction and   interest expense        Analysis of Financial
                       other construction      could lead to a         Condition and Results
                       projects in             misstatement of         of
                       accordance with         interest expense in     Operations -- Selected
                       Statement of            the statement of        Balance Sheet
                       Financial Accounting    income. In order to     Accounts and
                       Standards No. 34,       minimize this risk,      -- Property and
                       "Capitalization of      construction projects   Equipment.
                       Interest Cost."         must meet the           Note 2, Summary of
                                               following criteria      Significant
                                               before interest is      Accounting Policies
                                               capitalized:            in the Consolidated
                                               1. Total construction   Financial Statements.
                                                  costs are $50,000
                                                  or greater,
                                               2. the construction
                                               phase is one month or
                                                  longer, and
                                               3. the assets have a
                                                  useful life of one
                                                  year or longer.
REVENUE AND ACCOUNTS
RECEIVABLE:
                       Revenue consists        Establishing reserves   Management's
                       primarily of            against specific        Discussion and
                       collection fees from    accounts receivable     Analysis of Financial
                       various customer        and the overall         Condition and Results
                       types and transfer      adequacy of our         of
                       and landfill disposal   accounts receivable     Operations -- Selected
                       fees charged to third   reserve is a matter     Balance Sheet
                       parties. Advance        of judgment. If our     Accounts.
                       billings are recorded   judgment and
                       as deferred revenue.    estimates concerning    Note 2, Summary of
                       Revenue is recognized   the adequacy of our     Significant
                       over the period in      reserve for accounts    Accounting Policies
                       which services are      receivable is           in the Consolidated
                       provided. No one        incorrect, bad debt     Financial Statements.
                       customer has            expense would change.
                       individually
                       accounted for more
                       than 10.0% of our
                       consolidated revenue
                       of any of our
                       reportable segments
                       in any of the past
                       three years. Reserves
                       for accounts
                       receivable are
                       provided when a
                       receivable is
                       believed to be
                       uncollectible or
                       generally when a
                       receivable is in
                       excess of 90 days
                       old.
</Table>

 
                                        28

<PAGE>
 

<Table>
<Caption>
                                                   SUBJECTIVE OR            DISCLOSURE
POLICY                      DESCRIPTION          COMPLEX JUDGMENTS           REFERENCE
<S>                    <C>                     <C>                     <C>
DERIVATIVES:
                       From time to time, we   The hedging             Management's
                       use derivatives to      relationships we have   Discussion and
                       limit our exposure to   entered into are        Analysis of Financial
                       fluctuations in         expected to be either   Condition and Results
                       diesel fuel prices      100% effective or       of
                       and interest rates.     highly effective and    Operations -- Financial
                       These derivatives       have been determined    Condition and -- Fuel
                       have been accounted     to meet the criteria    Hedge.
                       for in accordance       for hedge accounting.
                       with Statement of       If, in the future,      Note 5, Notes Payable
                       Financial Accounting    these relationships     and Long-Term Debt
                       Standards No. 133,      are no longer           and Note 11, Fuel
                       "Accounting for         expected to be 100%     Hedge in the
                       Derivative              or highly effective,    Consolidated
                       Instruments and         or if they no longer    Financial Statements.
                       Hedging Activities."    meet the criteria for
                                               hedge accounting, our
                                               results of operations
                                               could change.
</Table>

 
                                        29

<PAGE>
 

<Table>
<Caption>
                                                   SUBJECTIVE OR            DISCLOSURE
POLICY                      DESCRIPTION          COMPLEX JUDGMENTS           REFERENCE
<S>                    <C>                     <C>                     <C>
LONG-LIVED ASSET
IMPAIRMENTS:
                       Long-lived assets       Our estimates of        Management's
                       consist primarily of    future cash flows and   Discussion and
                       property, equipment,    fair values are based   Analysis of Financial
                       goodwill and other      on our judgment.        Condition and Results
                       intangible assets. We   Accordingly, we could   of
                       periodically evaluate   designate certain       Operations -- Property
                       whether events and      assets as impaired      and Equipment.
                       circumstances have      that are not and fail
                       occurred (as further    to identify certain     Note 2, Summary of
                       described in Note 2     impaired assets.        Significant
                       of the Consolidated                             Accounting Policies
                       Financial Statements)                           in the Consolidated
                       that may warrant                                Financial Statements.
                       revision of the
                       estimated useful life
                       of long-lived assets
                       or whether the
                       remaining balance of
                       these assets should
                       be evaluated for
                       possible impairment.
                       We use an estimate of
                       the undiscounted cash
                       flow over the
                       remaining life of the
                       assets in assessing
                       their recoverability.
                       In addition, goodwill
                       is tested for
                       impairment on an
                       annual basis or more
                       frequently if
                       indicators of
                       impairment arise. In
                       testing for
                       impairment, we
                       estimate the fair
                       value of each
                       operating segment of
                       our business and
                       compare the fair
                       values with the
                       carrying values. We
                       measure impairment
                       loss as the amount by
                       which the carrying
                       amount of the asset
                       or operating segment
                       exceeds its fair
                       value.
</Table>

 
BUSINESS COMBINATIONS
 
     We make decisions to acquire or invest in businesses based on financial and
strategic considerations. Businesses acquired are accounted for under the
purchase method of accounting and are included in our Consolidated Financial
Statements from the date of acquisition.
 
                                        30

<PAGE>
 
     We acquired various solid waste businesses during the year ended December
31, 2002. The aggregate purchase price we paid for these transactions was $55.8
million.
 
     We acquired various solid waste businesses during the year ended December
31, 2001. The aggregate purchase price we paid for these transactions was $287.7
million. The aggregate purchase price paid, less cash and restricted cash
acquired plus debt assumed, was $247.5 million.
 
     In July 1999, we entered into a definitive agreement with Allied Waste
Industries to acquire certain solid waste assets. In 2000, we had completed the
purchase of these assets for approximately $105.5 million in cash, $85.8 million
of which were acquired during 2000. In October 1999, we entered into a
definitive agreement with Allied for the simultaneous purchase and sale of
certain other solid waste assets. In 2000, we and Allied had completed the
purchase and sale of these assets of which annual revenue was approximately
$145.0 million. Our net proceeds from the cash portion of the exchange of assets
were $30.7 million. All of these transactions have been accounted for under the
purchase method of accounting.
 
     In addition to the acquisitions from Allied, we also acquired various other
solid waste businesses during the year ended December 31, 2000. The aggregate
purchase price we paid in these transactions was $102.5 million in cash.
 
     Cost in excess of fair value of net assets acquired for 2002 acquisitions
totaled approximately $40.1 million. As of December 31, 2002 we had intangible
assets, net of accumulated amortization, of $1,569.9 million, which consist
primarily of the cost in excess of fair value of net assets acquired.
 
     During 2002, $5.1 million of the total purchase price paid for acquisitions
and contingent payments to former owners was allocated to landfill airspace. As
of December 31, 2002, we had $1,026.3 million of landfill development costs
which includes purchase price allocated to landfill airspace as well as other
capitalized landfill costs. When a landfill is acquired as part of a group of
assets, purchase price is allocated to airspace based upon the discounted
expected future cash flows of the landfill relative to the other assets within
the acquired group and is adjusted for other non-depletable landfill assets and
liabilities acquired (primarily closure and post-closure liabilities). Landfill
purchase price is amortized using the units-of-consumption method over total
available airspace which includes probable expansion airspace where appropriate.
 
     Cost in excess of fair value of net assets acquired for 2001 acquisitions
totaled approximately $223.3 million. As of December 31, 2001, we had intangible
assets, net of accumulated amortization, of $1,551.6 million, which consists
primarily of the cost in excess of fair value of net assets acquired. In
addition, during 2001, $62.6 million of the total purchase price for
acquisitions and contingent payments to former owners was allocated to landfill
airspace.
 
     Cost in excess of fair value of net assets acquired for 2000 acquisitions
totaled approximately $253.4 million. As of December 31, 2000, we had intangible
assets, net of accumulated amortization, of $1,435.0 million, which consists
primarily of the cost in excess of fair value of net assets acquired. In
addition, during 2000, $30.9 million of the total purchase price for
acquisitions and contingent payments to former owners was allocated to landfill
airspace.
 
CONSOLIDATED RESULTS OF OPERATIONS
 
  Years Ended December 31, 2002, 2001 and 2000
 
     Our net income was $239.6 million for the year ended December 31, 2002, as
compared to $125.5 million in 2001 and $221.0 million in 2000. Our operating
results for the years ended December 31, 2002, 2001 and 2000 include other
charges (income) described below.
 
                                        31

<PAGE>
 
     The following table summarizes our costs and expenses in millions of
dollars and as a percentage of our revenue for 2000 through 2002:
 

<Table>
<Caption>
                                                   2002                2001                2000
                                             ----------------    ----------------    ----------------
                                                $         %         $         %         $         %
                                             --------   -----    --------   -----    --------   -----
<S>                                          <C>        <C>      <C>        <C>      <C>        <C>
Revenue....................................  $2,365.1   100.0%   $2,257.5   100.0%   $2,103.3   100.0%
Cost of operations.........................   1,472.9    62.3     1,422.5    63.0     1,271.3    60.5
Depreciation, amortization and depletion of
  property and equipment...................     193.5     8.2       168.3     7.4       157.0     7.5
Amortization of intangible assets..........       6.1      .2        47.1     2.1        40.4     1.9
Selling, general and administrative
  expenses.................................     238.7    10.1       236.5    10.5       193.9     9.2
Other charges (income).....................      (5.6)    (.2)       99.6     4.4         6.7      .3
                                             --------   -----    --------   -----    --------   -----
    Operating income.......................  $  459.5    19.4%   $  283.5    12.6%   $  434.0    20.6%
                                             ========   =====    ========   =====    ========   =====
</Table>

 
     Revenue.  Revenue was $2,365.1 million, $2,257.5 million and $2,103.3
million for the years ended December 31, 2002, 2001 and 2000, respectively.
Revenue increased by $107.6 million, or 4.8%, from 2001 to 2002. Revenue
increased by $154.2 million, or 7.3%, from 2000 to 2001. The following table
reflects the components of our revenue growth for the years ended December 31,
2002, 2001 and 2000:
 

<Table>
<Caption>
                                                          2002   2001   2000
                                                          ----   ----   ----
<S>                                                       <C>    <C>    <C>
Core price..............................................  1.4%    1.9%   2.5%
Recycling commodities...................................   .4    (1.1)    --
                                                          ---    ----   ----
          Total price...................................  1.8      .8    2.5
                                                          ---    ----   ----
Core volume.............................................  1.6     1.5    3.5
Non-core volume.........................................   .4      .8     --
                                                          ---    ----   ----
          Total volume..................................  2.0     2.3    3.5
                                                          ---    ----   ----
          Total internal growth.........................  3.8     3.1    6.0
Acquisitions............................................   .8     4.2    6.5
Taxes(a)................................................   .2      --     --
                                                          ---    ----   ----
          Total revenue growth..........................  4.8%    7.3%  12.5%
                                                          ===    ====   ====
</Table>

 
---------------
 
(a) Represents new taxes levied on landfill volumes in certain states that are
    passed on to customers.
 
     The economic slowdown which began in 2001 continued to negatively impact
the portion of our business servicing the manufacturing sector and
non-residential construction industry during 2002. Volumes attributable to
manufacturing and construction activity continued to weaken during 2002.
 
     The weakness in our business attributable to the economic slowdown was
partially offset by an increase in recycling commodity prices in the early part
of 2002.
 
     Despite the weakness we experienced in the aspects of our business noted
above, our internal growth from core operations for 2002 was 3.0%. During 2002,
we secured several long-term franchise and municipal contracts. We also
benefited from the geographic mix of our business which favors high growth
markets.
 
     During the first and second quarters of 2001, our revenue was negatively
impacted by weakness in recycling commodity prices. In addition, during the
second quarter of 2001, we began to see a slowdown in revenue from the
manufacturing sector, particularly in the Midwestern and Mid-Atlantic states.
 
     During the third quarter of 2001, the economic slowdown began to impact our
industrial business servicing the non-residential construction industry.
Landfill volumes attributable to manufacturing and construction activity began
to weaken. In addition, the slowdown we began to experience in the second
quarter in the manufacturing sector became more acute as we experienced
significant shift reductions and plant closings in the Southeastern United
States, particularly in the textile and home furnishing industries in the
Carolinas. These conditions were reflected in our internal growth numbers, which
were approximately half of what we experienced in prior quarters.
 
                                        32

<PAGE>
 
     During the fourth quarter of 2001, we continued to see a weakening in waste
volumes from the manufacturing sector. We also continued to see a slowdown in
commercial construction and special waste activity which resulted in both volume
reductions and price sensitivity for these services. Furthermore, we began to
see a softening in residential construction activity.
 
     We anticipate internal growth from core operations to be 2.0% to 3.0%
during 2003 assuming no deterioration or improvement in the overall economy from
that experienced during the fourth quarter of 2002. However, our price and
volume growth may remain flat or may decline in 2003 depending upon the severity
and duration of the economic slowdown.
 
     Cost of Operations.  Cost of operations was $1,472.9 million, $1,422.5
million and $1,271.3 million, or, as a percentage of revenue, 62.3%, 63.0% and
60.5%, for the years ended December 31, 2002, 2001 and 2000, respectively.
 
     The increase in aggregate dollars from 2001 to 2002 is primarily a result
of the expansion of our operations through acquisitions and internal growth.
During the fourth quarter of 2001, we recorded a charge of $86.1 million on an
after-tax basis, or $132.0 million on a pre-tax basis. Of this pre-tax amount,
$24.2 million was recorded to cost of operations which relates primarily to the
downsizing of our compost, mulch and soil business and related inventory
adjustments and an increase in self-insurance reserves.
 
     Excluding the impact of this charge, cost of operations for 2001 was
$1,398.3 million, or 61.9% as a percent of revenue. The increase in adjusted
cost of operations as a percentage of revenue from 2001 to 2002 is primarily the
result of the economic slowdown, higher costs for risk and health insurance, and
increased revenue from municipal contracts and transfer stations which have
higher operating costs. These increases in cost of operations were partially
offset by improved operating efficiencies, higher recycling commodity prices,
lower fuel costs and the termination of our operating lease facility.
 
     The increase in aggregate dollars from 2000 to 2001 is primarily a result
of the expansion of our operations through acquisitions and internal growth. The
increase in cost of operations as a percentage of revenue from 2000 to 2001,
excluding the impact of the charge recorded in the fourth quarter of 2001, is
primarily a result of the economic slowdown, lower recycling commodity prices,
higher labor costs and higher costs for risk and health insurance partially
offset by improved operating efficiencies and revenue mix. In addition, during
the third quarter of 2001 we continued to be successful in attracting municipal
customers; however, these customers generally produce lower margins than other
customers.
 
     To date in 2003, we have experienced a significant increase in fuel prices.
We believe that cost of operations as a percentage of revenue may continue to
remain high or increase further depending upon the cost of fuel, health
insurance, risk insurance and other key components of our cost structure and the
severity and duration of the economic slowdown.
 
     Depreciation, Amortization and Depletion of Property and
Equipment.  Depreciation, amortization and depletion expenses for property and
equipment were $193.5 million, $168.3 million and $157.0 million, or, as a
percentage of revenue, 8.2%, 7.4% and 7.5%, for the years ended December 31,
2002, 2001 and 2000, respectively. The increase in aggregate dollars for all
periods presented is primarily due to acquisitions and capital expenditures. The
increase as a percentage of revenue from 2001 to 2002 is primarily due to higher
depreciation expense resulting from capital expenditures, acquisitions and the
purchase of equipment originally placed into service pursuant to an operating
lease. The decrease as a percentage of revenue from 2000 to 2001 is primarily
due to lower depletion expense at our landfills resulting from higher compaction
and more cost efficient cell construction.
 
     Amortization of Intangible Assets.  Intangible assets consist primarily of
cost in excess of fair value of net assets acquired, but also includes values
assigned to long-term contracts and covenants not to compete. Expenses for
amortization of intangible assets were $6.1 million, $47.1 million and $40.4
million, or, as a percentage of revenue, .2%, 2.1% and 1.9%, for the years ended
December 31, 2002, 2001 and 2000, respectively. The decrease in aggregate
dollars and as a percent of revenue from 2001 to 2002 is due to the adoption of
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," effective January 1, 2002 under which most of our intangible
assets are no longer subject to amortization. The
                                        33

<PAGE>
 
increase in aggregate dollars and as a percentage of revenue from 2000 to 2001
is primarily due to an increase in the aggregate dollar amount of acquisitions
accounted for using the purchase method of accounting.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $238.7 million, $236.5 million and $193.9 million,
or, as a percentage of revenue, 10.1%, 10.5% and 9.2%, for the years ended
December 31, 2002, 2001 and 2000, respectively. The increases in aggregate
dollars are primarily a result of the expansion of our operations through
acquisitions and internal growth.
 
     During the fourth quarter of 2001, we recorded a charge of $86.1 million on
an after-tax basis, or $132.0 million on a pre-tax basis. Of this pre-tax
amount, $8.2 million was recorded to selling, general and administrative
expenses which relates primarily to an increase in bad debt expense resulting
from the economic slowdown. Excluding the impact of this charge, selling,
general and administrative expenses for 2001 were $228.3 million, or 10.1% as a
percent of revenue, which is consistent with 2002. The increase in selling,
general and administrative expenses as a percentage of revenue from 2000 to 2001
is primarily due to the strengthening of our regional management structure and
various systems and training initiatives. We believe that selling, general and
administrative expenses in the range of 10% of revenue is appropriate for 2003
given our business platform. However, selling, general and administrative
expenses as a percentage of revenue may increase depending upon the severity and
duration of the economic slowdown.
 
     Other Charges.  During the fourth quarter of 2002, we recorded a $5.6
million gain on the sale of certain assets for amounts exceeding estimates
originally made during the fourth quarter of 2001.
 
     During the fourth quarter of 2001, we recorded a charge of $86.1 million on
an after-tax basis, or $132.0 million on a pre-tax basis. Of this pre-tax
amount, $99.6 million was recorded to other charges which relates primarily to
completed and planned divestitures and closings of certain core and non-core
businesses and asset impairments.
 
     Other charges were $6.7 million for the year ended December 31, 2000. These
charges relate primarily to the early closure of a landfill in south Texas.
 
     Operating Income.  Operating income was $459.5 million, $283.5 million and
$434.0 million, or, as a percentage of revenue, 19.4%, 12.6% and 20.6%, for the
years ended December 31, 2002, 2001 and 2000, respectively. Excluding the impact
of the other charges (income) we recorded in the fourth quarters of 2002 and
2001, our operating income was $453.9 million, or 19.2%, and $415.5 million, or
18.4%, for the years ended December 31, 2002 and 2001, respectively.
 
     Interest Expense.  We incurred interest expense on our revolving credit
facility, unsecured notes and tax-exempt bonds. Interest expense was $77.0
million, $80.1 million and $81.6 million for the years ended December 31, 2002,
2001 and 2000, respectively. The decrease in interest expense is due to a
general market decrease in interest rates and an increase in tax-exempt
financings which generally bear interest at lower rates than our unsecured
notes. The decrease in interest expense is also due to interest rate swap
agreements that we entered into during 2001 and 2002.
 
     Capitalized interest was $2.5 million, $3.3 million and $2.9 million for
the years ended December 31, 2002, 2001 and 2000, respectively.
 
     Interest and Other Income (Expense), Net.  Interest and other income, net
of other expense, was $4.0 million, $5.9 million and $4.0 million for the years
ended December 31, 2002, 2001 and 2000, respectively. The variances during the
periods are primarily due to fluctuations in cash balances on hand and related
interest income and net gains on the disposition of assets during 2000 and 2001.
 
     Income Taxes.  Our provision for income taxes was $146.9 million, $83.8
million and $135.4 million for the years ended December 31, 2002, 2001 and 2000,
respectively. Our effective income tax rate was 38.0%, 40.0% and 38.0% for the
years ended December 31, 2002, 2001 and 2000, respectively. The increase in our
effective tax rate from 2000 to 2001 is the result of certain non-tax-deductible
items included in the charge that we recorded during the fourth quarter of 2001.
Excluding the impact of this charge, our effective tax rate for 2001 was 38.0%.
 
                                        34

<PAGE>
 
     Consolidated Results of Operations.  Our net income for the year ended
December 31, 2002 was $239.6 million. Our adjusted net income was $236.1 million
for the year ended December 31, 2002. Our adjusted operating results exclude a
$5.6 million pre-tax, or a $3.5 million after-tax, gain we recorded during the
fourth quarter of 2002 on the sale of certain assets for amounts exceeding
estimates originally made during the fourth quarter of 2001.
 
LANDFILL AND ENVIRONMENTAL MATTERS
 
     Among our most significant investments and most valuable assets are our
landfills. The additional disclosures included in this section provide the users
of our financial statements with a clearer understanding of our investment in
our landfills and various accounting principles that are unique to landfill
operations.
 
  Available Airspace
 
     The following tables reflect landfill airspace activity for landfills owned
or operated by us for the years ended December 31, 2000, 2001 and 2002:
 

<Table>
<Caption>
                                  BALANCE AS OF      NEW          LANDFILLS                           CHANGES IN    BALANCE AS OF
                                  DECEMBER 31,    EXPANSIONS    ACQUIRED, NET    PERMITS   AIRSPACE   ENGINEERING   DECEMBER 31,
                                      1999        UNDERTAKEN   OF DIVESTITURES   GRANTED   CONSUMED    ESTIMATES        2000
                                  -------------   ----------   ---------------   -------   --------   -----------   -------------
<S>                               <C>             <C>          <C>               <C>       <C>        <C>           <C>
Permitted airspace:
  Cubic yards (in millions).....     1,304.1           --             8.8          74.6     (32.5)          .1         1,355.1
  Number of sites...............          55                           (2)           --                                     53
Expansion airspace:
  Cubic yards (in millions).....       369.7         31.4           (27.1)        (74.6)       --           --           299.4
  Number of sites...............          20            2              (1)           (4)                                    17
                                     -------        -----           -----         -----     -----        -----         -------
Total available airspace:
  Cubic yards (in millions).....     1,673.8         31.4           (18.3)           --     (32.5)          .1         1,654.5
                                     =======        =====           =====         =====     =====        =====         =======
  Number of sites...............          55                           (2)                                                  53
                                     =======                        =====                                              =======
</Table>


<Table>
<Caption>
                               BALANCE AS OF      NEW          LANDFILLS                           CHANGES IN    CHANGES
                               DECEMBER 31,    EXPANSIONS    ACQUIRED, NET    PERMITS   AIRSPACE   ENGINEERING     IN
                                   2000        UNDERTAKEN   OF DIVESTITURES   GRANTED   CONSUMED    ESTIMATES    DESIGN
                               -------------   ----------   ---------------   -------   --------   -----------   -------
<S>                            <C>             <C>          <C>               <C>       <C>        <C>           <C>
Permitted airspace:
  Cubic yards (in millions)       1,355.1           --             7.5            .7     (32.5)        (1.8)        --
  Number of sites............          53                            1            --
Expansion airspace:
  Cubic yards (in
    millions)................       299.4         34.7           (26.5)           --        --           .9       51.1
  Number of sites............          17            4              (1)           --        --
                                  -------        -----           -----         -----     -----        -----       ----
Total available airspace:
  Cubic yards (in millions)       1,654.5         34.7           (19.0)           .7     (32.5)         (.9)      51.1
                                  =======        =====           =====         =====     =====        =====       ====
Number of sites..............          53                            1
                                  =======                        =====
 
<Caption>
                               BALANCE AS OF
                               DECEMBER 31,
                                   2001
                               -------------
<S>                            <C>
Permitted airspace:
  Cubic yards (in millions)       1,329.0
  Number of sites............          54
Expansion airspace:
  Cubic yards (in
    millions)................       359.6
  Number of sites............          20
                                  -------
Total available airspace:
  Cubic yards (in millions)       1,688.6
                                  =======
Number of sites..............          54
                                  =======
</Table>


<Table>
<Caption>
                               BALANCE AS OF      NEW          LANDFILLS                           CHANGES IN    CHANGES
                               DECEMBER 31,    EXPANSIONS    ACQUIRED, NET    PERMITS   AIRSPACE   ENGINEERING     IN
                                   2001        UNDERTAKEN   OF DIVESTITURES   GRANTED   CONSUMED    ESTIMATES    DESIGN
                               -------------   ----------   ---------------   -------   --------   -----------   -------
<S>                            <C>             <C>          <C>               <C>       <C>        <C>           <C>
Permitted airspace:
  Cubic yards (in
    millions)................     1,329.0           --             4.9          45.1     (34.6)        13.1         .4
  Number of sites............          54                            1             1
Expansion airspace:
  Cubic yards (in
    millions)................       359.6          4.3              --         (35.7)       --         (2.1)      27.2
  Number of sites............          20            2              --            (2)       --
                                  -------        -----           -----         -----     -----        -----       ----
Total available airspace:
  Cubic yards (in
    millions)................     1,688.6          4.3             4.9           9.4     (34.6)        11.0       27.6
                                  =======        =====           =====         =====     =====        =====       ====
Number of sites..............          54                            1             1
                                  =======                        =====         =====
 
<Caption>
                               BALANCE AS OF
                               DECEMBER 31,
                                   2002
                               -------------
<S>                            <C>
Permitted airspace:
  Cubic yards (in
    millions)................     1,357.9
  Number of sites............          56
Expansion airspace:
  Cubic yards (in
    millions)................       353.3
  Number of sites............          20
                                  -------
Total available airspace:
  Cubic yards (in
    millions)................     1,711.2
                                  =======
Number of sites..............          56
                                  =======
</Table>

 
     Changes in engineering estimates typically include minor modifications to
the available disposal capacity of a landfill based on a refinement of the
capacity calculations resulting from updated information. Changes in design
typically include significant modifications to a landfill's footprint or
vertical slopes.
 
                                        35

<PAGE>
 
     During 2000, we actively pursued obtaining landfill permits which resulted
in adding over twice as much permitted airspace during the year than was
consumed. During 2001, total available airspace increased by 34.1 million cubic
yards primarily due to changes in design partially offset by consumption. During
2002, total available airspace increased by 22.6 million cubic yards primarily
due to the opening of a greenfield site in South Carolina, and changes in
engineering estimates partially offset by consumption.
 
     As of December 31, 2002, we owned or operated 56 solid waste landfills with
total available disposal capacity estimated to be 1.7 billion in-place cubic
yards. Total available disposal capacity represents the sum of estimated
permitted airspace plus an estimate of probable expansion airspace. These
estimates are developed annually by independent engineers together with our
engineers utilizing information provided by annual aerial surveys. As of
December 31, 2002, total available disposal capacity is estimated to be 1.4
billion in-place cubic yards of permitted airspace plus .3 billion in-place
cubic yards of probable expansion airspace. Before airspace included in an
expansion area is determined to be probable expansion airspace and, therefore,
included in our calculation of total available disposal capacity, it must meet
our expansion criteria. See Note 4, Accrued Landfill, Environmental and Legal
Costs of the Notes to our Consolidated Financial Statements for further
information.
 
     As of December 31, 2002, twenty of our landfills meet the criteria for
including probable expansion airspace in their total available disposal
capacity. At projected annual volumes, these twenty landfills have an estimated
remaining average site life of 32 years, including probable expansion airspace.
The average estimated remaining life of all of our landfills is 34 years.
 
     As of December 31, 2002, five of our landfills that meet the criteria for
including expansion airspace had obtained approval from local authorities and
are proceeding into the state permitting process. Also, as of December 31, 2002,
nine of our twenty landfills that meet the criteria for including expansion
airspace had submitted permit applications to state authorities. The remaining
six landfills that meet the criteria for including expansion airspace are in the
process of obtaining approval from local authorities and have not identified any
fatal flaws or impediments associated with the expansions at either the local or
state level.
 
  Closure and Post-Closure Costs
 
     The following table reflects our closure and post-closure expense per cubic
yard of airspace consumed for the years ended December 31, 2002, 2001 and 2000:
 

<Table>
<Caption>
                                                              2002    2001    2000
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Closure and post-closure expense (in millions)..............  $26.1   $22.9   $23.4
Cubic yards of airspace consumed (in millions)..............   34.6    32.5    32.5
Closure and post-closure expense per cubic yard.............  $ .75   $ .70   $ .72
</Table>

 
     As of December 31, 2002, accrued closure and post-closure costs were $255.8
million. The current portion of these costs of $22.1 million is reflected in our
Consolidated Balance Sheets in other current liabilities. The long-term portion
of these costs of $233.7 million is reflected in our Consolidated Balance Sheets
in accrued landfill, environmental and legal costs. As of December 31, 2002,
assuming that all available landfill capacity is used, we expect to expense
approximately $541.3 million of additional closure and post-closure costs over
the remaining lives of our facilities.
 
     Our estimates for closure and post-closure do not take into account
discounts for the present value of total estimated costs. If total estimated
costs were discounted to present value, they would be lower.
 
                                        36

<PAGE>
 
  Investment in Landfills
 
     The following tables reflect changes in our investment in landfills for the
years ended December 31, 2000, 2001 and 2002 and the future expected investment
as of December 31, 2002 (in millions):
 

<Table>
<Caption>
                                                           LANDFILLS
                              BALANCE AS OF                ACQUIRED,      TRANSFERS      IMPAIRED      ADDITIONS    BALANCE AS OF
                              DECEMBER 31,     CAPITAL       NET OF          AND           ASSET       CHARGED TO   DECEMBER 31,
                                  1999        ADDITIONS   DIVESTITURES   ADJUSTMENTS    WRITE-DOWN      EXPENSE         2000
                              -------------   ---------   ------------   -----------   -------------   ----------   -------------
<S>                           <C>             <C>         <C>            <C>           <C>             <C>          <C>
Non-depletable landfill
  land......................     $ 46.4         $  .5        $  1.1        $  (.8)       $     --       $     --      $    47.2
Landfill development
  costs.....................      827.6           7.6         (16.0)         58.0           (11.7)            --          865.5
Construction in
  progress -- landfill......       44.3          62.1           (.1)        (59.7)             --             --           46.6
Accumulated depletion and
  amortization..............     (135.1)           --          10.5            .2             6.8          (61.9)        (179.5)
                                 ------         -----        ------        ------        --------       --------      ---------
Net investment in landfill
  land and development
  costs.....................     $783.2         $70.2        $ (4.5)       $ (2.3)       $   (4.9)      $  (61.9)     $   779.8
                                 ======         =====        ======        ======        ========       ========      =========
</Table>


<Table>
<Caption>
                                                                        LANDFILLS
                             BALANCE AS OF                              ACQUIRED,      TRANSFERS      IMPAIRED      ADDITIONS
                             DECEMBER 31,     CAPITAL                     NET OF          AND           ASSET       CHARGED TO
                                 2000        ADDITIONS   RETIREMENTS   DIVESTITURES   ADJUSTMENTS    WRITE-DOWN      EXPENSE
                             -------------   ---------   -----------   ------------   -----------   -------------   ----------
<S>                          <C>             <C>         <C>           <C>            <C>           <C>             <C>
Non-depletable landfill
  land.....................     $ 47.2         $ 5.1       $  (.9)        $  2.3        $ (2.2)       $   (1.0)      $     --
Landfill development
  costs....................      865.5           5.0           --           30.7          86.8           (29.2)            --
Construction in progress --
  landfill.................       46.6          58.4           --            (.4)        (87.0)             --             --
Accumulated depletion and
  amortization.............     (179.5)           --           --            3.9            .3             (.2)         (61.5)
                                ------         -----       ------         ------        ------        --------       --------
Net investment in landfill
  land and development
  costs....................     $779.8         $68.5       $  (.9)        $ 36.5        $ (2.1)       $  (30.4)      $  (61.5)
                                ======         =====       ======         ======        ======        ========       ========
 
<Caption>
 
                             BALANCE AS OF
                             DECEMBER 31,
                                 2001
                             -------------
<S>                          <C>
Non-depletable landfill
  land.....................    $    50.5
Landfill development
  costs....................        958.8
Construction in progress --
  landfill.................         17.6
Accumulated depletion and
  amortization.............       (237.0)
                               ---------
Net investment in landfill
  land and development
  costs....................    $   789.9
                               =========
</Table>

 

<Table>
<Caption>
                                                                         LANDFILLS
                              BALANCE AS OF                              ACQUIRED,       TRANSFERS     ADDITIONS    BALANCE AS OF
                              DECEMBER 31,     CAPITAL                     NET OF           AND        CHARGED TO   DECEMBER 31,
                                  2001        ADDITIONS   RETIREMENTS   DIVESTITURES    ADJUSTMENTS     EXPENSE         2002
                              -------------   ---------   -----------   ------------   -------------   ----------   -------------
<S>                           <C>             <C>         <C>           <C>            <C>             <C>          <C>
Non-depletable landfill
  land......................     $ 50.5         $ 3.3       $   --         $   --        $     .2       $     --      $    54.0
Landfill development
  costs.....................      958.8          18.1           --            5.1            44.3             --        1,026.3
Construction in progress --
  landfill..................       17.6          56.0           --             --           (41.3)            --           32.3
Accumulated depletion and
  amortization..............     (237.0)           --           --             --              .3          (67.4)        (304.1)
                                 ------         -----       ------         ------        --------       --------      ---------
Net investment in landfill
  land and development
  costs.....................     $789.9         $77.4       $   --         $  5.1        $    3.5       $  (67.4)     $   808.5
                                 ======         =====       ======         ======        ========       ========      =========
</Table>

 

<Table>
<Caption>
                                                              BALANCE AS OF
                                                                DECEMBER       EXPECTED       TOTAL
                                                                   31,          FUTURE       EXPECTED
                                                                  2002        INVESTMENT    INVESTMENT
                                                              -------------   ----------   ------------
<S>                                                           <C>             <C>          <C>
Non-depletable landfill land................................    $   54.0       $     --     $    54.0
Landfill development costs..................................     1,026.3        1,146.4       2,172.7
Construction in progress -- landfill........................        32.3             --          32.3
Accumulated depletion and amortization......................      (304.1)            --        (304.1)
                                                                --------       --------     ---------
Net investment in landfill land and development costs.......    $  808.5       $1,146.4     $ 1,954.9
                                                                ========       ========     =========
</Table>

 
     The following table reflects our net investment in our landfills, excluding
non-depletable land, and our depletion and amortization expense for the years
ended December 31, 2002, 2001 and 2000:
 

<Table>
<Caption>
                                                             2002       2001       2000
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Number of landfills owned or operated....................        56         54         53
Net investment, excluding non-depletable land (in
  millions)..............................................  $  754.5   $  739.4   $  732.6
Total estimated available disposal capacity (in millions
  of cubic yards)........................................   1,711.2    1,688.6    1,654.5
Net investment per cubic yard............................  $    .44   $    .44   $    .44
Landfill depletion and amortization expense (in
  millions)..............................................  $   67.4   $   61.5   $   61.9
Airspace consumed (in millions of cubic yards)...........      34.6       32.5       32.5
Depletion and amortization per cubic yard of airspace
  consumed...............................................  $   1.95   $   1.89   $   1.90
</Table>

 
                                        37

<PAGE>
 
     During 2002, our weighted average compaction rate for converting cubic
yards to tons was approximately 1,500 pounds per cubic yard.
 
     As of December 31, 2002, we expect to spend an estimated additional
$1,146.4 million on existing landfills, primarily related to cell construction
and environmental structures, over their expected remaining lives. Our total
expected gross investment, excluding non-depletable land, estimated to be $1.9
billion, or $1.11 per cubic yard, is used in determining our depletion and
amortization expense based upon airspace consumed using the units-of-consumption
method. Our estimates for expected future investment in landfills do not take
into account inflation or discounts for the present value of total estimated
costs. For further information, see "Closure and Post-Closure Costs."
 
     We accrue costs related to environmental remediation activities through a
charge to income in the period such liabilities become probable and can be
reasonably estimated. We also accrue costs related to environmental remediation
activities associated with properties acquired through business combinations as
a charge to cost in excess of fair value of net assets acquired or landfill
purchase price allocated to airspace, as appropriate. No material amounts were
charged to expense during the years ended December 31, 2002, 2001 and 2000.
 
FINANCIAL CONDITION
 
     One of our key financial objectives is to maintain a simple, cost-effective
and transparent capital structure.
 
     At December 31, 2002, we had $141.5 million of cash and cash equivalents.
We also had $175.0 million of restricted cash, of which $139.7 million relates
to proceeds from tax-exempt bonds and other tax-exempt financing that will be
used to fund capital expenditures. At December 31, 2002, we had $378.2 million
of tax-exempt bonds and other tax-exempt financing outstanding at favorable
interest rates.
 
     In July 1998, we entered into a $1.0 billion unsecured revolving credit
facility with a group of banks. $500.0 million of the credit facility was
scheduled to expire in July 2002 and the remaining $500.0 million was scheduled
to expire in July 2003. As a result of our strong financial position and
liquidity, in February 2002 we reduced the short- and long-term portions of our
credit facility to $300.0 million and $450.0 million, respectively. In July
2002, we renewed the short- and long-term portions of our credit facility on
substantially the same terms and conditions. The short-term portion of the
facility expires in July 2003 and the long-term portion expires in July 2007.
Borrowings under the credit facility bear interest at LIBOR-based rates. We use
our operating cash flow and proceeds from our credit facilities to finance our
working capital, capital expenditures, acquisitions, share repurchases and other
requirements. As of December 31, 2002, we had $437.7 million available under our
credit facility.
 
     In May 1999, we sold $600.0 million of unsecured notes in the public
market. $225.0 million of these notes bear interest at 6 5/8% per annum and
mature in 2004. The remaining $375.0 million bear interest at 7 1/8% per annum
and mature in 2009. Interest on these notes is payable semi-annually in May and
November. The $225.0 million and $375.0 million in notes were offered at a
discount of $1.0 million and $.5 million, respectively. Proceeds from the notes
were used to repay our revolving credit facility.
 
     In December 1999, we entered into an operating lease facility established
to finance the acquisition of operating equipment consisting primarily of
revenue-producing vehicles. In July 2002, we exercised our right to purchase the
equipment underlying this facility by paying $72.6 million using our excess
cash, which was the balance outstanding under the facility at that time.
 
     In August 2001, we sold $450.0 million of unsecured notes in the public
market. The notes bear interest at 6 3/4% and mature in 2011. Interest on these
notes is payable semi-annually in February and August. The notes were offered at
a discount of $2.6 million. Proceeds from the notes were used to repay our
revolving credit facility.
 
     In order to manage risk associated with fluctuations in interest rates, in
September 2001 and October 2002, we entered into interest rate swap agreements
with investment grade rated financial institutions. The swap agreements have
total notional values of $225.0 million and $75.0 million, respectively, and
require our
                                        38

<PAGE>
 
company to pay interest at floating rates based upon changes in LIBOR and
receive interest at fixed rates of 6 5/8% and 6 3/4%, respectively. The swap
agreements terminate in May 2004 and August 2011, respectively.
 
     At December 31, 2002, we had $378.2 million of tax-exempt bonds and other
tax-exempt financings outstanding of which approximately $96.5 million was
obtained during fiscal 2002. Borrowings under these bonds and other financings
bear interest based on fixed or floating interest rates at the prevailing market
ranging from 1.45% to 5.25% at December 31, 2002 and have maturities ranging
from 2003 to 2032. As of December 31, 2002, we had $139.7 million of restricted
cash related to proceeds from tax-exempt bonds and other tax-exempt financings.
This restricted cash will be used to fund capital expenditures under the terms
of the agreements.
 
     We plan to extend the maturity of our revolving short-term credit facility
prior to its expiration in July 2003 to July 2004. We believe that such an
extension would provide us with sufficient financial resources to meet our
anticipated capital requirements and obligations as they come due. We believe
that we would be able to raise additional debt or equity financing, if
necessary, to fund special corporate needs or to complete acquisitions. However,
we cannot assure you that we would be able to obtain additional financing under
favorable terms or to extend the existing short-term credit facility on the same
terms.
 
SELECTED BALANCE SHEET ACCOUNTS
 
     We were the first in our industry to provide the users of our financial
statements with additional disclosures regarding selected balance sheet
accounts. These additional disclosures include schedules that show the activity
in our available airspace, investment in landfills, property and equipment, and
other selected balance sheet accounts. We believe that these disclosures permit
the readers of our financial statements to gain a better understanding of our
company's financial condition, results of operations and cash flows.
 
     The following tables reflect the activity in our allowance for doubtful
accounts, accrued closure and post-closure, accrued self-insurance and amounts
due to former owners during the years ended December 31, 2000, 2001 and 2002 (in
millions):
 

<Table>
<Caption>
                                                              CLOSURE,
                                                            POST-CLOSURE
                                          ALLOWANCE FOR         AND                          AMOUNTS DUE TO
                                        DOUBTFUL ACCOUNTS   REMEDIATION    SELF-INSURANCE    FORMER OWNERS
                                        -----------------   ------------   ---------------   --------------
<S>                                     <C>                 <C>            <C>               <C>
Balance, December 31, 1999............       $ 14.2            $152.3          $ 38.4            $ 47.0
Additions charged to expense..........         11.8              23.4           100.1                --
Additions due to acquisitions, net of
  divestitures........................          2.1               9.1              --               7.0
Payments or usage.....................        (14.9)            (17.2)          (97.4)            (38.7)
                                             ------            ------          ------            ------
Balance, December 31, 2000............         13.2             167.6            41.1              15.3
Current portion.......................         13.2              16.8            22.1              15.3
                                             ------            ------          ------            ------
Long-term portion.....................       $   --            $150.8          $ 19.0            $   --
                                             ======            ======          ======            ======
</Table>

 

<Table>
<Caption>
                                                               CLOSURE,
                                         ALLOWANCE FOR       POST-CLOSURE                      AMOUNTS DUE TO
                                       DOUBTFUL ACCOUNTS   AND REMEDIATION    SELF-INSURANCE   FORMER OWNERS
                                       -----------------   ----------------   --------------   --------------
<S>                                    <C>                 <C>                <C>              <C>
Balance, December 31, 2000...........       $ 13.2              $167.6            $ 41.1           $ 15.3
Additions charged to expense.........         22.8                22.9             130.2               --
Additions due to acquisitions, net of
  divestitures.......................          1.5                69.3                --             18.8
Payments or usage....................        (18.5)              (20.3)           (113.7)           (28.1)
                                            ------              ------            ------           ------
Balance, December 31, 2001...........         19.0               239.5              57.6              6.0
Current portion......................         19.0                21.1              38.4              6.0
                                            ------              ------            ------           ------
Long-term portion....................       $   --              $218.4            $ 19.2           $   --
                                            ======              ======            ======           ======
</Table>

 
                                        39

<PAGE>
 

<Table>
<Caption>
                                                               CLOSURE,
                                         ALLOWANCE FOR       POST-CLOSURE                      AMOUNTS DUE TO
                                       DOUBTFUL ACCOUNTS   AND REMEDIATION    SELF-INSURANCE   FORMER OWNERS
                                       -----------------   ----------------   --------------   --------------
<S>                                    <C>                 <C>                <C>              <C>
Balance, December 31, 2001...........       $ 19.0              $239.5            $ 57.6           $  6.0
Additions charged to expense.........         11.2                26.1             138.1               --
Additions due to acquisitions, net of
  divestitures.......................           .2                 5.0                --              4.2
Payments or usage....................        (11.4)              (14.8)           (120.7)            (2.7)
                                            ------              ------            ------           ------
Balance, December 31, 2002...........         19.0               255.8              75.0              7.5
Current portion......................         19.0                22.1              33.9              7.5
                                            ------              ------            ------           ------
Long-term portion....................       $   --              $233.7            $ 41.1           $   --
                                            ======              ======            ======           ======
</Table>

 
     Our expense related to doubtful accounts as a percentage of revenue for
2000, 2001 and 2002 was .6%, 1.0% and .5%, respectively.
 
     As of December 31, 2002, accounts receivable were $238.6 million, net of
allowance for doubtful accounts of $19.0 million, resulting in days sales
outstanding of 36 days, or 23 days net of deferred revenue. In addition, at
December 31, 2002, our trade receivables in excess of 90 days old totaled $13.8
million, or 5.4% of gross receivables outstanding.
 
     Our expense for self-insurance as a percentage of revenue for 2000, 2001
and 2002 was 4.8%, 5.8% and 5.8%, respectively. The increases are primarily due
to overall increases in insurance costs that we experienced during 2001 and
2002.
 
PROPERTY AND EQUIPMENT
 
     The following tables reflect the activity in our property and equipment
accounts for the years ended December 31, 2000, 2001 and 2002 (in millions):
 

<Table>
<Caption>
                                                                 GROSS PROPERTY AND EQUIPMENT
                             ----------------------------------------------------------------------------------------------------
                             BALANCE AS OF                             ACQUISITIONS,                    IMPAIRED    BALANCE AS OF
                             DECEMBER 31,     CAPITAL                     NET OF       TRANSFERS AND     ASSET      DECEMBER 31,
                                 1999        ADDITIONS   RETIREMENTS   DIVESTITURES     ADJUSTMENTS    WRITE-DOWN       2000
                             -------------   ---------   -----------   -------------   -------------   ----------   -------------
<S>                          <C>             <C>         <C>           <C>             <C>             <C>          <C>
Other land.................    $   82.8       $   .5       $  (.5)        $  7.2          $  1.5         $   --       $   91.5
Non-depletable landfill
  land.....................        46.4           .5           --            1.1             (.8)            --           47.2
Landfill development
  costs....................       827.6          7.6           --          (16.0)           58.0          (11.7)         865.5
Vehicles and equipment.....       961.3         64.0        (41.2)          (2.5)           37.3             --        1,018.9
Buildings and
  improvements.............       187.5         10.7          (.8)            .2            29.7            (.2)         227.1
Construction in
  progress -- landfill.....        44.3         62.1           --            (.1)          (59.7)            --           46.6
Construction in
  progress -- other........        24.4         62.6           --           (1.9)          (67.1)            --           18.0
                               --------       ------       ------         ------          ------         ------       --------
        Total..............    $2,174.3       $208.0       $(42.5)        $(12.0)         $ (1.1)        $(11.9)      $2,314.8
                               ========       ======       ======         ======          ======         ======       ========
</Table>

 

<Table>
<Caption>
                                                    ACCUMULATED DEPRECIATION, AMORTIZATION AND DEPLETION
                            -----------------------------------------------------------------------------------------------------
                            BALANCE AS OF   ADDITIONS                                                   IMPAIRED    BALANCE AS OF
                            DECEMBER 31,    CHARGED TO                                 TRANSFERS AND     ASSET      DECEMBER 31,
                                1999         EXPENSE     RETIREMENTS   DIVESTITURES     ADJUSTMENTS    WRITE-DOWN       2000
                            -------------   ----------   -----------   -------------   -------------   ----------   -------------
<S>                         <C>             <C>          <C>           <C>             <C>             <C>          <C>
Landfill development
  costs...................    $ (135.1)     $   (61.9)     $   --         $ 10.5          $   .2         $  6.8       $ (179.5)
Vehicles and equipment....      (399.9)         (88.1)       30.1           27.8             1.2             --         (428.9)
Buildings and
  improvements............       (33.8)          (7.0)         .4            1.9             (.1)            --          (38.6)
                              --------      ---------      ------         ------          ------         ------       --------
        Total.............    $ (568.8)     $  (157.0)     $ 30.5         $ 40.2          $  1.3         $  6.8       $ (647.0)
                              ========      =========      ======         ======          ======         ======       ========
</Table>

 
                                        40

<PAGE>
 

<Table>
<Caption>
                                                                 GROSS PROPERTY AND EQUIPMENT
                             ----------------------------------------------------------------------------------------------------
                             BALANCE AS OF                             ACQUISITIONS,                    IMPAIRED    BALANCE AS OF
                             DECEMBER 31,     CAPITAL                     NET OF       TRANSFERS AND     ASSET      DECEMBER 31,
                                 2000        ADDITIONS   RETIREMENTS   DIVESTITURES     ADJUSTMENTS    WRITE-DOWN       2001
                             -------------   ---------   -----------   -------------   -------------   ----------   -------------
<S>                          <C>             <C>         <C>           <C>             <C>             <C>          <C>
Other land.................    $   91.5      $     1.3     $ (1.6)        $  5.4          $   --         $ (2.3)      $   94.3
Non-depletable landfill
  land.....................        47.2            5.1        (.9)           2.3            (2.2)          (1.0)          50.5
Landfill development
  costs....................       865.5            5.0         --           30.7            86.8          (29.2)         958.8
Vehicles and equipment.....     1,018.9          113.4      (31.0)          17.8            37.0           (2.9)       1,153.2
Buildings and
  improvements.............       227.1            9.1       (2.2)           7.6            15.3            (.5)         256.4
Construction in
  progress -- landfill.....        46.6           58.4         --            (.4)          (87.0)            --           17.6
Construction in
  progress -- other........        18.0           57.0         --             --           (51.5)            --           23.5
                               --------      ---------     ------         ------          ------         ------       --------
        Total..............    $2,314.8      $   249.3     $(35.7)        $ 63.4          $ (1.6)        $(35.9)      $2,554.3
                               ========      =========     ======         ======          ======         ======       ========
</Table>

 

<Table>
<Caption>
                                                    ACCUMULATED DEPRECIATION, AMORTIZATION AND DEPLETION
                            -----------------------------------------------------------------------------------------------------
                            BALANCE AS OF   ADDITIONS                                                   IMPAIRED    BALANCE AS OF
                            DECEMBER 31,    CHARGED TO                                 TRANSFERS AND     ASSET      DECEMBER 31,
                                2000         EXPENSE     RETIREMENTS   DIVESTITURES     ADJUSTMENTS    WRITE-DOWN       2001
                            -------------   ----------   -----------   -------------   -------------   ----------   -------------
<S>                         <C>             <C>          <C>           <C>             <C>             <C>          <C>
Landfill development
  costs...................    $ (179.5)     $   (61.5)     $   --         $  3.9          $   .3         $  (.2)      $ (237.0)
Vehicles and equipment....      (428.9)         (98.2)       26.6            3.0             1.2             .6         (495.7)
Buildings and
  improvements............       (38.6)          (8.6)         .6             --              --            (.1)         (46.7)
                              --------      ---------      ------         ------          ------         ------       --------
        Total.............    $ (647.0)     $  (168.3)     $ 27.2         $  6.9          $  1.5         $   .3       $ (779.4)
                              ========      =========      ======         ======          ======         ======       ========
</Table>

 

<Table>
<Caption>
                                                                       GROSS PROPERTY AND EQUIPMENT
                                          ---------------------------------------------------------------------------------------
                                          BALANCE AS OF                             ACQUISITIONS,                   BALANCE AS OF
                                          DECEMBER 31,     CAPITAL                     NET OF       TRANSFERS AND   DECEMBER 31,
                                              2001        ADDITIONS   RETIREMENTS   DIVESTITURES     ADJUSTMENTS        2002
                                          -------------   ---------   -----------   -------------   -------------   -------------
<S>                                       <C>             <C>         <C>           <C>             <C>             <C>
Other land..............................    $   94.3       $  5.1       $ (2.5)        $ (7.0)         $  (.2)        $   89.7
Non-depletable landfill land............        50.5          3.3           --             --              .2             54.0
Landfill development costs..............       958.8         18.1           --            5.1            44.3          1,026.3
Vehicles and equipment..................     1,153.2        220.8        (47.8)          15.1            15.5          1,356.8
Buildings and improvements..............       256.4         12.6         (2.3)          (3.4)            7.6            270.9
Construction in progress -- landfill....        17.6         56.0           --             --           (41.3)            32.3
Construction in progress -- other.......        23.5         15.3           --             --           (29.7)             9.1
                                            --------       ------       ------         ------          ------         --------
        Total...........................    $2,554.3       $331.2       $(52.6)        $  9.8          $ (3.6)        $2,839.1
                                            ========       ======       ======         ======          ======         ========
</Table>

 

<Table>
<Caption>
                                                           ACCUMULATED DEPRECIATION, AMORTIZATION AND DEPLETION
                                         ----------------------------------------------------------------------------------------
                                         BALANCE AS OF   ADDITIONS                                                  BALANCE AS OF
                                         DECEMBER 31,    CHARGED TO                                 TRANSFERS AND   DECEMBER 31,
                                             2001         EXPENSE     RETIREMENTS   DIVESTITURES     ADJUSTMENTS        2002
                                         -------------   ----------   -----------   -------------   -------------   -------------
<S>                                      <C>             <C>          <C>           <C>             <C>             <C>
Landfill development costs.............    $ (237.0)     $   (67.4)     $   --         $   --          $   .3         $ (304.1)
Vehicles and equipment.................      (495.7)        (116.5)       36.9            1.8             3.4           (570.1)
Buildings and improvements.............       (46.7)          (9.6)        1.2             .3             (.1)           (54.9)
                                           --------      ---------      ------         ------          ------         --------
        Total..........................    $ (779.4)     $  (193.5)     $ 38.1         $  2.1          $  3.6         $ (929.1)
                                           ========      =========      ======         ======          ======         ========
</Table>

 
     Capital additions for 2002 include $72.6 million used to purchase equipment
consisting primarily of revenue-producing vehicles originally placed into
service pursuant to an operating lease.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The major components of changes in cash flows for the years ended December
31, 2002, 2001 and 2000 are discussed below.
 
     Cash Flows From Operating Activities.  Cash flows provided by operating
activities were $569.7 million, $459.2 million and $461.8 million for the years
ended December 31, 2002, 2001 and 2000, respectively. The changes in cash
provided by operating activities during the periods are due to the expansion of
our business, deferred taxes and timing of receipts and payments from accounts
receivable and accounts payable, respectively.
 
     We use cash flow from operations to fund capital expenditures,
acquisitions, share repurchases and debt repayments.
 
                                        41

<PAGE>
 
     Cash Flows Used In Investing Activities.  Cash flows used in investing
activities consist primarily of cash used for capital additions and business
acquisitions. Cash used to acquire businesses, net of cash acquired, was $55.8
million, $261.2 million and $188.1 million during the years ended December 31,
2002, 2001 and 2000, respectively. Capital additions were $258.6 million, $249.3
million and $208.0 million during the years ended December 31, 2002, 2001 and
2000, respectively.
 
     We intend to finance capital expenditures and acquisitions through cash on
hand, cash flows from operations, our revolving credit facility, tax-exempt
bonds and other financings. We expect to use primarily cash for future business
acquisitions.
 
     Cash Flows From (Used In) Financing Activities.  Cash flows provided by
(used in) financing activities during the years ended December 31, 2002, 2001
and 2000 included commercial bank borrowings and repayments of debt in all three
years, proceeds from our sale of unsecured notes in 2001, and proceeds from
issuances of tax-exempt bonds in 2002, 2001 and 2000. In August 2001, we sold
unsecured notes with a face value of $450.0 million at a discounted price of
$447.4 million. Proceeds from the notes were used to repay our revolving credit
facility.
 
     In December 1999, we entered into an operating lease facility established
to finance the acquisition of operating equipment consisting primarily of
revenue-producing vehicles. In July 2002, we retired this facility using our
excess cash.
 
     During 2000, 2001 and 2002, our board of directors authorized the
repurchase of up to $150.0 million, $125.0 million and $175.0 million,
respectively, of our common stock. As of December 31, 2002, we paid $300.1
million to repurchase approximately 17.2 million shares of our stock, of which
we paid $150.0 million during 2002 to repurchase approximately 8.0 million
shares of our stock. We intend to finance future stock repurchases through cash
on hand, cash flow from operations, our revolving credit facility and other
financings.
 
     We used proceeds from our revolving credit facility, unsecured notes and
tax-exempt bonds to fund capital expenditures and acquisitions and to repay
debt.
 
CREDIT RATING
 
     Our company has received investment grade credit ratings. As of December
31, 2002, our senior debt was rated Baa3 by Moody's, BBB by Standard & Poor's
and BBB+ by Fitch.
 
     One of our key financial objectives is to maintain our investment grade
credit rating on our senior debt. We believe that frequently communicating with
our rating agencies and providing them with detailed information concerning our
financial and operational performance is critical in achieving this objective.
 
     The following table demonstrates our improvement in certain financial
ratios as of and for the years ended December 31, 2002, 2001 and 2000 that we
believe are important to our credit rating agencies:
 

<Table>
<Caption>
                                                       2002   2001   2001 ADJUSTED(A)   2000
                                                       ----   ----   ----------------   ----
<S>                                                    <C>    <C>    <C>                <C>
Net debt to total capitalization.....................  38.2%  41.3%        41.3%        41.7%
Net debt to EBITDA(b)................................   1.8x   2.5x         2.0x         1.9x
EBITDA to interest expense(b)........................   8.6x   6.2x         7.9x         7.7x
Operating income to total assets.....................  10.9%   7.4%        10.8%        12.2%
</Table>

 
---------------
 
(a) Adjusted results for 2001 exclude an $86.1 million after-tax charge we
    recorded in the fourth quarter of 2001 related to the completed and planned
    divestitures and closings of certain core and non-core businesses, asset
    impairments, downsizing our compost, mulch and soil business and related
    inventory adjustments, an increase in self-insurance reserves and an
    increase in bad debt expense related to the economic slowdown.
(b) EBITDA represents operating income plus depreciation, amortization and
    depletion. While EBITDA data should not be construed as a substitute for
    operating income, net income or cash flows from operations in analyzing our
    operating performance, financial position and cash flows, we have included
    EBITDA data, which is not a measure of financial performance calculated in
    accordance with accounting
 
                                        42

<PAGE>
 
    principles generally accepted in the United States, because we believe that
    this data is commonly used by certain credit rating agencies to evaluate a
    company's financial performance. Due to the fact that not all companies
    calculate non-GAAP measures in the same manner, the EBITDA presentation
    herein may not be comparable to similarly titled measures reported by other
    companies.
 
     We believe that our investment grade rating from our credit rating agencies
and the financial ratios above are indicative of the financial strength of our
company.
 
OPERATING LEASE FACILITY
 
     One of our key financial objectives is to maintain a simple, cost-effective
and transparent capital structure.
 
     As we previously disclosed in our quarterly and annual filings with the
Securities and Exchange Commission, in December 1999, we entered into a $100.0
million facility established to finance the acquisition of operating equipment
consisting primarily of revenue-producing vehicles. The facility had a term of
three years with two consecutive one-year renewals and was entered into
primarily because its implicit interest rate was over ten basis points less than
our revolving credit facility at the time. The facility met the criteria of an
operating lease under generally accepted accounting principles. Accordingly,
during the term of this facility, we did not record this facility as debt nor
did we record the related operating equipment as assets on our balance sheets.
However, we included the cost of operating equipment acquired under the facility
as capital expenditures for purposes of calculating our free cash flow.
 
     In July 2002, we exercised our right to purchase the equipment underlying
this facility by paying $72.6 million using our excess cash, which was the
balance outstanding under the facility at that time. As a result of our success
in obtaining financing in the public markets, including tax-exempt bonds, we do
not anticipate using this form of financing again in the foreseeable future.
 
FUEL HEDGE
 
     We have minimized our risk associated with changes in the price of diesel
fuel by entering into derivatives with a group of financial institutions having
investment grade ratings. Our derivative instruments qualify for hedge
accounting treatment under Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended.
Under these option agreements, we receive or make payments based on the
difference between actual average heating oil prices and predetermined fixed
prices. These option agreements protect us from fuel prices rising above a
predetermined fixed price in the option agreements, but also limit our ability
to benefit from price decreases below the predetermined fixed price in the
option agreements.
 
     During June 2001, we entered into option agreements for approximately 14.3
million gallons of heating oil. These option agreements settled each month in
equal notional amounts through December 2002. The option agreements were
structured as zero-cost collars indexed to the price of heating oil. The option
agreements expired in December 2002. In accordance with SFAS 133, $1.6 million
and $(1.6) million, net of tax, representing the effective portion of the change
in fair value during the periods have been recorded in stockholders' equity as a
component of accumulated other comprehensive income (loss) for the years ended
December 31, 2002 and 2001, respectively. The ineffective portions of the
changes in fair value of approximately $.1 million and $(.1) million for the
years ended December 31, 2002 and 2001, respectively, have been included in
other income (expense), net in the accompanying Consolidated Statements of
Income. Realized losses of $.8 million and $.6 million for the years ended
December 31, 2002 and 2001, respectively, related to these option agreements are
included in cost of operations in our Consolidated Statements of Income.
 
                                        43

<PAGE>
 
FUTURE OBLIGATIONS
 
     The following table summarizes our significant future obligations as of
December 31, 2002:
 

<Table>
<Caption>
                                           MATURITIES OF NOTES
                               OPERATING       PAYABLE AND       CLOSURE AND
  YEAR ENDING DECEMBER 31,      LEASES       LONG-TERM DEBT      POST-CLOSURE   REMEDIATION    TOTAL
  ------------------------     ---------   -------------------   ------------   -----------   --------
<S>                            <C>         <C>                   <C>            <C>           <C>
2003.........................    $ 4.0          $    2.8            $ 17.8         $ 4.3      $   28.9
2004.........................      3.4             227.7              30.9            .9         262.9
2005.........................      2.9               2.7              17.4           2.9          25.9
2006.........................      2.7               2.4              19.6            .9          25.6
2007.........................      2.6               1.9              14.3            .9          19.7
Thereafter...................      9.2           1,197.7             638.2          49.0       1,894.1
                                 -----          --------            ------         -----      --------
          Total..............    $24.8          $1,435.2            $738.2         $58.9      $2,257.1
                                 =====          ========            ======         =====      ========
</Table>

 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     The table below provides information about our market sensitive financial
instruments and constitutes a "forward-looking statement." Our major market risk
exposure is changing interest rates in the United States and fluctuations in
LIBOR. We intend to manage interest rate risk through the use of a combination
of fixed and floating rate debt. All items described below are non-trading.
 

<Table>
<Caption>
                                                                    EXPECTED MATURITY DATE
                                     ------------------------------------------------------------------------------------
                                                                                                           FAIR VALUE
                                                                                                        (ASSET)/LIABILITY
                                                                                                          DECEMBER 31,
                                      2003     2004     2005     2006     2007    THEREAFTER   TOTAL          2002
                                     ------   ------   ------   ------   ------   ----------   ------   -----------------
<S>                                  <C>      <C>      <C>      <C>      <C>      <C>          <C>      <C>
VARIABLE RATE DEBT:
Amount outstanding (in millions)...  $   .6   $   .6   $   .6   $   .3   $   --     $257.6     $259.7        $259.7
Average interest rates.............    1.80%    1.80%    1.80%    1.80%      --%      1.68%      1.68%

INTEREST RATE SWAPS:
Amount outstanding (in millions)...      --   $225.0       --       --       --     $ 75.0     $300.0        $ (9.1)
Average interest rates.............      --      2.6%      --       --       --        2.1%       2.5%
</Table>

 
     The fair value of variable rate debt approximates the carrying value since
interest rates are variable and, thus, approximate current market rates.
 
SEASONALITY
 
     Our operations can be adversely affected by periods of inclement weather
which could delay the collection and disposal of waste, reduce the volume of
waste generated or delay the construction or expansion of our landfill sites and
other facilities.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
     In June 2001, the Financial Accounting Standards Board issued Statement No.
143, "Accounting for Asset Retirement Obligations." This statement is effective
for financial statements issued for fiscal years beginning after June 15, 2002
and applies to all legally enforceable obligations associated with the
retirement of tangible long-lived assets. SFAS 143 will require our company to
change the methodology we currently use to record closure and post-closure costs
related to our landfills. The most significant change to our methodology
promulgated by this statement is inflating and discounting obligations to
reflect today's dollars.
 
     SFAS 143 does not change the basic landfill accounting policies followed by
us and others in the waste industry. In general, the industry has amortized
capitalized costs and accrued future closure and post-closure obligations using
the units-of-consumption method as cubic yards of available airspace are
consumed over the life of the related landfill. This practice is referred to as
life cycle accounting and will continue to be followed except as modified by
SFAS 143 as discussed below.
 
                                        44

<PAGE>
 
     Under SFAS 143, obligations associated with final capping activities that
occur during the operating life of the landfill will be recognized on a
units-of-consumption basis as airspace is consumed within each discrete capping
event. Obligations related to closure and post-closure activities that occur
after the landfill has ceased operations will be recognized on a
units-of-consumption basis as airspace is consumed throughout the entire
landfill. Landfill retirement obligations will be capitalized as the related
liabilities are recognized and amortized using the units-of-consumption method
over the airspace consumed within the capping event or the airspace consumed
throughout the entire landfill, depending upon the nature of the obligation. All
obligations will be initially measured at estimated fair value. Fair value will
be calculated on a present value basis using the company's credit-adjusted,
risk-free rate.
 
     Upon adopting SFAS 143, the company will no longer record closure and
post-closure expense as a component of cost of operations. Instead, amortization
expense will be recorded on the capitalized portion of the obligation and
accretion expense will be recorded using the effective interest method.
 
     The table below reflects significant changes between our current
methodology and the methodology we will use upon adopting SFAS 143:
 

<Table>
<Caption>
                                                                       PRACTICE UPON ADOPTION OF
          DESCRIPTION                     CURRENT PRACTICE                    SFAS NO. 143
<S>                               <C>                               <C>                               <C>
DEFINITIONS:
Final Capping                     Costs related to installation of  No change.
                                  the components that comprise the
                                  permanent final cover over areas
                                  of a landfill where airspace
                                  capacity has been consumed.
Closure                           Includes routine maintenance      No change, except that it will
                                  costs incurred after a site       include the final portion of the
                                  ceases to accept waste, but       methane gas collection system to
                                  prior to being certified closed.  be constructed.
Post-Closure                      Includes routine monitoring and   No change, except it will
                                  maintenance of a landfill after   include methane gas collection
                                  it has been certified as closed   systems in all cases where the
                                  by the applicable state           need for such systems are
                                  regulatory agency.                considered probable.
DISCOUNT RATE:                    Not applicable.                   Credit-adjusted, risk-free rate
                                                                    of 6.75%.
INFLATION:                        Not applicable.                   Inflation rate of 2.5%.
COST ESTIMATES:                   Cost estimates generally assume   No change, except that the cost
                                  work will be performed by third   of any activities performed
                                  parties.                          internally will be increased to
                                                                    represent an estimate of the
                                                                    amount a third party would
                                                                    charge to perform such activity.
                                                                    This third party profit will be
                                                                    taken in to income in the period
                                                                    the work is performed
                                                                    internally.
</Table>

 
                                        45

<PAGE>
 

<Table>
<Caption>
                                                                       PRACTICE UPON ADOPTION OF
          DESCRIPTION                     CURRENT PRACTICE                    SFAS NO. 143
<S>                               <C>                               <C>                               <C>
METHANE GAS COLLECTION SYSTEMS:   Capitalized when constructed and  During the active life of a
                                  charged to expense through        landfill, included in cell
                                  depreciation over the shorter of  development costs when the need
                                  their useful life or the life of  for such systems is considered
                                  the landfill.                     probable; charged to expense
                                                                    through depletion as airspace is
                                                                    consumed using the units-
                                                                    of-consumption method. Systems
                                                                    associated with the last final
                                                                    capping event at a landfill are
                                                                    included in closure.
RECOGNITION OF LIABILITY:
Final Capping                     Accrued over the life of the      All final capping will be
                                  landfill. Costs are charged to    recorded as a liability and
                                  cost of operations and accrued    asset at fair value as the
                                  liabilities as airspace is        obligation is incurred. The
                                  consumed using the units-         discounted cash flow associated
                                  of-consumption method. Costs are  with each final capping event is
                                  not discounted.                   recorded to the accrued
                                                                    liability, with a corresponding
                                                                    increase to landfill assets as
                                                                    airspace is consumed related to
                                                                    the specific final capping
                                                                    event. Interest is accreted on
                                                                    the liability using the
                                                                    effective interest method until
                                                                    the liability is paid.
Closure and Post-Closure          Accrued over the life of the      Accrued over the life of the
                                  landfill. Costs are charged to    landfill. The discounted cash
                                  cost of operations and accrued    flow associated with the fair
                                  liabilities as airspace is        value of such liabilities is
                                  consumed using the units-         recorded to accrued liabilities,
                                  of-consumption method. Costs are  with a corresponding increase in
                                  not discounted.                   landfill assets as airspace is
                                                                    consumed. Interest is accreted
                                                                    on the liability using the
                                                                    effective interest method until
                                                                    the liability is paid.
STATEMENT OF OPERATIONS:
Cost of Operations                Expense charged to cost of        Not applicable.
                                  operations equal to amount of
                                  liability accrued.
Landfill Asset Amortization       Not applicable.                   The landfill asset is amortized
                                                                    as airspace is consumed over the
                                                                    life of a specific capping event
                                                                    for final capping or the life of
                                                                    a landfill for closure and
                                                                    post-closure.
Accretion                         Not applicable.                   Expense recognized as a
                                                                    component of operating expenses
                                                                    at credit-adjusted, risk-free
                                                                    rate (6.75%) using the effective
                                                                    interest method.
</Table>

 
     We will adopt SFAS No. 143 beginning January 1, 2003 and, based on current
estimates, will record an after-tax expense of approximately $21 million as a
cumulative effect of a change in accounting principle. In addition, beginning
January 1, 2003, we will modify our accounting for methane gas collection
systems and, based on current estimates, will record an after-tax expense of
approximately $17 million as a cumulative effect of a change in accounting
principle. We expect that the impact of adopting SFAS No. 143 and changing
 
                                        46

<PAGE>
 
our accounting for methane gas collection systems in 2003 will decrease earnings
per share in the range of $.02 to $.03 per share. The adoption of SFAS No. 143
will have no net effect on our cash flow.
 
     In July 2002, the Financial Accounting Standards Board issued Statement No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS
No. 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities, such as restructurings, involuntarily terminating
employees and consolidating facilities initiated after December 31, 2002. The
implementation of SFAS No. 146 is not expected to have a material effect on our
consolidated financial position, results of operations or cash flows.
 
                                        47

<PAGE>
 

I
TEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 

<Table>
<Caption>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Certified Public Accountants..........    49
Report of Independent Certified Public Accountants..........    51
Consolidated Balance Sheets as of December 31, 2002 and
  2001......................................................    52
Consolidated Statements of Income for each of the Three
  Years Ended December 31, 2002.............................    53
Consolidated Statements of Stockholders' Equity and
  Comprehensive Income for each of the Three Years Ended
  December 31, 2002.........................................    54
Consolidated Statements of Cash Flows for each of the Three
  Years Ended December 31, 2002.............................    55
Notes to Consolidated Financial Statements..................    56
Financial Statement Schedule II, Valuation and Qualifying
  Accounts and Reserves, for each of the Three Years Ended
  December 31, 2002.........................................    88
</Table>

 
                                        48

<PAGE>
 

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To the Board of Directors and Stockholders of Republic Services, Inc.:
 
     We have audited the accompanying consolidated balance sheet of Republic
Services, Inc. and subsidiaries (the "Company") as of December 31, 2002, and the
related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for the year then ended. Our audit also
included the financial statement schedule listed in the index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit. The consolidated financial
statements of the Company as of December 31, 2001 and for each of the years in
the two year period ended December 31, 2001 and the financial statement
schedules as of December 31, 2001 and 2000 and for each of the years then ended
listed in Item 15(a) of this form 10-K were audited by other auditors who have
ceased operations and whose report dated January 30, 2002 expressed an
unqualified opinion on those statements and schedules before the restatement
adjustments and disclosures described below and in Notes 2, 4 and 10.
 
     We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
     In our opinion, the 2002 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Republic Services, Inc. and subsidiaries at December 31, 2002, and
the consolidated results of their operations and their cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
 
     As discussed in Note 2 of the consolidated financial statements, effective
January 1, 2002 the Company adopted Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").
 
     As discussed above, the consolidated financial statements of the Company as
of December 31, 2001, and for each of the years in the two year period ended
December 31, 2001, were audited by other auditors who have ceased operations.

The Company has made certain adjustments to and provided additional disclosures
in prior years' financial statements to conform with the current year's
presentation or to comply with adoption requirements of new accounting
pronouncements, as follows:
 
          (i) As described in Note 2, the 2001 and 2000 consolidated financial
     statements have been revised to include the transitional and other
     disclosures required by SFAS 142, which the Company adopted as of January
     1, 2002. Our audit procedures with respect to the disclosures in Note 2
     with respect to 2001 and 2000 included (a) agreeing the previously reported
     net income (in total and the related earnings-per-share amounts) to the
     previously issued consolidated financial statements and the adjustments to
     net income representing amortization expense (including any related tax
     effects) recognized in those periods related to goodwill as a result of
     initially applying SFAS 142 to the Company's underlying records obtained
     from management, and (b) testing the mathematical accuracy of the
     reconciliation of adjusted net income to previously reported net income and
     the related earnings-per-share amounts. Additionally, our procedures with
     respect to the disclosures in Note 2 regarding 2001 included (a) agreeing
     the cost basis and accumulated amortization of goodwill and other
     intangibles to the Company's underlying records obtained from management,
     and (b) agreeing the total of goodwill and other intangible assets, net of
     accumulated amortization, to the 2001 consolidated balance sheet.
 
          (ii) As described in Note 2, the 2001 and 2000 consolidated financial
     statements have been revised to include the disclosures required by
     Statement of Financial Accounting Standards No. 148, "Accounting for
     Stock-Based Compensation -- Transition and Disclosure," which were adopted
     by the Company as of December 31, 2002. Our audit procedures with respect
     to the disclosures in Note 2 regarding 2001
 
                                        49

<PAGE>
 
     and 2000 included (a) agreeing the previously reported net income (in total
     and the related per share amounts) to the previously issued consolidated
     financial statements, (b) agreeing the adjustments to reported net income
     representing pro forma compensation expense, net of any tax effect, related
     to those periods to the Company's underlying records obtained from
     management, and (c) testing the mathematical accuracy of the reconciliation
     of pro forma net income to reported net income and related per share
     amounts.
 
          (iii) In the table presented under "Stock Options" in Note 2, the
     Company changed the calculation of the pro forma weighted-average fair
     value of stock options granted in 2002. The amounts in the 2001 and 2000
     consolidated financial statements have been restated to conform to the 2002
     calculation of the pro forma weighted-average fair value of stock options
     granted. We audited the adjustments that were applied to restate the
     disclosures for the weighted average fair value of stock options granted
     reflected in the 2001 and 2000 consolidated financial statements. Our
     procedures included (a) agreeing the adjusted weighted average fair value
     of stock options granted during the period to the Company's underlying
     records obtained from management, and (b) testing the mathematical accuracy
     of the calculations of the weighted average fair value of stock options
     granted during the period.
 
          (iv) In the table presented in Note 4, the Company provided additional
     detail regarding the composition of "Landfill, Environmental and Legal
     Costs," as of December 31, 2001 which was not provided in the prior year's
     financial statements. Our procedures related to the 2001 amounts reflected
     in the table in Note 4 included (a) agreeing the components of 2001
     "Landfill, Environmental and Legal Costs" to the company's underlying
     records obtained from management, and (b) testing the mathematical accuracy
     of the table in Note 4.
 
          (v) As described in Note 10, the Company changed the composition of
     its reportable segments in 2002, and the amounts in the 2001 and 2000
     consolidated financial statements relating to reportable segments have been
     restated to conform to the 2002 composition of reportable segments. In
     addition, the Company provided additional disclosure, not provided in prior
     years, of consolidated revenue by source. We audited the 2001 and 2000
     disclosures for reportable segments included in Note 10 to conform to the
     2002 composition of reportable segments and the 2001 and 2000 disclosure of
     revenue by source. Our procedures with regard to the disclosure of the 2001
     and 2000 reportable segments included (a) agreeing the amounts of segment
     gross operating revenue, intercompany operating revenue, net operating
     revenue, depreciation, amortization and depletion, other charges (income),
     operating income, capital expenditures and total assets to the Company's
     underlying records obtained from management, (b) testing the mathematical
     accuracy of the reconciliations of segment amounts to the 2001 and 2000
     consolidated financial statements, (c) agreeing the amount of charges
     included in 2001 operating income from Corporate Entities to the Company's
     underlying records obtained from management, and (d) agreeing the 2001
     balance of goodwill, net of accumulated amortization, for each reportable
     segment to the Company's underlying records obtained from management. With
     regard to the disclosure of 2001 and 2000 revenue by source, our procedures
     included (a) agreeing the amounts of 2001 and 2000 revenue by source to the
     Company's underlying records provided by management, (b) testing the
     mathematical accuracy of the 2001 and 2000 revenue by source table, and (c)
     agreeing the total revenue for 2001 and 2000 to the amounts reported in the
     2001 statement of income.
 
     In our opinion, the adjustments and disclosures described in (i), (ii),
(iii), (iv) and (v) above are appropriate and have been properly applied.
However, we were not engaged to audit, review or apply any procedures to the
2001 and 2000 consolidated financial statements of the Company other than with
respect to such adjustments and disclosures and, accordingly, we do not express
an opinion or any other form of assurance on the 2001 and 2000 consolidated
financial statements taken as a whole.
 
                                          /s/ ERNST & YOUNG LLP
 
Fort Lauderdale, Florida
February 3, 2003
 
                                        50

<PAGE>
 

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To Republic Services, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Republic
Services, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001
and 2000, and the related consolidated statements of operations, stockholders'
equity and other comprehensive income, and cash flows for each of the years in
the three-year period ended December 31, 2001. These financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
 
     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Republic Services, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.
 
     Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits 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
 
Fort Lauderdale, Florida,
  January 30, 2002.

 
THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH REPUBLIC SERVICES, INC.'S FILING ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2001. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN
LLP IN CONNECTION WITH THIS FILING ON FORM 10-K AND ARTHUR ANDERSEN LLP HAS NOT
CONSENTED TO THE INCLUSION OF THIS AUDIT REPORT IN THIS FORM 10-K.
 
                                        51

<PAGE>
 
                            REPUBLIC SERVICES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                        (IN MILLIONS, EXCEPT SHARE DATA)
 

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2002       2001
                                                              --------   --------
<S>                                                           <C>        <C>
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $  141.5   $   16.1
  Accounts receivable, less allowance for doubtful accounts
     of $19.0 at December 31, 2002 and 2001.................     238.6      232.9
  Prepaid expenses and other current assets.................      63.0       69.2
  Deferred tax assets.......................................       9.2        6.6
                                                              --------   --------
          Total Current Assets..............................     452.3      324.8
  RESTRICTED CASH...........................................     175.0      142.3
  PROPERTY AND EQUIPMENT, NET...............................   1,910.0    1,774.9
  INTANGIBLE ASSETS, NET....................................   1,569.9    1,551.6
  OTHER ASSETS..............................................     101.9       62.7
                                                              --------   --------
                                                              $4,209.1   $3,856.3
                                                              ========   ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable..........................................  $  123.5   $  107.9
  Accrued liabilities.......................................     109.3       93.6
  Amounts due to former owners..............................       7.5        6.0
  Deferred revenue..........................................      82.9       72.8
  Notes payable and current maturities of long-term debt....       2.8       33.6

  Other current liabilities.................................      66.2       72.5
                                                              --------   --------
          Total Current Liabilities.........................     392.2      386.4
LONG-TERM DEBT, NET OF CURRENT MATURITIES...................   1,439.3    1,334.1
ACCRUED LANDFILL, ENVIRONMENTAL AND LEGAL COSTS.............     234.7      219.4
DEFERRED INCOME TAXES.......................................     195.0      118.7
OTHER LIABILITIES...........................................      66.8       41.8
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Preferred stock, par value $.01 per share; 50,000,000
     shares authorized; none issued.........................        --         --
  Common stock, par value $.01 per share; 750,000,000 shares
     authorized; 180,825,749 and 178,858,274 issued,
     including shares held in treasury, respectively........       1.8        1.8
  Additional paid-in capital................................   1,298.7    1,264.7
  Retained earnings.........................................     880.7      641.1
  Treasury stock, at cost (17,167,600 and 9,213,600 shares,
     respectively)..........................................    (300.1)    (150.1)
  Accumulated other comprehensive loss, net of tax..........        --       (1.6)
                                                              --------   --------
          Total Stockholders' Equity........................   1,881.1    1,755.9
                                                              --------   --------
                                                              $4,209.1   $3,856.3
                                                              ========   ========
</Table>

 
        The accompanying notes are an integral part of these statements.
 
                                        52

<PAGE>
 
                            REPUBLIC SERVICES, INC.
 
                       CONSOLIDATED STATEMENTS OF INCOME
                 (IN MILLIONS, EXCEPT EARNINGS PER SHARE DATA)
 

<Table>
<Caption>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2002       2001       2000
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
REVENUE.....................................................  $2,365.1   $2,257.5   $2,103.3
EXPENSES:
  Cost of operations........................................   1,472.9    1,422.5    1,271.3
  Depreciation, amortization and depletion..................     199.6      215.4      197.4
  Selling, general and administrative.......................     238.7      236.5      193.9
  Other charges (income)....................................      (5.6)      99.6        6.7
                                                              --------   --------   --------
OPERATING INCOME............................................     459.5      283.5      434.0
INTEREST EXPENSE............................................     (77.0)     (80.1)     (81.6)
INTEREST INCOME.............................................       4.3        4.4        1.7
OTHER INCOME (EXPENSE), NET.................................       (.3)       1.5        2.3
                                                              --------   --------   --------
INCOME BEFORE INCOME TAXES..................................     386.5      209.3      356.4
PROVISION FOR INCOME TAXES..................................     146.9       83.8      135.4
                                                              --------   --------   --------
NET INCOME..................................................  $  239.6   $  125.5   $  221.0
                                                              ========   ========   ========
BASIC AND DILUTED EARNINGS PER SHARE........................  $   1.44   $    .73   $   1.26
                                                              ========   ========   ========
WEIGHTED AVERAGE DILUTED COMMON AND COMMON EQUIVALENT SHARES
  OUTSTANDING...............................................     166.7      171.1      175.0
                                                              ========   ========   ========
</Table>

 
        The accompanying notes are an integral part of these statements.
 
                                        53

<PAGE>
 
                            REPUBLIC SERVICES, INC.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                                 (IN MILLIONS)
 

<Table>
<Caption>
                                                                                                ACCUMULATED
                                           COMMON STOCK                                            OTHER       COMPREHENSIVE
                                          ---------------   ADDITIONAL                         COMPREHENSIVE       INCOME
                                          SHARES,    PAR     PAID-IN     RETAINED   TREASURY      INCOME           (LOSS)
                                            NET     VALUE    CAPITAL     EARNINGS    STOCK        (LOSS)       FOR THE PERIOD
                                          -------   -----   ----------   --------   --------   -------------   --------------
<S>                                       <C>       <C>     <C>          <C>        <C>        <C>             <C>
BALANCE AT DECEMBER 31, 1999............   175.5    $1.8     $1,206.3     $294.6    $    --        $  --
  Net income............................      --      --           --      221.0         --           --           $221.0
  Issuance of common stock..............      .1      --          2.1         --         --           --               --
  Purchases of common stock for
    treasury............................    (3.6)     --           --         --      (50.9)          --               --
                                                                                                                   ------
         Total comprehensive income.....      --      --           --         --         --           --           $221.0
                                           -----    ----     --------     ------    -------        -----           ======
BALANCE AT DECEMBER 31, 2000............   172.0     1.8      1,208.4      515.6      (50.9)          --
  Net income............................      --      --           --      125.5         --           --           $125.5
  Issuance of common stock..............     3.2      --         56.3         --         --           --               --
  Purchases of common stock for
    treasury............................    (5.6)     --           --         --      (99.2)          --               --
  Change in value of derivative
    instruments, net of tax.............      --      --           --         --         --         (1.6)            (1.6)
                                                                                                                   ------
         Total comprehensive income.....      --      --           --         --         --           --           $123.9
                                           -----    ----     --------     ------    -------        -----           ======
BALANCE AT DECEMBER 31, 2001............   169.6     1.8      1,264.7      641.1     (150.1)        (1.6)
  Net income............................      --      --           --      239.6         --           --           $239.6
  Issuance of common stock..............     2.0      --         34.0         --         --           --               --
  Purchases of common stock for
    treasury............................    (8.0)     --           --         --     (150.0)          --               --
  Change in value of derivative
    instruments, net of tax.............      --      --           --         --         --          1.6              1.6
                                                                                                                   ------
         Total comprehensive income.....      --      --           --         --         --           --           $241.2
                                           -----    ----     --------     ------    -------        -----           ======
BALANCE AT DECEMBER 31, 2002............   163.6    $1.8     $1,298.7     $880.7    $(300.1)       $  --
                                           =====    ====     ========     ======    =======        =====
</Table>

 
        The accompanying notes are an integral part of these statements.
 
                                        54

<PAGE>
 
                            REPUBLIC SERVICES, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN MILLIONS)
 

<Table>
<Caption>
                                                                YEARS ENDED DECEMBER 31,
                                                              -----------------------------
                                                               2002      2001       2000
                                                              -------   -------   ---------
<S>                                                           <C>       <C>       <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
  Net income................................................  $ 239.6   $ 125.5   $   221.0
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization of property and
       equipment............................................    126.1     106.8        95.1
     Landfill depletion and amortization....................     67.4      61.5        61.9
     Amortization of intangible and other assets............      6.1      47.1        40.4
     Deferred tax provision (benefit).......................     73.1     (10.7)       29.8
     Provision for doubtful accounts........................     11.2      17.2        11.8
     Income tax benefit from stock option exercises.........      4.0       3.3          .2
     Other non-cash charges.................................     (4.8)    132.3         8.0
     Changes in assets and liabilities, net of effects from
       business acquisitions:
       Accounts receivable..................................    (13.6)     (3.8)        6.2
       Prepaid expenses and other assets....................     (5.9)     (9.2)      (16.8)
       Accounts payable and accrued liabilities.............     37.1     (29.8)         .3
       Other liabilities....................................     29.4      19.0         3.9
                                                              -------   -------   ---------
                                                                569.7     459.2       461.8
                                                              -------   -------   ---------
CASH USED IN INVESTING ACTIVITIES:
  Purchases of property and equipment.......................   (258.6)   (249.3)     (208.0)
  Proceeds from sale of equipment...........................     14.6       8.7        12.6
  Cash used in business acquisitions, net of cash
     acquired...............................................    (55.8)   (261.2)     (188.1)
  Cash proceeds from business dispositions..................     18.9      44.3        31.2
  Amounts due to former owners..............................     (2.7)    (28.1)      (38.7)
  Restricted cash...........................................    (32.7)      3.8       (74.0)
                                                              -------   -------   ---------
                                                               (316.3)   (481.8)     (465.0)
                                                              -------   -------   ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
  Net payments on revolving credit facility.................    (30.0)   (489.0)      (33.0)
  Proceeds from issuance of unsecured notes, net of
     discount...............................................              447.4          --
  Proceeds from notes payable and long-term debt............     96.9     131.1        83.1
  Payments of notes payable and long-term debt..............     (2.2)     (6.6)       (7.1)
  Purchase of equipment under operating lease...............    (72.6)       --          --
  Issuance of common stock..................................     29.9      53.0          .9
  Purchases of common stock for treasury....................   (150.0)    (99.2)      (50.9)
  Purchases of common stock to fund employee benefit plan...                 --         (.9)
                                                              -------   -------   ---------
                                                               (128.0)     36.7        (7.9)
                                                              -------   -------   ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............    125.4      14.1       (11.1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............     16.1       2.0        13.1
                                                              -------   -------   ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $ 141.5   $  16.1   $     2.0
                                                              =======   =======   =========
</Table>

 
        The accompanying notes are an integral part of these statements.
 
                                        55

<PAGE>
 
                            REPUBLIC SERVICES, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (ALL TABLES IN MILLIONS, EXCEPT PER SHARE DATA)
 
1.  BASIS OF PRESENTATION
 
     The accompanying Consolidated Financial Statements include the accounts of
Republic Services, Inc. (a Delaware corporation) and its subsidiaries (the
"Company"). The Company provides non-hazardous solid waste collection and
disposal services in the United States. All material intercompany transactions
have been eliminated.
 
     Certain amounts in the 2001 and 2000 Consolidated Financial Statements have
been reclassified to conform to the 2002 presentation.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
USE OF ESTIMATES
 
     The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States and necessarily include
amounts based on estimates and assumptions made by management. Actual results
could differ from these amounts. Significant items subject to such estimates and
assumptions include the depletion and amortization of landfill development
costs, accruals for closure and post-closure costs, valuation allowances for
accounts receivable, liabilities for potential litigation, claims and
assessments, and liabilities for environmental remediation, deferred taxes and
self-insurance.
 
ACCOUNTS RECEIVABLE
 
     Accounts receivable represent receivables from customers for collection,
transfer, disposal and other services. Receivables are recorded when billed.
Accounts receivable, net of the allowance for doubtful accounts, represents
their estimated net realizable value. Provisions for doubtful accounts are
recorded based on historical collection experience, the age of the receivables,
specific customer information and economic conditions. In general, reserves are
provided for accounts receivable in excess of 90 days old. Accounts receivable
are written off when they are deemed uncollectible.
 
PREPAID EXPENSES AND OTHER CURRENT ASSETS
 
     A summary of prepaid expenses and other current assets is as follows:
 

<Table>
<Caption>
                                                               DECEMBER 31,
                                                              --------------
                                                              2002     2001
                                                              -----    -----
<S>                                                           <C>      <C>
Inventory...................................................  $16.6    $19.2
Prepaid expenses............................................   19.3     16.5
Other non-trade receivables.................................   24.6     28.5
Other assets................................................    2.5      5.0
                                                              -----    -----
                                                              $63.0    $69.2
                                                              =====    =====
</Table>

 
     Inventories consist primarily of compost, mulch, and soil materials,
equipment parts, and fuel that are valued under a method that approximates the
lower of cost (first-in, first-out) or market.
 
     The Company expenses substantially all advertising expenditures as
incurred.
 
PROPERTY AND EQUIPMENT
 
     Property and equipment are recorded at cost. Expenditures for major
additions and improvements to facilities are capitalized. All expenditures for
maintenance and repairs are charged to expense as incurred. When property is
retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the accounts and any resulting gain or loss is reflected in the
Consolidated Statements of Income.
                                        56

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company revises the estimated useful lives of property and equipment
acquired through business acquisitions to conform with its policies regarding
property and equipment. Depreciation is provided over the estimated useful lives
of the assets involved using the straight-line method. The estimated useful
lives are twenty to forty years for buildings and improvements, five to twelve
years for vehicles, seven to ten years for most landfill equipment, five to
fifteen years for all other equipment, and five to ten years for furniture and
fixtures.
 
     Landfills are stated at cost and are depleted based on consumed airspace.
Landfill improvements include direct costs incurred to obtain landfill permits
and direct costs incurred to acquire, construct and develop sites. All indirect
landfill development costs are expensed as incurred. (For further information,
see Note 4, Accrued Landfill, Environmental and Legal Costs.)
 
     The Company capitalizes interest on landfill cell construction and other
construction projects in accordance with Statement of Financial Accounting
Standards No. 34, "Capitalization of Interest Cost." Construction projects must
meet the following criteria before interest is capitalized:
 
          1. Total construction costs are $50,000 or greater,
 
          2. The construction phase is one month or longer, and
 
          3. The assets have a useful life of one year or longer.
 
     Interest is capitalized on qualified assets while they undergo activities
to ready them for their intended use. Capitalization of interest ceases once an
asset is placed into service or if construction activity is suspended for more
than a brief period of time. The interest capitalization rate is based upon the
Company's weighted average cost of indebtedness. Interest capitalized was $2.5
million, $3.3 million and $2.9 million for the years ended December 31, 2002,
2001 and 2000, respectively.
 
     A summary of property and equipment is as follows:
 

<Table>
<Caption>
                                                                    DECEMBER 31,
                                                              ------------------------
                                                                  2002          2001
                                                              ------------    --------
<S>                                                           <C>             <C>
Other land..................................................    $   89.7      $   94.3
Non-depletable landfill land................................        54.0          50.5
Landfill development costs..................................     1,026.3         958.8
Vehicles and equipment......................................     1,356.8       1,153.2
Buildings and improvements..................................       270.9         256.4
Construction-in-progress -- landfill........................        32.3          17.6
Construction-in-progress -- other...........................         9.1          23.5
                                                                --------      --------
                                                                 2,839.1       2,554.3
                                                                --------      --------
Less: Accumulated depreciation, depletion and amortization--
  Landfill development costs................................      (304.1)       (237.0)
  Vehicles and equipment....................................      (570.1)       (495.7)
  Building and improvements.................................       (54.9)        (46.7)
                                                                --------      --------
                                                                  (929.1)       (779.4)
                                                                --------      --------
Property and equipment, net.................................    $1,910.0      $1,774.9
                                                                ========      ========
</Table>

 
     In August 2001, the Financial Accounting Standards Board issued Statement
No. 144, "Accounting for the Impairment of Long-Lived Assets" ("SFAS 144"). This
statement supersedes Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121") and
APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and
 
                                        57

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Transactions." This statement establishes a single accounting model for assets
to be disposed of by sale and resolves certain SFAS 121 implementation issues.
SFAS 144 is effective for financial statements issued for fiscal years beginning
after December 15, 2001, and is generally to be applied prospectively. The
adoption of this statement had no effect on the Company's consolidated financial
position or results of operations.
 
     The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of property and
equipment or whether the remaining balance of property and equipment should be
evaluated for possible impairment. The following are examples of such events or
changes in circumstances:
 
     - A significant decrease in the market price of a long-lived asset or asset
       group,
 
     - A significant adverse change in the extent or manner in which a
       long-lived asset or asset group is being used or in its physical
       condition,
 
     - A significant adverse change in legal factors or in the business climate
       that could affect the value of a long-lived asset or asset group,
       including an adverse action or assessment by a regulator,
 
     - An accumulation of costs significantly in excess of the amount originally
       expected for the acquisition or construction of a long-lived asset or
       asset group,
 
     - A current-period operating or cash flow loss combined with a history of
       operating or cash flow losses or a projection or forecast that
       demonstrates continuing losses associated with the use of a long-lived
       asset or asset group, or
 
     - A current expectation that, more likely than not, a long-lived asset or
       asset group will be sold or otherwise disposed of significantly before
       the end of its previously estimated useful life.
 
     There are certain indicators listed above that require significant judgment
and understanding of the waste industry when applied to landfill development or
expansion. For example, a regulator may initially deny a landfill expansion
permit application though the expansion permit is ultimately granted. In
addition, management may periodically divert waste from one landfill to another
to conserve remaining permitted landfill airspace. Therefore, certain events
could occur in the ordinary course of business and not necessarily be considered
indicators of impairment due to the unique nature of the waste industry.
 
     The Company uses an estimate of the related undiscounted cash flows over
the remaining life of the property and equipment in assessing their
recoverability. The Company measures impairment loss as the amount by which the
carrying amount of the asset exceeds the fair value of the asset.
 
     Included in other charges of $99.6 million for the year ended December 31,
2001 in the accompanying Consolidated Financial Statements are write-downs to
fixed assets of $35.6 million for completed and planned divestitures and
closings of certain core and non-core businesses, and asset impairments.
 
     During the year ended December 31, 2000, the Company recorded a $6.7
million pre-tax charge primarily related to the early closure of a landfill in
south Texas.
 
INTANGIBLE ASSETS
 
     Intangible assets consist of the cost of acquired businesses in excess of
the fair value of net assets acquired and other intangible assets. Other
intangible assets include values assigned to long-term contracts and covenants
not to compete and are amortized generally over periods ranging from 3 to 25
years.
 
                                        58

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table summarizes the activity in the intangible asset and
related accumulated amortization accounts for the year ended December 31, 2002:
 

<Table>
<Caption>
                                                              GROSS INTANGIBLE ASSETS
                                                            ----------------------------
                                                            GOODWILL   OTHER     TOTAL
                                                            --------   ------   --------
<S>                                                         <C>        <C>      <C>
Balance, December 31, 2001................................  $1,669.6   $ 49.2   $1,718.8
  Acquisitions............................................      42.5       .5      43.00
  Other additions.........................................        --       .7         .7
  Divestitures............................................     (30.0)      --      (30.0)
  Retirements.............................................        --    (10.4)     (10.4)
  Reversal of 2001 charge.................................       5.6       --        5.6
                                                            --------   ------   --------
Balance, December 31, 2002................................  $1,687.7   $ 40.0   $1,727.7
                                                            ========   ======   ========
</Table>

 

<Table>
<Caption>
                                                              ACCUMULATED AMORTIZATION
                                                            ----------------------------
                                                            GOODWILL   OTHER     TOTAL
                                                            --------   ------   --------
<S>                                                         <C>        <C>      <C>
Balance, December 31, 2001................................  $ (147.1)  $(20.1)  $ (167.2)
  Amortization expense....................................        --     (4.6)      (4.6)
  Divestitures............................................       3.6       --        3.6
  Retirements.............................................        --     10.4       10.4
                                                            --------   ------   --------
Balance, December 31, 2002................................  $ (143.5)  $(14.3)  $ (157.8)
                                                            ========   ======   ========
</Table>

 
     During 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). In
accordance with SFAS 142, the Company ceased amortizing intangibles with
indefinite lives effective January 1, 2002. Prior to the adoption of SFAS No.
142, cost in excess of the fair value of net assets acquired was amortized over
40 years on a straight-line basis.
 
     The following table summarizes the adjustments to net income and earnings
per share as if SFAS 142 were adopted January 1, 2000:
 

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31,
                                                              ------------------------
                                                               2002     2001     2000
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Reported net income.........................................  $239.6   $125.5   $221.0
Goodwill amortization, net of tax...........................      --     25.8     22.6
                                                              ------   ------   ------
Adjusted net income.........................................  $239.6   $151.3   $243.6
                                                              ======   ======   ======
Reported basic and diluted earnings per share...............  $ 1.44   $  .73   $ 1.26
Goodwill amortization, net of tax...........................      --      .15      .13
                                                              ------   ------   ------
Adjusted basic and diluted earnings per share...............  $ 1.44   $  .88   $ 1.39
                                                              ======   ======   ======
</Table>

 
     In general, goodwill is tested for impairment on an annual basis. In
testing for impairment, the Company estimates the fair value of each operating
segment and compares the fair values with the carrying values. The fair value of
goodwill is determined by deducting the fair value of an operating segment's
identifiable assets and liabilities from the fair value of the operating segment
as a whole, as if that operating segment had just been acquired and the purchase
price were being initially allocated. If the fair value were less than the
carrying value for a segment, an impairment charge would be recorded to earnings
in the Company's Consolidated Statement of Income.
 
                                        59

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In addition, the Company would evaluate an operating segment for impairment
if events or circumstances change between annual tests indicating a possible
impairment. Examples of such events or circumstances include:
 
     - A significant adverse change in legal factors or in the business climate,
 
     - An adverse action or assessment by a regulator,
 
     - A more likely than not expectation that a segment or a significant
       portion thereof will be sold, or
 
     - The testing for recoverability under SFAS No. 144 of a significant asset
       group within the segment.
 
     The Company incurred no impairment of goodwill upon its initial adoption of
SFAS No. 142, or as a result of its annual goodwill impairment test. However,
there can be no assurance that goodwill will not be impaired at any time in the
future.
 
     Included in other charges of $99.6 million for the year ended December 31,
2001 in the accompanying Consolidated Financial Statements are write-downs to
intangible assets of $54.2 million for completed and planned divestitures of
certain core businesses.
 
ACCRUED LIABILITIES
 
     A summary of accrued liabilities is as follows:
 

<Table>
<Caption>
                                                               DECEMBER 31,
                                                              ---------------
                                                               2002     2001
                                                              ------    -----
<S>                                                           <C>       <C>
Accrued payroll and benefits................................  $ 41.6    $29.5
Accrued fees and taxes......................................    26.8     19.8
Accrued interest............................................    19.0     17.9
Other.......................................................    21.9     26.4
                                                              ------    -----
                                                              $109.3    $93.6
                                                              ======    =====
</Table>

 
OTHER CURRENT LIABILITIES
 
     A summary of other current liabilities is as follows:
 

<Table>
<Caption>
                                                               DECEMBER 31,
                                                              ---------------
                                                               2002     2001
                                                              ------    -----
<S>                                                           <C>       <C>
Accrued landfill, environmental and legal costs, current
  portion...................................................  $ 25.6    $23.0
Self-insurance reserves, current............................    33.9     38.4
Other.......................................................     6.7     11.1
                                                              ------    -----
                                                              $ 66.2    $72.5
                                                              ======    =====
</Table>

 
STOCK OPTIONS
 
     The Company accounts for its stock-based compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under the 1998 Stock Incentive Plan for the
periods presented had an exercise price equal to the market value of the
underlying common stock at the date of grant. Had compensation cost for stock
option grants under the Company's Stock Incentive Plan been determined pursuant
to Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), the Company's net income would have
decreased accordingly. Using the Black-Scholes option pricing model, the
Company's
 
                                        60

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
pro forma net income, earnings per share and pro forma weighted-average fair
value of options granted during the period, with related assumptions, are as
follows:
 

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31,
                                                           ------------------------------
                                                             2002       2001       2000
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Net income, as reported..................................  $  239.6   $  125.5   $  221.0
  Less: Stock-based employee compensation expense
     pursuant to SFAS No. 123, net of tax................      10.7       11.3       17.8
                                                           --------   --------   --------
Net income, pro forma....................................  $  228.9   $  114.2   $  203.2
                                                           ========   ========   ========
Basic and diluted earnings per share --
  As reported............................................  $   1.44   $    .72   $   1.26
                                                           ========   ========   ========
  Pro forma..............................................  $   1.37   $    .67   $   1.16
                                                           ========   ========   ========
Pro forma weighted-average fair value of the Company's
  stock options granted during the period................  $   7.47   $   6.45   $   5.87
Assumptions --
  Risk-free interest rates...............................       2.7%       4.3%       5.0%
  Expected lives.........................................   5 years    5 years    5 years
  Expected volatility....................................      40.0%      40.0%      40.0%
</Table>

 
REVENUE RECOGNITION AND DEFERRED REVENUE
 
     The Company generally provides services under contract with municipalities
or individual customers. Revenue consists primarily of collection fees from
commercial, industrial, residential and municipal customers and transfer and
landfill disposal fees charged to third parties. Advance billings are recorded
as deferred revenue, and the revenue is then recognized over the period services
are provided. Collection, transfer and disposal, and other services accounted
for approximately 75%, 18% and 7%, respectively, of consolidated revenue for the
year ended December 31, 2002. No one customer has individually accounted for
more than 10% of the Company's consolidated revenues of any of the Company's
reportable segments in any of the past three years.
 
     The Company recognizes revenue when all four of the following criteria are
met:
 
     - Persuasive evidence of an arrangement exists such as a service agreement
       with a hauling customer or a disposal agreement with a disposal customer.
 
     - Services have been performed such as the collection and hauling of waste
       or the disposal of waste at a Company owned disposal facility.
 
     - The price of the services provided to the customer are fixed or
       determinable.
 
     - Collectability is reasonably assured.
 
OTHER CHARGES
 
     During the fourth quarter of 2002, the Company recorded a $5.6 million gain
on the sale of certain assets for amounts exceeding estimates originally made
during the fourth quarter of 2001.
 
     During the fourth quarter of 2001, the Company recorded a charge of $86.1
million on an after-tax basis, or $132.0 million on a pre-tax basis, related to
completed and planned divestitures and closings of certain core and non-core
businesses, asset impairments, downsizing its compost, mulch and soil business
and related inventory adjustments, an increase in self-insurance reserves and an
increase in bad debt expense related to the economic slowdown. Of the pre-tax
amount, $24.2 million is included in cost of operations in the
 
                                        61

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
accompanying Consolidated Statements of Income, $8.2 million is included in
selling, general and administrative expenses, and the remaining $99.6 million is
included in other charges.
 
     Other charges of $6.7 million for the year ended December 31, 2000 are
primarily related to the early closure of a landfill in south Texas.
 
INCOME TAXES
 
     The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and between
the tax basis of assets and liabilities and their reported amounts in the
financial statements.
 
COMPREHENSIVE INCOME
 
     During the years ended December 31, 2002 and 2001, the Company recorded
unrealized gains (losses) of $2.8 million and $(2.8) million, ($1.7 million and
$(1.7) million, net of tax), respectively, relating to the change in fair value
of its fuel hedge option agreements in accordance with Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), as amended. (For further information, see Note 11,
Fuel Hedge.) Of these amounts, $1.6 million and $(1.6) million, net of tax, were
recorded to other comprehensive income (loss) for the years ended December 31,
2002 and 2001, respectively. The Company had no other components of other
comprehensive income (loss) for the periods presented.
 
STATEMENTS OF CASH FLOWS
 
     The Company considers all unrestricted highly liquid investments with
purchased maturities of three months or less to be cash equivalents. The effect
of non-cash transactions related to business combinations, as discussed in Note
3, Business Combinations, and other non-cash transactions are excluded from the
accompanying Consolidated Statements of Cash Flows.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amounts of cash and cash equivalents, restricted cash,
receivables, accounts payable and accrued liabilities approximate fair value due
to the short maturity of these instruments. The fair value of the Company's
fixed rate unsecured notes using quoted market rates is $1,164.3 million at
December 31, 2002. The carrying value of the unsecured notes is $1,046.9 million
at December 31, 2002. The carrying amounts of the Company's remaining notes
payable and long-term debt approximate fair value because interest rates are
primarily variable and, accordingly, approximate current market rates.
 
CONCENTRATION OF CREDIT RISK
 
     The Company provides services to commercial, industrial, municipal and
residential customers in the United States. Concentrations of credit risk with
respect to trade receivables are limited due to the wide variety of customers
and markets in which services are provided as well as their dispersion across
many geographic areas in the United States. The Company performs ongoing credit
evaluations of its customers, but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based on various factors including the credit risk of specific customers, age of
receivables outstanding, historical trends, economic conditions and other
information. Reserves for specific accounts receivable are provided when a
receivable is believed likely to be uncollectible or generally when a receivable
is in excess of 90 days old.
 
                                        62

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NEW ACCOUNTING PRONOUNCEMENTS
 
     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143").
SFAS 143 is effective for financial statements issued for fiscal years beginning
after June 15, 2002 and applies to all legally enforceable obligations
associated with the retirement of tangible long-lived assets. SFAS 143 will
require the Company to change the methodology it currently uses to record
closure and post-closure costs related to its landfills. The most significant
change to the Company's methodology required by SFAS 143 is inflating and
discounting obligations to reflect today's dollars.
 
     SFAS 143 does not change the basic landfill accounting policies followed by
the Company and others in the waste industry. In general, the industry has
amortized capitalized costs and accrued future closure and post-closure
obligations using the units-of-consumption method as cubic yards of available
airspace are consumed over the life of the related landfill. This practice is
referred to as life cycle accounting and will continue to be followed except as
modified by SFAS 143 as discussed below.
 
     Under SFAS 143, obligations associated with final capping activities that
occur during the operating life of the landfill will be recognized on a
units-of-consumption basis as airspace is consumed within each discrete capping
event. Obligations related to closure and post-closure activities that occur
after the landfill has ceased operations will be recognized on a
units-of-consumption basis as airspace is consumed throughout the entire
landfill. Landfill retirement obligations will be capitalized as the related
liabilities are recognized and amortized using the units-of-consumption method
over the airspace consumed within the capping event or the airspace consumed
throughout the entire landfill, depending upon the nature of the obligation. All
obligations will be initially measured at estimated fair value. Fair value will
be calculated on a present value basis using the Company's credit-adjusted,
risk-free rate.
 
     Upon adopting SFAS 143, the Company will no longer record closure and
post-closure expense as a component of cost of operations. Instead, amortization
expense will be recorded on the capitalized portion of the obligation and
accretion expense will be recorded using the effective interest method.
 
     The table below reflects significant changes between the Company's current
methodology and the methodology the Company will use upon adopting SFAS 143:
 

<Table>
<Caption>
                                                                       PRACTICE UPON ADOPTION OF
          DESCRIPTION                     CURRENT PRACTICE                    SFAS NO. 143
<S>                               <C>                               <C>                               <C>
DEFINITIONS:
Final Capping                     Costs related to installation of  No change.
                                  the components that comprise the
                                  permanent final cover over areas
                                  of a landfill where airspace
                                  capacity has been consumed.
Closure                           Includes routine maintenance      No change, except that it will
                                  costs incurred after a site       include the final portion of the
                                  ceases to accept waste, but       methane gas collection system to
                                  prior to being certified closed.  be constructed.
Post-Closure                      Includes routine monitoring and   No change, except it will
                                  maintenance of a landfill after   include methane gas collection
                                  it has been certified as closed   systems in all cases where the
                                  by the applicable state           need for such systems are
                                  regulatory agency.                considered probable.
</Table>

 
                                        63

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 

<Table>
<Caption>
                                                                       PRACTICE UPON ADOPTION OF
          DESCRIPTION                     CURRENT PRACTICE                    SFAS NO. 143
<S>                               <C>                               <C>                               <C>
DISCOUNT RATE:                    Not applicable.                   Credit-adjusted, risk-free rate
                                                                    of 6.75%.
INFLATION:                        Not applicable.                   Inflation rate of 2.5%.
COST ESTIMATES:                   Cost estimates generally assume   No change, except that the cost
                                  work will be performed by third   of any activities performed
                                  parties.                          internally will be increased to
                                                                    represent an estimate of the
                                                                    amount a third party would
                                                                    charge to perform such activity.
                                                                    This third party profit will be
                                                                    taken in to income in the period
                                                                    the work is performed
                                                                    internally.
METHANE GAS COLLECTION SYSTEMS:   Capitalized when constructed and  During the active life of a
                                  charged to expense through        landfill, included in cell
                                  depreciation over the shorter of  development costs when the need
                                  their useful life or the life of  for such systems is considered
                                  the landfill.                     probable; charged to expense
                                                                    through depletion as airspace is
                                                                    consumed using the units-
                                                                    of-consumption method. Systems
                                                                    associated with the last final
                                                                    capping event at a landfill are
                                                                    included in closure.
RECOGNITION OF LIABILITY:
Final Capping                     Accrued over the life of the      All final capping will be
                                  landfill. Costs are charged to    recorded as a liability and
                                  cost of operations and accrued    asset at fair value as the
                                  liabilities as airspace is        obligation is incurred. The
                                  consumed using the units-         discounted cash flow associated
                                  of-consumption method. Costs are  with each final capping event is
                                  not discounted.                   recorded to the accrued
                                                                    liability, with a corresponding
                                                                    increase to landfill assets as
                                                                    airspace is consumed related to
                                                                    the specific final capping
                                                                    event. Interest is accreted on
                                                                    the liability using the
                                                                    effective interest method until
                                                                    the liability is paid.
Closure and Post-Closure          Accrued over the life of the      Accrued over the life of the
                                  landfill. Costs are charged to    landfill. The discounted cash
                                  cost of operations and accrued    flow associated with the fair
                                  liabilities as airspace is        value of such liabilities is
                                  consumed using the units-         recorded to accrued liabilities,
                                  of-consumption method. Costs are  with a corresponding increase in
                                  not discounted.                   landfill assets as airspace is
                                                                    consumed. Interest is accreted
                                                                    on the liability using the
                                                                    effective interest method until
                                                                    the liability is paid.
STATEMENT OF OPERATIONS:
Cost of Operations                Expense charged to cost of        Not applicable.
                                  operations equal to amount of
                                  liability accrued.
</Table>

 
                                        64

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 

<Table>
<Caption>
                                                                       PRACTICE UPON ADOPTION OF
          DESCRIPTION                     CURRENT PRACTICE                    SFAS NO. 143
<S>                               <C>                               <C>                               <C>
Landfill Asset Amortization       Not applicable.                   The landfill asset is amortized
                                                                    as airspace is consumed over the
                                                                    life of a specific capping event
                                                                    for final capping or the life of
                                                                    a landfill for closure and
                                                                    post-closure.
Accretion                         Not applicable.                   Expense recognized as a
                                                                    component of operating expenses
                                                                    at credit-adjusted, risk-free
                                                                    rate (6.75%) using the effective
                                                                    interest method.
</Table>

 
     The Company will adopt SFAS No. 143 beginning January 1, 2003 and, based on
current estimates, will record an after-tax expense of approximately $21 million
as a cumulative effect of a change in accounting principle. In addition,
beginning January 1, 2003, the Company will modify its accounting for methane
gas collection systems and, based on current estimates, will record an after-tax
expense of approximately $17 million as a cumulative effect of a change in
accounting principle. The Company expects that the impact of adopting SFAS No.
143 and changing its accounting for methane gas collection systems in 2003 will
decrease earnings per share in the range of $.02 to $.03 per share. The adoption
of SFAS No. 143 will have no net effect on our cash flow.
 
     In July 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities, such as restructurings, involuntarily terminating
employees, and consolidating facilities initiated after December 31, 2002. The
implementation of SFAS No. 146 is not expected to have a material effect on the
Company's consolidated financial position, results of operations or cash flows.
 
3.  BUSINESS COMBINATIONS
 
     The Company acquires businesses as part of its growth strategy. Businesses
acquired are accounted for under the purchase method of accounting and are
included in the Consolidated Financial Statements from the date of acquisition.
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 if, and when,
information regarding contingencies becomes available to further define and
quantify assets acquired and liabilities assumed. The allocation period
generally 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 differences between its fair value estimates and actual fair
values are material.
 
     The Company acquired various solid waste businesses during the year ended
December 31, 2002. The aggregate purchase price paid for these transactions was
$55.8 million.
 
     The Company acquired various solid waste businesses during the year ended
December 31, 2001. The aggregate purchase price paid for these transactions was
$287.7 million. The aggregate purchase price paid, less cash and restricted cash
acquired plus debt assumed, was $247.5 million.
 
     In July 1999, the Company entered into a definitive agreement with Allied
Waste Industries, Inc. ("Allied") to acquire certain solid waste assets. In
2000, the Company had completed the purchase of these
 
                                        65

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
assets for approximately $105.5 million in cash, $85.8 million of which were
acquired during 2000. In October 1999, the Company entered into a definitive
agreement with Allied for the simultaneous purchase and sale of certain other
solid waste assets for which annual revenue was approximately $145.0 million. In
2000, the Company and Allied completed the purchase and sale of these assets.
Net proceeds from the cash portion of the exchange of assets were $30.7 million.
 
     In addition to the acquisitions from Allied, the Company also acquired
various other solid waste businesses during the year ended December 31, 2000,
which were accounted for under the purchase method of accounting. The aggregate
purchase price the Company paid in these transactions was $102.5 million in
cash.
 
     During 2002, 2001 and 2000, $5.1 million, $62.6 million and $30.9 million,
respectively, of the total purchase price paid for acquisitions and contingent
payments to former owners was allocated to landfill airspace. For landfills
purchased as part of a group of several assets, the allocations of purchase
price were based on the discounted expected future cash flow of each landfill
relative to other assets within the acquired group and were adjusted for other
non-depletable landfill assets and liabilities acquired (primarily closure and
post-closure liabilities). Landfill purchase price is amortized using the
units-of-consumption method over total available airspace, which includes
probable expansion airspace where appropriate, and is included in property and
equipment, net in the accompanying Consolidated Balance Sheets.
 
     The following summarizes the preliminary purchase price allocations for
business combinations accounted for under the purchase method of accounting:
 

<Table>
<Caption>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               2002     2001      2000
                                                              ------   -------   -------
<S>                                                           <C>      <C>       <C>
Property and equipment......................................  $27.0    $ 87.7    $120.7
Intangible assets...........................................   43.0     223.3     253.4
Restricted cash.............................................     --      61.8        --
Working capital deficit.....................................   (8.9)    (10.2)      (.6)
Long-term debt assumed......................................     --     (28.1)     (4.2)
Other assets (liabilities), net.............................   (5.3)    (73.3)    (15.8)
Net purchase price paid with assets.........................     --        --    (165.4)
                                                              -----    ------    ------
Cash used in acquisitions, net of cash acquired.............  $55.8    $261.2    $188.1
                                                              =====    ======    ======
</Table>

 
     Substantially all of the intangible assets recorded for these acquisitions
are deductible for tax purposes.
 
     The Company's unaudited pro forma consolidated results of operations
assuming all significant acquisitions during 2002 accounted for under the
purchase method of accounting had occurred at the beginning of the periods
presented are as follows:
 

<Table>
<Caption>
                                                              YEARS ENDED
                                                             DECEMBER 31,
                                                         ---------------------
                                                           2002         2001
                                                         --------     --------
<S>                                                      <C>          <C>
Revenue................................................  $2,404.2     $2,311.0
Net income.............................................  $  238.5     $  123.8
Basic and diluted earnings per share...................  $   1.43     $    .74
Weighted average diluted common and common equivalent
  shares outstanding...................................     166.7        171.1
</Table>

 
     The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of the beginning of the
periods presented.
 
                                        66

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
4.  ACCRUED LANDFILL, ENVIRONMENTAL AND LEGAL COSTS
 
     Certain of the Company's landfill accounting policies will be modified upon
the adoption of SFAS 143, which is effective January 1, 2003. (For further
information, see Note 2, Summary of Significant Accounting Policies.)
 
LANDFILL, ENVIRONMENTAL AND LEGAL COSTS
 
     A summary of accrued landfill and environmental costs is as follows:
 

<Table>
<Caption>
                                                              DECEMBER 31,
                                                            -----------------
                                                             2002       2001
                                                            ------     ------
<S>                                                         <C>        <C>
Accrued landfill site closure and post-closure costs......  $196.9     $179.1
Remediation...............................................    58.9       60.4
Accrued environmental and legal costs.....................     4.5        2.9
                                                            ------     ------
                                                             260.3      242.4
Less: current portion (included in other current
  liabilities)............................................   (25.6)     (23.0)
                                                            ------     ------
                                                            $234.7     $219.4
                                                            ======     ======
</Table>

 
LIFE CYCLE ACCOUNTING
 
     The Company uses life cycle accounting and the units-of-consumption method
to recognize certain landfill costs over the life of the site. In life cycle
accounting, all costs to acquire, construct, close and maintain a site during
the post-closure period are capitalized or accrued, and charged to expense based
upon the consumption of cubic yards of available airspace. Costs and airspace
estimates are developed annually by independent engineers together with the
Company's engineers. These estimates are used by the Company's operating and
accounting personnel to annually adjust the Company's rates used to expense
capitalized costs and accrue closure and post-closure costs. Changes in these
estimates primarily relate to changes in available airspace, inflation and
applicable regulations. Changes in available airspace include changes due to the
addition of airspace lying in probable expansion areas.
 
TOTAL AVAILABLE DISPOSAL CAPACITY
 
     As of December 31, 2002, the Company owned or operated 56 solid waste
landfills with total available disposal capacity of approximately 1.7 billion
in-place cubic yards. Total available disposal capacity represents the sum of
estimated permitted airspace plus an estimate of expansion airspace that the
Company believes has a probable likelihood of being permitted.
 
PROBABLE EXPANSION AIRSPACE
 
     Before airspace included in an expansion area is determined as probable
expansion airspace and, therefore, included in the Company's calculation of
total available disposal capacity, the following criteria must be met:
 
          1. The land associated with the expansion airspace is either owned by
             the Company or is controlled by the Company pursuant to an option
             agreement;
 
          2. The Company is committed to supporting the expansion project
             financially and with appropriate resources;
 
          3. There are no identified fatal flaws or impediments associated with
             the project, including political impediments;
 
                                        67

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
          4. Progress is being made on the project;
 
          5. The expansion is attainable within a reasonable time frame; and
 
          6. The Company believes it is likely the expansion permit will be
     received.
 
     Upon meeting the Company's expansion criteria, the rates used at each
applicable landfill to expense costs to acquire, construct, close and maintain a
site during the post-closure period are adjusted to include probable expansion
airspace and all additional costs to be capitalized or accrued associated with
the expansion airspace.
 
     The Company has identified three sequential steps that landfills generally
follow to obtain expansion permits. These steps are as follows:
 
          1. Obtaining approval from local authorities;
 
          2. Submitting a permit application to state authorities; and
 
          3. Obtaining permit approval from state authorities.
 
     Once a landfill meets the Company's expansion criteria, management
continuously monitors each site's progress in obtaining the expansion permit. If
at any point it is determined that an expansion area no longer meets the
required criteria, the probable expansion airspace is removed from the
landfill's total available capacity and the rates used at the landfill to
expense costs to acquire, construct, close and maintain a site during the
post-closure period are adjusted accordingly.
 
CAPITALIZED LANDFILL COSTS
 
     Capitalized landfill costs include expenditures for land, permitting costs,
cell construction costs and environmental structures. Capitalized permitting and
cell construction costs are limited to direct costs relating to these
activities, including legal, engineering and construction associated with
excavation, liners and site berms. Interest is capitalized on landfill
construction projects while the assets are undergoing activities to ready them
for their intended use.
 
     Costs related to acquiring land, excluding the estimated residual value of
unpermitted, non-buffer land, and costs related to permitting and cell
construction are depleted as airspace is consumed using the units-of-
consumption method. Environmental structures, which include leachate collection
systems, methane collection systems and groundwater monitoring wells, are
charged to expense over the shorter of their useful life or the life of the
landfill.
 
     Capitalized landfill costs may also include an allocation of purchase price
paid for landfills. For landfills purchased as part of a group of several
assets, the purchase price assigned to the landfill is determined based upon the
discounted expected future cash flows of the landfill relative to the other
assets within the acquired group. If the landfill meets the Company's expansion
criteria, the purchase price is further allocated between permitted airspace and
expansion airspace based upon the ratio of permitted versus probable expansion
airspace to total available airspace. Landfill purchase price is amortized using
the units-of-consumption method over the total available airspace including
probable expansion airspace where appropriate.
 
CLOSURE AND POST-CLOSURE COSTS
 
     Landfill site closure and post-closure costs include estimated costs to be
incurred for final closure of the landfills and estimated costs for providing
required post-closure monitoring and maintenance of landfills. These costs are
accrued and charged to cost of operations based upon consumed airspace in
relation to total available disposal capacity using the units-of-consumption
method. The Company estimates future cost requirements for closure and
post-closure monitoring and maintenance for its solid waste facilities based on
 
                                        68

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
the technical standards of the Environmental Protection Agency's Subtitle D
regulations and applicable state and local regulations. These estimates do not
take into account inflation or discounts for the present value of total
estimated costs. Closure and post-closure expense totaled approximately $26.1
million, $22.9 million and $23.4 million during the years ended December 31,
2002, 2001 and 2000, respectively. Accruals for closure and post-closure are
included in accrued landfill, environmental and legal costs in the accompanying
Consolidated Balance Sheets.
 
     A number of the Company's landfills were acquired from other entities and
recorded using the purchase method of accounting. Accordingly, the Company
assessed and recorded a closure and post-closure liability as of the date the
landfill was acquired based upon the estimated total closure and post-closure
costs and the percentage of total available disposal capacity utilized as of
such date. Thereafter, the difference between the closure and post-closure costs
accrued and the total estimated closure and post-closure costs to be incurred
are accrued and charged to expense as airspace is consumed. Closure and
post-closure costs will be fully accrued for the Company's landfills at the time
such facilities cease to accept waste and are closed. As of December 31, 2002,
assuming that all available landfill capacity is used, the Company expects to
expense approximately $541.3 million of such costs over the remaining lives of
these facilities.
 
     The expected future payments for closure and post-closure costs as of
December 31, 2002 are as follows:
 

<Table>
<Caption>
                        YEAR ENDING
                        DECEMBER 31,
------------------------------------------------------------
<S>                                                           <C>
2003........................................................  $ 17.8
2004........................................................    30.9
2005........................................................    17.4
2006........................................................    19.6
2007........................................................    14.3
Thereafter..................................................   638.2
                                                              ------
                                                              $738.2
                                                              ======
</Table>

 
REMEDIATION
 
     The Company accrues for remediation costs when they become probable and
reasonably estimatable. Substantially all of the Company's recorded remediation
costs are for incremental landfill post-closure care required under approved
remediation action plans for acquired landfills. Remediation costs are estimated
by independent engineers together with the Company's engineers based upon site
remediation plans. These estimates do not take into account discounts for the
present value of total estimated costs. Management believes that the amounts
accrued for remediation costs are adequate. However, a significant increase in
the estimated costs for remediation could have a material adverse effect on the
Company's financial position, results of operations or cash flows.
 
     The expected future payments for remediation costs as of December 31, 2002
are as follows:
 

<Table>
<Caption>
                        YEAR ENDING
                        DECEMBER 31,
------------------------------------------------------------
<S>                                                           <C>
2003........................................................  $  4.3
2004........................................................      .9
2005........................................................     2.9
2006........................................................      .9
2007........................................................      .9
Thereafter..................................................    49.0
                                                              ------
                                                              $ 58.9
                                                              ======
</Table>

 
                                        69

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
ENVIRONMENTAL COSTS
 
     In the normal course of business, the Company is subject to ongoing
environmental investigations by certain regulatory agencies, as well as other
claims and disputes that could result in litigation. Environmental costs are
accrued by the Company through a charge to income in the period such liabilities
become probable and can be reasonably estimated. No material amounts were
charged to expense during the years ended December 31, 2002, 2001, and 2000.
 
5.  NOTES PAYABLE AND LONG-TERM DEBT
 
     Notes payable and long-term debt are as follows:
 

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2002         2001
                                                              --------     --------
<S>                                                           <C>          <C>
$225.0 million unsecured notes, net of unamortized discount
  of $.3 million and $.5 million, respectively, and
  including an $8.2 million and $(.2) million adjustment to
  fair market value as of December 31, 2002 and 2001,
  respectively; interest payable semi-annually in May and
  November at 6 5/8%; principal due at maturity in 2004.....  $  232.9     $  224.3
$375.0 million unsecured notes, net of unamortized discount
  of $.4 million and $.5 million, respectively; interest
  payable semi-annually in May and November at 7 1/8%;
  principal due at maturity in 2009.........................     374.6        374.5
$450.0 million unsecured notes, net of unamortized discount
  of $2.4 million and $2.6 million, respectively, and
  including $.9 million adjustment to fair value as of
  December 31, 2002; interest payable semi-annually in
  February and August at 6 3/4%; principal due at maturity
  in 2011...................................................     448.5        447.4
$750.0 million unsecured revolving credit facility; interest
  payable using LIBOR based rates (2.1% at December 31,
  2002); $300.0 million matures July 2003 and $450.0 million
  matures July 2007.........................................        --           --
Tax-exempt bonds and other tax-exempt financing; fixed and
  floating interest rates (ranging from 1.45% to 5.25% at
  December 31, 2002); maturities ranging from 2003 to
  2032......................................................     378.2        283.2
Other notes including unsecured and secured by real
  property, equipment and other assets; interest rates
  ranging from 1.5% to 10.0%; maturing through 2012.........       7.9         38.3
                                                              --------     --------
                                                               1,442.1      1,367.7
Less: Current portion.......................................      (2.8)       (33.6)
                                                              --------     --------
                                                              $1,439.3     $1,334.1
                                                              ========     ========
</Table>

 
                                        70

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Aggregate maturities of notes payable and long-term debt as of December 31,
2002 (excluding discounts and adjustments to fair market value from hedging
transactions) are as follows:
 

<Table>
<Caption>
                        YEAR ENDING
                        DECEMBER 31,
------------------------------------------------------------
<S>                                                           <C>
2003........................................................  $    2.8
2004........................................................     227.7
2005........................................................       2.7
2006........................................................       2.4
2007........................................................       1.9
Thereafter..................................................   1,197.7
                                                              --------
                                                              $1,435.2
                                                              ========
</Table>

 
     As of December 31, 2002, the Company had approximately $437.7 million of
availability under its revolving credit facility.
 
     As of December 31, 2002, the Company had $175.0 million of restricted cash
of which $139.7 million were proceeds from the issuance of tax-exempt bonds and
other tax-exempt financing and will be used to fund capital expenditures.
Restricted cash also includes amounts held in trust as a financial guarantee of
the Company's performance.
 
     The Company made interest payments on notes payable and long-term debt of
approximately $75.9 million, $70.4 million and $83.4 million (net of capitalized
interest of $2.5 million, $3.3 million and $2.9 million) for the years ended
December 31, 2002, 2001 and 2000, respectively.
 
     In August 2001, the Company sold $450.0 million of public notes, which have
a fixed coupon rate of 6 3/4% and mature in 2011. Proceeds from these notes were
used to repay the Company's revolving credit facility.
 
     The Company's ability to obtain financing through the capital markets is a
key component of its financial strategy. Historically, the Company has managed
risk associated with executing this strategy, particularly as it relates to
fluctuations in interest rates, by using a combination of fixed and floating
rate debt. During 2001 and 2002, the Company also entered into interest rate
swap agreements to manage risk associated with fluctuations in interest rates
and to take advantage of favorable floating interest rates. The swap agreements
have total notional values of $225.0 million and $75.0 million, respectively,
and mature in 2004 and 2011, respectively. These maturities are identical to the
Company's public notes that were sold in 1999 and 2001, respectively. Under the
swap agreements, the Company pays interest at floating rates based on changes in
LIBOR and receives interest at fixed rates of 6 5/8% and 6 3/4%, respectively.
The Company has designated these agreements as hedges in changes in the fair
value of the Company's fixed-rate debt and accounts for them in accordance with
SFAS 133. The Company has determined that these agreements qualify for the
short-cut method under SFAS 133 and, therefore, changes in the fair value of the
agreements are assumed to be perfectly effective in hedging changes in the fair
value of the Company's fixed rate debt due to changes in interest rates.
 
     As of December 31, 2002, interest rate swap agreements are reflected at
fair market value of $9.1 million and are included in other assets and as an
adjustment to long-term debt in the accompanying Consolidated Balance Sheets.
During the years ended December 31, 2002 and 2001, the Company recorded net
interest income of $5.8 million and $1.3 million, respectively, related to its
interest rate swap agreements which is included in interest expense in the
accompanying Consolidated Statements of Income.
 
     The unsecured revolving credit facility requires the Company to maintain
certain financial ratios and comply with certain financial covenants. At
December 31, 2002, the Company was in compliance with the financial covenants
under these agreements.
 
                                        71

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
6.  INCOME TAXES
 
     The components of the provision for income taxes are as follows:
 

<Table>
<Caption>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               2002      2001     2000
                                                              -------   ------   -------
<S>                                                           <C>       <C>      <C>
Current:
  Federal...................................................  $ 62.0    $86.1    $ 93.9
  State.....................................................    11.8      8.4      11.7
Federal and state deferred..................................    73.1    (10.7)     29.8
                                                              ------    -----    ------
Provision for income taxes..................................  $146.9    $83.8    $135.4
                                                              ======    =====    ======
</Table>

 
     A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is shown below:
 

<Table>
<Caption>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               2002      2001     2000
                                                              -------   ------   -------
<S>                                                           <C>       <C>      <C>
Statutory federal income tax rate...........................    35.0%    35.0%     35.0%
Non-deductible expenses.....................................      .7      1.3       1.3
State income taxes, net of federal benefit..................     2.1      2.6       3.0
Other, net..................................................      .2      1.1      (1.3)
                                                              ------    -----    ------
Effective income tax rate...................................    38.0%    40.0%     38.0%
                                                              ======    =====    ======
</Table>

 
     Components of the net deferred income tax liability in the accompanying
Consolidated Balance Sheets are as follows:
 

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                           ------------------------
                                                               2002          2001
                                                           ------------     -------
<S>                                                        <C>              <C>
Deferred tax assets (liabilities):
  Current portion -
     Book basis in property over tax basis...............    $    .8        $    .8
     Accruals not currently deductible...................        8.4            5.8
                                                             -------        -------
          Total..........................................    $   9.2        $   6.6
                                                             =======        =======
  Long-term portion -
     Book basis in property over tax basis...............    $(214.6)       $(140.1)
     Accruals not currently deductible...................       19.6           21.4
                                                             -------        -------
          Total..........................................    $(195.0)       $(118.7)
                                                             =======        =======
</Table>

 
     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The Company adjusts the valuation allowance, if
any, in the period management determines it is more likely than not that
deferred tax assets will or will not be realized.
 
     The Company made income tax payments of approximately $69.3 million, $109.3
million and $89.3 million for the years ended December 31, 2002, 2001 and 2000,
respectively.
 
7.  STOCKHOLDERS' EQUITY
 
     During 2000, 2001 and 2002, the Board of Directors authorized the
repurchase of up to $150.0 million, $125.0 million and $175.0 million,
respectively, of its Common Stock. As of December 31, 2002, the Company had paid
$300.1 million to repurchase 17.2 million shares of its Common Stock.
 
                                        72

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
8.  STOCK OPTIONS
 
     In July 1998, the Company adopted the 1998 Stock Incentive Plan ("Stock
Incentive Plan") to provide for grants of options to purchase shares of Common
Stock to employees and non-employee directors of the Company who are eligible to
participate in the Stock Incentive Plan. Options granted under the Stock
Incentive Plan are non-qualified and are granted at a price equal to the fair
market value of the Company's Common Stock at the date of grant. Generally,
options granted have a term of ten years from the date of grant, and vest in
increments of 25% per year over a four year period beginning on the first
anniversary date of the grant. Options granted to non-employee directors have a
term of ten years and vest immediately at the date of grant. In May 2002, the
Company's stockholders approved and adopted an amendment and restatement of the
Stock Incentive Plan, which modified a number of its provisions, including an
increase in the number of shares of Common Stock reserved for issuance under the
Stock Incentive Plan from 20.0 million to 27.0 million. As of December 31, 2002,
there were 9.3 million stock options reserved for future grants under the Stock
Incentive Plan.
 
     The following table summarizes stock option activity for the years ended
2000, 2001 and 2002:
 

<Table>
<Caption>
                                                                       WEIGHTED-AVERAGE
                                                              SHARES    EXERCISE PRICE
                                                              ------   ----------------
<S>                                                           <C>      <C>
Options outstanding at January 1, 2000......................   15.0         $16.57
Granted.....................................................     .3          13.07
Exercised...................................................    (.1)         10.38
Cancelled...................................................   (1.1)         16.57
                                                               ----         ------
Options outstanding at December 31, 2000....................   14.1          16.54
Granted.....................................................    2.2          14.85
Exercised...................................................   (3.1)         16.60
Cancelled...................................................    (.8)         16.66
                                                               ----         ------
Options outstanding at December 31, 2001....................   12.4          16.22
Granted.....................................................    2.3          17.45
Exercised...................................................   (1.9)         15.18
Cancelled...................................................    (.2)         15.39
                                                               ----         ------
Options outstanding at December 31, 2002....................   12.6         $16.61
                                                               ====         ======
</Table>

 
     The following table summarizes information about the Company's outstanding
and exercisable stock options at December 31, 2002:
 

<Table>
<Caption>
                                                  OUTSTANDING                 EXERCISABLE
                                        --------------------------------   ------------------
                                                  WEIGHTED-
                                                   AVERAGE     WEIGHTED-            WEIGHTED-
                                                  REMAINING     AVERAGE              AVERAGE
                                                 CONTRACTUAL   EXERCISE             EXERCISE
RANGE OF EXERCISE PRICE                 SHARES   LIFE (YRS.)     PRICE     SHARES     PRICE
-----------------------                 ------   -----------   ---------   ------   ---------
<S>                                     <C>      <C>           <C>         <C>      <C>
$ 3.39 -- $13.55......................    1.6        6.8        $11.89       .9      $11.88
$13.56 -- $16.93......................    2.1        7.6         14.72       .7       15.00
$16.94 -- $20.32......................    8.7        6.1         17.75      5.8       17.78
$20.33 -- $33.88......................     .2        5.8         23.86       .2       24.19
                                         ----        ---        ------      ---      ------
                                         12.6        6.4        $16.61      7.6      $16.99
                                         ====        ===        ======      ===      ======
</Table>

 
     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock options
is deducted in determining net income.
 
                                        73

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company also maintains the Republic Services 401(k) Plan (the "Plan"),
which is a defined contribution plan covering all eligible employees. Under the
provisions of the Plan, participants may direct the Company to defer a portion
of their compensation to the Plan, subject to a maximum of 15% of eligible
compensation, as defined. In general, the Company provides matching
contributions of 50% of the amount contributed by each participant up to 4% of
the employee's salary. The employer match is generally made in shares of the
Company's common stock. Both employee and Company contributions vest
immediately. During 2002, the Company contributed shares of its common stock
valued at $2.5 million to the Plan.
 
9.  EARNINGS PER SHARE
 
     Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is based on the combined weighted average number of common shares and
common share equivalents outstanding which include, where appropriate, the
assumed exercise of employee stock options. In computing diluted earnings per
share, the Company utilizes the treasury stock method.
 
     Earnings per share is calculated as follows:
 

<Table>
<Caption>
                                                             YEARS ENDED DECEMBER 31,
                                                             ------------------------
                                                              2002     2001     2000
                                                             ------   ------   ------
<S>                                                          <C>      <C>      <C>
Numerator:
  Net income...............................................  $239.6   $125.5   $221.0
                                                             ------   ------   ------
Denominator:
  Denominator for basic earnings per share.................   165.4    170.1    174.7
  Effect of dilutive securities -- Options to purchase
     common stock..........................................     1.3      1.0       .3
                                                             ------   ------   ------
     Denominator for diluted earnings per share............   166.7    171.1    175.0
                                                             ======   ======   ======
     Basic and diluted earnings per share..................  $ 1.44   $  .73   $ 1.26
                                                             ======   ======   ======
Antidilutive securities not included in the diluted
  earnings per share calculation:
     Options to purchase common stock......................      .8      3.3     12.3
     Weighted-average exercise price.......................  $19.87   $18.27   $17.42
</Table>

 
10.  SEGMENT INFORMATION
 
     The Company provides collection, transfer and disposal services in the
domestic non-hazardous solid waste industry. Operations are managed and
evaluated through five regions: Eastern, Central, Southern, Southwestern and
Western. These five regions are presented below as the Company's reportable
segments. These reportable segments provide integrated waste management services
consisting of collection, transfer and disposal of domestic non-hazardous solid
waste.
 
     Summarized financial information concerning the Company's reportable
segments for the respective years ended December 31 is shown in the following
table. In prior years' Consolidated Financial Statements, the Company presented
one reportable segment. For the current year presentation, prior period
information has been restated to conform to the current year presentation.
 
                                        74

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                         DEPRECIATION,
                                   GROSS     INTERCOMPANY      NET        AMORTIZATION      OTHER
                                 OPERATING    OPERATING     OPERATING         AND          CHARGES    OPERATING       CAPITAL
             2002                 REVENUE     REVENUE(B)     REVENUE      DEPLETION(C)     (INCOME)    INCOME     EXPENDITURES(D)
             ----                ---------   ------------   ---------   ----------------   --------   ---------   ---------------
<S>                              <C>         <C>            <C>         <C>                <C>        <C>         <C>
Eastern Region.................  $  564.1      $ (79.7)     $  484.4        $   32.0        $(4.1)     $ 87.0         $ 39.2
Central Region.................     589.6       (120.2)        469.4            53.6         (1.5)      105.3           77.1
Southern Region................     643.1        (65.5)        577.6            52.7           --       118.3           58.0
Southwestern Region............     311.8        (29.1)        282.7            22.8           --        41.9           30.6
Western Region.................     690.0       (139.1)        550.9            41.3           --       145.5           47.3
Corporate Entities (a).........        .2          (.1)           .1            (2.8)          --       (38.5)           6.4
                                 --------      -------      --------        --------        -----      ------         ------
        Total..................  $2,798.8      $(433.7)     $2,365.1        $  199.6        $(5.6)     $459.5         $258.6
                                 ========      =======      ========        ========        =====      ======         ======
 
<Caption>
 
                                  TOTAL
             2002                 ASSETS
             ----                --------
<S>                              <C>
Eastern Region.................  $  822.2
Central Region.................     950.9
Southern Region................     830.7
Southwestern Region............     374.6
Western Region.................     826.7
Corporate Entities (a).........     404.0
                                 --------
        Total..................  $4,209.1
                                 ========
</Table>


<Table>
<Caption>
                                                                         DEPRECIATION,
                                   GROSS     INTERCOMPANY      NET        AMORTIZATION      OTHER
                                 OPERATING    OPERATING     OPERATING         AND          CHARGES    OPERATING       CAPITAL
             2001                 REVENUE     REVENUE(B)     REVENUE      DEPLETION(C)     (INCOME)    INCOME     EXPENDITURES(D)
             ----                ---------   ------------   ---------   ----------------   --------   ---------   ---------------
<S>                              <C>         <C>            <C>         <C>                <C>        <C>         <C>
Eastern Region.................  $  563.8      $ (78.1)     $  485.7        $   47.0        $53.6      $ 16.9         $ 35.3
Central Region.................     576.7       (122.7)        454.0            54.7          8.9        93.9           64.4
Southern Region................     620.7        (64.2)        556.5            56.1         14.8        95.6           58.3
Southwestern Region............     296.8        (29.0)        267.8            23.5          3.4        24.5           23.1
Western Region.................     612.2       (118.7)        493.5            41.1         18.0       101.5           51.4
Corporate Entities (a).........       (.1)          .1            --            (7.0)          .9       (48.9)          16.8
                                 --------      -------      --------        --------        -----      ------         ------
        Total..................  $2,670.1      $(412.6)     $2,257.5        $  215.4        $99.6      $283.5         $249.3
                                 ========      =======      ========        ========        =====      ======         ======
 
<Caption>
 
                                  TOTAL
             2001                 ASSETS
             ----                --------
<S>                              <C>
Eastern Region.................  $  846.0
Central Region.................     883.8
Southern Region................     827.8
Southwestern Region............     363.5
Western Region.................     840.6
Corporate Entities (a).........      94.6
                                 --------
        Total..................  $3,856.3
                                 ========
</Table>


<Table>
<Caption>
                                                                         DEPRECIATION,
                                   GROSS     INTERCOMPANY      NET        AMORTIZATION      OTHER
                                 OPERATING    OPERATING     OPERATING         AND          CHARGES    OPERATING       CAPITAL
             2000                 REVENUE     REVENUE(B)     REVENUE      DEPLETION(C)     (INCOME)    INCOME     EXPENDITURES(D)
             ----                ---------   ------------   ---------   ----------------   --------   ---------   ---------------
<S>                              <C>         <C>            <C>         <C>                <C>        <C>         <C>
Eastern Region.................  $  533.1      $ (58.2)     $  474.9        $   42.4        $  --      $ 87.2         $ 44.9
Central Region.................     541.5        (99.0)        442.5            50.9          1.6       109.8           66.5
Southern Region................     581.2        (55.8)        525.4            53.4           --       115.8           58.1
Southwestern Region............     252.3        (23.2)        229.1            22.3          5.1        32.3           34.8
Western Region.................     559.2       (118.3)        440.9            32.7           --       121.3           65.3
Corporate Entities (a).........        .5        (10.0)         (9.5)           (4.3)          --       (32.4)         (61.6)
                                 --------      -------      --------        --------        -----      ------         ------
        Total..................  $2,467.8      $(364.5)     $2,103.3        $  197.4        $ 6.7      $434.0         $208.0
                                 ========      =======      ========        ========        =====      ======         ======
 
<Caption>
 
                                  TOTAL
             2000                 ASSETS
             ----                --------
<S>                              <C>
Eastern Region.................  $  940.7
Central Region.................     882.0
Southern Region................     851.5
Southwestern Region............     363.5
Western Region.................     519.1
Corporate Entities (a).........       4.7
                                 --------
        Total..................  $3,561.5
                                 ========
</Table>

 
---------------
 
(a) Corporate functions include legal, tax, treasury, information technology,
    insurance, human resources, national accounts and other typical
    administrative functions. During 2001, operating income from Corporate
    Entities includes $12.2 million of charges related primarily to increases in
    self-insurance reserves and bad debt expense.
(b) Intercompany operating revenue reflects transactions within and between
    segments and are generally made on a basis intended to reflect the market
    value of such services.
(c) Effective January 1, 2002 upon the adoption of SFAS 142, the Company ceased
    amortizing intangibles with indefinite lives. (See Note 2, Summary of
    Significant Accounting Policies, for further information.)
(d) Capital expenditures for 2002 exclude $72.6 million used to purchase
    equipment consisting primarily of revenue-producing vehicles originally
    placed into service pursuant to an operating lease.
 
                                        75

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Goodwill is the cost of acquired businesses in excess of the fair value of
net assets acquired. The activity in goodwill, net of accumulated amortization,
during 2002 is as follows:
 

<Table>
<Caption>
                               BALANCE AS OF                                     REVERSAL OF        BALANCE AS OF
                               DECEMBER 31,                                          2001           DECEMBER 31,
                                   2001          ACQUISITIONS   DIVESTITURES        CHARGE              2002
                             -----------------   ------------   ------------   ----------------   -----------------
<S>                          <C>                 <C>            <C>            <C>                <C>
Eastern Region.............      $  427.9           $ 2.3          $ (5.3)          $  4.1            $  429.0
Central Region.............         318.0            27.4            (3.9)             1.5               343.0
Southern Region............         322.9             3.5            (3.2)              --               323.2
Southwestern Region........         129.4             5.3              --               --               134.7
Western Region.............         324.3             4.0           (14.0)              --               314.3
                                 --------           -----          ------           ------            --------
          Total............      $1,522.5           $42.5          $(26.4)          $  5.6            $1,544.2
                                 ========           =====          ======           ======            ========
</Table>

 
     Total revenue of the Company by revenue source for the years ended December
31, 2002, 2001 and 2000 is as follows:
 

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31,
                                                          ------------------------------
                                                            2002       2001       2000
                                                          --------   --------   --------
<S>                                                       <C>        <C>        <C>
Collection:
  Residential...........................................  $  530.7   $  479.7   $  434.6
  Commercial............................................     696.7      686.0      627.8
  Industrial............................................     501.6      509.6      486.5
  Other.................................................      50.8       47.5       47.6
                                                          --------   --------   --------
          Total collection..............................   1,779.8    1,722.8    1,596.5
                                                          --------   --------   --------
Transfer and disposal...................................     854.1      780.8      717.4
Less: Intercompany......................................    (428.5)    (405.0)    (364.5)
                                                          --------   --------   --------
  Transfer and disposal, net............................     425.6      375.8      352.9
Other...................................................     159.7      158.9      153.9
                                                          --------   --------   --------
          Total revenue.................................  $2,365.1   $2,257.5   $2,103.3
                                                          ========   ========   ========
</Table>

 
11.  FUEL HEDGE
 
     The Company has minimized its risk associated with changes in the price of
diesel fuel by entering into derivatives with a group of financial institutions
having investment grade ratings. The Company's derivative instruments qualify
for hedge accounting treatment under SFAS 133. Under these option agreements,
the Company receives or makes payments based on the difference between actual
average heating oil prices and predetermined fixed prices. These option
agreements provide the Company protection from fuel prices rising above a
predetermined fixed price in the option agreements but also limit the Company's
ability to benefit from price decreases below the predetermined fixed price in
the option agreements.
 
     In accordance with SFAS 133, to the extent the option agreements are
effective in hedging changes in diesel fuel prices, unrealized gains and losses
on these option agreements are recorded, net of tax, in stockholders' equity as
a component of accumulated other comprehensive income or loss. To the extent the
change in the fuel option agreements does not perfectly offset the change in
value of diesel fuel purchases being hedged, SFAS 133 requires the ineffective
portion of the hedge to immediately be recognized as other income or expense.
The effectiveness of these option agreements as a hedge against future purchases
of diesel fuel is periodically evaluated. If the option agreements were to
become other than highly effective, the unrealized accumulated gains and or
losses would be immediately recognized in income. Realized gains and losses on
these option agreements are recognized as a component of fuel expense in the
period in which the corresponding fuel is purchased.
 
                                        76

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During June 2001, the Company entered into option agreements for
approximately 14.3 million gallons of heating oil. These option agreements
settled each month in equal notional amounts through December 2002. The option
agreements were structured as zero-cost collars indexed to the price of heating
oil. These option agreements expired in December 2002. In accordance with SFAS
133, $1.6 million, and $(1.6) million, net of tax, representing the effective
portion of the change in fair value during the periods have been recorded in
stockholders' equity as a component of accumulated other comprehensive income
(loss) for the years ended December 31, 2002 and 2001, respectively. The
ineffective portions of the changes in fair value of approximately $.1 million
and $(.1) million for the years ended December 31, 2002 and 2001, respectively,
have been included in other income (expense), net in the accompanying
Consolidated Statements of Income. Realized losses of $.8 million and $.6
million for the years ended December 31, 2002 and 2001, respectively, related to
these option agreements are included in cost of operations in the Company's
Consolidated Statements of Income.
 
12.  COMMITMENTS AND CONTINGENCIES
 
LEGAL PROCEEDINGS
 
     The Company is a party to various general legal proceedings which have
arisen in the ordinary course of business. While the results of these matters
cannot be predicted with certainty, the Company believes that losses, if any,
resulting from the ultimate resolution of these matters will not have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows. However, unfavorable resolution could affect the
consolidated financial position, results of operations or cash flows for the
quarterly periods in which they are resolved.
 
LEASE COMMITMENTS
 
     During December 1999, the Company entered into a $100.0 million operating
lease facility established to finance the acquisition of operating equipment
(primarily revenue-producing vehicles). In July 2002, the Company exercised its
right to purchase the equipment underlying this facility by paying $72.6
million. In addition, the Company and its subsidiaries lease real property,
equipment and software under various other operating leases with terms from one
to twenty-five years. Rent expense during the years ended December 31, 2002,
2001 and 2000 was approximately $20.0 million, $27.5 million and $25.3 million,
respectively.
 
     Future minimum lease obligations under non-cancelable real property,
equipment and software leases with initial terms in excess of one year at
December 31, 2002 are as follows:
 

<Table>
<Caption>
                  YEAR ENDING DECEMBER 31,
                  ------------------------
<S>                                                           <C>
2003........................................................  $ 4.0
2004........................................................    3.4
2005........................................................    2.9
2006........................................................    2.7
2007........................................................    2.6
Thereafter..................................................    9.2
                                                              -----
                                                              $24.8
                                                              =====
</Table>

 
LIABILITY INSURANCE
 
     The Company carries general liability, vehicle liability, employment
practices liability, pollution liability, directors and officers liability,
worker's compensation and employer's liability coverage, as well as umbrella
liability policies to provide excess coverage over the underlying limits
contained in these primary policies. The Company also carries property
insurance.
 
                                        77

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company's insurance programs for worker's compensation, general
liability, vehicle liability and employee-related health care benefits are
effectively self-insured. Claims in excess of self-insurance levels are fully
insured subject to policy limits. Accruals are based on claims filed and
estimates of claims incurred but not reported.
 
     The Company's liabilities for unpaid and incurred but not reported claims
at December 31, 2002 was $75.0 million under its current risk management program
and are included in other current and other liabilities in the accompanying
Consolidated Balance Sheets. While the ultimate amount of claims incurred are
dependent on future developments, in management's opinion, recorded reserves are
adequate to cover the future payment of claims. However, it is reasonably
possible that recorded reserves may not be adequate to cover the future payment
of claims. Adjustments, if any, to estimates recorded resulting from ultimate
claim payments will be reflected in results of operations in the periods in
which such adjustments are known.
 
OTHER MATTERS
 
     In the normal course of business, the Company is required to post
performance bonds, insurance policies, letters of credit and/or cash deposits as
a financial guarantee of the Company's performance. To date, the Company has
satisfied financial responsibility requirements for regulatory agencies by
making cash deposits, obtaining bank letters of credit or by obtaining surety
bonds. At December 31, 2002, surety bonds totaling $652.6 million which expire
through 2015 and letters of credit totaling $359.1 million were outstanding. In
addition, at December 31, 2002, the Company had $175.0 million of restricted
cash deposits held as financial guarantees as well as funds restricted for
capital expenditures under certain debt facilities.
 
     The Company's business activities are conducted in the context of a
developing and changing statutory and regulatory framework. Governmental
regulation of the waste management industry requires the Company to obtain and
retain numerous governmental permits to conduct various aspects of its
operations. These permits are subject to revocation, modification or denial. The
costs and other capital expenditures which may be required to obtain or retain
the applicable permits or comply with applicable regulations could be
significant. Any revocation, modification or denial of permits could have a
material adverse effect on the Company.
 
     Through the date of the Company's initial public offering of common stock
in July 1998, the Company filed consolidated federal income tax returns with
AutoNation Inc. ("AutoNation"), its former parent company. The Internal Revenue
Service is auditing AutoNation's consolidated tax returns for fiscal years 1995
through 1999. In accordance with the Company's tax sharing agreement with
AutoNation, the Company may be liable for certain assessments imposed by the
Internal Revenue Service for the periods through June 1998, resulting from this
audit. In addition, the Internal Revenue Service is auditing the Company's
consolidated tax returns for fiscal years 1998 and 1999. Management believes
that the tax liabilities recorded are adequate. However, a significant
assessment in excess of liabilities recorded against the Company could have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
 
13.  RELATED PARTY TRANSACTIONS
 
     The following is a summary of agreements and transactions that the Company
is involved in with related parties. It is the Company's policy that
transactions with related parties must be on terms that, on the whole, are no
less favorable than those that would be available from unaffiliated parties. It
is management's belief that all of these transactions met that standard at the
time such transactions were effected.
 
     The Company leases its corporate office space from AutoNation. During 2002,
2001 and 2000, the Company paid AutoNation approximately $.7 million, $.7
million and $.5 million, respectively, pursuant to the lease. During 2002, the
Company collected solid waste from, and leased roll-off containers to, certain
automotive retail and other properties of AutoNation. The Company provided all
of these services at standard
 
                                        78

<PAGE>
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
rates. The Company continues to provide these services to AutoNation on the same
terms. In March 2000, the Company sold a Lear Jet 55 to AutoNation for
approximately $4.7 million. In January 2001, the Company purchased a Lear Jet 55
from AutoNation for approximately $4.7 million which the Company believes
approximated its fair market value. H. Wayne Huizenga and Harris W. Hudson are
both directors of AutoNation.
 
     Pro Player Stadium is a professional sports stadium in South Florida that
is owned and controlled by H. Wayne Huizenga, the former Chairman and a current
member of the Company's Board of Directors. One of the Company's subsidiaries
collected solid waste from, and leased roll-off waste containers to, Pro Player
Stadium pursuant to standard agreements under which Pro Player Stadium paid an
aggregate of $293,392 in 2002. The Company expects to continue to provide these
services in 2003 on the same terms.
 
14.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
     The following is an analysis of certain items in the Consolidated
Statements of Income by quarter for 2002 and 2001:
 

<Table>
<Caption>
                                                                  FIRST    SECOND     THIRD    FOURTH
                                                                 QUARTER   QUARTER   QUARTER   QUARTER
                                                                 -------   -------   -------   -------
<S>                                                       <C>    <C>       <C>       <C>       <C>
Revenue.................................................  2002   $551.9    $598.2    $609.7    $605.3
                                                          2001   $535.4    $576.0    $582.6    $563.5
Operating income (loss).................................  2002   $106.9    $116.3    $118.2    $118.1
                                                          2001   $ 98.9    $111.8    $110.4    $(37.6)
Net income (loss).......................................  2002   $ 54.9    $ 61.0    $ 62.2    $ 61.5
                                                          2001   $ 49.6    $ 58.1    $ 56.7    $(38.9)
Basic and diluted net income (loss) per share...........  2002   $  .32    $  .36    $  .38    $  .37
                                                          2001   $  .29    $  .34    $  .33    $ (.23)
Weighted average diluted common and common equivalent
  shares outstanding....................................  2002    169.1     167.5     164.8     165.3
                                                          2001    171.8     171.4     171.1     170.0
</Table>

 
     The Company's operating results for 2002 include a $5.6 million gain on the
sale of certain assets for amounts exceeding estimates originally made during
the fourth quarter of 2001.
 
     The Company's operating results for 2001 were affected by a charge of $86.1
million charge on an after-tax basis, or $132.0 million on a pre-tax basis,
recorded during the fourth quarter of 2001 related to completed and planned
divestitures and closings of certain core and non-core businesses, asset
impairments, downsizing its compost, mulch and soil business and related
inventory adjustments, an increase in self-insurance reserves and an increase in
bad debt expense related to the economic slowdown.
 
                                        79

<PAGE>
 

I
TEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
     As discussed in the Current Report on Form 8-K dated June 21, 2002 that we
filed with the Commission on June 24, 2002, we appointed Ernst & Young LLP as
our new independent public accountant effective June 21, 2002 and we dismissed
Arthur Andersen LLP as our independent public accountant effective as of June
21, 2002.
 
                                        80

<PAGE>
 

                                    PART III
 
     The information required by Items 10, 11, 12 and 13 of Part III of Form
10-K will be set forth in the Proxy Statement of the Company relating to the
2003 Annual Meeting of Stockholders and is incorporated by reference herein.
 

ITEM 14.  CONTROLS AND PROCEDURES
 
     (a) Evaluation of Disclosure Controls and Procedures
 
     Within the 90 days prior to the filing date of this Annual Report, we
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Securities Exchange Act Rules 13a-14(c) and
15d-14(c). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were
effective as of the date of their evaluation in timely alerting them to material
information relating to us (including our consolidated subsidiaries) required to
be included in this Annual Report.
 
     (b) Changes in Internal Controls
 
     There were no significant changes in our internal controls or in other
factors that could significantly affect such internal controls subsequent to the
date of the evaluation described in paragraph (a) above. As a result, no
corrective actions were required or undertaken.
 
                                        81

<PAGE>
 

                                    PART IV
 

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
 
     (a) The following documents are filed as part of this report:
 
     1. All Financial Statements:
 
        The following financial statements are filed as part of this report
        under Item 8 -- Financial Statements and Supplementary Data.
 

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Certified Public Accountants..........   49
Report of Independent Certified Public Accountants..........   51
Consolidated Balance Sheets as of December 31, 2002 and
  2001......................................................   52
Consolidated Statements of Income for each of the Three
  Years Ended December 31, 2002.............................   53
Consolidated Statements of Stockholders' Equity and
  Comprehensive Income for each of the Three Years Ended
  December 31, 2002.........................................   54
Consolidated Statements of Cash Flows for each of the Three
  Years Ended December 31, 2002.............................   55
Notes to Consolidated Financial Statements..................   56
</Table>

 
     2. Financial Statement Schedules:
 
        Schedule II -- Valuation and Qualifying Accounts and Reserves, for each
        of the Three Years Ended December 31, 2002, 2001 and 2000.
 
        All other schedules are omitted as the required information is not
        applicable or the information is presented in the Consolidated Financial
        Statements and Notes thereto in Item 8 above.
 
     3. Exhibits:
 
        The following exhibits are filed herewith or are incorporated by
        reference to exhibits previously filed with the Commission, as indicated
        in the description of each. We agree to furnish to the Commission upon
        request a copy of any instrument with respect to long-term debt not
        filed herewith as to which the total amount of securities authorized
        thereunder does not exceed 10 percent of our total assets on a
        consolidated basis.
 

<Table>
<Caption>
<S>       <C>  <C>
<Caption>
EXHIBITS                          DESCRIPTION OF EXHIBIT
--------                          ----------------------
<S>       <C>  <C>
3.1       --   Amended and Restated Certificate of Incorporation
               (incorporated by reference to Exhibit 3.1 of the Company's
               Quarterly Report on Form 10-Q for the period ended June 30,
               1998).
3.2       --   Certificate of Amendment to Amended and Restated Certificate
               of Incorporation of Republic Services, Inc. (incorporated by
               reference to Exhibit 4.2 of the Company's Registration
               Statement on Form S-8, Registration No. 333-81801, filed
               with the Commission on June 29, 1999).
3.3       --   Amended and Restated Bylaws of Republic Services, Inc.
               (incorporated by reference to Exhibit 3.2 of the Company's
               Quarterly Report on Form 10-Q for the period ended June 30,
               1998).
4.1       --   Form of Republic Services, Inc. Common Stock Certificate
               (incorporated by reference to Exhibit 4.4 of the Company's
               Registration Statement on Form S-8, Registration No. 333-
               81801, filed with the Commission on June 29, 1999).
4.2       --   Long Term Credit Agreement dated July 3, 2002 among Republic
               Services, Inc., Bank of America N.A. as Administrative
               Agent, and the several financial institutions thereto (filed
               herewith).
</Table>

 
                                        82

<PAGE>
 

<Table>
<Caption>
EXHIBITS                          DESCRIPTION OF EXHIBIT
--------                          ----------------------
<S>       <C>  <C>
4.3       --   Indenture dated May 24, 1999, by Republic Services, Inc. to
               The Bank of New York, as trustee (incorporated by reference
               to Exhibit 4.3 of the Company's Annual Report on Form 10-K
               for the year ended December 31, 1999).
4.4       --   6 5/8% Note due May 15, 2004 in the principal amount of
               $200,000,000 (incorporated by reference to Exhibit 4.4 of
               the Company's Annual Report on Form 10-K for the year ended
               December 31, 1999).
4.5       --   6 5/8% Note due May 15, 2004 in the principal amount of
               $25,000,000 (incorporated by reference to Exhibit 4.5 of the
               Company's Annual Report on Form 10-K for the year ended
               December 31, 1999).
4.6       --   7 1/8% Note due May 15, 2009 in the principal amount of
               $200,000,000 (incorporated by reference to Exhibit 4.6 of
               the Company's Annual Report on Form 10-K for the year ended
               December 31, 1999).
4.7       --   7 1/8% Note due May 15, 2009 in the principal amount of
               $175,000,000 (incorporated by reference to Exhibit 4.7 of
               the Company's Annual Report on Form 10-K for the year ended
               December 31, 1999).
4.8       --   Indenture dated as of August 15, 2001, by Republic Services,
               Inc. to The Bank of New York, as trustee (incorporated by
               reference to Exhibit 4.1 of the Company's Current Report on
               Form 8-K dated August 9, 2001).
4.9       --   First Supplemental Indenture, dated as of August 15, 2001 by
               Republic Services, Inc. to The Bank Of New York, as trustee
               (incorporated by reference to Exhibit 4.2 of the Company's
               Current Report on Form 8-K dated August 9, 2001).
4.10      --   6 3/4% Senior Note due 2011, in principal amount of
               $400,000,000 (incorporated by reference to Exhibit 4.4 of
               the Company's Current Report on Form 8-K dated August 9,
               2001).
4.11      --   6 3/4% Senior Note due 2011, in principal amount of
               $50,000,000 (incorporated by reference to Exhibit 4.4 of the
               Company's Current Report on Form 8-K dated August 9, 2001).
10.1      --   Separation and Distribution Agreement dated June 30, 1998 by
               and between the Republic Services, Inc. and AutoNation, Inc.
               (then known as Republic Industries, Inc.) (incorporated by
               reference to Exhibit 10.1 of the Company's Quarterly Report
               on Form 10-Q for the period ended June 30, 1998).
10.2      --   Tax Indemnification and Allocation Agreement dated June 30,
               1998 by and between Republic Services, Inc. and AutoNation,
               Inc. (then known as Republic Industries, Inc.) (incorporated
               by reference to Exhibit 10.4 of the Company's Quarterly
               Report on Form 10-Q for the period ended June 30, 1998).
10.3      --   Republic Services, Inc. 1998 Stock Incentive Plan (as
               amended and restated March 6, 2002) (incorporated by
               reference to Exhibit 10.1 of the Company's Quarterly Report
               on Form 10-Q, for the period ended March 31, 2002).*
10.4      --   Employment Agreement dated October 25, 2000 by and between
               James E. O'Connor and Republic Services, Inc. (incorporated
               by reference to Exhibit 10.7 of the Company's Annual Report
               on Form 10-K for the year ended December 31, 2000). *
10.5      --   Employment Agreement dated October 25, 2000 by and between
               Tod C. Holmes and Republic Services, Inc. (incorporated by
               reference to Exhibit 10.9 of the Company's Annual Report on
               Form 10-K for the year ended December 31, 2000).*
10.6      --   Employment Agreement dated October 25, 2000 by and between
               David A. Barclay and Republic Services, Inc. (incorporated
               by reference to Exhibit 10.10 of the Company's Annual Report
               on Form 10-K for the year ended December 31, 2000).*
10.7      --   Employment Agreement dated July 31, 2001 by and between
               Harris W. Hudson and Republic Services, Inc. (incorporated
               by reference to Exhibit 10.8 of the Company's Annual Report
               on Form 10-K for the year ended December 31, 2001).*
</Table>

 
                                        83

<PAGE>
 

<Table>
<Caption>
EXHIBITS                          DESCRIPTION OF EXHIBIT
--------                          ----------------------
<S>       <C>  <C>
10.8      --   Employment Agreement dated May 14, 2001 by and between
               Michael Cordesman, who became an executive officer in March
               2002, and Republic Services, Inc. (incorporated by reference
               to Exhibit 10.1 of the Company's Quarterly Report on Form
               10-Q, for the period ended March 31, 2002).*
21.1      --   Subsidiaries of the Company (filed herewith).
23.1      --   Consent of Ernst & Young (filed herewith).
</Table>

 
---------------
 
* Indicates a management contract or compensatory plan, contract or arrangement.
 
     (b) Reports on Form 8-K:
 
     Form 8-K, furnished pursuant to Item 9 and dated October 28, 2002,
including a press release announcing the Company's operating results for the
three and nine months ended September 30, 2002, and a press release announcing
the board of directors' approval of an additional $150.0 million for the
Company's Common Stock repurchase program. This Form 8-K is not deemed
incorporated by reference into any of our filings with the Securities and
Exchange Commission.
 
                                        84

<PAGE>
 

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          REGISTRANT:
 
                                          REPUBLIC SERVICES, INC.
 
                                          By:     /s/ JAMES E. O'CONNOR
                                            ------------------------------------
                                                     James E. O'Connor
                                              Chairman of the Board and Chief
                                                      Executive Officer
 
March 27, 2003
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
 

<Table>
<Caption>
                       SIGNATURE                                       TITLE                    DATE
                       ---------                                       -----                    ----
<C>     <C>                                               <S>                              <C>

 
                 /s/ JAMES E. O'CONNOR                    Chairman of the Board and Chief  March 27, 2003
 ------------------------------------------------------     Executive Officer (principal
                   James E. O'Connor                        executive officer)

 
                  /s/ HARRIS W. HUDSON                    Vice Chairman and Director       March 27, 2003
 ------------------------------------------------------
                    Harris W. Hudson

 
                   /s/ TOD C. HOLMES                      Senior Vice President and Chief  March 27, 2003
 ------------------------------------------------------     Financial Officer (principal
                     Tod C. Holmes                          financial officer)

 
                /s/ CHARLES F. SERIANNI                   Chief Accounting Officer         March 27, 2003
 ------------------------------------------------------     (principal accounting
                  Charles F. Serianni                       officer)

 
                 /s/ H. WAYNE HUIZENGA                    Director                         March 27, 2003
 ------------------------------------------------------
                   H. Wayne Huizenga

 
                  /s/ JOHN W. CROGHAN                     Director                         March 27, 2003
 ------------------------------------------------------
                    John W. Croghan

 
                 /s/ RAMON A. RODRIGUEZ                   Director                         March 27, 2003
 ------------------------------------------------------
                   Ramon A. Rodriguez

 
                 /s/ ALLAN C. SORENSEN                    Director                         March 27, 2003
 ------------------------------------------------------
                   Allan C. Sorensen
</Table>

 
                                        85

<PAGE>
 

                                 CERTIFICATION
 
I, James E. O'Connor, certify that:
 
     1. I have reviewed this annual report on Form 10-K of Republic Services,
Inc;
 
     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
 
     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
 
     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;
 
          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and
 
          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;
 
     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
 
          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and
 
          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and
 
     6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
 
Date: March 27, 2003
 
By: /s/ JAMES E. O'CONNOR
------------------------------------------------------
James E. O'Connor
Chairman and Chief Executive Officer
 
                                        86

<PAGE>
 
                                 CERTIFICATION
 
I, Tod C. Holmes, certify that:
 
     1. I have reviewed this annual report on Form 10-K of Republic Services,
Inc;
 
     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
 
     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
 
     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;
 
          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and
 
          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;
 
     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
 
          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and
 
          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and
 
     6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
 
Date: March 27, 2003
 
By: /s/ TOD C. HOLMES
    ----------------------------------------------------------
    Tod C. Holmes
    Senior Vice President and
    Chief Financial Officer
 
                                        87

<PAGE>
 
                            REPUBLIC SERVICES, INC.
 
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                  SCHEDULE II
                                 (IN MILLIONS)
 

<Table>
<Caption>
                                                 BALANCE AT   ADDITIONS    ACCOUNTS              BALANCE AT
                                                 BEGINNING    CHARGED TO   WRITTEN                  END
                                                  OF YEAR       INCOME       OFF      OTHER(1)    OF YEAR
                                                 ----------   ----------   --------   --------   ----------
<S>                                              <C>          <C>          <C>        <C>        <C>
CLASSIFICATIONS
Allowance for doubtful accounts:
  2002.........................................    $19.0        $11.2       $(11.4)     $ .2       $19.0
  2001.........................................     13.2         22.8        (18.5)      1.5        19.0
  2000.........................................     14.2         11.8        (14.9)      2.1        13.2
</Table>

 
---------------
 
(1) Allowance of acquired and divested businesses, net.
 
                                        88

<PAGE>
 

                                 EXHIBIT INDEX
 

<Table>
<Caption>
<S>       <C>  <C>
<Caption>
EXHIBITS                          DESCRIPTION OF EXHIBIT
--------                          ----------------------
<S>       <C>  <C>
4.2       --   Long Term Credit Agreement dated July 3, 2002 among Republic
               Services, Inc., Bank of America N.A. as Administrative
               Agent, and the several financial institutions thereto (filed
               herewith).
21.1      --   Subsidiaries of the Company (filed herewith).
23.1      --   Consent of Ernst & Young (filed herewith).
</Table>

 
                                        89




<PAGE>
                                                                     Exhibit 4.2


================================================================================





                           LONG TERM CREDIT AGREEMENT

                            Dated as of July 3, 2002,

                                      among

                            REPUBLIC SERVICES, INC.,
                                as the Borrower,

                             BANK OF AMERICA, N.A.,
                            as Administrative Agent,

                                 CITIBANK, N.A.,
                              as Syndication Agent,

                                  BANK ONE, NA,
                                 SUNTRUST BANK,
                                       and
                               BARCLAYS BANK PLC,
                           as Co-Documentation Agents

                                       and

                  THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO


                         BANC OF AMERICA SECURITIES LLC
                                       and
                           SALOMON SMITH BARNEY, INC.
                                       as
                  Joint Lead Arrangers and Joint Book Managers






================================================================================



<PAGE>

<TABLE>
<CAPTION>
                                                    ARTICLE I
                                                   DEFINITIONS

<C>                                                                                                             <C>
1.1      Certain Defined Terms...................................................................................1
1.2      Other Interpretive Provisions..........................................................................19
1.3      Accounting Principles..................................................................................20

                                                    ARTICLE II
                                                   THE CREDITS

2.1      Amounts and Terms of Commitments.......................................................................20
2.2      Loan Accounts..........................................................................................20
2.3      Procedure for Committed Borrowing......................................................................21
2.4      Conversion and Continuation Elections for Committed Borrowings.........................................22
2.5      Voluntary Termination or Reduction of Commitments......................................................23
2.6      Optional Prepayments...................................................................................23
2.7      Repayment..............................................................................................24
2.8      Interest...............................................................................................24
2.9      Fees...................................................................................................25
2.10     Computation of Fees and Interest.......................................................................26
2.11     Payments by the Company................................................................................26
2.12     Payments by the Lenders to the Administrative Agent....................................................27
2.13     Sharing of Payments, Etc...............................................................................27
2.14     Swing Line Commitment..................................................................................29
2.15     Borrowing Procedures for Swing Line Loans..............................................................29
2.16     Prepayment or Refunding of Swing Line Loans............................................................30
2.17     Participations in Swing Line Loans.....................................................................30

2.18     Participation Obligations Unconditional................................................................31
2.19     Conditions to Swing Line Loans.........................................................................31

                                                    ARTICLE III
                                               THE LETTERS OF CREDIT

3.1      The Letter of Credit Subfacility.......................................................................31
3.2      Issuance, Amendment and Renewal of Letters of Credit...................................................33
3.3      Risk Participations, Drawings and Reimbursements.......................................................35
3.4      Repayment of Participations............................................................................36
3.5      Role of the Issuing Lenders............................................................................37
3.6      Obligations Absolute...................................................................................37
3.7      Cash Collateral Pledge.................................................................................38
3.8      Letter of Credit Fees..................................................................................39
3.9      Applicability of ISP98 and UCP.........................................................................39

                                                    ARTICLE IV
                                    TAXES, YIELD PROTECTION AND ILLEGALITY

4.1      Taxes..................................................................................................40
4.2      Illegality.............................................................................................41
</TABLE>


                                        i



<PAGE>

<TABLE>
<CAPTION>

<C>                                                                                                            <C>
4.3      Increased Costs and Reduction of Return................................................................42
4.4      Funding Losses.........................................................................................42
4.5      Inability to Determine Rates...........................................................................43
4.6      Certificates of Lenders................................................................................43
4.7      Mitigation.............................................................................................44
4.8      Substitution of Lenders................................................................................44
4.9      Survival...............................................................................................44

                                                   ARTICLE V
                                             CONDITIONS PRECEDENT

5.1      Conditions to Effectiveness............................................................................44
5.2      Conditions to All Credit Extensions....................................................................46

                                                  ARTICLE VI
                                         REPRESENTATIONS AND WARRANTIES

6.1      Corporate Existence and Power..........................................................................47
6.2      Corporate Authorization; No Contravention..............................................................47
6.3      Governmental Authorization.............................................................................47
6.4      Binding Effect.........................................................................................48
6.5      Litigation.............................................................................................48
6.6      No Default.............................................................................................48
6.7      ERISA Compliance.......................................................................................48
6.8      Use of Proceeds; Margin Regulations....................................................................49
6.9      Title to Properties....................................................................................49
6.10     Taxes..................................................................................................49
6.11     Financial Condition....................................................................................49
6.12     Environmental Matters..................................................................................50
6.13     Regulated Entities.....................................................................................50
6.14     No Burdensome Restrictions.............................................................................50
6.15     Copyrights, Patents, Trademarks and Licenses, etc......................................................50
6.16     Subsidiaries...........................................................................................50
6.17     Insurance..............................................................................................51
6.18     Solvency...............................................................................................51
6.19     Full Disclosure........................................................................................51

                                                  ARTICLE VII
                                            AFFIRMATIVE COVENANTS

7.1      Financial Statements...................................................................................51
7.2      Certificates; Other Information........................................................................52
7.3      Notices................................................................................................53
7.4      Preservation of Corporate Existence, Etc...............................................................54
7.5      Maintenance of Property................................................................................54
7.6      Insurance..............................................................................................54
7.7      Payment of Obligations.................................................................................54
7.8      Compliance with Laws...................................................................................55
</TABLE>



                                       ii

<PAGE>


<TABLE>
<CAPTION>

<C>                                                                                                            <C>
7.9      Compliance with ERISA..................................................................................55
7.10     Inspection of Property and Books and Records...........................................................55
7.11     Environmental Laws.....................................................................................55
7.12     Use of Proceeds........................................................................................55

                                                 ARTICLE VIII
                                              NEGATIVE COVENANTS

8.1      Financial Condition Covenants..........................................................................56
8.2      Limitation on Liens....................................................................................56
8.3      Disposition of Assets..................................................................................57
8.4      Consolidations and Mergers.............................................................................58
8.5      Loans and Investments..................................................................................58
8.6      Limitation on Subsidiary Indebtedness..................................................................58
8.7      Transactions with Affiliates...........................................................................58
8.8      Use of Proceeds........................................................................................59
8.9      Restricted Payments....................................................................................59
8.10     ERISA..................................................................................................59
8.11     Change in Business.....................................................................................59
8.12     Accounting Changes.....................................................................................59
8.13     Burdensome Agreements..................................................................................59

                                                 ARTICLE IX
                                             EVENTS OF DEFAULT

9.1      Event of Default.......................................................................................60
9.2      Remedies...............................................................................................62
9.3      Rights Not Exclusive...................................................................................62

                                                 ARTICLE X
                                        THE ADMINISTRATIVE AGENT

10.1     Appointment and Authorization of Administrative Agent..................................................62
10.2     Delegation of Duties...................................................................................63
10.3     Liability of Administrative Agent......................................................................63
10.4     Reliance by Administrative Agent.......................................................................64
10.5     Notice of Default......................................................................................64
10.6     Credit Decision; Disclosure of Information by Administrative Agent.....................................64
10.7     Indemnification of Administrative Agent................................................................65
10.8     Administrative Agent in its Individual Capacity........................................................66
10.9     Successor Administrative Agent.........................................................................66
10.10    Administrative Agent May File Proofs of Claim..........................................................67
10.11    Other Agents; Arrangers and Managers...................................................................67
</TABLE>

                                      iii



<PAGE>


<TABLE>
<CAPTION>

                                                 ARTICLE XI
                                               MISCELLANEOUS

<C>                                                                                                            <C>
11.1     Amendments and Waivers.................................................................................68
11.2     Notices and Other Communications; Facsimile Copies.....................................................69
11.3     No Waiver; Cumulative Remedies.........................................................................70
11.4     Attorney Costs, Expenses and Taxes.....................................................................70
11.5     Indemnification by the Company.........................................................................70
11.6     Payments Set Aside.....................................................................................71
11.7     Successors and Assigns.................................................................................71
11.8     Assignments, Participations, etc.......................................................................72
11.9     Confidentiality........................................................................................75
11.10    Set-off................................................................................................76
11.11    Notification of Addresses, Lending Offices, Etc........................................................76
11.12    Counterparts...........................................................................................76
11.13    Severability...........................................................................................77
11.14    No Third Parties Benefited.............................................................................77
11.15    Tax Forms..............................................................................................77
11.16    Governing Law and Jurisdiction.........................................................................78
11.17    Waiver of Right to Trial by Jury.......................................................................79
11.18    Entire Agreement.......................................................................................79
11.19    Survival of Representations and Warranties.............................................................79
</TABLE>


                                       iv

<PAGE>


                           LONG TERM CREDIT AGREEMENT


         This LONG TERM CREDIT AGREEMENT is entered into as of July 3, 2002,
among REPUBLIC SERVICES, INC., a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively the "Lenders"; individually each a "Lender") and BANK OF AMERICA,
N.A., as administrative agent for the Lenders.

         In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         1.1 CERTAIN DEFINED TERMS. The following terms have the following
         meanings:

                  ACQUIRED PLAN means any Plan which was originally established
         and maintained by a Person other than the Company or an ERISA Affiliate
         and which became, or hereafter becomes, a Plan as a result of an
         Acquisition by the Company or any Subsidiary.

                  ACQUISITION means any transaction or series of related
         transactions for the purpose of or resulting, directly or indirectly,
         in (a) the acquisition of all or substantially all of the assets of a
         Person, or of all or substantially all of any business or division of a
         Person, (b) the acquisition of in excess of 50% of the capital stock,
         partnership interests, membership interests or equity of any Person, or
         otherwise causing any Person to become a Subsidiary, or (c) a merger or
         consolidation or any other combination with another Person (other than
         a Person that is a Subsidiary) provided that the Company or the
         Subsidiary is the surviving entity.

                  ADJUSTED PRO RATA SHARE means for any Lender at any time the
         proportion (expressed as a decimal, rounded to the ninth decimal place)
         which such Lender's Commitment constitutes of the combined Commitments
         (or, after the Commitments have terminated, which (i) the principal
         amount of such Lender's Loans PLUS (without duplication) the
         participation of such Lender in (or in the case of an Issuing Lender or
         the Swing Line Lender, its unparticipated portion of) the Effective
         Amount of all L/C Obligations and the principal amount of all Swing
         Line Loans constitutes of (ii) the aggregate principal amount of all
         Loans PLUS (without duplication) the Effective Amount of all L/C
         Obligations).

                  ADMINISTRATIVE AGENT means BofA in its capacity as agent for
         the Lenders hereunder, and any successor agent arising under SECTION
         10.9.

                  ADMINISTRATIVE AGENT-RELATED PERSONS means the Administrative
         Agent, together with its Affiliates (including, in the case of BofA in
         its capacity as the Administrative Agent, BAS), and the officers,
         directors, employees, agents and attorneys-in-fact of such Persons and
         Affiliates.


<PAGE>

                  ADMINISTRATIVE AGENT'S PAYMENT OFFICE means the address for
         payments set forth on SCHEDULE 11.2 or such other address as the
         Administrative Agent may from time to time specify by notice to the
         Company and the Lenders.

                  ADMINISTRATIVE QUESTIONNAIRE means an Administrative
         Questionnaire in a form supplied by the Administrative Agent.

                  AFFILIATE means, as to any Person, any other Person which,
         directly or indirectly, is in control of, is controlled by, or is under
         common control with such Person. A Person shall be deemed to control
         another Person if the controlling Person possesses, directly or
         indirectly, the power to direct or cause the direction of the
         management and policies of the other Person, whether through the
         ownership of voting securities or membership interests, by contract or
         otherwise.

                  AGREEMENT means this Credit Agreement.

                  APPLICABLE MARGIN - see SCHEDULE 1.1.

                  APPROVED FUND - see SUBSECTION 11.8(G).

                  ARRANGERS means collectively, BAS and Salomon Smith Barney,
         Inc.

                  ASSIGNEE - see SUBSECTION 11.8(A).

                  ASSIGNMENT AND ASSUMPTION means an Assignment and Assumption
         substantially in the form of EXHIBIT C.

                  ATTORNEY COSTS means and includes all reasonable fees and
         disbursements of any law firm or other external counsel and, without
         duplication, the allocated cost of internal legal services and all
         reasonable disbursements of internal counsel.

                  ATTRIBUTABLE INDEBTEDNESS means, on any date, (a) in respect
         of any Synthetic Lease Obligation, the capitalized amount of the
         remaining lease payments under the relevant lease that would appear on
         a balance sheet of such Person prepared as of such date in accordance
         with GAAP if such lease were accounted for as a capital lease, and (b)
         in respect of any Securitization Transaction, the aggregate amount of
         obligations owed to (including the amount of investment in transferred
         assets by) Persons other than the Company or its Subsidiaries.

                  BANKRUPTCY CODE means the Federal Bankruptcy Reform Act of
         1978 (11 U.S.C.ss.101, ET SEQ.).

                  BAS means Banc of America Securities LLC, in its capacity as
         joint lead arranger and joint book manager.

                  BASE RATE means for any day a fluctuating rate per annum equal
         to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the
         rate of interest in effect for such day as publicly announced from time
         to time by BofA as its "prime rate." The "prime 

                                       2

<PAGE>

         rate" is a rate set by BofA based upon various factors including BofA's
         costs and desired return, general economic conditions and other
         factors, and is used as a reference point for pricing some loans, which
         may be priced at, above, or below such announced rate. Any change in
         such rate announced by BofA shall take effect at the opening of
         business on the day specified in the public announcement of such
         change.

                  BASE RATE COMMITTED LOAN means a Committed Loan, or an L/C
         Advance, that bears interest based on the Base Rate.

                  BOFA means Bank of America, N.A., a national banking 
         association.

                  BORROWING means a borrowing hereunder consisting of Committed
         Loans of the same Type, made to the Company on the same day by one or
         more Lenders under ARTICLE II and, other than in the case of Base Rate
         Committed Loans, having the same Interest Period. A Borrowing is a
         Committed Borrowing.

                  BORROWING DATE means any date on which a Borrowing occurs
         under SECTION 2.3 or a Swing Line Loan is made under SECTION 2.14.

                  BUSINESS DAY means any day other than a Saturday, Sunday or
         other day on which commercial banks in New York City, Chicago or San
         Francisco are authorized or required by law to close and, if the
         applicable Business Day relates to any Offshore Rate Loan, means such a
         day on which dealings in Dollars are carried on in the London interbank
         market.

                  CANADIAN CURRENCY EQUIVALENT AMOUNT means, with respect to the
         Canadian Dollar and a specified Dollar amount, the amount of Canadian
         Dollars into which such Dollar amount would be converted, based on the
         Exchange Rate.

                  CANADIAN DOLLARS means the lawful currency of Canada.

                  CANADIAN L/C means a Letter of Credit which is denominated in
         Canadian Dollars.

                  CAPITAL ADEQUACY REGULATION means any guideline, request or
         directive of any central bank or other Governmental Authority, or any
         other law, rule or regulation, whether or not having the force of law,
         in each case, regarding capital adequacy of any bank or of any
         corporation controlling a bank.

                  CAPITAL LEASE means, with respect to any Person, any lease of
         (or other agreement conveying the right to use) any real or personal
         property by such Person that, in conformity with GAAP, is accounted for
         as a capital lease on the balance sheet of such Person.

                  CASH COLLATERALIZE means to pledge and deposit with or deliver
         to the Administrative Agent, for the benefit of the Administrative
         Agent, the Issuing Lenders and the Lenders, as collateral for the L/C
         Obligations, cash or deposit account balances 

                                       3

<PAGE>

         pursuant to documentation in form and substance satisfactory to the
         Administrative Agent and the Required Lenders. Derivatives of such term
         shall have corresponding meanings. Cash collateral shall be maintained
         in blocked accounts at the Administrative Agent or, with the
         Administrative Agent's consent, the applicable Issuing Lender.

                  CHANGE OF CONTROL means (a) if any Person or group of Persons
         acting in concert shall own or control, directly or indirectly, more
         than 20% of the outstanding securities (on a fully diluted basis and
         taking into account any securities or contract rights exercisable,
         exchangeable or convertible into equity securities) of the Company
         having voting rights in the election of directors; or (b) during any
         period of 24 consecutive months, a majority of the members of the board
         of directors or other equivalent governing body of such Person cease to
         be composed of individuals (i) who were members of that board or
         equivalent governing body on the first day of such period, (ii) whose
         election or nomination to that board or equivalent governing body was
         approved by individuals referred to in clause (i) above constituting at
         the time of such election or nomination at least a majority of that
         board or equivalent governing body or (iii) whose election or
         nomination to that board or other equivalent governing body was
         approved by individuals referred to in clauses (i) and (ii) above
         constituting at the time of such election or nomination at least a
         majority of that board or equivalent governing body (excluding, in the
         case of both clause (ii) and clause (iii), any individual whose initial
         nomination for, or assumption of office as, a member of that board or
         equivalent governing body occurs as a result of an actual or threatened
         solicitation of proxies or consents for the election or removal of one
         or more directors by any person or group other than a solicitation for
         the election of one or more directors by or on behalf of the board of
         directors).

                  CODE means the Internal Revenue Code of 1986, and regulations
         promulgated thereunder.

                  COMMITMENT - see SECTION 2.1. As of the Effective Date, the
         amount of the combined Commitments of all Lenders is $450,000,000.

                  COMMITTED BORROWING means a Borrowing hereunder consisting of
         Committed Loans made by the Lenders ratably according to their
         respective Pro Rata Shares.

                  COMMITTED LOAN means a Loan by a Lender to the Company under
         SECTION 2.1, which may be a Base Rate Committed Loan or an Offshore
         Rate Loan (each a "Type" of Committed Loan).

                  COMPANY - see the PREAMBLE.

                  COMPLIANCE CERTIFICATE means a certificate substantially in
         the form of EXHIBIT D.

                  COMPUTATION PERIOD means any period of four consecutive fiscal
         quarters ending on the last day of a fiscal quarter.

                  CONSOLIDATED EBITDA means, with respect to the Company and its
         Subsidiaries for any period of computation thereof during such period,

                                       4

<PAGE>

         the sum of, without duplication, (i) Consolidated Net Income, plus (ii)
         Consolidated Interest Expense during such period, plus (iii) taxes on
         income during such period, plus (iv) amortization during such period,
         plus (v) depreciation during such period, determined, to the extent
         applicable as a result of Acquisitions during such period, on a pro
         forma basis in accordance with Article 11 of Regulation S-X of the SEC.

                  CONSOLIDATED INTEREST EXPENSE means, with respect to any
         period of computation thereof, the gross interest expense of the
         Company and its Subsidiaries, including, without limitation, (i) the
         amortization of debt discounts, (ii) the amortization of all fees
         payable in connection with the incurrence of Indebtedness to the extent
         included in interest expense, (iii) the portion of any liabilities
         incurred in connection with Capital Leases allocable to interest
         expense and (iv) consolidated yield or discount accrued on the
         aggregate outstanding investment or claim held by purchasers, assignees
         or other transferees of (or of interests in) receivables of the Company
         and its Subsidiaries in connection with any Securitization Transaction
         (regardless of the accounting treatment of such Securitization
         Transaction).

                  CONSOLIDATED NET INCOME means, for any period of computation
         thereof, the gross revenues from operations of the Company and its
         Subsidiaries, less all operating and non-operating expenses of the
         Company and its Subsidiaries, including taxes on income but excluding
         all non-cash, nonrecurring charges and all extraordinary gains or
         losses.

                  CONSOLIDATED SHAREHOLDERS' EQUITY means consolidated
         shareholders' equity as shown on the Company's balance sheet, excluding
         the amount of any foreign currency translation adjustment which is
         included in the equity section of such balance sheet (whether positive
         or negative) and minus all loans and advances by the Company or any
         Subsidiary to any Affiliate (other than the Company or a Subsidiary).

                  CONSOLIDATED TANGIBLE ASSETS means the consolidated total
         assets of the Company and its Subsidiaries but excluding goodwill,
         franchises, licenses, patents, trademarks, trade names, copyrights and
         any other intangible assets.

                  CONTINGENT OBLIGATION means, as to any Person, any direct or
         indirect liability of such Person, whether or not contingent, (a) with
         respect to any Indebtedness, lease, dividend, letter of credit or other
         obligation (the "primary obligations") of another Person (the "primary
         obligor"), including any obligation of such Person (i) to purchase,
         repurchase or otherwise acquire such primary obligations or any
         security therefor, (ii) to advance or provide funds for the payment or
         discharge of any such primary obligation, or to maintain working
         capital or equity capital of the primary obligor or otherwise to
         maintain the net worth or solvency or any balance sheet item, level of
         income or financial condition of the primary obligor, (iii) to purchase
         property, securities or services primarily for the purpose of assuring
         the owner of any such primary obligation of the ability of the primary
         obligor to make payment of such primary obligation, or (iv) otherwise
         to assure or hold harmless the holder of any such primary obligation
         against loss in respect thereof (each a "Guaranty Obligation"); (b)
         with respect to any Surety Instrument issued for the account of such
         Person or as to which such Person is otherwise liable for reimbursement
         of drawings or payments; or (c) to purchase any materials, 

                                       5

<PAGE>

         supplies or other property from, or to obtain the services of, another
         Person if the relevant contract or other related document or obligation
         requires that payment for such materials, supplies or other property,
         or for such services, shall be made regardless of whether delivery of
         such materials, supplies or other property is ever made or tendered, or
         such services are ever performed or tendered. The amount of any
         Contingent Obligation shall (a) in the case of Guaranty Obligations, be
         deemed equal to the stated or determinable amount of the primary
         obligation in respect of which such Guaranty Obligation is made
         (subject to any limitation set forth in such guaranty) or, if not
         stated or if indeterminable, the maximum reasonably anticipated
         liability in respect thereof, and (b) in the case of other Contingent
         Obligations, be equal to the maximum reasonably anticipated liability
         in respect thereof.

                  CONTRACTUAL OBLIGATION means, as to any Person, any provision
         of any security issued by such Person or of any agreement, undertaking,
         contract, indenture, mortgage, deed of trust or other document to which
         such Person is a party or by which it or any of its property is bound.

                  CONVERSION/CONTINUATION DATE means any date on which, under
         SECTION 2.4, the Company (a) converts Committed Loans of one Type to
         the other Type or (b) continues Offshore Rate Loans for a new Interest
         Period.

                  CREDIT EXTENSION means and includes (a) the making of any Loan
         hereunder and (b) the Issuance of any Letter of Credit hereunder.

                  DOLLAR EQUIVALENT AMOUNT means, with respect to a Canadian
         Dollar amount, the amount of Dollars into which the Canadian Dollar
         amount would be converted, based on the applicable Exchange Rate.

                  DOLLAR VALUE of a Letter of Credit in a Canadian Dollar amount
         means the Dollar Equivalent Amount of the stated amount of such Letter
         of Credit as recorded in the Administrative Agent's records pursuant to
         SECTION 3.1(C).

                  DOLLARS, DOLLARS and $ each mean lawful money of the United
         States.

                  EFFECTIVE AMOUNT means, with respect to any outstanding L/C
         Obligations on any date, the amount of such L/C Obligations on such
         date after giving effect to any Issuances of Letters of Credit
         occurring on such date, any other changes in the aggregate amount of
         the L/C Obligations as of such date, including as a result of any
         reimbursements of outstanding unpaid drawings under any Letter of
         Credit or any reduction in the maximum amount available for drawing
         under Letters of Credit taking effect on such date.

                  EFFECTIVE DATE - see SECTION 5.1.

                  ELIGIBLE ASSIGNEE - see SUBSECTION 11.8(G).

                                       6

<PAGE>

                  ENVIRONMENTAL CLAIMS means all written claims, however
         asserted, by any Governmental Authority or other Person alleging
         potential liability or responsibility for violation of any
         Environmental Law, or for release or injury to the environment.

                  ENVIRONMENTAL LAWS means all federal, state, local or
         municipal laws, statutes, common law duties, rules, regulations,
         ordinances and codes, together with all administrative or judicial
         orders, directed duties, requests, licenses, authorizations and permits
         of, and agreements with, any Governmental Authorities, in each case
         relating to environmental matters.

                  ENVIRONMENTAL LIABILITY means any liability, contingent or
         otherwise (including any liability for damages, costs of environmental
         remediation, fines, penalties or indemnities), of the Company, any of
         its Affiliates or any of their respective Subsidiaries directly or
         indirectly resulting from or based upon (a) violation of any
         Environmental Law, (b) the generation, use, handling, transportation,
         storage, treatment or disposal of any Hazardous Materials, (c) exposure
         to any Hazardous Materials, (d) the release or threatened release of
         any Hazardous Materials into the environment or (e) any contract,
         agreement or other consensual arrangement pursuant to which liability
         is assumed or imposed with respect to any of the foregoing.

                  ERISA means the Employee Retirement Income Security Act of
         1974, and the regulations promulgated thereunder.

                  ERISA AFFILIATE means any trade or business (whether or not
         incorporated) under common control with the Company within the meaning
         of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
         the Code for purposes of provisions relating to Section 412 of the
         Code).

                  ERISA EVENT means (a) a Reportable Event with respect to a
         Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
         from a Pension Plan subject to Section 4063 of ERISA during a plan year
         in which it was a substantial employer (as defined in Section 4001 (a)
         (2) of ERISA) or a substantial cessation of operations which is treated
         as such a withdrawal; (c) a complete or partial withdrawal by the
         Company or any ERISA Affiliate from a Multiemployer Plan or
         notification that a Multiemployer Plan is in reorganization; (d) the
         filing of a notice of intent to terminate a Pension Plan under Section
         4041(c) of ERISA, the termination of a Multiemployer Plan under 4041A
         of ERISA, or the commencement of proceedings by the PBGC to terminate a
         Pension Plan or Multiemployer Plan; (e) an event or condition which
         might reasonably be expected to constitute grounds under Section 4042
         of ERISA for the termination of, or the appointment of a trustee to
         administer, any Pension Plan or Multiemployer Plan; or (f) the
         imposition of any liability under Title IV of ERISA, other than PBGC
         premiums due but not delinquent under Section 4007 of ERISA, upon the
         Company or any ERISA Affiliate.

                  EVENT OF DEFAULT means any of the events or circumstances
         specified in SECTION 9.1; provided that any requirement of notice or
         lapse of time (or both) has been satisfied.

                                       7

<PAGE>

                  EXCHANGE RATE means, with respect to the issuance of a
         Canadian L/C, the Spot Rate of Exchange as of the date two Business
         Days preceding the Valuation Date.

                  EXISTING CREDIT AGREEMENTS means, collectively, (i) that
         certain Short Term Credit Agreement, dated as of July 10, 1998, as
         amended, by and among the Company, Bank of America, N.A., as agent, and
         the lenders party thereto, and (ii) that certain Long Term Credit
         Agreement, dated as of July 10, 1998, as amended, by and among the
         Company, Bank of America, N.A., as agent, and the lenders party
         thereto.

                  EXISTING LETTERS OF CREDIT means the letters of credit listed
         on SCHEDULE 3.3.

                  FACILITY FEE RATE - see SCHEDULE 1.1.

                  FEDERAL FUNDS RATE means, for any day, the rate per annum
         equal to the weighted average of the rates on overnight Federal funds
         transactions with members of the Federal Reserve System arranged by
         Federal funds brokers on such day, as published by the Federal Reserve
         Bank on the Business Day next succeeding such day; provided that (a) if
         such day is not a Business Day, the Federal Funds Rate for such day
         shall be such rate on such transactions on the next preceding Business
         Day as so published on the next succeeding Business Day, and (b) if no
         such rate is so published on such next succeeding Business Day, the
         Federal Funds Rate for such day shall be the average rate (rounded
         upward, if necessary, to a whole multiple of 1/100 of 1%) charged to
         BofA on such day on such transactions as determined by the
         Administrative Agent.

                  FRB means the Board of Governors of the Federal Reserve
         System, and any Governmental Authority succeeding to any of its
         principal functions.

                  FUND - see SUBSECTION 11.8(G).

                  FURTHER TAXES means any and all present or future taxes,
         levies, assessments, imposts, duties, deductions, fees, withholdings or
         similar charges (including net income taxes and franchise taxes), and
         all liabilities with respect thereto, imposed by any jurisdiction on
         account of amounts payable or paid pursuant to SECTION 4.1.

                  GAAP means generally accepted accounting principles set forth
         from time to time in the opinions and pronouncements of the Accounting
         Principles Board and the American Institute of Certified Public
         Accountants and statements and pronouncements of the Financial
         Accounting Standards Board (or agencies with similar functions of
         comparable stature and authority within the U.S. accounting
         profession), which are applicable to the circumstances as of the date
         of determination.

                  GOVERNMENTAL AUTHORITY means any nation or government, any
         state or other political subdivision thereof, any central bank (or
         similar monetary or regulatory authority) thereof, any entity
         exercising executive, legislative, judicial, regulatory or
         administrative functions of or pertaining to government, and any
         corporation or other entity owned or controlled, through stock or
         capital ownership or otherwise, by any of the foregoing.

                                       8

<PAGE>

                  GUARANTY OBLIGATION has the meaning specified in the
         definition of Contingent Obligation.

                  HAZARDOUS MATERIALS means all explosive or radioactive
         substances or wastes and all hazardous or toxic substances, wastes or
         other pollutants, including petroleum or petroleum distillates,
         asbestos or asbestos-containing materials, polychlorinated biphenyls,
         radon gas, infectious or medical wastes and all other substances or
         wastes of any nature regulated pursuant to any Environmental Law.

                  HONOR DATE has the meaning specified in SUBSECTION 3.3 (A).

                  INDEBTEDNESS of any Person means, without duplication, (a) all
         indebtedness of such Person for borrowed money; (b) all obligations
         issued, undertaken or assumed by such Person as the deferred purchase
         price of property or services (other than trade payables entered into
         in the ordinary course of business on ordinary terms); (c) all
         reimbursement or payment obligations of such Person with respect to
         Surety Instruments; (d) all obligations of such Person evidenced by
         notes, bonds, debentures or similar instruments; (e) all indebtedness
         of such Person created or arising under any conditional sale or other
         title retention agreement, or incurred as financing, in either case
         with respect to property acquired by such Person (even though the
         rights and remedies of the seller or lender under such agreement in the
         event of default are limited to repossession or sale of such property);
         (f) all obligations of such Person with respect to Capital Leases; (g)
         Attributable Indebtedness; (h) all indebtedness of the types referred
         to in CLAUSES (A) through (G) above secured by (or for which the holder
         of such indebtedness has an existing right, contingent or otherwise, to
         be secured by) any Lien upon or in property (including accounts and
         contracts rights) owned by such Person, even though such Person has not
         assumed or become liable for the payment of such Indebtedness, provided
         that the amount of any such Indebtedness shall be deemed to be the
         lesser of the face principal amount thereof and the fair market value
         of the property subject to such Lien; and (i) all Guaranty Obligations
         of such Person in respect of Indebtedness of the types described above;
         PROVIDED that Indebtedness shall not include obligations arising out of
         the endorsement of instruments for deposit or collection in the
         ordinary course of business. For all purposes of this Agreement, the
         Indebtedness of any Person shall include all Indebtedness of any
         partnership or joint venture in which such Person is a general partner
         or a joint venturer (other than any such Indebtedness which is
         expressly non-recourse to such Person).

                  INDEMNIFIED LIABILITIES - see SECTION 11.5.

                  INDEMNITEES - see SECTION 11.5.

                  INDEPENDENT AUDITOR - see SUBSECTION 7.1(A).

                  INSOLVENCY PROCEEDING means, with respect to any Person, (a)
         any case, action or proceeding with respect to such Person before any
         court or other Governmental Authority relating to bankruptcy,
         reorganization, insolvency, liquidation, receivership, dissolution,
         winding-up or relief of debtors or (b) any general assignment for the

                                       9

<PAGE>

         benefit of creditors, composition, marshalling of assets for creditors,
         or other, similar arrangement in respect of its creditors generally or
         any substantial portion of its creditors; in each case undertaken under
         any U.S. Federal, state or foreign law, including the Bankruptcy Code.

                  INTEREST PAYMENT DATE means, as to any Loan other than a Base
         Rate Committed Loan or Swing Line Loan, the last day of each Interest
         Period applicable to such Loan and, as to any Base Rate Committed Loan
         or Swing Line Loan, the last Business Day of each calendar quarter,
         provided that if any Interest Period for an Offshore Rate Loan exceeds
         three months, each three-month anniversary of the first day of such
         Interest Period also shall be an Interest Payment Date.

                  INTEREST PERIOD means, as to any Offshore Rate Loan, the
         period commencing on the Borrowing Date of such Loan or on the date on
         which such Loan is converted into or continued as an Offshore Rate
         Loan, and ending on the date one, two, three or six months thereafter
         as selected by the Company in its Notice of Committed Borrowing or
         Notice of Conversion/Continuation, as the case may be; PROVIDED that:

                           (i) if any Interest Period would otherwise end on a
                  day that is not a Business Day, such Interest Period shall be
                  extended to the following Business Day unless, in the case of
                  an Offshore Rate Loan, the result of such extension would be
                  to carry such Interest Period into another calendar month, in
                  which event such Interest Period shall end on the preceding
                  Business Day;

                           (ii) any Interest Period for an Offshore Rate Loan
                  that begins on the last Business Day of a calendar month (or
                  on a day for which there is no numerically corresponding day
                  in the calendar month at the end of such Interest Period)
                  shall end on the last Business Day of the calendar month at
                  the end of such Interest Period; and

                           (iii) no Interest Period for any Loan shall extend 
                  beyond the Termination Date.

                  INVESTMENT - see SECTION 8.5.

                  IRS means the Internal Revenue Service, and any Governmental
         Authority succeeding to any of its principal functions under the Code.

                  ISSUANCE DATE has the meaning specified in SUBSECTION 3.1(A).

                  ISSUE means, with respect to any Letter of Credit, to issue or
         to extend the expiry of, or to renew or increase the amount of, such
         Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have
         corresponding meanings.

                  ISSUING LENDER means BofA in its capacity as issuer of one or
         more Letters of Credit hereunder, together with (i) any replacement
         letter of credit issuer arising under SUBSECTION 10.1(B) or SECTION
         10.9 and (ii) any other Lender or any Affiliate of a Lender which has
         agreed in writing to become an "Issuing Lender" hereunder.

                                       10

<PAGE>

                  L/C ADVANCE means each Lender's participation in any L/C
         Borrowing in accordance with its Pro Rata Share.

                  L/C AMENDMENT APPLICATION means an application form for
         amendment of an outstanding standby letter of credit as shall at any
         time be in use by the applicable Issuing Lender, as such Issuing Lender
         shall request.

                  L/C APPLICATION means an application form for issuance of a
         standby letter of credit as shall at any time be in use by the
         applicable Issuing Lender, as such Issuing Lender shall request;
         provided, however, that to the extent an L/C Application is
         inconsistent with the provisions of this Agreement, the provisions of
         this Agreement shall control.

                  L/C BORROWING means an extension of credit resulting from a
         drawing under any Letter of Credit which shall not have been reimbursed
         on the date when made nor converted into a Borrowing of Committed Loans
         under SUBSECTION 3.3(C).

                  L/C COMMITMENT means the commitment of the Issuing Lenders to
         Issue, and the commitment of the Lenders severally to participate in,
         Letters of Credit from time to time Issued or outstanding under ARTICLE
         III (including the Existing Letters of Credit) in an aggregate amount
         not to exceed on any date the lesser of (a) $450,000,000 or (b) the
         combined Commitments. The L/C Commitment is part of, and not in
         addition to, the combined Commitments.

                  L/C FEE RATE - see SCHEDULE 1.1.

                  L/C OBLIGATIONS means at any time the sum of (a) the aggregate
         Dollar Equivalent Amount of all undrawn Canadian L/Cs and Dollar amount
         of all other undrawn Letters of Credit then outstanding, plus (b) the
         Dollar Equivalent Amount of all unreimbursed drawings under all
         Canadian L/Cs, plus (c) the Dollar amount of all unreimbursed drawings
         under all other Letters of Credit, including all outstanding L/C
         Borrowings.

                  L/C-RELATED DOCUMENTS means the Letters of Credit, the L/C
         Applications, the L/C Amendment Applications and any other document
         relating to any Letter of Credit, including any of the applicable
         Issuing Lender's standard form documents for letter of credit
         issuances.

                  LENDER - see the PREAMBLE. References to the "Lenders" shall
         include BofA in its capacity as Swing Line Lender and each Issuing
         Lender in its capacity as such; for purposes of clarification only, to
         the extent that the Swing Line Lender or any Issuing Lender may have
         any rights or obligations in addition to those of the other Lenders due
         to its status as Swing Line Lender or Issuing Lender, its status as
         such will be specifically referenced.

                  LENDING OFFICE means, as to any Lender, the office or offices
         of such Lender specified as its "Lending Office" or "Domestic Lending

                                       11

<PAGE>

         Office" or "Offshore Lending Office", as the case may be, on SCHEDULE
         11.2, or such other office or offices as such Lender may from time to
         time notify the Company and the Administrative Agent.

                  LETTER OF CREDIT means each Existing Letter of Credit and any
         other standby letter of credit Issued by an Issuing Lender pursuant to
         ARTICLE III.

                  LIBOR - see the definition of Offshore Rate.

                  LIEN means any security interest, mortgage, deed of trust,
         pledge, hypothecation, assignment, charge or deposit arrangement,
         encumbrance, lien (statutory or other) or preferential arrangement of
         any kind or nature whatsoever in respect of any property (including
         those created by, arising under or evidenced by any conditional sale or
         other title retention agreement, the interest of a lessor under a
         Capital Lease, or any financing lease having substantially the same
         economic effect as any of the foregoing, but not including the interest
         of a lessor under an operating lease).

                  LOAN means an extension of credit by a Lender to the Company
         under ARTICLE II or ARTICLE III in the form of a Committed Loan, Swing
         Line Loan or L/C Advance.

                  LOAN DOCUMENTS means this Agreement, any Notes, the
         L/C-Related Documents and all other documents delivered to the
         Administrative Agent or any Lender in connection herewith.

                  MARGIN STOCK means "margin stock" as such term is defined in
         Regulation T, U or X of the FRB.

                  MATERIAL ADVERSE EFFECT means a material adverse change in, or
         a material adverse effect upon, the operations, business, properties,
         assets or condition (financial or otherwise) of the Company and its
         Subsidiaries taken as a whole.

                  MATERIAL FINANCIAL OBLIGATIONS means Indebtedness,
         Attributable Indebtedness, Contingent Obligations and obligations under
         Swap Contracts of the Company or any Subsidiary, and obligations of the
         Company or any Subsidiary in respect of any Securitization Transaction,
         in an aggregate amount (or in the case of a Swap Contract having a Swap
         Contract Value), for all such Indebtedness, Attributable Indebtedness,
         Contingent Obligations, obligations under Swap Contracts and
         obligations in respect of Securitization Transactions, but without
         duplication, equal to $25,000,000 or more.

                  MOODY'S means Moody's Investor Service, Inc., a Delaware
         corporation.

                  MULTIEMPLOYER PLAN means a "multiemployer plan", within the
         meaning of Section 4001 (a) (3) of ERISA, with respect to which the
         Company or any ERISA Affiliate may have any liability.

                  NOTE means a promissory note executed by the Company in favor
         of a Lender pursuant to SUBSECTION 2.2(B), in substantially the form of
         EXHIBIT F.

                                       12

<PAGE>

                  NOTICE OF COMMITTED BORROWING means a notice in substantially
         the form of EXHIBIT A.

                  NOTICE OF CONVERSION/CONTINUATION means a notice in
         substantially the form of EXHIBIT B.

                  NOTICE OF SWING LINE LOAN means a notice substantially in the
         form of EXHIBIT G.

                  OBLIGATIONS means all advances, debts, liabilities,
         obligations, covenants and duties arising under any Loan Document owing
         by the Company to any Lender, the Administrative Agent or any other
         Indemnified Person, whether direct or indirect (including those
         acquired by assignment), absolute or contingent, due or to become due,
         or now existing or hereafter arising.

                  OFFSHORE RATE means, for any Interest Period, with respect to
         Offshore Rate Loans comprising part of the same Borrowing, the rate of
         interest per annum (rounded upward to the next 1/32nd of 1%) determined
         by the Administrative Agent pursuant to the following formula:
 
         Offshore Rate =                 LIBOR
                         ------------------------------------
                         1.00 - Eurodollar Reserve Percentage

Where,

                           "EURODOLLAR RESERVE PERCENTAGE" means, for any day
                  during any Interest Period, the reserve percentage (expressed
                  as a decimal, carried out to five decimal places) in effect on
                  such day, whether or not applicable to any Lender, under
                  regulations issued from time to time by the FRB for
                  determining the maximum reserve requirement (including any
                  emergency, supplemental or other marginal reserve requirement)
                  with respect to Eurocurrency funding (currently referred to as
                  "Eurocurrency liabilities"). The Offshore Rate for each
                  outstanding Offshore Rate Loan shall be adjusted automatically
                  as of the effective date of any change in the Eurodollar
                  Reserve Percentage; and

                           "LIBOR" means, for such Interest Period:

                           (a) the rate per annum equal to the rate determined
                  by the Administrative Agent to be the offered rate that
                  appears on the page of the Telerate screen (or any successor
                  thereto) that displays an average British Bankers Association
                  Interest Settlement Rate for deposits in Dollars (for delivery
                  on the first day of such Interest Period) with a term
                  equivalent to such Interest Period, determined as of
                  approximately 11:00 a.m. (London time) two Business Days prior
                  to the first day of such Interest Period, or

                           (b) if the rate referenced in the preceding clause
                  (a) does not appear on such page or service or such page or
                  service shall not be available, the rate per annum equal to
                  the rate determined by the Administrative Agent to be the

                                       13

<PAGE>

                  offered rate on such other page or other service that displays
                  an average British Bankers Association Interest Settlement
                  Rate for deposits in Dollars (for delivery on the first day of
                  such Interest Period) with a term equivalent to such Interest
                  Period, determined as of approximately 11:00 a.m. (London
                  time) two Business Days prior to the first day of such
                  Interest Period, or

                           (c) if the rates referenced in the preceding clauses
                  (a) and (b) are not available, the rate per annum determined
                  by the Administrative Agent as the rate of interest at which
                  deposits in Dollars for delivery on the first day of such
                  Interest Period in same day funds in the approximate amount of
                  the Offshore Rate Loan being made, continued or converted by
                  BofA and with a term equivalent to such Interest Period would
                  be offered by BofA's London Branch to major banks in the
                  London interbank eurodollar market at their request at
                  approximately 4:00 p.m. (London time) two Business Days prior
                  to the first day of such Interest Period.

                  OFFSHORE RATE LOAN means a Committed Loan that bears interest
         based on the Offshore Rate.

                  ORGANIZATION DOCUMENTS means (i) for any corporation, the
         certificate of incorporation, the bylaws, any certificate of
         determination or instrument relating to the rights of preferred
         shareholders of such corporation, any shareholder rights agreement, and
         all applicable resolutions of the board of directors (or any committee
         thereof) of such corporation, (ii) for any partnership or joint
         venture, the partnership or joint venture agreement and any other
         organizational document of such entity, (iii) for any limited liability
         company, the certificate or articles of organization, the operating
         agreement and any other organizational document of such limited
         liability company, (iv) for any trust, the declaration of trust, the
         trust agreement and any other organizational document of such trust and
         (v) for any other entity, the document or agreement pursuant to which
         such entity was formed and any other organizational document of such
         entity.

                  OTHER TAXES means any present or future stamp, court or
         documentary taxes or any other excise or property taxes, charges or
         similar levies which arise from any payment made hereunder or from the
         execution, delivery, performance, enforcement or registration of, or
         otherwise with respect to, this Agreement or any other Loan Document.

                  PARTICIPANT - see SUBSECTION 11.8(D).

                  PAYMENT SHARING NOTICE means a written notice from the Company
         or any Lender informing the Administrative Agent that an Event of
         Default has occurred and is continuing and directing the Administrative
         Agent to allocate payments received from the Company in accordance with
         SUBSECTION 2.13 (B).

                  PBGC means the Pension Benefit Guaranty Corporation, or any
         Governmental Authority succeeding to any of its principal functions
         under ERISA.

                                       14

<PAGE>

                  PENSION PLAN means a pension plan (as defined in Section 3(2)
         of ERISA) subject to Title IV of ERISA, other than a Multiemployer
         Plan, with respect to which the Company or any ERISA Affiliate may have
         any liability.

                  PERMITTED LIENS - see SECTION 8.2.

                  PERSON means an individual, partnership, corporation, limited
         liability company, business trust, joint stock company, trust,
         unincorporated association, joint venture or Governmental Authority.

                  PLAN ACQUISITION DATE means, with respect to any Acquired
         Plan, the first date on which the Company or any ERISA Affiliate may
         have any liability with respect to such Acquired Plan.

                  PLAN means an employee benefit plan (as defined in Section
         3(3) of ERISA), other than a Multiemployer Plan, with respect to which
         the Company or any ERISA Affiliate may have any liability, and includes
         any Pension Plan.

                  PRO RATA SHARE means for any Lender at any time the proportion
         (expressed as a decimal, rounded to the ninth decimal place) which such
         Lender's Commitment constitutes of the combined Commitments, or, after
         the Commitments have terminated, which (i) the principal amount of such
         Lender's Committed Loans PLUS (without duplication) the participation
         of such Lender in (or in the case of an Issuing Lender or the Swing
         Line Lender, the unparticipated portion of) the Effective Amount of all
         L/C Obligations and the principal amount of all Swing Line Loans
         constitutes of (ii) the aggregate principal amount of all Committed
         Loans and Swing Line Loans PLUS (without duplication) the Effective
         Amount of all L/C Obligations.

                  RATING means the long-term, unsecured, unenhanced debt rating
         assigned to senior Indebtedness of the Company by S&P and Moody's.

                  REPORTABLE EVENT means, any of the events set forth in Section
         4043 (c) of ERISA or the regulations thereunder, other than any such
         event for which the 30-day notice requirement under ERISA has been
         waived in regulations issued by the PBGC.

                  REQUIRED LENDERS means Lenders holding Adjusted Pro Rata
         Shares aggregating more than 50%; PROVIDED that if and so long as any
         Lender fails to fund any Committed Loan when required by SECTION 2.16
         or SECTION 3.3 or a participation in a Swing Line Loan or an L/C
         Borrowing pursuant to SECTION 2.17 or SECTION 3.3, as the case may be,
         such Lender's Adjusted Pro Rata Share shall be deemed for purposes of
         this definition to be reduced by the percentage which the defaulted
         amount constitutes of the combined Commitments (or, if the Commitments
         have terminated, the Total Outstandings), and the Adjusted Pro Rata
         Share of the applicable Issuing Lender or the Swing Line Lender, as the
         case may be, shall be deemed for purposes of this definition to be
         increased by such percentage.

                  REQUIREMENT OF LAW means, as to any Person, any law (statutory
         or common), treaty, rule or regulation or determination of an
         arbitrator or of a Governmental 

                                       15

<PAGE>

         Authority, in each case applicable to or binding upon such Person or
         any of its property or to which such Person or any of its property is
         subject.

                  RESPONSIBLE OFFICER means the chief executive officer, the
         president or any vice president of the Company, or any other officer
         having substantially the same authority and responsibility; or, with
         respect to financial matters, the chief financial officer, the vice
         president-finance, the treasurer or any assistant treasurer of the
         Company, or any other officer having substantially the same authority
         and responsibility.

                  RESTRICTED CASH means that amount of cash of the Company and
         its Subsidiaries reserved in a restricted trustee controlled account,
         as shown on the balance sheet of the Company, at any Computation Date,
         on the line item "Restricted Cash."

                  RESTRICTED PAYMENT means any dividend or other distribution
         (whether in cash, securities or other property) with respect to any
         capital stock or other equity interest of the Company or any
         Subsidiary, or any payment (whether in cash, securities or other
         property), including any sinking fund or similar deposit, on account of
         the purchase, redemption, retirement, acquisition, cancellation or
         termination of any such capital stock or other equity interest or of
         any option, warrant or other right to acquire any such capital stock or
         other equity interest.

                  S&P means Standard & Poors Rating Group, a division of
         McGraw-Hill.

                  SEC means the Securities and Exchange Commission, or any
         Governmental Authority succeeding to any of its principal functions.

                  SECURITIZATION TRANSACTION means any sale, assignment or other
         transfer by the Company or any Subsidiary of accounts receivable, lease
         receivables or other payment obligations owing to the Company or any
         Subsidiary or any interest in any of the foregoing, together in each
         case with any collections and other proceeds thereof, any collection or
         deposit accounts related thereto, and any collateral, guaranties or
         other property or claims in favor of the Company or such Subsidiary
         supporting or securing payment by the obligor thereon of, or otherwise
         related to, any such receivables.

                  SHORT TERM CREDIT AGREEMENT means that certain Short Term
         Credit Agreement dated as of July 3, 2002 among the Company, certain
         financial institutions as lenders and BofA as administrative agent,
         issuing lender and swing line lender.

                  SOLVENT means, when used with respect to any Person, that at
         the time of determination:

                  (a) the fair value of its assets (both at fair valuation and
         at present fair saleable value on an orderly basis) is in excess of the
         total amount of its liabilities, including Contingent Obligations; and

                  (b) it is then able and expects to be able to pay its debts as
         they mature; and

                                       16

<PAGE>

                  (c) it has capital sufficient to carry on its business as
         conducted and as proposed to be conducted.

                  SPOT RATE OF EXCHANGE means, (i) in determining the Dollar
         Equivalent Amount of a specified Canadian Dollar amount as of any date,
         the spot exchange rate determined by the Administrative Agent in
         accordance with its usual procedures for the purchase by the
         Administrative Agent of Dollars with Canadian Dollars at approximately
         10:00 A.M. on the Business Day that is two (2) Business Days prior to
         such date, and (ii) in determining the Canadian Currency Equivalent
         Amount of a specified Dollar amount on any date, the spot exchange rate
         determined by the Administrative Agent in accordance with its usual
         procedures for the purchase by the Administrative Agent of Canadian
         Dollars with Dollars at approximately 10:00 A.M. on the Business Day
         that is two (2) Business Days prior to such date.

                  SUBSIDIARY of a Person means any corporation, association,
         partnership, limited liability company, joint venture or other business
         entity of which more than 50% of the voting stock, membership interests
         or other equity interests is owned or controlled directly or indirectly
         by such Person, or one or more of the Subsidiaries of such Person, or a
         combination thereof. Unless the context otherwise clearly requires,
         references herein to a "Subsidiary" refer to a Subsidiary of the
         Company.

                  SURETY INSTRUMENTS means all letters of credit (including
         standby and commercial), banker's acceptances, bank guaranties,
         shipside bonds, surety bonds and similar instruments.

                  SWAP CONTRACT means any agreement, whether or not in writing,
         relating to any transaction that is a rate swap, basis swap, forward
         rate transaction, commodity swap, commodity option, equity or equity
         index swap or option, bond, note or bill option, interest rate option,
         forward foreign exchange transaction, cap, collar or floor transaction,
         currency swap, cross-currency rate swap, swaption, currency option or
         any other, similar transaction (including any option to enter into any
         of the foregoing) or any combination of the foregoing, and, unless the
         context otherwise clearly requires, any master agreement relating to or
         governing any or all of the foregoing.

                  SWAP CONTRACT VALUE means, with respect to each Swap Contract,
         the net obligations of the Company or any Subsidiary thereunder that
         would be payable in accordance with its provisions as a result of the
         occurrence of an early termination date under such Swap Contract, as
         determined in accordance with its provisions.

                  SWING LINE COMMITMENT means the commitment of the Swing Line
         Lender to make Swing Line Loans hereunder.

                  SWING LINE LENDER means BofA in its capacity as swing line
         lender hereunder, together with any replacement swing line lender
         arising under SECTION 10.9.

                  SWING LINE LOAN - see SECTION 2.14.

                                       17

<PAGE>

                  SYNTHETIC LEASE OBLIGATION means the monetary obligation of a
         Person under (a) a so-called synthetic, off-balance sheet or tax
         retention lease, or (b) an agreement for the use or possession of
         property creating obligations that do not appear on the balance sheet
         of such Person but which, upon the insolvency or bankruptcy of such
         Person, would be characterized as the indebtedness of such Person
         (without regard to accounting treatment).

                  TAXES means any and all present or future taxes, levies,
         assessments, imposts, duties, deductions, fees, withholdings or similar
         charges, and all liabilities with respect thereto, excluding, in the
         case of each Lender and the Administrative Agent, taxes imposed on or
         measured by its net income.

                  TERMINATION DATE means the earlier to occur of:

                           (a) July 3, 2007; and

                           (b) the date on which the Commitments terminate in 
                  accordance with the provisions of this Agreement.

                  TOTAL DEBT means, at any time, the sum (determined on a
         consolidated basis and without duplication) of all Indebtedness of the
         Company and its Subsidiaries, excluding contingent obligations with
         respect to Surety Instruments (other than any letter of credit issued
         for the account of the Company or any Subsidiary to support
         Indebtedness of a Person other than the Company or any Subsidiary).

                  TOTAL DEBT TO EBITDA RATIO means in respect of any Computation
         Period the ratio of (a) Total Debt MINUS Restricted Cash, as at the end
         of such Computation Period, to (b) Consolidated EBITDA for such
         Computation Period.

                  TOTAL OUTSTANDINGS means the sum of the aggregate principal
         amount of all outstanding Loans (whether Committed Loans or Swing Line
         Loans) plus the Effective Amount of all L/C Obligations.

                  TYPE has the meaning specified in the definition of "Committed
         Loan."

                  UNFUNDED PENSION LIABILITY means the excess of a Pension
         Plan's benefit liabilities under Section 4001 (a) (16) of ERISA, over
         the current value of such Plan's assets, determined in accordance with
         the assumptions used for funding such Pension Plan pursuant to Section
         412 of the Code for the applicable plan year.

                  UNITED STATES and U.S. each means the United States of
         America.

                  UNMATURED EVENT OF DEFAULT means any event or circumstance
         which, with the giving of notice, the lapse of time or both, will (if
         not cured or otherwise remedied during such time) constitute an Event
         of Default.

                  UTILIZATION FEE RATE - see SCHEDULE 1.1.

                                       18

<PAGE>

                  VALUATION DATE means any of (i) the date of any Credit
         Extension, (ii) the date of any L/C Borrowing, and (iii) any other date
         when there are outstanding Canadian L/Cs that the Administrative Agent
         shall determine the Dollar Equivalent Amount of Canadian L/Cs.

                  WHOLLY-OWNED SUBSIDIARY means any Subsidiary in which (other
         than directors' qualifying shares required by law) 100% of the capital
         stock, membership interests or other equity interests of each class
         having ordinary voting power, and 100% of the capital stock, membership
         interests or other equity interests of every other class, in each case,
         at the time as of which any determination is being made, is owned,
         beneficially and of record, by the Company, or by one or more of the
         other Wholly-Owned Subsidiaries, or both.

         1.2 OTHER INTERPRETIVE PROVISIONS.

                  (a) The meanings of defined terms are equally applicable to
         the singular and plural forms of the defined terms.

                  (b) The words "hereof", "herein", "hereunder" and similar
         words refer to this Agreement as a whole and not to any particular
         provision of this Agreement; and subsection, Section, Schedule and
         Exhibit references are to this Agreement unless otherwise specified.

                  (c) (i) The term "documents" includes any and all instruments,
         documents, agreements, certificates, indentures, notices and other
         writings, however evidenced.

                           (ii) The term "including" is not limiting and means 
         "including without limitation."

                           (iii) In the computation of periods of time from a
         specified date to a later specified date, the word "from" means "from
         and including"; the words "to" and "until" each mean "to but
         excluding", and the word "through" means "to and including."

                  (d) Unless otherwise expressly provided herein, (i) references
         to agreements (including this Agreement) and other contractual
         instruments shall be deemed to include all subsequent amendments and
         other modifications thereto, but only to the extent such amendments and
         other modifications are not prohibited by the terms of any Loan
         Document, and (ii) references to any statute or regulation are to be
         construed as including all statutory and regulatory provisions
         consolidating, amending, replacing, supplementing or interpreting the
         statute or regulation.

                  (e) The captions and headings of this Agreement are for
         convenience of reference only and shall not affect the interpretation
         of this Agreement.

                  (f) This Agreement and other Loan Documents may use several
         different limitations, tests or measurements to regulate the same or
         similar matters. All such limitations, tests and measurements are
         cumulative and shall each be performed in 

                                       19

<PAGE>

         accordance with their terms. Unless otherwise expressly provided
         herein, any reference to any action of the Administrative Agent, the
         Lenders or the Required Lenders by way of consent, approval or waiver
         shall be deemed modified by the phrase "in its/their reasonable
         discretion."

                  (g) This Agreement and the other Loan Documents are the result
         of negotiations among and have been reviewed by counsel to the
         Administrative Agent, the Company and the other parties, and are the
         products of all parties. Accordingly, they shall not be construed
         against the Lenders or the Administrative Agent merely because of the
         Administrative Agent's or Lenders' involvement in their preparation.

         1.3 ACCOUNTING PRINCIPLES.

                  (a) Unless the context otherwise requires, all accounting
         terms not expressly defined herein shall be construed, and all
         financial computations required under this Agreement shall be made, in
         accordance with GAAP, consistently applied, but without giving effect
         to any change in GAAP which would require the Company to
         "mark-to-market" its obligations under Swap Contracts (unless the
         Company and the Required Lenders agree to give effect to such change);
         PROVIDED that if the Company notifies the Administrative Agent that the
         Company wishes to amend any covenant in ARTICLE VIII to eliminate the
         effect of any change in GAAP on the operation of such covenant (or if
         the Administrative Agent notifies the Company that the Required Lenders
         wish to amend ARTICLE VIII for such purpose), then the Company's
         compliance with such covenant shall be determined on the basis of GAAP
         in effect immediately before the relevant change in GAAP became
         effective, until either such notice is withdrawn or such covenant is
         amended in a manner satisfactory to the Company and the Required
         Lenders.

                  (b) References herein to "fiscal year" and "fiscal quarter"
         refer to such fiscal periods of the Company.

                                   ARTICLE II

                                   THE CREDITS

         2.1 AMOUNTS AND TERMS OF COMMITMENTS. Each Lender severally agrees, on
the terms and conditions set forth herein, to make Committed Loans to the
Company from time to time on any Business Day during the period from the
Effective Date to the Termination Date, in an aggregate amount not to exceed at
any time outstanding the amount set forth on SCHEDULE 2.1 (such amount, as
reduced pursuant to SECTION 2.5, or changed by one or more assignments under
SECTION 11.8, such Lender's "Commitment"); PROVIDED, HOWEVER, that, after giving
effect to any Committed Borrowing, the Total Outstandings shall not exceed the
combined Commitments; AND PROVIDED, FURTHER, that the aggregate principal amount
of the Committed Loans of any Lender PLUS the participation of such Lender in
the principal amount of all outstanding Swing Line Loans and in the Effective
Amount of all L/C Obligations shall not at any time exceed such Lender's
Commitment. Within the limits of each Lender's Commitment, and subject to the
other terms and conditions hereof, the Company may borrow under this SECTION
2.1, prepay under SECTION 2.6 and reborrow under this SECTION 2.1. If for any
reason the Total Outstandings at any 

                                       20

<PAGE>

time exceed the combined Commitments then in effect, the Company shall
immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an
aggregate amount equal to such excess.

         2.2 LOAN ACCOUNTS.

                  (a) The Loans made by each Lender and the Letters of Credit
         Issued by each Issuing Lender shall be evidenced by one or more
         accounts or records maintained by such Lender or Issuing Lender, as the
         case may be, in the ordinary course of business. The accounts or
         records maintained by the Administrative Agent, each Issuing Lender and
         each Lender shall be rebuttable presumptive evidence of the amount of
         the Loans made by the Lenders to the Company and the Letters of Credit
         Issued for the account of the Company, and the interest and payments
         thereon. Any failure so to record or any error in doing so shall not,
         however, limit or otherwise affect the obligation of the Company
         hereunder to pay any amount owing with respect to the Loans or any
         Letter of Credit.

                  (b) Upon the request of any Lender made through the
         Administrative Agent, the Loans made by such Lender may be evidenced by
         one or more Notes, instead of or in addition to loan accounts. Each
         such Lender shall endorse on the schedules annexed to its Note(s) the
         date, amount and maturity of each Loan evidenced thereby and the amount
         of each payment of principal made by the Company with respect thereto.
         Each such Lender is irrevocably authorized by the Company to endorse
         its Note(s) and each Lender's record shall be rebuttable presumptive
         evidence of the amount of the Loans evidenced thereby, and the interest
         and payments thereon; provided, however, that the failure of a Lender
         to make, or an error in making, a notation thereon with respect to any
         Loan shall not limit or otherwise affect the obligations of the Company
         hereunder or under any such Note to such Lender.

         2.3 PROCEDURE FOR COMMITTED BORROWING.

                  (a) Each Committed Borrowing shall be made upon the Company's
         irrevocable written notice delivered to the Administrative Agent in the
         form of a Notice of Committed Borrowing, which notice must be received
         by the Administrative Agent prior to (i) 10:30 a.m. (Chicago time)
         three Business Days prior to the requested Borrowing Date, in the case
         of Offshore Rate Loans, and (ii) 10:30 a.m. (Chicago time) on the
         requested Borrowing Date, in the case of Base Rate Committed Loans,
         specifying:

                                     (A) the amount of the Committed Borrowing,
                           which shall be in an aggregate amount of $10,000,000
                           or a higher multiple of $1,000,000;

                                     (B) the requested Borrowing Date, which
                           shall be a Business Day;

                                     (C) the Type of Loans comprising such
                           Committed Borrowing; and

                                     (D) in the case of Offshore Rate Loans, the
                           duration of the initial Interest Period applicable to
                           such Loans.

                                       21

<PAGE>

                  (b) The Administrative Agent will promptly notify each Lender
         of its receipt of any Notice of Committed Borrowing and of the amount
         of such Lender's Pro Rata Share of such Borrowing.

                  (c) Each Lender will make the amount of its Pro Rata Share of
         each Committed Borrowing available to the Administrative Agent for the
         account of the Company at the Administrative Agent's Payment Office by
         12:00 noon (Chicago time) on the Borrowing Date requested by the
         Company in funds immediately available to the Administrative Agent. The
         proceeds of all such Loans will then promptly be made available to the
         Company by the Administrative Agent by wire transfer in accordance with
         written instructions provided to the Administrative Agent by the
         Company of like funds as received by the Administrative Agent.

                  (d) After giving effect to any Committed Borrowing, unless the
         Administrative Agent otherwise consents, the number of Interest Periods
         in effect hereunder shall not exceed 10.

         2.4 CONVERSION AND CONTINUATION ELECTIONS FOR COMMITTED BORROWINGS.

                  (a) The Company may, upon irrevocable written notice to the
         Administrative Agent in accordance with SUBSECTION 2.4(B):

                                    (i) elect, as of any Business Day, in the
                  case of Base Rate Committed Loans, or as of the last day of
                  the applicable Interest Period, in the case of Offshore Rate
                  Loans, to convert such Loans (or any part thereof in an
                  aggregate amount of $10,000,000 or a higher integral multiple
                  of $1,000,000) into Committed Loans of the other Type; or

                                    (ii) elect, as of the last day of the
                  applicable Interest Period, to continue any Offshore Rate
                  Loans having Interest Periods expiring on such day (or any
                  part thereof in an aggregate amount of $10,000,000 or a higher
                  integral multiple of $1,000,000) for another Interest Period;

         PROVIDED that if at any time the aggregate amount of Offshore Rate
         Loans in respect of any Borrowing is reduced, by payment, prepayment,
         or conversion of any part thereof, to be less than $10,000,000, such
         Offshore Rate Loans shall automatically convert into Base Rate
         Committed Loans.

                  (b) The Company shall deliver a Notice of
         Conversion/Continuation to be received by the Administrative Agent not
         later than 10:30 a.m. (Chicago time) (i) three Business Days in advance
         of the Conversion/Continuation Date, if the Committed Loans are to be
         converted into or continued as Offshore Rate Loans; and (ii) on the
         Conversion/Continuation Date, if the Committed Loans are to be
         converted into Base Rate Committed Loans, specifying:

                                     (A) the proposed Conversion/Continuation
                           Date;

                                       22

<PAGE>

                                     (B) the aggregate amount of Committed Loans
                           to be converted or continued;

                                     (C) the Type of Committed Loans resulting
                           from the proposed conversion or continuation; and

                                     (D) in the case of conversion into or
                           continuation of Offshore Rate Loans, the duration of
                           the requested Interest Period.

                  (c) If upon the expiration of any Interest Period applicable
         to Offshore Rate Loans, the Company has failed to select timely a new
         Interest Period to be applicable to such Offshore Rate Loans (or any
         Event of Default or Unmatured Event of Default exists and the Required
         Lenders have not given the consent referred to in subsection (e)
         below), such Offshore Rate Loans shall automatically convert into Base
         Rate Committed Loans effective as of the expiration date of such
         Interest Period.

                  (d) The Administrative Agent will promptly notify each Lender
         of its receipt of a Notice of Conversion/Continuation, or, if no timely
         notice is provided by the Company, the Administrative Agent will
         promptly notify each Lender of the details of any automatic conversion.
         All conversions and continuations shall be made ratably according to
         the respective outstanding principal amounts of the Committed Loans
         with respect to which the notice was given held by each Lender.

                  (e) Unless the Required Lenders otherwise consent, the Company
         may not elect to have a Loan converted into or continued as an Offshore
         Rate Loan during the existence of an Event of Default or Unmatured
         Event of Default.

                  (f) After giving effect to any conversion or continuation of
         Loans, unless the Administrative Agent shall otherwise consent, the
         number of Interest Periods in effect hereunder shall not exceed 10.

         2.5 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The Company may,
upon not less than three Business Days' prior notice to the Administrative
Agent, terminate the Commitments, or permanently reduce the Commitments by a
minimum amount of $10,000,000 or a higher integral multiple of $1,000,000;
UNLESS, after giving effect thereto and to any prepayments of Loans made on the
effective date thereof, the Total Outstandings would exceed the amount of the
combined Commitments then in effect. Once reduced in accordance with this
Section, the Commitments may not be increased. Any reduction of the Commitments
shall be applied to reduce the Commitment of each Lender according to its Pro
Rata Share. If the Company terminates the Commitments or reduces the Commitments
to zero, the Company shall pay all accrued and unpaid interest, fees and other
amounts payable hereunder on the date of such termination.

         2.6 OPTIONAL PREPAYMENTS. Subject to the proviso to SUBSECTION 2.4(A)
and to SECTION 4.4, the Company may, from time to time, upon irrevocable notice
to the Administrative Agent, which notice must be received by the Administrative
Agent prior to 10:30 a.m. Chicago time (i) three Business Days prior to the date
of prepayment, in the case of Offshore Rate Loans, and (ii) on the date of
prepayment, in the case of Base Rate Committed Loans, ratably prepay Committed

                                       23

<PAGE>

Loans in whole or in part, in an aggregate amount of $10,000,000 or a higher
integral multiple of $1,000,000 (or, if any Base Rate Committed Loans have been
made pursuant to SUBSECTION 3.3(A), in an aggregate amount equal to the
aggregate amount of such Base Rate Committed Loans). Such notice of prepayment
shall specify the date and amount of such prepayment and the Committed Loans to
be prepaid. The Administrative Agent will promptly notify each Lender of its
receipt of any such notice and of such Lender's Pro Rata Share of such
prepayment. If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with, in the case of Offshore
Rate Loans, accrued interest to such date on the amount prepaid and any amounts
required pursuant to SECTION 4.4.

         2.7 REPAYMENT.

                  (a) The Company shall repay all Committed Loans on the
         Termination Date.

                  (b) The Company shall repay each Swing Line Loan on the
         earlier to occur of (i) the fourth Business Day following the giving of
         notice from the Swing Line Lender to the Company and (ii) the
         Termination Date.

         2.8 INTEREST.

                  (a) Each Committed Loan shall bear interest on the outstanding
         principal amount thereof from the applicable Borrowing Date at a rate
         per annum equal to (i) the Offshore Rate plus the Applicable Margin or
         (ii) the Base Rate, as the case may be (and subject to the Company's
         right to convert to the other Type of Committed Loan under SECTION
         2.4). Each Swing Line Loan shall bear interest on the outstanding
         principal amount thereof from the applicable Borrowing Date at a rate
         per annum equal to the Base Rate or such other rate as may be agreed to
         from time to time by the Company and the Swing Line Lender; provided
         that after any purchase by the Lenders of a participation in a Swing
         Line Loan, the rate of interest on such Swing Line Loan shall not be
         less than the Base Rate.

                  (b) Interest on each Loan shall be paid in arrears on each
         Interest Payment Date. Interest also shall be paid on the date of any
         conversion of Offshore Rate Loans under SECTION 2.4 and prepayment of
         Offshore Rate Loans under SECTION 2.6, in each case for the portion of
         the Loans so converted or prepaid.

                  (c) Notwithstanding the foregoing provisions of this Section,
         upon notice to the Company from the Agent (acting at the request or
         with the consent of the Required Lenders) during the existence of any
         Event of Default, and for so long as such Event of Default continues,
         the Company shall pay interest (after as well as before entry of
         judgment thereon to the extent permitted by law) on the principal
         amount of all outstanding Loans and, to the extent permitted by
         applicable law, on any other amount payable hereunder or under any
         other Loan Document, at a rate per annum which is determined by adding
         2% per annum to the rate otherwise applicable thereto pursuant to the
         terms hereof or such other Loan Document (or, if no such rate is
         specified, the Base Rate). All such interest shall be payable on
         demand.

                                       24

<PAGE>

                  (d) Anything herein to the contrary notwithstanding, the
         obligations of the Company to any Lender hereunder shall be subject to
         the limitation that payments of interest shall not be required for any
         period for which interest is computed hereunder, to the extent (but
         only to the extent) that contracting for or receiving such payment by
         such Lender would be contrary to the provisions of any law applicable
         to such Lender limiting the highest rate of interest that may be
         lawfully contracted for, charged or received by such Lender, and in
         such event the Company shall pay such Lender interest at the highest
         rate permitted by applicable law.

         2.9 FEES. In addition to certain fees described in SECTION 3.8:

                  (a) ARRANGEMENT, AGENCY FEES. The Company agrees to pay to the
         Administrative Agent and the Arrangers such fees at such times and in
         such amounts as are mutually agreed to from time to time by the
         Company, the Administrative Agent and the Arrangers.

                  (b) FACILITY FEES. The Company shall pay to the Administrative
         Agent for the account of each Lender a facility fee computed at the
         Facility Fee Rate per annum on the amount of such Lender's Commitment
         as in effect from time to time (whether used or unused) or, if the
         Commitments have terminated, on the sum (without duplication) of (i)
         the principal amount of such Lender's Committed Loans plus (ii) the
         participation of such Lender in (or in the case of an Issuing Lender or
         the Swing Line Lender, its unparticipated portion of) the Effective
         Amount of all L/C Obligations and the principal amount of all Swing
         Line Loans. Such facility fee shall accrue from the Effective Date to
         the Termination Date, and thereafter until all Committed Loans are paid
         in full, and shall be due and payable quarterly in arrears on the last
         Business Day of each calendar quarter, with the final payment to be
         made on the Termination Date (or, if later, on the date all Committed
         Loans and L/C Obligations are paid in full).

                  (c) UTILIZATION FEES. If, at any time, the sum of (1) the
         Total Outstandings plus (2) the "Total Outstandings" under and as
         defined in the Short Term Credit Agreement, exceeds 50% of the sum of
         (1) the aggregate Commitments, plus (2) the aggregate "Commitments"
         under and as defined in the Short Term Credit Agreement, the Company
         shall pay to the Administrative Agent for the account of each Lender a
         utilization fee for any period computed at a rate per annum equal to
         the Utilization Fee Rate on the sum (without duplication) of (i) the
         principal amount of such Lender's Committed Loans and L/C Obligations
         plus (ii) the participation of such Lender in (or in the case of an
         Issuing Lender or the Swing Line Lender, its unparticipated portion of)
         the Effective Amount of all L/C Obligations and the principal amount of
         all Swing Line Loans. Such utilization fee shall accrue from the
         Effective Date to the Termination Date, and thereafter until all
         Committed Loans are paid in full, and shall be due and payable
         quarterly in arrears on the last Business Day of each calendar quarter,
         with the final payment to be made on the Termination Date (or, if
         later, on the date all Committed Loans and L/C Obligations are paid in
         full).

                                       25

<PAGE>

         2.10 COMPUTATION OF FEES AND INTEREST.

                  (a) All computations of interest for Base Rate Committed Loans
         (and Swing Line Loans bearing interest at the Base Rate) when the Base
         Rate is determined by BofA's "prime rate" shall be made on the basis of
         a year of 365 or 366 days, as the case may be, and actual days elapsed.
         All other computations of interest and fees shall be made on the basis
         of a 360-day year and actual days elapsed. Interest and fees shall
         accrue during each period during which such interest or such fees are
         computed from the first day thereof to the last day thereof.

                  (b) Each determination of an interest rate by the
         Administrative Agent shall be conclusive and binding on the Company and
         the Lenders in the absence of manifest error. The Administrative Agent
         will, at the request of the Company or any Lender, deliver to the
         Company or such Lender, as the case may be, a statement showing the
         quotations used by the Administrative Agent in determining any interest
         rate and the resulting interest rate.

         2.11 PAYMENTS BY THE COMPANY.

                  (a) All payments to be made by the Company shall be made
         without condition or deduction for any counterclaim, defense,
         recoupment or setoff. Except as otherwise expressly provided herein,
         all payments by the Company shall be made to the Administrative Agent
         for the account of the Lenders at the Administrative Agent's Payment
         Office, and shall be made in Dollars and in immediately available
         funds, no later than 1:00 p.m. (Chicago time) on the date specified
         herein. The Administrative Agent will promptly distribute to each
         Lender its Pro Rata Share (or other applicable share as expressly
         provided herein) of such payment in like funds as received. Any payment
         received by the Administrative Agent later than 1:00 p.m. (Chicago
         time) shall be deemed to have been received on the following Business
         Day and any applicable interest or fee shall continue to accrue.

                  (b) Whenever any payment is due on a day other than a Business
         Day, such payment shall be made on the following Business Day (unless,
         in the case of a payment with respect to an Offshore Rate Loan, the
         following Business Day is in another calendar month, in which case such
         payment shall be made on the preceding Business Day), and such
         extension of time shall in such case be included in the computation of
         interest or fees, as the case may be.

                  (c) Unless the Company has notified the Administrative Agent,
         prior to the date any payment is required to be made by it to the
         Administrative Agent hereunder, that the Company will not make such
         payment, the Administrative Agent may assume that the Company has
         timely made such payment and may (but shall not be so required to), in
         reliance thereon, make available a corresponding amount to the Person
         entitled thereto. If and to the extent that such payment was not in
         fact made to the Administrative Agent in immediately available funds,
         then, if the Company failed to make such payment, each Lender shall
         forthwith on demand repay to the Administrative Agent the portion of
         such assumed payment that was made available to such Lender in
         immediately available funds, together with interest thereon in respect
         of each day from and including the date such amount was made available
         by the Administrative Agent to such Lender to the date such amount is

                                       26

<PAGE>

         repaid to the Administrative Agent in immediately available funds at
         the Federal Funds Rate from time to time in effect. A notice of the
         Administrative Agent to the Company with respect to any amount owing
         under this subsection (c) shall be conclusive, absent manifest error.

         2.12 PAYMENTS BY THE LENDERS TO THE ADMINISTRATIVE AGENT.

                  (a) Unless the any Lender has notified the Administrative
         Agent, prior to the date any payment is required to be made by it to
         the Administrative Agent hereunder, that such Lender will not make such
         payment, the Administrative Agent may assume that such Lender has
         timely made such payment and may (but shall not be so required to), in
         reliance thereon, make available a corresponding amount to the Person
         entitled thereto. If and to the extent that such payment was not in
         fact made to the Administrative Agent in immediately available funds,
         then, if any Lender failed to make such payment, such Lender shall
         forthwith on demand pay to the Administrative Agent the amount thereof
         in immediately available funds, together with interest thereon for the
         period from the date such amount was made available by the
         Administrative Agent to the Company to the date such amount is
         recovered by the Administrative Agent (the "Compensation Period") at a
         rate per annum equal to the Federal Funds Rate from time to time in
         effect. If such Lender pays such amount to the Administrative Agent,
         then such amount shall constitute such Lender's Committed Loan included
         in the applicable Borrowing. If such Lender does not pay such amount
         forthwith upon the Administrative Agent's demand therefor, the
         Administrative Agent may make a demand therefor upon the Company, and
         the Company shall pay such amount to the Administrative Agent, together
         with interest thereon for the Compensation Period at a rate per annum
         equal to the rate of interest applicable to the applicable Borrowing.
         Nothing herein shall be deemed to relieve any Lender from its
         obligation to fulfill its Commitment or to prejudice any rights which
         the Administrative Agent or the Company may have against any Lender as
         a result of any default by such Lender hereunder. A notice of the
         Administrative Agent to any Lender with respect to any amount owing
         under this subsection (a) shall be conclusive, absent manifest error.

                  (b) The obligations of the Lenders hereunder to make Committed
         Loans and to fund participations in Letters of Credit and Swing Line
         Loans are several and not joint. The failure of any Lender to make any
         Committed Loan or to fund any such participation on any date required
         hereunder shall not relieve any other Lender of its corresponding
         obligation to do so on such date, and no Lender shall be responsible
         for the failure of any other Lender to so make its Committed Loan or
         purchase its participation.

         2.13 SHARING OF PAYMENTS, ETC.

                  (a) Except as otherwise expressly provided herein, whenever
         any payment received by the Administrative Agent to be distributed to
         the Lenders is insufficient to pay in full the amounts then due and
         payable to the Lenders, and the Administrative Agent has not received a
         Payment Sharing Notice, such payment shall be distributed to the
         Lenders (and for purposes of this Agreement shall be deemed to have
         been applied by the Lenders, notwithstanding the fact that any Lender
         may have made a different 

                                       27

<PAGE>

         application in its books and records) in the following order: FIRST, to
         the payment of reimbursement obligations of the Company in respect of
         any Letter of Credit; SECOND, to the payment of the principal amount of
         the Loans which is then due and payable, ratably among the Lenders in
         accordance with the aggregate principal amount owed to each Lender;
         THIRD, to the payment of interest then due and payable on the Loans and
         on the reimbursement obligations in respect of Letters of Credit,
         ratably among the Lenders in accordance with the aggregate amount of
         interest owed to each Lender; FOURTH, to the payment of the facility
         fees and utilization fees payable under SUBSECTIONS 2.9(B) and (C) and
         letter of credit fees payable under SECTION 3.8, ratably among the
         Lenders in accordance with the amount of such fees owed to each Lender;
         and FIFTH, to the payment of any other amount payable under this
         Agreement, ratably among the Lenders in accordance with the aggregate
         amount owed to each Lender.

                  (b) After the Administrative Agent has received a Payment
         Sharing Notice, and for so long thereafter as any Event of Default
         exists, all payments received by the Administrative Agent to be
         distributed to the Lenders shall be distributed to the Lenders (and for
         purposes of this Agreement shall be deemed to have been applied by the
         Lenders, notwithstanding the fact that any Lender may have made a
         different application in its books and records) in the following order:
         FIRST, to the payment of amounts payable under SECTIONS 11.4 and 11.5,
         ratably among the Lenders in accordance with the aggregate amount owed
         to each Lender; SECOND, to the payment of facility fees and utilization
         fees payable under SUBSECTIONS 2.9(B) and (C) and letter of credit fees
         payable under SECTION 3.8, ratably among the Lenders in accordance with
         the amount of such fees owed to each Lender; THIRD, to the payment of
         the interest accrued on and the principal amount of all of the Loans
         and reimbursement obligations (including contingent reimbursement
         obligations) regardless of whether any such amount is then due and
         payable, ratably among the Lenders in accordance with the aggregate
         accrued interest plus the aggregate principal amount owed to each
         Lender; and FOURTH, to the payment of any other amount payable under
         this Agreement, ratably among the Lenders in accordance with the
         aggregate amount owed to each Lender.

                  (c) If, other than as expressly provided elsewhere herein, any
         Lender shall obtain any payment or other recovery (whether voluntary,
         involuntary, through the exercise of any right of set-off, or
         otherwise) on account of principal of or interest on any Loan, or any
         other amount payable hereunder, in excess of the share of payments and
         other recoveries such Lender would have received if such payment or
         other recovery had been distributed pursuant to the provisions of
         SUBSECTION 2.13(A) or (B) (whichever is applicable at the time of such
         payment or other recovery), such Lender shall immediately (i) notify
         the Administrative Agent of such fact and (ii) purchase from the other
         Lenders such participations in the Loans made by (or other Obligations
         owed to) them as shall be necessary to cause such purchasing Lender to
         share the excess payment or other recovery pro rata with each of them
         in accordance with the order of payments set forth in SUBSECTION
         2.13(A) or (B), as the case may be; PROVIDED that if all or any portion
         of such excess payment or other recovery is thereafter recovered from
         the purchasing Lender, such purchase shall to that extent be rescinded
         and each other Lender shall repay to the purchasing Lender the purchase
         price paid therefor, together with an amount equal to such paying
         Lender's ratable share (according to the proportion of (i) the amount

                                       28

<PAGE>

         of such paying Lender's required repayment to (ii) the total amount so
         recovered from the purchasing Lender) of any interest or other amount
         paid or payable by the purchasing Lender in respect of the total amount
         so recovered. The Company agrees that any Lender so purchasing a
         participation from another Lender may, to the fullest extent permitted
         by law, exercise all its rights of payment (including the right of
         set-off, but subject to SECTION 11.10) with respect to such
         participation as fully as if such Lender were the direct creditor of
         the Company in the amount of such participation. The Administrative
         Agent will keep records (which shall be conclusive and binding in the
         absence of manifest error) of participations purchased under this
         Section and will in each case notify the Lenders following any such
         purchases or repayments.

                  (d) Any amount that would be applied to a contingent
         obligation of the Company in respect of a Letter of Credit under CLAUSE
         THIRD of SUBSECTION 2.13(B) shall be held by the Administrative Agent
         as Cash Collateral hereunder. If such Letter of Credit is thereafter
         drawn upon, the Administrative Agent shall pay the applicable Issuing
         Lender an amount equal to the lesser of the amount of such drawing and
         the amount of the funds so held as Cash Collateral for such Letter of
         Credit. If and to the extent that such Letter of Credit expires or
         terminates (or the maximum amount available for drawing thereunder is
         reduced), the funds so held as Cash Collateral for such Letter of
         Credit (or the portion thereof in excess of the maximum amount
         available for drawing thereunder) shall be applied by the
         Administrative Agent as set forth in SUBSECTION 2.13(A) or 2.13(B), as
         applicable.

         2.14 SWING LINE COMMITMENT. Subject to the terms and conditions of this
Agreement, the Swing Line Lender agrees to make loans to the Company on a
revolving basis (each such loan, a "Swing Line Loan") from time to time on any
Business Day during the period from the Effective Date to the Termination Date
in an aggregate principal amount at any one time outstanding not to exceed
$25,000,000; PROVIDED that after giving effect to any proposed Swing Line Loan,
the Total Outstandings shall not exceed the combined Commitments.

         2.15 BORROWING PROCEDURES FOR SWING LINE LOANS. The Company shall
provide a Notice of Swing Line Loan or telephonic notice (followed by a
confirming Notice of Swing Line Loan) of a proposed Swing Line Loan to the
Administrative Agent and the Swing Line Lender not later than 12:00 noon
(Chicago time) on the proposed Borrowing Date. Each such notice shall be
effective upon receipt by the Administrative Agent and the Swing Line Lender and
shall specify the date and the principal amount of such Swing Line Loan. Unless
the Swing Line Lender has received written notice prior to 12:00 noon (Chicago
time) on the proposed Borrowing Date from the Administrative Agent or any Lender
that one or more of the conditions precedent set forth in ARTICLE V with respect
to such Swing Line Loan is not then satisfied, the Swing Line Lender shall pay
over the requested principal amount to the Company on the requested Borrowing
Date in immediately available funds. Each Swing Line Loan shall be made on a
Business Day and shall be in the amount of $1,000,000 or an integral multiple
thereof. The Swing Line Lender will promptly notify the Administrative Agent of
the making and amount of each Swing Line Loan.

                                       29

<PAGE>

         2.16 PREPAYMENT OR REFUNDING OF SWING LINE LOANS.

                  (a) The Company may, at any time and from time to time, prepay
         any Swing Line Loan in whole or in part, in an amount equal to
         $1,000,000 or an integral multiple thereof. The Company shall deliver a
         notice of prepayment in accordance with SECTION 11.2 to be received by
         the Administrative Agent and the Swing Line Lender not later than 11:00
         a.m. (Chicago time) on the Business Day of such prepayment, specifying
         the date and amount of such prepayment. If such notice is given by the
         Company, the payment amount specified in such notice shall be due and
         payable on the date specified therein.

                  (b) The Swing Line Lender may, at any time in its sole and
         absolute discretion, on behalf of the Company (which hereby irrevocably
         directs the Swing Line Lender to act on its behalf), request each
         Lender to make a Committed Loan in an amount equal to such Lender's Pro
         Rata Share of the principal amount of the Swing Line Loans outstanding
         on the date such notice is given. Unless any of the events described in
         SUBSECTION 9.1(F) or (G) shall have occurred (in which event the
         procedures of SECTION 2.17 shall apply), and regardless of whether the
         conditions precedent set forth in this Agreement to the making of
         Committed Loans are then satisfied or the aggregate amount of such
         Committed Loans is not in the minimum or integral amount otherwise
         required hereunder, each Lender shall make the proceeds of its
         Committed Loan available to the Administrative Agent for the account of
         the Swing Line Lender at the Administrative Agent's Payment Office
         prior to 12:00 noon (Chicago time) in immediately available funds on
         the Business Day next succeeding the date such notice is given. The
         proceeds of such Committed Loans shall be immediately applied to repay
         the outstanding Swing Line Loans. All Committed Loans made pursuant to
         this SECTION 2.16 shall be Base Rate Committed Loans (but, subject to
         the other provisions of this Agreement, may be converted to Offshore
         Rate Loans).

         2.17 PARTICIPATIONS IN SWING LINE LOANS.

                  (a) If an event described in SUBSECTION 9.1(F) or (G) exists
         (or for any reason the Lenders may not make Committed Loans pursuant to
         SECTION 2.16), each Lender will, upon notice from the Administrative
         Agent, purchase from the Swing Line Lender (and the Swing Line Lender
         will sell to each Lender) an undivided participation interest in all
         outstanding Swing Line Loans in an amount equal to its Pro Rata Share
         of the outstanding principal amount of the Swing Line Loans (and each
         Lender will immediately transfer to the Administrative Agent, for the
         account of the Swing Line Lender, in immediately available funds, the
         amount of its participation).

                  (b) Whenever, at any time after the Swing Line Lender has
         received payment for any Lender's participation interest in the Swing
         Line Loans pursuant to SUBSECTION 2.17(A), the Swing Line Lender
         receives any payment on account thereof, the Swing Line Lender will
         distribute to the Administrative Agent for the account of such Lender
         its participation interest in such amount (appropriately adjusted, in
         the case of interest payments, to reflect the period of time during
         which such Lender's participation interest was outstanding and funded)
         in like funds as received; PROVIDED, HOWEVER, that in the event that
         such payment received by the Swing Line Lender is required to be
         returned, such Lender will return to the Administrative Agent for the
         account of the Swing Line 

                                       30

<PAGE>

         Lender any portion thereof previously distributed by the Swing Line
         Lender to it in like funds as such payment is required to be returned
         by the Swing Line Lender.

         2.18 PARTICIPATION OBLIGATIONS UNCONDITIONAL.

                  (a) Each Lender's obligation to make Committed Loans pursuant
         to SECTION 2.16 and/or to purchase participation interests in Swing
         Line Loans pursuant to SECTION 2.17 shall be absolute and unconditional
         and shall not be affected by any circumstance whatsoever, including (a)
         any set-off, counterclaim, recoupment, defense or other right which
         such Lender may have against the Swing Line Lender, the Company or any
         other Person for any reason whatsoever; (b) the occurrence or
         continuance of an Event of Default or Unmatured Event of Default; (c)
         any adverse change in the condition (financial or otherwise) of the
         Company or any other Person; (d) any breach of this Agreement or any
         other Loan Document by the Company or any other Person; (e) any
         inability of the Company to satisfy the conditions precedent to
         borrowing set forth in this Agreement on the date upon which any such
         Loan is to be made or any participation interest therein is to be
         purchased; or (f) any other circumstance, happening or event
         whatsoever, whether or not similar to any of the foregoing.

                  (b) Notwithstanding the provisions of SUBSECTION 2.18(A), no
         Lender shall be required to make any Committed Loan to the Company to
         refund a Swing Line Loan pursuant to SECTION 2.16 or to purchase a
         participation interest in a Swing Line Loan pursuant to SECTION 2.17
         if, prior to the making by the Swing Line Lender of such Swing Line
         Loan, the Swing Line Lender received written notice from any Lender
         specifying that such Lender believed in good faith that one or more of
         the conditions precedent to the making of such Swing Line Loan were not
         satisfied and, in fact, such conditions precedent were not satisfied at
         the time of the making of such Swing Line Loan; provided that the
         obligation of such Lender to make such Committed Loans and to purchase
         such participation interests shall be reinstated upon the earlier to
         occur of (i) the date on which such Lender notifies the Swing Line
         Lender that its prior notice has been withdrawn and (ii) the date on
         which all conditions precedent to the making of such Swing Line Loan
         have been satisfied (or waived by the Required Lenders or all Lenders,
         as applicable).

         2.19 CONDITIONS TO SWING LINE LOANS. Notwithstanding any other
provision of this Agreement, the Swing Line Lender shall not be obligated to
make any Swing Line Loan if an Event of Default or Unmatured Event of Default
exists or would result therefrom.

                                  ARTICLE III

                              THE LETTERS OF CREDIT

         3.1 THE LETTER OF CREDIT SUBFACILITY.

                  (a) Subject to the terms and conditions set forth herein, (i)
         each Issuing Lender agrees, in reliance upon the agreements of the
         other Lenders set forth in this ARTICLE III, (A) from time to time on
         any Business Day during the period from the Effective Date to the date
         which is seven Business Days prior to the Termination Date to Issue

                                       31

<PAGE>

         standby Letters of Credit for the account of the Company, and to amend
         or renew standby Letters of Credit previously issued by it, in
         accordance with SUBSECTIONS 3.2(C) and 3.2(D), and (B) to honor
         properly drawn drafts under the Letters of Credit issued by it; and
         (ii) the Lenders severally agree to participate in standby Letters of
         Credit Issued for the account of the Company; provided that no Issuing
         Lender shall be obligated to Issue, and (subject to SECTION 3.2(b)) no
         Lender shall be obligated to participate in, any Letter of Credit if as
         of the date of Issuance of such Letter of Credit (the "Issuance Date")
         (1) the Total Outstandings exceed the combined Commitments, (2) the
         Effective Amount of all L/C Obligations would exceed the L/C Commitment
         or (3) the participation of any Lender in the Effective Amount of all
         L/C Obligations plus the participation of such Lender in the principal
         amount of all outstanding Swing Line Loans plus the outstanding
         principal amount of the Committed Loans of such Lender would exceed
         such Lender's Commitment. Within the foregoing limits, and subject to
         the other terms and conditions hereof, the Company's ability to obtain
         Letters of Credit shall be fully revolving, and, accordingly, the
         Company may, during the foregoing period, obtain Letters of Credit to
         replace Letters of Credit which have expired or which have been drawn
         upon and reimbursed.

                  (b) No Issuing Lender shall be under any obligation to Issue
         any Letter of Credit if:

                                    (i) any order, judgment or decree of any
                  Governmental Authority or arbitrator shall by its terms
                  purport to enjoin or restrain such Issuing Lender from Issuing
                  such Letter of Credit, or any Requirement of Law applicable to
                  such Issuing Lender or any request or directive (whether or
                  not having the force of law) from any Governmental Authority
                  with jurisdiction over such Issuing Lender shall prohibit, or
                  request that such Issuing Lender refrain from, the Issuance of
                  letters of credit generally or such Letter of Credit in
                  particular or shall impose upon such Issuing Lender with
                  respect to such Letter of Credit any restriction, reserve or
                  capital requirement (for which such Issuing Lender is not
                  otherwise compensated hereunder) not in effect on the
                  Effective Date, or shall impose upon such Issuing Lender any
                  unreimbursed loss, cost or expense which was not applicable on
                  the Effective Date and which such Issuing Lender in good faith
                  deems material to it (it being understood that the applicable
                  Issuing Lender shall promptly notify the Company and the
                  Administrative Agent of any of the foregoing events or
                  circumstances);

                                    (ii) such Issuing Lender has received
                  written notice from any Lender, the Administrative Agent or
                  the Company, on or prior to the Business Day immediately
                  preceding the requested date of Issuance of such Letter of
                  Credit, that one or more of the applicable conditions
                  contained in ARTICLE V is not then satisfied;

                                    (iii) the expiry date of such requested
                  Letter of Credit is after the earlier of the seventh Business
                  Day prior to the Termination Date or the eighteen month
                  anniversary of its issuance (subject to periodic extensions

                                       32

<PAGE>

                  for periods not to exceed one year), unless all of the Lenders
                  have approved such expiry date in writing; or

                                    (iv) such Letter of Credit does not provide
                  for drafts, or is not otherwise in form and substance
                  acceptable to such Issuing Lender, or the Issuance of a Letter
                  of Credit would violate any applicable policies of such
                  Issuing Lender;

                                    (v) such Letter of Credit is denominated in
                  a currency other than Dollars, or, in the case of BofA only,
                  in a currency other than Dollars or Canadian Dollars.

                  (c) On the terms and conditions set forth herein, BofA may
         Issue upon request and for the account of the Company a standby
         Canadian L/C. For purposes of determining L/C Obligations, any Canadian
         L/C shall be recorded in the Administrative Agent's account in Dollars
         based on the Dollar Equivalent Amount on the date of issuance of such
         Canadian L/C; PROVIDED, HOWEVER, that the Administrative Agent shall
         determine the Dollar Equivalent Amount of any Canadian L/C on the
         Valuation Date for the purpose of determining L/C Obligations. Any draw
         on a Canadian L/C shall be repaid in Canadian Dollars in an amount
         equal to the amount of the draw in Canadian Dollars. If at any time
         there is a drawing under a Canadian L/C and the Company shall not
         promptly reimburse such drawing as provided in SECTION 3.3, the Company
         shall be obligated to immediately repay to the Administrative Agent for
         the benefit of the Lenders an amount in Dollars equal to the Dollar
         Equivalent Amount of the Canadian Dollars paid by BofA to the
         beneficiary of such Canadian L/C on the date of such drawing.

         3.2 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.

                  (a) Each Letter of Credit shall be issued or amended, as the
         case may be, upon the request of the Company delivered to the
         applicable Issuing Lender (with a copy to the Administrative Agent) in
         the form of a L/C Application, appropriately completed and signed by a
         Responsible Officer of the Company. Such L/C Application must be
         received by the applicable Issuing Lender and the Administrative Agent
         not later than 11:00 a.m. at least two Business Days (or such later
         date and time as the applicable Issuing Lender may agree in a
         particular instance in its sole discretion) prior to the proposed
         issuance date or date of amendment, as the case may be. In the case of
         a request for an initial issuance of a Letter of Credit, such L/C
         Application shall specify in form and detail satisfactory to the
         applicable Issuing Lender: (A) the proposed issuance date of the
         requested Letter of Credit (which shall be a Business Day); (B) the
         amount thereof; (C) the expiry date thereof; (D) the name and address
         of the beneficiary thereof; (E) the documents to be presented by such
         beneficiary in case of any drawing thereunder; (F) the full text of any
         certificate to be presented by such beneficiary in case of any drawing
         thereunder; and (G) such other matters as the applicable Issuing Lender
         may require. In the case of a request for an amendment of any
         outstanding Letter of Credit, such L/C Application shall specify in
         form and detail satisfactory to the applicable Issuing Lender (A) the
         Letter of Credit to be amended; (B) the proposed date of 

                                       33

<PAGE>

         amendment thereof (which shall be a Business Day); (C) the nature of
         the proposed amendment; and (D) such other matters as the applicable
         Issuing Lender may require.

                  (b) Promptly after receipt of any L/C Application or L/C
         Amendment Application, the applicable Issuing Lender will confirm with
         the Administrative Agent (by telephone or in writing) that the
         Administrative Agent has received a copy of such L/C Application or L/C
         Amendment Application from the Company, and, if not, the applicable
         Issuing Lender will provide the Administrative Agent with a copy
         thereof. Upon receipt by the applicable Issuing Lender of confirmation
         from the Administrative Agent that the requested issuance or amendment
         is permitted in accordance with the terms hereof, then, subject to the
         terms and conditions hereof, the applicable Issuing Lender shall, on
         the requested date, issue a Letter of Credit for the account of the
         Company or enter into the applicable amendment, as the case may be, in
         each case in accordance with such Issuing Lender's usual and customary
         business practices. Immediately upon the issuance of each Letter of
         Credit, each Lender shall be deemed to, and hereby irrevocably and
         unconditionally agrees to, purchase from the applicable Issuing Lender
         a risk participation in such Letter of Credit in an amount equal to the
         product of such Lender's Pro Rata Share times the amount of such Letter
         of Credit.
                  (c) If the Company so requests in any applicable L/C
         Application, the applicable Issuing Lender may, in its sole and
         absolute discretion, agree to issue a Letter of Credit that has
         automatic renewal provisions (each, an "Auto-Renewal Letter of
         Credit"); PROVIDED that any such Auto-Renewal Letter of Credit must
         permit the applicable Issuing Lender to prevent any such renewal at
         least once in each twelve-month period (commencing with the date of
         Issuance of such Letter of Credit) by giving prior notice to the
         beneficiary thereof not later than a day (the "Nonrenewal Notice Date")
         in each such twelve-month period to be agreed upon at the time such
         Letter of Credit is Issued. Unless otherwise directed by the applicable
         Issuing Lender, the Company shall not be required to make a specific
         request to the applicable Issuing Lender for any such renewal. Once an
         Auto-Renewal Letter of Credit has been issued, the Lenders shall be
         deemed to have authorized (but may not require) the applicable Issuing
         Lender to permit the renewal of such Letter of Credit at any time to an
         expiry date not later than seven Business Days prior to the Termination
         Date; provided, however, that the applicable Issuing Lender shall not
         permit any such renewal if (A) the applicable Issuing Lender has
         determined that it would have no obligation at such time to issue such
         Letter of Credit in its renewed form under the terms hereof (by reason
         of the provisions of SECTION 3.1(B) or otherwise), or (B) it has
         received notice (which may be by telephone or in writing) on or before
         the day that is two Business Days before the Nonrenewal Notice Date (1)
         from the Administrative Agent that the Required Lenders have elected
         not to permit such renewal or (2) from the Administrative Agent, any
         Lender or the Company that one or more of the applicable conditions
         specified in SECTION 5.2 is not then satisfied.

                  (d) Promptly after its delivery of any Letter of Credit or any
         amendment to a Letter of Credit to an advising bank with respect
         thereto or to the beneficiary thereof, the applicable Issuing Lender
         will also deliver to the Company and the Administrative Agent a true
         and complete copy of such Letter of Credit or amendment.

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<PAGE>

         3.3 RISK PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS.

                  (a) Upon receipt from the beneficiary of any Letter of Credit
         of any notice of a drawing under such Letter of Credit, the applicable
         Issuing Lender shall notify the Company and the Administrative Agent
         thereof. Not later than 11:00 a.m. on the date of any payment by the
         applicable Issuing Lender under a Letter of Credit (each such date, an
         "HONOR DATE"), the Company shall reimburse the applicable Issuing
         Lender through the Administrative Agent in an amount equal to the
         amount of such drawing. If the Company fails to so reimburse the
         applicable Issuing Lender by such time, the Administrative Agent shall
         promptly notify each Lender of the Honor Date, the amount of the
         unreimbursed drawing (the "UNREIMBURSED AMOUNT"), and the amount of
         such Lender's Pro Rata Share thereof. In such event, the Company shall
         be deemed to have requested a Committed Borrowing of Base Rate
         Committed Loans to be disbursed on the Honor Date in an amount equal to
         the Unreimbursed Amount, without regard to the minimum and multiples
         specified in SECTION 2.3 for the principal amount of Base Rate
         Committed Loans, but subject to the amount of the unutilized portion of
         the combined Commitments and the conditions set forth in SECTION 5.2
         (other than the delivery of a Notice of Committed Borrowing). Any
         notice given by the applicable Issuing Lender or the Administrative
         Agent pursuant to this SECTION 3.03(A) may be given by telephone if
         immediately confirmed in writing; PROVIDED that the lack of such an
         immediate confirmation shall not affect the conclusiveness or binding
         effect of such notice

                  (b) Each Lender (including the Lender acting as applicable
         Issuing Lender) shall upon any notice pursuant to SECTION 3.3(A) make
         funds available to the Administrative Agent for the account of the
         applicable Issuing Lender at the Administrative Agent's Payment Office
         in an amount equal to its Pro Rata Share of the Unreimbursed Amount not
         later than 1:00 p.m. on the Business Day specified in such notice by
         the Administrative Agent, whereupon, subject to the provisions of
         SECTION 3.3(C), each Lender that so makes funds available shall be
         deemed to have made a Base Rate Committed Loan to the Company in such
         amount. The Administrative Agent shall remit the funds so received to
         the applicable Issuing Lender.

                  (c) With respect to any Unreimbursed Amount that is not fully
         refinanced by a Committed Borrowing of Base Rate Committed Loans
         because the conditions set forth in SECTION 5.2 cannot be satisfied or
         for any other reason, the Company shall be deemed to have incurred from
         the applicable Issuing Lender an L/C Borrowing in the amount of the
         Unreimbursed Amount that is not so refinanced, which L/C Borrowing
         shall be due and payable on demand (together with interest) and shall
         bear interest at the rate set forth in SECTION 2.8(C). In such event,
         each Lender's payment to the Administrative Agent for the account of
         the applicable Issuing Lender pursuant to SECTION 3.3(B) shall be
         deemed payment in respect of its participation in such L/C Borrowing
         and shall constitute an L/C Advance from such Lender in satisfaction of
         its participation obligation under this ARTICLE III.

                  (d) Until each Lender funds its Committed Loan or L/C Advance
         pursuant to this SECTION 3.3 to reimburse the applicable Issuing Lender
         for any amount drawn under 

                                       35

<PAGE>

         any Letter of Credit, interest in respect of such Lender's Pro Rata
         Share of such amount shall be solely for the account of the applicable
         Issuing Lender.

                  (e) Each Lender's obligation to make Committed Loans or L/C
         Advances to reimburse the applicable Issuing Lender for amounts drawn
         under Letters of Credit, as contemplated by this SECTION 3.3, shall be
         absolute and unconditional and shall not be affected by any
         circumstance, including (A) any set-off, counterclaim, recoupment,
         defense or other right which such Lender may have against the
         applicable Issuing Lender, the Company or any other Person for any
         reason whatsoever; (B) the occurrence or continuance of an Unmatured
         Event of Default, or (C) any other occurrence, event or condition,
         whether or not similar to any of the foregoing; PROVIDED, HOWEVER, that
         each Lender's obligation to make Committed Loans pursuant to this
         SECTION 3.3 is subject to the conditions set forth in SECTION 5.2
         (other than delivery by the Company of a Notice of Committed
         Borrowing). No such making of an L/C Advance shall relieve or otherwise
         impair the obligation of the Company to reimburse the applicable
         Issuing Lender for the amount of any payment made by the applicable
         Issuing Lender under any Letter of Credit, together with interest as
         provided herein.

                  (f) If any Lender fails to make available to the
         Administrative Agent for the account of the applicable Issuing Lender
         any amount required to be paid by such Lender pursuant to the foregoing
         provisions of this SECTION 3.3 by the time specified in SECTION 3.3(B),
         the applicable Issuing Lender shall be entitled to recover from such
         Lender (acting through the Administrative Agent), on demand, such
         amount with interest thereon for the period from the date such payment
         is required to the date on which such payment is immediately available
         to the applicable Issuing Lender at a rate per annum equal to the
         Federal Funds Rate from time to time in effect. A certificate of the
         applicable Issuing Lender submitted to any Lender (through the
         Administrative Agent) with respect to any amounts owing under this
         subsection (f) shall be conclusive absent manifest error.

         3.4 REPAYMENT OF PARTICIPATIONS.

                  (a) At any time after the applicable Issuing Lender has made a
         payment under any Letter of Credit and has received from any Lender
         such Lender's L/C Advance in respect of such payment in accordance with
         SECTION 3.3, if the Administrative Agent receives for the account of
         the applicable Issuing Lender any payment in respect of the related
         Unreimbursed Amount or interest thereon (whether directly from the
         Company or otherwise, including proceeds of cash collateral applied
         thereto by the Administrative Agent), the Administrative Agent will
         distribute to such Lender its Pro Rata Share thereof (appropriately
         adjusted, in the case of interest payments, to reflect the period of
         time during which such Lender's L/C Advance was outstanding) in the
         same funds as those received by the Administrative Agent.

                  (b) If any payment received by the Administrative Agent for
         the account of the applicable Issuing Lender pursuant to SECTION 3.3(A)
         is required to be returned under any of the circumstances described in
         SECTION 11.6 (including pursuant to any settlement entered into by the
         applicable Issuing Lender in its discretion), each Lender shall pay to
         the Administrative Agent for the account of the applicable Issuing
         Lender its Pro Rata 

                                       36

<PAGE>

         Share thereof on demand of the Administrative Agent, plus interest
         thereon from the date of such demand to the date such amount is
         returned by such Lender, at a rate per annum equal to the Federal Funds
         Rate from time to time in effect.

         3.5 ROLE OF THE ISSUING LENDERS. Each Lender and the Company agree
that, in paying any drawing under a Letter of Credit, the applicable Issuing
Lender shall not have any responsibility to obtain any document (other than any
sight draft, certificates and documents expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such
document. None of the applicable Issuing Lender, any Agent-Related Person nor
any of the respective correspondents, participants or assignees of the
applicable Issuing Lender shall be liable to any Lender for (i) any action taken
or omitted in connection herewith at the request or with the approval of the
Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted
in the absence of gross negligence or willful misconduct; or (iii) the due
execution, effectiveness, validity or enforceability of any document or
instrument related to any Letter of Credit or L/C Application. The Company
hereby assumes all risks of the acts or omissions of any beneficiary or
transferee with respect to its use of any Letter of Credit; PROVIDED, HOWEVER,
that this assumption is not intended to, and shall not, preclude the Company's
pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. None of the applicable Issuing
Lender, any Agent-Related Person, nor any of the respective correspondents,
participants or assignees of the applicable Issuing Lender, shall be liable or
responsible for any of the matters described in clauses (i) through (v) of
SECTION 3.6; PROVIDED, HOWEVER, that anything in such clauses to the contrary
notwithstanding, the Company may have a claim against the applicable Issuing
Lender, and the applicable Issuing Lender may be liable to the Company, to the
extent, but only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by the Company which the Company proves were caused
by the applicable Issuing Lender's willful misconduct or gross negligence or the
Applicable Issuing Lender's willful failure to pay under any Letter of Credit
after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing, the applicable
Issuing Lender may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary, and the applicable Issuing Lender shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.

         3.6 OBLIGATIONS ABSOLUTE. The obligation of the Company to reimburse
the applicable Issuing Lender for each drawing under each Letter of Credit and
to repay each L/C Borrowing shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances, including the following:

         (i) any lack of validity or enforceability of such Letter of Credit,
         this Agreement, or any other agreement or instrument relating thereto;

         (ii) the existence of any claim, counterclaim, set-off, defense or
         other right that the Company may have at any time against any
         beneficiary or any transferee of such 

                                       37

<PAGE>

         Letter of Credit (or any Person for whom any such beneficiary or any
         such transferee may be acting), the applicable Issuing Lender or any
         other Person, whether in connection with this Agreement, the
         transactions contemplated hereby or by such Letter of Credit or any
         agreement or instrument relating thereto, or any unrelated transaction;

         (iii) any draft, demand, certificate or other document presented under
         such Letter of Credit proving to be forged, fraudulent, invalid or
         insufficient in any respect or any statement therein being untrue or
         inaccurate in any respect; or any loss or delay in the transmission or
         otherwise of any document required in order to make a drawing under
         such Letter of Credit;

         (iv) any payment by the applicable Issuing Lender under such Letter of
         Credit against presentation of a draft or certificate that does not
         strictly comply with the terms of such Letter of Credit; or any payment
         made by the applicable Issuing Lender under such Letter of Credit to
         any Person purporting to be a trustee in bankruptcy,
         debtor-in-possession, assignee for the benefit of creditors,
         liquidator, receiver or other representative of or successor to any
         beneficiary or any transferee of such Letter of Credit, including any
         arising in connection with any proceeding under any insolvency law; or

         (v) any other circumstance or happening whatsoever, whether or not
         similar to any of the foregoing, including any other circumstance that
         might otherwise constitute a defense available to, or a discharge of,
         the Company.

The Company shall promptly examine a copy of each Letter of Credit and each
amendment thereto that is delivered to it and, in the event of any claim of
noncompliance with the Company's instructions or other irregularity, the Company
will immediately notify the applicable Issuing Lender. The Company shall be
conclusively deemed to have waived any such claim against the applicable Issuing
Lender and its correspondents unless such notice is given as aforesaid.

         3.7 CASH COLLATERAL PLEDGE. Upon the request of the Administrative
Agent, (i) if the applicable Issuing Lender has honored any full or partial
drawing request under any Letter of Credit and such drawing has resulted in an
L/C Borrowing, or (ii) if, as of the date which is seven Business Days prior to
the Termination Date, any Letter of Credit may for any reason remain outstanding
and partially or wholly undrawn, the Company shall immediately Cash
Collateralize the then outstanding amount of all L/C Obligations (in an amount
equal to such outstanding amount determined as of the date of such L/C Borrowing
or the date which is seven Business Days prior to the Termination Date, as the
case may be). For purposes hereof, "Cash Collateralize" means to pledge and
deposit with or deliver to the Administrative Agent, for the benefit of the
applicable Issuing Lender and the Lenders, as collateral for the L/C
Obligations, cash or deposit account balances pursuant to documentation in form
and substance reasonably satisfactory to the Administrative Agent and the
applicable Issuing Lender (which documents are hereby consented to by the
Lenders). Derivatives of such term have corresponding meanings. The Company
hereby grants to the Administrative Agent, for the benefit of the Issuing
Lenders and the Lenders, a security interest in all such cash, deposit accounts

                                       38

<PAGE>

and all balances therein and all proceeds of the foregoing. Cash collateral
shall be maintained in blocked, non-interest bearing deposit accounts at BofA.

         3.8 LETTER OF CREDIT FEES.

                  (a) The Company shall pay to the Administrative Agent for the
         account of each Lender a letter of credit fee with respect to each
         Letter of Credit equal to the L/C Fee Rate (plus, upon notice from the
         Administrative Agent (acting at the request or with the consent of the
         Required Lenders) during the existence of an Event of Default, and for
         so long as such Event of Default shall continue, 2%) per annum of the
         average daily maximum amount available to be drawn on such Letter of
         Credit or in the case of a Canadian L/C the Dollar Equivalent Amount of
         such average daily maximum amount, computed on a quarterly basis in
         arrears on the last Business Day of each calendar quarter and on the
         Termination Date (or such later date on which such Letter of Credit
         shall expire or be fully drawn).

                  (b) The letter of credit fees payable under SUBSECTION 3.8(A)
         shall be due and payable quarterly in arrears on the last Business Day
         of each calendar quarter during which Letters of Credit are
         outstanding, commencing on the first such quarterly date to occur after
         the Effective Date, through the Termination Date (or such later date
         upon which all outstanding Letters of Credit shall expire or be fully
         drawn), with the final payment to be made on the Termination Date (or
         such later date).

                  (c) The Company shall pay to each Issuing Lender a letter of
         credit fronting fee of 1/8 of 1% per annum (0.125%) of the average
         daily maximum amount available to be drawn on each outstanding Letter
         of Credit issued by such Issuing Lender or in the case of a Canadian
         L/C the Dollar Equivalent Amount of such average daily maximum amount.
         Such fronting fee shall be due and payable in full by the Company to
         the applicable Issuing Lenders, with respect to each Letter of Credit,
         quarterly in advance on the last Business Day of each calendar quarter
         with respect to each Letter of Credit, commencing on the first such
         quarterly date to occur following the date of issuance (or renewal) of
         such Letter of Credit through the Termination Date (or such later date
         upon which such outstanding Letter of Credit shall expire or be fully
         drawn), with the final payment to be made on the Termination Date (or
         such later date).

                  (d) The Company shall pay to each Issuing Lender from time to
         time on demand the normal issuance, presentation, amendment and other
         processing fees, and other standard costs and charges, of such Issuing
         Lender relating to letters of credit as from time to time in effect.

         3.9 APPLICABILITY OF ISP98 AND UCP. Unless otherwise expressly agreed
by the applicable Issuing Lender and the Company when a Letter of Credit is
issued (including any such agreement applicable to an Existing Letter of
Credit), (i) the rules of the "International Standby Practices 1998" published
by the Institute of International Banking Law & Practice (or such later version
thereof as may be in effect at the time of issuance) shall apply to each standby
Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for
Documentary Credits, as most recently published by the International Chamber of
Commerce (the "ICC") at the time of 

                                       39

<PAGE>

issuance (including the ICC decision published by the Commission on Banking
Technique and Practice on April 6, 1998 regarding the European single currency
(euro)) shall apply to each commercial Letter of Credit.

                                   ARTICLE IV

                     TAXES, YIELD PROTECTION AND ILLEGALITY

         4.1 TAXES.

                  (a) Any and all payments by the Company to each Lender or the
         Administrative Agent under this Agreement and any other Loan Document
         shall be made free and clear of, and without deduction or withholding
         for, any Taxes. In addition, the Company shall pay all Other Taxes and
         Further Taxes.

                  (b) If the Company shall be required by law to deduct or
         withhold any Taxes, Other Taxes or Further Taxes from or in respect of
         any sum payable hereunder to any Lender or the Administrative Agent,
         then:

                                    (i) the sum payable shall be increased as
                  necessary so that, after making all required deductions and
                  withholdings (including deductions and withholdings applicable
                  to additional sums payable under this Section), such Lender or
                  the Administrative Agent, as the case may be, receives and
                  retains an amount equal to the sum it would have received and
                  retained had no such deductions or withholdings been made;

                                    (ii) the Company shall make such deductions 
                  and withholdings; and

                                    (iii) the Company shall pay the full amount
                  deducted or withheld to the relevant taxing authority or other
                  authority in accordance with applicable law.

                  (c) The Company agrees to indemnify and hold harmless each
         Lender and the Administrative Agent for the full amount of Taxes, Other
         Taxes and Further Taxes in the amount that such Lender specifies as
         necessary to preserve the after-tax yield such Lender would have
         received if such Taxes, Other Taxes or Further Taxes had not been
         imposed, and any liability (including penalties, interest, additions to
         tax and expenses) arising therefrom or with respect thereto, whether or
         not such Taxes, Other Taxes or Further Taxes were correctly or legally
         asserted. Payment under this indemnification shall be made within 30
         days after the date such Lender or the Administrative Agent makes
         written demand therefor.

                  (d) Within 30 days after the date of any payment by the
         Company of any Taxes, Other Taxes or Further Taxes, the Company shall
         furnish each applicable Lender and the Administrative Agent the
         original or a certified copy of a receipt evidencing payment thereof,
         or other evidence of payment satisfactory to such Lender and the
         Administrative Agent.

                                       40

<PAGE>

                  (e) Notwithstanding the foregoing provisions of this SECTION
         4.1, (i) if any Lender fails to notify the Company of any event or
         circumstance which will entitle such Lender to compensation pursuant to
         this SECTION 4.1 within 60 days after such Lender obtains knowledge of
         such event or circumstance, then such Lender shall not be entitled to
         compensation from the Company for any amount arising prior to the date
         which is 60 days before the date on which such Lender notifies the
         Company of such event or circumstance; and (ii) the Company shall not
         be required to pay an additional amount to, or to indemnify, any Lender
         pursuant to this SECTION 4.1 to the extent that (x) the obligation to
         withhold or pay such amount existed on the Initial Date (as defined
         below) or (y) the obligation to withhold or pay such amount would not
         have arisen but for the failure of such Lender to comply with the
         provisions of SECTION 10.10 of this Agreement. For purposes of CLAUSE
         (II) of the foregoing sentence "Initial Date" means (A) in the case of
         any Lender that is a signatory hereto, the date of this Agreement, (B)
         in the case of any Person which subsequently becomes a Lender
         hereunder, the date of the applicable Assignment and Acceptance, and
         (C) in the case of any Participant, the date on which it becomes a
         Participant.

         4.2 ILLEGALITY.

                  (a) If any Lender reasonably determines that the introduction
         of any Requirement of Law, or any change in any Requirement of Law, or
         in the interpretation or administration of any Requirement of Law, has
         made it unlawful, or that any central bank or other Governmental
         Authority has asserted that it is unlawful, for such Lender or its
         applicable Lending Office to make Offshore Rate Loans, then, on notice
         thereof by such Lender to the Company through the Administrative Agent,
         any obligation of such Lender to make Offshore Rate Loans shall be
         suspended until such Lender notifies the Administrative Agent and the
         Company that the circumstances giving rise to such determination no
         longer exist.

                  (b) If a Lender reasonably determines that it is unlawful to
         maintain any Offshore Rate Loan, the Company shall, upon its receipt of
         notice of such fact and demand from such Lender (with a copy to the
         Administrative Agent), prepay in full such Offshore Rate Loan of such
         Lender together with interest accrued thereon and amounts required
         under SECTION 4.4, either on the last day of the Interest Period
         thereof, if such Lender may lawfully continue to maintain such Offshore
         Rate Loan to such day, or immediately, if such Lender may not lawfully
         continue to maintain such Offshore Rate Loan. If the Company is
         required to so prepay any Offshore Rate Loan, then concurrently with
         such prepayment, the Company shall borrow from the affected Lender, in
         the amount of such repayment, a Base Rate Committed Loan.

                  (c) If the obligation of any Lender to make or maintain
         Offshore Rate Loans has been so terminated or suspended, all Loans
         which would otherwise be made by such Lender as Offshore Rate Loans
         shall be instead Base Rate Committed Loans.

                                       41

<PAGE>

         4.3 INCREASED COSTS AND REDUCTION OF RETURN.

                  (a) If any Lender reasonably determines that, due to either
         (i) the introduction of or any change (other than any change by way of
         imposition of or increase in reserve requirements included in the
         calculation of the Offshore Rate) after the date hereof in or in the
         interpretation of any law or regulation or (ii) compliance by such
         Lender with any guideline or request from any central bank or other
         Governmental Authority (whether or not having the force of law)
         adopted, issued or delivered after the date hereof, there shall be any
         increase in the cost to such Lender (excluding any Taxes, Other Taxes,
         Further Taxes or taxes imposed on or measured by the net income of such
         Lender) of agreeing to make or making, funding or maintaining any
         Offshore Rate Loan or participating in any Letter of Credit, or, in the
         case of an Issuing Lender, any increase in the cost to such Issuing
         Lender of agreeing to issue, issuing or maintaining any Letter of
         Credit or of agreeing to make or making, funding or maintaining any
         unpaid drawing under any Letter of Credit, then the Company shall be
         liable for, and shall from time to time, upon demand (with a copy of
         such demand to be sent to the Administrative Agent), pay to the
         Administrative Agent for the account of such Lender, additional amounts
         as are sufficient to compensate such Lender for such increased cost.

                  (b) If any Lender shall have reasonably determined that (i)
         the introduction after the date hereof of any Capital Adequacy
         Regulation, (ii) any change after the date hereof in any Capital
         Adequacy Regulation, (iii) any change after the date hereof in the
         interpretation or administration of any Capital Adequacy Regulation by
         any central bank or other Governmental Authority charged with the
         interpretation or administration thereof, or (iv) compliance by such
         Lender (or its Lending Office) or any corporation controlling such
         Lender with any Capital Adequacy Regulation (excluding any Capital
         Adequacy Regulation as in effect on the date hereof) affects or would
         affect the amount of capital required or expected to be maintained by
         such Lender or any corporation controlling such Lender and (taking into
         consideration such Lender's or such corporation's policies with respect
         to capital adequacy and such Lender's desired return on capital)
         reasonably determines that the amount of such capital is increased as a
         consequence of its Commitment, Loans or obligations under this
         Agreement, then, upon demand of such Lender to the Company through the
         Administrative Agent, the Company shall pay to such Lender, from time
         to time as specified by such Lender, additional amounts sufficient to
         compensate such Lender for such increase.

                  (c) Notwithstanding the foregoing provisions of this SECTION
         4.3, if any Lender fails to notify the Company of any event or
         circumstance which will entitle such Lender to compensation pursuant to
         this SECTION 4.3 within 60 days after such Lender obtains knowledge of
         such event or circumstance, then such Lender shall not be entitled to
         compensation from the Company for any amount arising prior to the date
         which is 60 days before the date on which such Lender notifies the
         Company of such event or circumstance.

         4.4 FUNDING LOSSES. The Company shall reimburse each Lender and hold
each Lender harmless from any loss or expense which the Lender may sustain or
incur as a consequence of:

                                       42

<PAGE>

                  (a) the failure of the Company to borrow, continue or convert
         a Loan after the Company has given (or is deemed to have given) a
         Notice of Committed Borrowing or a Notice of Conversion/Continuation;

                  (b) the failure of the Company to make any prepayment in 
         accordance with any notice delivered under SECTION 2.6;

                  (c) the prepayment (including after acceleration thereof) of 
         an Offshore Rate Loan on a day that is not the last day of the relevant
         Interest Period; or

                  (d) the automatic conversion under SUBSECTION 2.4(A) of any
         Offshore Rate Loan to a Base Rate Committed Loan on a day that is not
         the last day of the relevant Interest Period;

including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Lenders under this Section and
under SUBSECTION 4.3(A), each Offshore Rate Loan made by a Lender (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the LIBOR used in determining the Offshore Rate
for such Offshore Rate Loan by a matching deposit or other borrowing in the
interbank eurodollar market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded.

         4.5 INABILITY TO DETERMINE RATES. If (a) the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan, or (b) the Required Lenders determine that the
Offshore Rate applicable pursuant to SUBSECTION 2.8(A) for any requested
Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to such Lenders of funding such Loan, the
Administrative Agent will promptly so notify the Company and each Lender.
Thereafter, the obligation of the Lenders to make or maintain Offshore Rate
Loans hereunder shall be suspended until the Administrative Agent (upon the
instruction of the Required Lenders in the case of CLAUSE (B)) revokes such
notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Committed Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such Notice, the Lenders shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Committed Loans instead of
Offshore Rate Loan.

         4.6 CERTIFICATES OF LENDERS. Any Lender claiming reimbursement or
compensation under this ARTICLE IV shall deliver to the Company (with a copy to
the Administrative Agent) a certificate setting forth in reasonable detail the
amount payable to such Lender hereunder and the manner in which such amount has
been calculated, and such certificate shall be conclusive and binding on the
Company in the absence of manifest error.

                                       43

<PAGE>

         4.7 MITIGATION. Each Lender shall promptly notify the Company and the
Administrative Agent of any event of which it has knowledge which will result
in, and will use reasonable commercial efforts available to it (and not, in such
Lender's good faith judgment, otherwise disadvantageous to such Lender) to
mitigate or avoid, (i) any obligation of the Company to pay any amount pursuant
to SECTION 4.1 or 4.3 or (ii) the occurrence of any circumstance of the nature
described in SECTION 4.2 or 4.5. Without limiting the foregoing, each Lender
will designate a different Lending Office if such designation will avoid (or
reduce the cost to the Company of) any event described in CLAUSE (I) or (II) of
the preceding sentence and such designation will not, in such Lender's good
faith judgment, be otherwise disadvantageous to such Lender.

         4.8 SUBSTITUTION OF LENDERS. Upon the receipt by the Company from any
Lender of a claim for compensation under SECTION 4.1 or 4.3 or a notice of the
type described in SECTION 4.2, the Company may: (i) designate a replacement bank
or financial institution satisfactory to the Company (a "Replacement Lender") to
acquire and assume all or a ratable part of all of such affected Lender's Loans
and Commitment; and/or (ii) request one or more of the other Lenders to acquire
and assume all or part of such affected Lender's Loans and Commitment. Any
designation of a Replacement Lender under CLAUSE (I) shall be subject to the
prior written consent of the Administrative Agent (which consent shall not be
unreasonably withheld).

         4.9 SURVIVAL. The agreements and obligations of the Company in this
ARTICLE IV shall survive the termination of this Agreement and the payment of
all other Obligations.

                                   ARTICLE V

                              CONDITIONS PRECEDENT

         5.1 CONDITIONS TO EFFECTIVENESS. This Agreement shall become effective
on the date (the "Effective Date") on which the Administrative Agent shall have
received (i) evidence satisfactory to the Administrative Agent that the Company
has paid all fees and other amounts then payable under SUBSECTION 2.9(A) and
(ii) all of the following, in form and substance satisfactory to the
Administrative Agent and each Lender, and (except for the Notes) in sufficient
copies for each Lender:

                  (a) AGREEMENT AND NOTES. This Agreement and the Notes executed
         by each party hereto and thereto.

                  (b) RESOLUTIONS; INCUMBENCY.

                                    (i) Copies of the resolutions of the board
                  of directors of the Company authorizing the execution and
                  delivery of the Loan Documents and the consummation of the
                  transactions contemplated hereby, certified as of the
                  Effective Date by the Secretary or an Assistant Secretary of
                  such Person; and

                                    (ii) a certificate of the Secretary or
                  Assistant Secretary of the Company certifying the names and
                  true signatures of the officers, employees or authorized
                  agents of the Company authorized to execute and deliver the
                  Loan Documents and to deliver Notices of Borrowing, Notices of

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<PAGE>

                  Conversion/Continuation, Notices of Swing Line Loans,
                  Compliance Certificates, L/C Applications, L/C Amendment
                  Applications and similar documents.

                  (c) ORGANIZATION DOCUMENTS. The articles or certificate of
         incorporation and the bylaws of the Company as in effect on the
         Effective Date, certified by the Secretary or Assistant Secretary of
         the Company as of the Effective Date.

                  (d) LEGAL OPINIONS. An opinion of legal counsel to the
         Company, substantially in the form of EXHIBIT E.

                  (e) PAYMENT OF FEES. Evidence of payment by the Company of all
         accrued and unpaid fees, costs and expenses to the extent then due and
         payable hereunder on the Effective Date, together with Attorney Costs
         of BofA to the extent invoiced prior to or on the Effective Date, plus
         such additional amounts of Attorney Costs as shall constitute BofA's
         reasonable estimate of Attorney Costs incurred or to be incurred by it
         through the closing proceedings (provided that such estimate shall not
         thereafter preclude final settling of accounts between the Company and
         BofA), including any such costs, fees and expenses arising under or
         referenced in SECTIONS 2.9 and 11.4.

                  (f) CERTIFICATE. A certificate signed by a Responsible
         Officer, dated as of the Effective Date, stating that:

                                    (i) the representations and warranties
                  contained in ARTICLE VI are true and correct on and as of such
                  date, as though made on and as of such date;

                                    (ii) no Event of Default or Unmatured Event
                  of Default exists or would result from the effectiveness of
                  this Agreement;

                                    (iii) since December 31, 2001, there has
                  been no event or circumstance that has had or could be
                  reasonably expected to have, either individually or in the
                  aggregate, a Material Adverse Effect;

                                    (iv) since December 31, 2001, there has not
                  occurred (1) a material change in the operations, assets,
                  financial affairs or ownership structure of the Company, or
                  (2) a Material Adverse Effect on the business, assets,
                  liabilities (actual or contingent), operations or condition
                  (financial or otherwise) of the Company and its Subsidiaries
                  taken as a whole or in the facts and information regarding
                  such entities as represented to date; and

                                    (v) there is no action, suit, investigation
                  or proceeding pending or threatened in any court or before any
                  arbitrator or governmental authority that purports (1) to
                  materially and adversely affect the Company or its
                  Subsidiaries, or (2) to affect any transaction contemplated
                  hereby or the ability of the Company to perform its
                  obligations under this Agreement or the Short Term Credit
                  Agreement.

                                       45

<PAGE>

                  (g) FINANCIAL STATEMENTS. Receipt and satisfactory review by
         the Administrative Agent of the consolidated financial statements of
         the Company and its Subsidiaries for the fiscal years ended 1999, 2000
         and 2001, including balance sheet, income, changes in shareholders'
         equity and cash flow statements audited by Arthur Andersen LLP and
         prepared in conformity with GAAP and such other financial information
         as the Administrative Agent may request.

                  (h) NOTICES. Notice of Committed Borrowing or a Notice of 
         Swing Line Loan, as applicable.

                  (i) INFORMATION. Receipt and review, with results satisfactory
         to the Administrative Agent and its counsel, of information regarding
         litigation, tax, accounting, labor, insurance, pension liabilities
         (actual or contingent), real estate leases, material contracts, debt
         agreements, property ownership, environmental matters, contingent
         liabilities and management of the Company and its Subsidiaries.

                  (j) EXISTING CREDIT AGREEMENTS. Evidence that the Existing
         Credit Agreements have been or concurrently with the Effective Date are
         being terminated.

                  (k) OTHER DOCUMENTS. Such other approvals, opinions, documents
         or materials as the Administrative Agent or any Lender may reasonably
         request.

         5.2 CONDITIONS TO ALL CREDIT EXTENSIONS. The obligation of each Lender
to make any Loan to be made by it (including the obligation of the Swing Line
Lender to make any Swing Line Loan) and the obligation of any Issuing Lender to
Issue any Letter of Credit is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Issuance Date:

                  (a) NOTICE, APPLICATION. The Administrative Agent shall have
         received a Notice of Committed Borrowing or the Swing Line Lender and
         the Administrative Agent shall have received a Notice of Swing Line
         Loan or, in the case of the Issuance of any Letter of Credit, the
         applicable Issuing Lender and the Administrative Agent shall have
         received an L/C Application or L/C Amendment Application, as required
         under SECTION 3.2.

                  (b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
         representations and warranties in ARTICLE VI shall be true and correct
         in all material respects on and of such Borrowing Date or Issuance Date
         with the same effect as if made on and as of such Borrowing Date or
         Issuance Date (except to the extent such representations and warranties
         expressly refer to an earlier date, in which case they shall be true
         and correct as of such earlier date).

                  (c) NO EXISTING DEFAULT. No Event of Default or Unmatured
         Event of Default shall exist or shall result from such Borrowing, Swing
         Line Loan or Issuance.

Each Notice of Committed Borrowing, Notice of Swing Line Loan, L/C Application
and L/C Amendment Application submitted by the Company hereunder shall
constitute a representation 

                                       46

<PAGE>

and warranty by the Company that, as of the date of each such notice and as of
the relevant Borrowing Date or Issuance Date, as applicable, the conditions in
this SECTION 5.2 are satisfied.

                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

         The Company represents and warrants to the Administrative Agent and
each Lender that:

         6.1 CORPORATE EXISTENCE AND POWER. The Company and each of its
Subsidiaries:

                  (a) is duly organized, validly existing and in good standing
         under the laws of the jurisdiction of its organization;

                  (b) has the power and authority and all governmental licenses,
         authorizations, consents and approvals (i) to own its assets and to
         carry on its business and (ii) to execute, deliver and perform its
         obligations under the Loan Documents to which it is a party;

                  (c) is duly qualified to do business in each jurisdiction
         where its ownership, lease or operation of property or the conduct of
         its business requires such qualification; and

                  (d) is in compliance with all Requirements of Law;

except, in each case referred to in SUBCLAUSE (B)(I), CLAUSE (C) or CLAUSE (D),
to the extent that the failure to do so could not reasonably be expected to have
a Material Adverse Effect.

         6.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by the Company of each Loan Document to which such Person is
party have been duly authorized by all necessary corporate action, and do not
and will not:

                  (a) contravene the terms of any of such Person's Organization
         Documents;

                  (b) conflict with or result in any breach or contravention of,
         or the creation of any Lien under, any document evidencing any material
         Contractual Obligation to which such Person or any of its Subsidiaries
         is a party or any order, injunction, writ or decree of any Governmental
         Authority to which such Person or any of its Subsidiaries or any of its
         or their property is subject; or

                  (c) violate any Requirement of Law.

         6.3 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority (other than any of the foregoing which has been obtained or made and
is in full force and effect) is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
the Agreement or any other Loan Document.

                                       47

<PAGE>

         6.4 BINDING EFFECT. This Agreement and each other Loan Document
constitute the legal, valid and binding obligations of the Company, to the
extent such Person is a party thereto, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.

         6.5 LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending or, to the best knowledge of the Company, threatened, at law,
in equity, in arbitration or before any Governmental Authority, against the
Company or any Subsidiary or any of their respective properties; (a) which
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby or thereby; or (b) as to which there
exists a reasonable likelihood of an adverse determination, which determination
would reasonably be expected to have a material adverse effect on the ability of
the Company to pay and perform the Obligations. No injunction, writ, temporary
restraining order or other order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.

         6.6 NO DEFAULT. No Event of Default or Unmatured Event of Default
exists or would result from the incurring of any Obligations by the Company. As
of the Effective Date, neither the Company nor any Subsidiary is in default
under or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably be expected to
have a Material Adverse Effect.

         6.7 ERISA COMPLIANCE. Except as specifically disclosed in SCHEDULE 6.7:

                  (a) Each Plan is in compliance in all material respects with
         the applicable provisions of ERISA, the Code and other federal or state
         law (or, in the case of an Acquired Plan, can be brought into such
         compliance without any material fine, penalty or other liability).
         Except for Acquired Plans with respect to which the failure to have
         received a qualification letter would not result in any material fine,
         penalty or other liability, each Plan which is intended to qualify
         under Section 401(a) of the Code has received a favorable determination
         letter from the IRS (or will be submitted for a determination letter
         within the applicable remedial amendment period), and to the best
         knowledge of the Company, nothing has occurred which would cause the
         loss of such qualification. The Company and each ERISA Affiliate has
         made all required contributions to any Plan subject to Section 412 of
         the Code (except for contributions to Acquired Plans not made prior to
         the respective Plan Acquisition Dates and which do not in the aggregate
         exceed $1,000,000 for any Acquired Plan), and no application for a
         funding waiver or an extension of any amortization period pursuant to
         Section 412 of the Code has been made with respect to any Plan.

                  (b) There are no pending or, to the best knowledge of Company,
         threatened claims, actions or lawsuits, or action by any Governmental
         Authority, with respect to any Plan which has resulted or could
         reasonably be expected to result in a Material Adverse Effect. There
         has been no prohibited transaction or violation of the fiduciary

                                       48

<PAGE>

         responsibility rules with respect to any Plan which has resulted or
         could reasonably be expected to result in a Material Adverse Effect.

                  (c) (i) No ERISA Event has occurred or is reasonably expected
         to occur; (ii) no contribution failure has occurred with respect to a
         Pension Plan sufficient to give rise to a Lien under Section 302(f) of
         ERISA; (iii) no Pension Plan has any Unfunded Pension Liability; (iv)
         neither the Company nor any ERISA Affiliate has incurred, or reasonably
         expects to incur, any liability under Title IV of ERISA with respect to
         any Pension Plan (other than premiums due and not delinquent under
         Section 4007 of ERISA); (v) neither the Company nor any ERISA Affiliate
         has incurred, or reasonably expects to incur, any liability (and no
         event has occurred which, with the giving of notice under Section 4219
         of ERISA, would result in such liability) under Section 4201 or 4243 of
         ERISA with respect to a Multiemployer Plan; and (vi) neither the
         Company nor any ERISA Affiliate has engaged in a transaction that could
         be subject to Section 4069 or 4212(c) of ERISA.

         6.8 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the Loans will
be used solely for the purposes set forth in and permitted by SECTION 7.12 and
SECTION 8.8. Neither the Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.

         6.9 TITLE TO PROPERTIES. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Effective Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.

         6.10 TAXES. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.

         6.11 FINANCIAL CONDITION.

                  (a) The audited consolidated financial statements of the
         Company and its Subsidiaries dated December 31, 2001, and the related
         consolidated statements of income or operations, shareholders' equity
         and cash flows for the fiscal year ended on that date, and (2) the
         unaudited interim consolidated financial statements of the Company and
         its Subsidiaries dated March 31, 2002, and the related consolidated
         statements of income or operations, shareholders' equity and cash flows
         for the fiscal quarter ended on that date:

                                    (i) were prepared in accordance with GAAP
                  consistently applied throughout the periods covered thereby,
                  except as otherwise expressly 

                                       49

<PAGE>

                  noted therein (subject, in the case of the unaudited interim
                  statements, to the absence of footnotes and to ordinary, good
                  faith year-end audit adjustments);

                                    (ii) fairly present (subject, in the case of
                  the unaudited interim statements, to ordinary, good faith
                  year-end audit adjustments) the financial condition of the
                  Company and its Subsidiaries as of the dates thereof and the
                  results of operations for the periods covered thereby; and

                                    (iii) show all material indebtedness and
                  other liabilities, absolute or contingent, of the Company and
                  its consolidated Subsidiaries as of the dates thereof,
                  including liabilities for taxes and material Contingent
                  Obligations.

                  (b) Since December 31, 2001, there has been no Material 
         Adverse Effect.

         6.12 ENVIRONMENTAL MATTERS. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in SCHEDULE 6.12, such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

         6.13 REGULATED ENTITIES. None of the Company, any Person controlling
the Company, or any Subsidiary is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.

         6.14 NO BURDENSOME RESTRICTIONS. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.

         6.15 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the material patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person, except to the extent failure to own,
license or otherwise have the right to use any such item, or any such conflict,
could not reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Company, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Company or any Subsidiary, and which is
material to the business or operations of the Company and its Subsidiaries,
infringes upon any rights held by any other Person (excluding infringements
which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect).

         6.16 SUBSIDIARIES. As of the Effective Date, the Company has no
Subsidiaries other than those specifically disclosed in PART (A) of SCHEDULE

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<PAGE>

6.16 and has no equity investments in any other corporation or entity other than
those specifically disclosed in PART (B) of SCHEDULE 6.16.

         6.17 INSURANCE. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies (or are
self-insured) in such amounts, with such deductibles and covering such risks as
are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such Subsidiary operates.

         6.18 SOLVENCY. The Company is Solvent after giving effect to the
transactions contemplated by the Loan Documents.

         6.19 FULL DISCLOSURE. The representations and warranties made by the
Company and its Subsidiaries in the Loan Documents as of the date such
representations and warranties are made or deemed made, and the statements
contained in any exhibit, report, statement or certificate furnished by or on
behalf of the Company or any Subsidiary in connection with the Loan Documents,
taken as a whole, do not contain any untrue statement of a material fact or omit
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading in any material respect as of the time when made or
delivered.

                                   ARTICLE VII

                              AFFIRMATIVE COVENANTS

         So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:

         7.1 FINANCIAL STATEMENTS. The Company shall deliver to the
Administrative Agent, in form and detail satisfactory to the Administrative
Agent and the Required Lenders, with sufficient copies for each Lender:

                  (a) as soon as available, but not later than 120 days after
         the end of each fiscal year, a copy of the audited consolidated balance
         sheet of the Company and its Subsidiaries as at the end of such year
         and the related consolidated statements of income or operations,
         shareholders' equity and cash flows for such year, setting forth in
         each case in comparative form the figures for the previous fiscal year,
         and accompanied by the opinion of Arthur Andersen LLP or another
         nationally-recognized independent public accounting firm ("Independent
         Auditor"), which opinion (i) shall state that such consolidated
         financial statements present fairly the Company's consolidated
         financial position for the periods indicated in conformity with GAAP
         and (ii) shall not be qualified or limited because of a restricted or
         limited examination by the Independent Auditor of any material portion
         of the Company's or any Subsidiary's records; and

                  (b) as soon as available, but not later than 60 days after the
         end of each of the first three fiscal quarters of each fiscal year
         (commencing with the fiscal quarter ending June 30, 2002), a copy of
         the unaudited consolidated balance sheet of the Company and its

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<PAGE>

         Subsidiaries as of the end of such quarter and the related consolidated
         statements of income, shareholders' equity and cash flows for the
         period commencing on the first day and ending on the last day of such
         quarter, and certified by a Responsible Officer as fairly presenting,
         in accordance with GAAP (subject to the absence of footnotes and to
         ordinary, good faith year-end audit adjustments), the financial
         position and the results of operations of the Company and its
         Subsidiaries as of such date and for such period.

         7.2 CERTIFICATES; OTHER INFORMATION. The Company shall furnish to the
Administrative Agent, with sufficient copies for each Lender:

                  (a) concurrently with the delivery of the financial statements
         referred to in SUBSECTIONS 7.1(A) and (B), a Compliance Certificate
         executed by a Responsible Officer;

                  (b) promptly after their becoming available, copies of all
         financial statements and reports that the Company sends to its
         shareholders, and copies of all financial statements and regular,
         periodic or special reports (including Forms 10K, 10Q and 8K) that the
         Company or any Subsidiary may make to, or file with, the SEC; and

                  (c) promptly, such additional information regarding the
         business, financial or corporate affairs of the Company or any
         Subsidiary as the Administrative Agent, at the request of any Lender,
         may from time to time reasonably request.

         Documents required to be delivered pursuant to SECTION 7.1(A) or (B) or
SECTION 7.2(B) (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the earlier of (i) the date
on which the Company posts such documents, or provides a link thereto on the
Company`s website on the Internet at the website address listed on SCHEDULE
11.2; and (ii) the date on which such documents are posted on the Company's
behalf on IntraLinks/IntraAgency or another relevant website, if any, to which
each Lender and the Administrative Agent have access (whether a commercial,
third-party website or whether sponsored by the Administrative Agent); provided
that: (i) the Company shall deliver paper copies of such documents to the
Administrative Agent or any Lender that requests the Company to deliver such
paper copies until a written request to cease delivering paper copies is given
by the Administrative Agent or such Lender and (ii) the Company shall notify
(which may be by facsimile or electronic mail) the Administrative Agent and each
Lender of the posting of any such documents and provide to the Administrative
Agent by electronic mail electronic versions (i.e., soft copies) of such
documents. Notwithstanding anything contained herein, in every instance the
Company shall be required to provide paper copies of the Compliance Certificates
required by SECTION 7.2(A) to the Administrative Agent (with sufficient copies
for each Lender). Except for such Compliance Certificates, the Administrative
Agent shall have no obligation to request the delivery or to maintain copies of
the documents referred to above, and in any event shall have no responsibility
to monitor compliance by the Company with any such request for delivery, and
each Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents.

                                       52

<PAGE>

         7.3 NOTICES. The Company shall promptly (or, in the case of any event
described in CLAUSE (C)(II) below, not less than 10 days prior to the occurrence
of such event) notify the Administrative Agent and each Lender:

                  (a) of the occurrence of any Event of Default or Unmatured
         Event of Default known to the Company;

                  (b) of any matter that has resulted or is reasonably expected
         to result in a Material Adverse Effect, including:

                                    (i) breach or non-performance of, or any
                  default under, a Contractual Obligation of the Company or any
                  Subsidiary;

                                    (ii) any dispute, litigation, investigation,
                  proceeding or suspension between the Company or any Subsidiary
                  and any Governmental Authority; or

                                    (iii) the commencement of, or any material
                  development in, any litigation or proceeding affecting the
                  Company or any Subsidiary, including pursuant to any
                  applicable Environmental Laws;

                  (c) of the occurrence of any of the following events known to
         the Company which affect the Company or any ERISA Affiliate, and
         deliver to the Administrative Agent and each Lender a copy of any
         notice with respect to such event that is filed with a Governmental
         Authority and any notice delivered by a Governmental Authority to the
         Company or any ERISA Affiliate with respect to such event:

                                    (i) an ERISA Event;

                                    (ii) a contribution failure with respect to
                  a Pension Plan sufficient to give rise to a Lien under Section
                  302(f) of ERISA;

                                    (iii) a material increase in the Unfunded
                  Pension Liability of any Pension Plan;

                                    (iv) the adoption of, or the commencement of
                  contributions to, any Pension Plan by the Company or any ERISA
                  Affiliate; or

                                    (v) the adoption of any amendment to a
                  Pension Plan if such amendment results in a material increase
                  in contributions or Unfunded Pension Liability;

                  (d) of any material change in accounting policies or financial
         reporting practices by the Company and its consolidated Subsidiaries;
         and

                  (e) promptly upon the issuance thereof, deliver to the
         Administrative Agent notice of any announcement by Moody's or S&P (i)
         of any change in any Rating or (ii) that any Rating will be put on a
         "negative outlook" or "negative credit watch."

                                       53

<PAGE>

         Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto. Each notice under SUBSECTION
7.3(A) shall describe with particularity any and all clauses or provisions of
this Agreement or any other Loan Document that have been breached or violated.

         7.4 PRESERVATION OF CORPORATE EXISTENCE, ETC. The Company shall, and
shall cause each Subsidiary to (provided that nothing in this SECTION 7.4 shall
prevent the voluntary liquidation, dissolution or winding up, not under any
bankruptcy or insolvency law, of any Subsidiary so long as no Event of Default
exists and no Event of Default or Unmatured Event of Default will result
therefrom):

                  (a) preserve and maintain in full force and effect its
         existence and good standing under the laws of its jurisdiction of
         organization;

                  (b) preserve and maintain in full force and effect all
         governmental rights, privileges, qualifications, permits, licenses and
         franchises necessary or desirable in the normal conduct of its business
         (except in connection with transactions permitted by SECTION 8.4 and
         sales of assets permitted by SECTION 8.3);

                  (c) use reasonable efforts, in the ordinary course of
         business, to preserve its business organization and goodwill; and

                  (d) preserve or renew all of its registered patents,
         trademarks, trade names and service marks, the non-preservation of
         which could reasonably be expected to have a Material Adverse Effect.

         7.5 MAINTENANCE OF PROPERTY. The Company shall, and shall cause each
Subsidiary to, maintain and preserve all its property which is used or useful in
its business in good working order and condition, ordinary wear and tear
excepted, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.

         7.6 INSURANCE. The Company shall, and shall cause each Subsidiary to,
maintain, with financially sound and reputable independent insurers (or pursuant
to a self-insurance program), insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by
Persons engaged in the same or similar business, of such types and in such
amounts as are customarily carried under similar circumstances by such other
Persons.

         7.7 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each
Subsidiary to, pay and discharge, as the same shall become due and payable, all
their respective material obligations and liabilities, including: (a) all
material tax liabilities, assessments and governmental charges or levies upon it
or its properties or assets and (b) all material claims which, if unpaid, would
by law become a Lien upon its property, UNLESS, in each case, the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary.

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<PAGE>

         7.8 COMPLIANCE WITH LAWS. The Company shall, and shall cause each
Subsidiary to, comply with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act) the non-compliance with which might have a Material Adverse
Effect.

         7.9 COMPLIANCE WITH ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code, it being understood that any
non-compliance with CLAUSE (A), (B) or (C) with respect to an Acquired Plan
existing on the Plan Acquisition Date for such Acquired Plan shall not
constitute a violation of this SECTION 7.9 so long as (i) the Company is
diligently proceeding to remedy such non-compliance and (ii) such non-compliance
will not result in any material fine, penalty or other liability.

         7.10 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. The Company shall,
and shall cause each Subsidiary to, maintain proper books of record and account,
in which full, true and correct entries (sufficient to permit the preparation of
consolidated financial statements in conformity with GAAP) shall be made of all
financial transactions and matters involving the assets and business of the
Company and such Subsidiary. The Company shall permit, and shall cause each
Subsidiary to permit, the Administrative Agent, any Lender or their respective
representatives (in each case at such Person's own expense unless an Event of
Default exists), upon reasonable notice at any reasonable time during normal
business hours and from time to time at the request of the Administrative Agent
or the relevant Lender, to visit and inspect the properties of the Company or
any Subsidiary (and, if (i) any Unmatured Event of Default exists and has been
continuing for 15 days or (ii) any Event of Default exists, to make copies or
abstracts of their respective corporate, financial and operating records), and
to examine the properties and books and records of the Company and its
Subsidiaries and to discuss the affairs, finances and accounts of the Company or
any Subsidiary with the appropriate officers, employees or authorized agents of
the Company or such Subsidiary.

         7.11 ENVIRONMENTAL LAWS. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
material compliance with all material Environmental Laws. Without limiting the
foregoing, the Company shall, and shall cause each Subsidiary to, (i) maintain
all material operating permits for all landfills now owned or hereafter
acquired; and (ii) dispose of hazardous waste only at licensed disposal
facilities operating, to the best of the Company's or the applicable
Subsidiary's knowledge after reasonable inquiry, in material compliance with all
material Environmental Laws.

         7.12 USE OF PROCEEDS. The Company shall use the proceeds of the Loans
(i) to repay the Indebtedness of the Company under, and to terminate, the
Existing Credit Agreements, and (ii) for working capital, capital expenditures
and other general corporate purposes (including commercial paper backup and
Acquisitions) not in contravention of any Requirement of Law or of any Loan
Document; PROVIDED that the Company shall not use the proceeds of any Loan to
make any Acquisition if the Board of Directors of the Person to be acquired has
not approved such Acquisition.

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                                  ARTICLE VIII

                               NEGATIVE COVENANTS

         So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:

         8.1 FINANCIAL CONDITION COVENANTS.

                  (a) MINIMUM CONSOLIDATED SHAREHOLDERS' EQUITY. The Company
         shall not permit its Consolidated Shareholders' Equity as of the last
         day of any fiscal quarter to be less than the sum of (i) 85% of
         Consolidated Shareholders' Equity as of December 31, 2001 PLUS (ii) 50%
         of Consolidated Net Income (with no deduction for net losses) for each
         fiscal quarter ending after December 31, 2001 PLUS (iii) 100% of the
         net proceeds of equity issuances after December 31, 2001.

                  (b) MAXIMUM TOTAL DEBT TO EBITDA RATIO. The Company shall not
         permit, as of the last day of any fiscal quarter (beginning with the
         fiscal quarter ending June 30, 2002), the Total Debt to EBITDA Ratio
         for the Computation Period ending on such day to be greater than 3.25
         to 1.

         8.2 LIMITATION ON LIENS. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):

                  (a) any Lien existing on the Effective Date and set forth in
         SCHEDULE 8.2, and any extension, renewal or replacement of any such
         Lien so long as the principal amount secured thereby is not increased
         and the scope of the property subject to such Lien is not extended;

                  (b) Liens imposed by law for taxes, assessments or charges of
         any Governmental Authority for claims not yet due or which are being
         contested in good faith by appropriate proceedings diligently pursued
         and with respect to which adequate reserves or other appropriate
         provisions are being maintained in accordance with GAAP;

                  (c) statutory Liens of landlords and Liens of carriers,
         warehousemen, mechanics, materialmen and other Liens imposed by law or
         created in the ordinary course of business and in existence less than
         120 days from the date of creation thereof for amounts not yet due or
         which are being contested in good faith by appropriate proceedings and
         with respect to which adequate reserves or other appropriate provisions
         are being maintained in accordance with GAAP;

                  (d) Liens (other than any Lien imposed by ERISA) consisting of
         pledges or deposits required in the ordinary course of business in
         connection with workers' compensation, unemployment insurance and other
         social security legislation;

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                  (e) Liens on the property of the Company or any Subsidiary
         securing (i) the non-delinquent performance of bids, trade contracts
         (other than for borrowed money), leases, statutory obligations, (ii)
         surety bonds (excluding appeal bonds and other bonds posted in
         connection with court proceedings or judgments) and (iii) other
         non-delinquent obligations of a like nature in each case incurred in
         the ordinary course of business, provided all such Liens in the
         aggregate would not (even if enforced) cause a Material Adverse Effect;

                  (f) Liens consisting of judgment or judicial attachment liens
         and liens securing contingent obligations on appeal bonds and other
         bonds posted in connection with court proceedings or judgments,
         provided that (i) in the case of judgment and judicial attachment
         liens, the enforcement of such Liens is effectively stayed and (ii) all
         such liens in the aggregate at any time outstanding for the Company and
         its Subsidiaries do not exceed $50,000,000;

                  (g) easements, rights-of-way, restrictions and other similar
         encumbrances incurred in the ordinary course of business which,
         individually or in the aggregate, do not materially detract from the
         value of the property subject thereto or materially interfere with the
         ordinary conduct of the businesses of the Company and its Subsidiaries;

                  (h) Liens securing obligations in respect of Capital Leases
         and purchase money financings on assets subject to such leases or
         financings, provided that such Capital Leases and purchase money
         financings are otherwise permitted hereunder;

                  (i) Liens arising solely by virtue of any statutory or common
         law provision relating to banker's liens, rights of set-off or similar
         rights and remedies as to deposit accounts or other funds maintained
         with a creditor depository institution; PROVIDED that (i) such deposit
         account is not a dedicated cash collateral account and is not subject
         to restrictions against access by the Company in excess of those set
         forth by regulations promulgated by the FRB, and (ii) such deposit
         account is not intended by the Company or any Subsidiary to provide
         collateral to the depository institution; and

                  (j) other Liens, in addition to those permitted by CLAUSES (A)
         through (H), securing Indebtedness or arising in connection with
         Securitization Transactions; PROVIDED that the sum (without
         duplication) of all such Indebtedness, plus the aggregate investment or
         claim held at any time by all purchasers, assignees or other
         transferees of (or of interests in) receivables and other rights to
         payment in all Securitization Transactions, shall not at any time
         exceed in the aggregate 20% of Consolidated Tangible Assets.

         8.3 DISPOSITION OF ASSETS. The Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer
or otherwise dispose of (whether in one or a series of transactions) any
property (including accounts and notes receivable, with or without recourse) or
enter into any agreement to do any of the foregoing (including any
sale-leaseback), except:

                  (a) dispositions of inventory, or used, worn-out or surplus
         equipment, all in the ordinary course of business;

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                  (b) the sale, assignment or other transfer of accounts
         receivable, lease receivables or other rights to payment pursuant to
         any Securitization Transaction; and

                  (c) dispositions not otherwise permitted hereunder which are
         made for fair market value; provided that (i) at the time of any such
         disposition, no Event of Default shall exist or shall result from such
         disposition and (ii) the aggregate value of all assets so disposed of
         by the Company and its Subsidiaries in any one-year period (calculated
         as of the date of any such disposition) shall not exceed 20% of
         Consolidated Tangible Assets as of the last day of the most recently
         ended fiscal quarter.

         8.4 CONSOLIDATIONS AND MERGERS. The Company shall not, and shall not
permit any Subsidiary to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any other Person, except:

                  (a) any Subsidiary may merge with the Company, provided that
         the Company shall be the continuing or surviving corporation, or with
         any one or more Subsidiaries, provided that if any transaction shall be
         between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned
         Subsidiary shall be the continuing or surviving corporation;

                  (b) any Subsidiary may sell all or substantially all of its
         assets (upon voluntary liquidation or otherwise) to the Company or
         another Wholly-Owned Subsidiary; and

                  (c) any merger, consolidation or disposition in connection
         with a transaction permitted by SECTION 8.3 or an Acquisition permitted
         by SECTION 8.5.

         8.5 LOANS AND INVESTMENTS. The Company shall not, and shall not permit
any Subsidiary to, purchase or acquire, or make any commitment to purchase or
acquire, any capital stock, equity interest or obligations or other securities
of, or any interest in, any Person, or make or commit to make any Acquisition,
or make or commit to make any advance, loan, extension of credit or capital
contribution to or any other investment in any Person (including any Affiliate
of the Company) (any of the foregoing an "Investment"), unless (y) such loan,
advance, investment, acquisition or other purchase does not cause the Company to
violate the financial covenants contained in SECTION 8.1(A) or (B), and (z) no
Event of Default or Unmatured Event of Default would result therefrom.

         8.6 LIMITATION ON SUBSIDIARY INDEBTEDNESS. The Company shall not permit
the sum of the aggregate amount of all Indebtedness of Subsidiaries (excluding
(i) the existing Indebtedness listed on SCHEDULE 8.6 and extensions, renewals
and refinancings thereof so long as the principal amount thereof is not
increased and (ii) extensions of credit by the Company to any of its
Subsidiaries or by any of its Subsidiaries to the Company or another Subsidiary)
to exceed 20% of Consolidated Tangible Assets.

         8.7 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction with any Affiliate of the
Company (other than the Company or a Subsidiary), except upon fair and
reasonable terms no less favorable to the 

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Company or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate of the Company or such Subsidiary.

         8.8 USE OF PROCEEDS. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the Loan proceeds or any Letter of Credit,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock or (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock.

         8.9 RESTRICTED PAYMENTS. The Company shall not (i) declare or make any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock or (ii) purchase, redeem or otherwise acquire for value, or permit any
Subsidiary to purchase or otherwise acquire for value, any shares of the
Company's capital stock or any warrants, rights or options to acquire such
shares, now or hereafter outstanding, unless (y) such dividend or distribution,
purchase redemption or other acquisition does not cause the Company to violate
the financial covenants contained in SECTION 8.1(A) or (B), and (z) no Event of
Default or Unmatured Event of Default would result therefrom.

         8.10 ERISA. The Company shall not, and shall not permit any of its
ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in liability of the Company in an
aggregate amount in excess of $15,000,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.

         8.11 CHANGE IN BUSINESS. The Company shall not, and shall not permit
any Subsidiary to, engage in any material line of business other than those
lines of business carried on by the Company and its Subsidiaries on the date
hereof and lines of business complementary thereto; PROVIDED that in no event
will the Company permit a material portion of the business of the Company and
its Subsidiaries, taken as a whole, to involve or relate to hazardous waste.

         8.12 ACCOUNTING CHANGES. The Company shall not, and shall not permit
any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP.

         8.13 BURDENSOME AGREEMENTS. The Company shall not enter into any
Contractual Obligation (other than this Agreement or any other Loan Document)
that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to
the Company or to otherwise transfer property to the Company, (ii) of any
Subsidiary to guarantee the Indebtedness of the Company or (iii) of the Company
or any Subsidiary to create, incur, assume or suffer to exist Liens on property
of such Person; or (b) requires the grant of a Lien to secure an obligation of
such Person if a Lien is granted to secure another obligation of such Person;
except, in each case, (1) as required under applicable Requirements of Law, (2)
as required under the Loan Documents, (3) for Permitted Liens, and (4) for
prohibitions on assignment or transfer contained in leases.

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                                   ARTICLE IX

                                EVENTS OF DEFAULT

         9.1 EVENT OF DEFAULT. Any of the following shall constitute an "Event
of Default":

                  (a) NON-PAYMENT. The Company fails to pay, (i) when and as
         required to be paid herein, any amount of principal of any Loan or of
         the principal amount of any L/C Obligation, or (ii) within five days
         after the same becomes due, any interest, fee or any other amount
         payable hereunder or under any other Loan Document.

                  (b) REPRESENTATION OR WARRANTY. Any representation or warranty
         by the Company or any Subsidiary made or deemed made herein or in any
         other Loan Document, or which is contained in any certificate, document
         or financial or other statement by the Company, any Subsidiary or any
         Responsible Officer furnished at any time under this Agreement or under
         any other Loan Document, is incorrect in any material respect on or as
         of the date made or deemed made.

                  (c) SPECIFIC DEFAULTS. The Company fails to perform or observe
         any term, covenant or agreement contained in any of SUBSECTION 7.3(A)
         or ARTICLE VIII.

                  (d) OTHER DEFAULTS. The Company fails to perform or observe
         any other term or covenant contained in this Agreement or any other
         Loan Document, and such failure shall continue unremedied for a period
         of 30 days after the date upon which written notice thereof is given to
         the Company by the Administrative Agent or any Lender.

                  (e) CROSS-DEFAULT. (i) The Company or any Subsidiary (A) fails
         to make any payment of Material Financial Obligations when due (whether
         by scheduled maturity, required prepayment, acceleration, demand, or
         otherwise, but after giving effect to any applicable grace or cure
         period); or (B) fails to perform or observe any other condition or
         covenant, or any other event shall occur or condition shall exist,
         under one or more agreements or instruments relating to Material
         Financial Obligations, if the effect of such failure, event or
         condition (after giving effect to any applicable grace or cure period)
         is to cause (or require), or to permit the holder or holders of such
         Material Financial Obligations or the beneficiary or beneficiaries of
         such Material Financial Obligations (or a trustee or agent on behalf of
         such holder or holders or beneficiary or beneficiaries) to cause (or
         require), such Material Financial Obligations to become due and payable
         (or to be purchased, repurchased, defeased or cash collateralized)
         prior to the stated maturity thereof.

                  (f) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company or any
         Subsidiary (i) ceases or fails to be solvent, or generally fails to
         pay, or admits in writing its inability to pay, its debts as they
         become due, subject to applicable grace periods, if any, whether at
         stated maturity or otherwise; (ii) voluntarily ceases to conduct its
         business in the ordinary course; (iii) commences any Insolvency
         Proceeding with respect to itself; or (iv) takes any action to
         effectuate or authorize any of the foregoing; PROVIDED that the

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         foregoing shall not apply to the voluntary liquidation, dissolution or
         winding up of a Subsidiary permitted by SECTION 7.4.

                  (g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency
         Proceeding is commenced or filed against the Company or any Subsidiary,
         or any writ, judgment, warrant of attachment, execution or similar
         process is issued or levied against a substantial part of the Company's
         or any Subsidiary's properties, and such proceeding or petition shall
         not be dismissed, or such writ, judgment, warrant of attachment,
         execution or similar process shall not be released, vacated or fully
         bonded, within 60 days after commencement, filing or levy; (ii) the
         Company or any Subsidiary admits the material allegations of a petition
         against it in any Insolvency Proceeding, or an order for relief (or
         similar order under non-U.S. law) is ordered in any Insolvency
         Proceeding with respect to the Company or such Subsidiary; or (iii) the
         Company or any Subsidiary acquiesces in the appointment of a receiver,
         trustee, custodian, conservator, liquidator, mortgagee in possession
         (or agent therefor), or other similar Person for itself or a
         substantial portion of its property or business.

                  (h) ERISA. (i) An ERISA Event shall occur with respect to a
         Pension Plan or Multiemployer Plan which has resulted or could
         reasonably be expected to result in liability of the Company under
         Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC
         in an aggregate amount in excess of $5,000,000; (ii) a contribution
         failure shall occur with respect to a Pension Plan sufficient to give
         rise to a Lien under Section 302(f) of ERISA; or (iii) the Company or
         any ERISA Affiliate shall fail to pay when due, after the expiration of
         any applicable grace period (or any period during which (x) the Company
         is permitted to contest its obligation to make such payment without
         incurring any liability (other than interest) or penalty and (y) the
         Company is contesting such obligation in good faith and by appropriate
         proceedings), any installment payment with respect to its withdrawal
         liability under Section 4201 of ERISA or any contribution obligation
         under Section 4243 of ERISA, in each case under a Multiemployer Plan in
         an aggregate amount in excess of $5,000,000.

                  (i) JUDGMENTS. One or more non-interlocutory judgments,
         non-interlocutory orders, decrees or arbitration awards is entered
         against the Company or any Subsidiary involving in the aggregate a
         liability (to the extent not covered by insurance as to which the
         insurer does not dispute coverage) as to any single or related series
         of transactions, incidents or conditions of $25,000,000 or more, and
         the same shall remain unvacated and unstayed pending appeal for a
         period of 25 days after the entry thereof.

                  (j) CHANGE OF CONTROL. Any Change of Control occurs.

                  (k) INVALIDITY OF LOAN DOCUMENTS. Any Loan Document, at any
         time after its execution and delivery and for any reason other than as
         expressly permitted hereunder or satisfaction in full of all the
         Obligations, ceases to be in full force and effect; or the Company or
         any of its Subsidiaries contests in any manner the validity or
         enforceability of any Loan Document; or the Company or any of its
         Subsidiaries denies that it has any or further liability or obligation
         under any Loan Document, or purports to revoke, terminate or rescind
         any Loan Document.

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         9.2 REMEDIES. If any Event of Default occurs, the Administrative Agent
shall, at the request of, or may, with the consent of, the Required Lenders,

                  (a) declare the commitment of each Lender to make Loans
         (including the commitment of the Swing Line Lender to make Swing Line
         Loans) and any obligation of each Issuing Lender to Issue Letters of
         Credit to be terminated, whereupon such commitments and obligation
         shall be terminated;

                  (b) declare an amount equal to the maximum aggregate amount
         that is or at any time thereafter may become available for drawing
         under all outstanding Letters of Credit (whether or not any beneficiary
         shall have presented, or shall be entitled at such time to present, the
         drafts or other documents required to draw under such Letters of
         Credit) to be immediately due and payable, and declare the unpaid
         principal amount of all outstanding Loans, all interest accrued and
         unpaid thereon, and all other amounts owing or payable hereunder or
         under any other Loan Document to be immediately due and payable,
         without presentment, demand, protest or other notice of any kind, all
         of which are hereby expressly waived by the Company; and

                  (c) exercise on behalf of itself and the Lenders all other
         rights and remedies available to it and the Lenders under the Loan
         Documents or applicable law;

PROVIDED, HOWEVER, that upon the occurrence of any event specified in SUBSECTION
(F) or (G) of SECTION 9.1 (in the case of CLAUSE (I) of SUBSECTION (G), upon the
expiration of the 60-day period mentioned therein), the obligation of each
Lender to make Loans and any obligation of each Issuing Lender to Issue Letters
of Credit shall automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Administrative
Agent, the Issuing Lender or any other Lender. The Administrative Agent shall
promptly notify the Company of any declaration described in CLAUSE (A) or (B) of
the preceding sentence, but failure to give any such notice shall not impair any
such declaration or result in any liability to the Administrative Agent.

         9.3 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.

                                    ARTICLE X

                            THE ADMINISTRATIVE AGENT

         10.1 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT.

                  (a) Each Lender hereby irrevocably appoints, designates and
         authorizes the Administrative Agent to take such action on its behalf
         under the provisions of this Agreement and each other Loan Document and
         to exercise such powers and perform such duties as are expressly
         delegated to it by the terms of this Agreement or any other Loan
         Document, together with such powers as are reasonably incidental
         thereto. 

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         Notwithstanding any provision to the contrary contained elsewhere in
         this Agreement or in any other Loan Document, the Administrative Agent
         shall not have any duties or responsibilities, except those expressly
         set forth herein, nor shall the Administrative Agent have or be deemed
         to have any fiduciary relationship with any Lender or participant, and
         no implied covenants, functions, responsibilities, duties, obligations
         or liabilities shall be read into this Agreement or any other Loan
         Document or otherwise exist against the Administrative Agent. Without
         limiting the generality of the foregoing sentence, the use of the term
         "agent" herein and in the other Loan Documents with reference to the
         Administrative Agent is not intended to connote any fiduciary or other
         implied (or express) obligations arising under agency doctrine of any
         applicable law. Instead, such term is used merely as a matter of market
         custom, and is intended to create or reflect only an administrative
         relationship between independent contracting parties.

                  (b) Each Issuing Lender shall act on behalf of the Lenders
         with respect to any Letters of Credit Issued by it and the documents
         associated therewith, and each Issuing Lender shall have all of the
         benefits and immunities (i) provided to the Administrative Agent in
         this ARTICLE X with respect to any acts taken or omissions suffered by
         such Issuing Lender in connection with Letters of Credit Issued by it
         or proposed to be Issued by it and the applications and agreements for
         letters of credit pertaining to such Letters of Credit as fully as if
         the term "Administrative Agent" as used in this ARTICLE X, and in the
         definition of "Administrative Agent-Related Person" included such
         Issuing Lender with respect to such acts or omissions, and (ii) as
         additionally provided herein with respect to the Issuing Lenders.

         10.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel and
other consultants or experts concerning all matters pertaining to such duties.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects in the absence of
gross negligence or willful misconduct.

         10.3 LIABILITY OF ADMINISTRATIVE AGENT. No Administrative Agent-Related
Person shall (a) be liable for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct in connection with its duties expressly set forth herein), or
(b) be responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company or any
Subsidiary or Affiliate of the Company or any other party to any Loan Document
to perform its obligations hereunder or thereunder. No Administrative
Agent-Related Person shall be under any obligation to any Lender or participant
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan

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Document, or to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.

         10.4 RELIANCE BY ADMINISTRATIVE AGENT.

                  (a) The Administrative Agent shall be entitled to rely, and
         shall be fully protected in relying, upon any writing, communication,
         signature, resolution, representation, notice, consent, certificate,
         affidavit, letter, telegram, facsimile, telex or telephone message,
         electronic mail message, statement or other document or conversation
         believed by it to be genuine and correct and to have been signed, sent
         or made by the proper Person or Persons, and upon advice and statements
         of legal counsel (including counsel to the Company), independent
         accountants and other experts selected by the Administrative Agent. The
         Administrative Agent shall be fully justified in failing or refusing to
         take any action under this Agreement or any other Loan Document unless
         it shall first receive such advice or concurrence of the Required
         Lenders as it deems appropriate and, if it so requests, it shall first
         be indemnified to its satisfaction by the Lenders against any and all
         liability and expense which may be incurred by it by reason of taking
         or continuing to take any such action. The Administrative Agent shall
         in all cases be fully protected in acting, or in refraining from
         acting, under this Agreement or any other Loan Document in accordance
         with a request or consent of the Required Lenders (or such greater
         number of Lenders as may be expressly required hereby in any instance)
         and such request and any action taken or failure to act pursuant
         thereto shall be binding upon all the Lenders.

                  (b) For purposes of determining compliance with the conditions
         specified in SECTION 5.1, each Lender that has signed this Agreement
         shall be deemed to have consented to, approved or accepted or to be
         satisfied with, each document or other matter required thereunder to be
         consented to or approved by or acceptable or satisfactory to a Lender
         unless the Administrative Agent shall have received notice from such
         Lender prior to the proposed Effective Date specifying its objection
         thereto.

         10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default or Unmatured
Event of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Administrative Agent for the
account of the Lenders, unless the Administrative Agent shall have received
written notice from a Lender or the Company referring to this Agreement,
describing such Event of Default or Unmatured Event of Default and stating that
such notice is a "notice of default." The Administrative Agent will notify the
Lenders of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Event of Default or Unmatured Event of Default
as may be directed by the Required Lenders in accordance with ARTICLE IX;
PROVIDED, HOWEVER, that unless and until the Administrative Agent has received
any such direction, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Event
of Default or Unmatured Event of Default as it shall deem advisable or in the
best interest of the Lenders.

         10.6 CREDIT DECISION; DISCLOSURE OF INFORMATION BY ADMINISTRATIVE
AGENT. Each Lender acknowledges that no Administrative Agent-Related Person has

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made any representation or warranty to it, and that no act by the Administrative
Agent hereafter taken, including any consent to and acceptance of any assignment
or review of the affairs of the Company and its Subsidiaries or any Affiliate
thereof, shall be deemed to constitute any representation or warranty by any
Administrative Agent-Related Person to any Lender as to any matter, including
whether Agent-Related Persons have disclosed material information in their
possession. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon any Administrative Agent-Related Person
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
its Subsidiaries and Affiliates, and all applicable bank or other regulatory
laws relating to the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to the Company hereunder. Each
Lender also represents that it will, independently and without reliance upon any
Administrative Agent-Related Person and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent herein, the Administrative
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of any of the
Company, its Subsidiaries or Affiliates which may come into the possession of
any Administrative Agent-Related Person.

         10.7 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand each Administrative Agent-Related Person (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so), pro rata, and hold harmless each Administrative
Agent-Related Person from and against any and all Indemnified Liabilities
incurred by it; PROVIDED, HOWEVER, that no Lender shall be liable for the
payment to any Administrative Agent-Related Person of any portion of such
Indemnified Liabilities to the extent determined in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such
Administrative Agent-Related Person's own gross negligence or willful
misconduct; provided, however, that no action taken in accordance with the
directions of the Required Lenders or all of the Lenders, as applicable, shall
be deemed to constitute gross negligence or willful misconduct for purposes of
this Section. Without limitation of the foregoing, each Lender shall reimburse
the Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the termination of the combined
Commitments, the payment of all other Obligations and the resignation of the
Administrative Agent.

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         10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. BofA and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with each of
the Company and its Subsidiaries and Affiliates as though BofA were not the
Administrative Agent or an Issuing Lender hereunder and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BofA or its Affiliates may receive information regarding the
Company, its Subsidiaries or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such Affiliate
or Subsidiary) and acknowledge that the Administrative Agent shall be under no
obligation to provide such information to them. With respect to its Loans, BofA
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the such rights and powers as though it were not the
Administrative Agent or an Issuing Lender, and the terms "Lender" and "Lenders"
include BofA in its individual capacity.

         10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders; provided
that any such resignation by BofA shall also constitute its resignation as an
Issuing Lender and Swing Line Lender. If the Administrative Agent resigns under
this Agreement, the Required Lenders shall appoint from among the Lenders a
successor administrative agent for the Lenders, which successor administrative
agent shall be consented to by the Company at all times other than during the
existence of an Event of Default (which consent of the Company shall not be
unreasonably withheld or delayed). If no successor administrative agent is
appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Lenders
and the Company, a successor administrative agent from among the Lenders. Upon
the acceptance of its appointment as successor administrative agent hereunder,
the Person acting as such successor administrative agent shall succeed to all
the rights, powers and duties of the retiring Administrative Agent, Issuing
Lender and Swing Line Lender and the respective terms "Administrative Agent,"
"Issuing Lender" and "Swing Line Lender" shall mean such successor
administrative agent, Letter of Credit issuer and swing line lender, and the
retiring Administrative Agent's appointment, powers and duties as Administrative
Agent shall be terminated and the retiring Issuing Lender's and Swing Line
Lender's rights, powers and duties as such shall be terminated, without any
other or further act or deed on the part of such retiring Issuing Lender or
Swing Line Lender or any other Lender, other than the obligation of the
successor Issuing Lender to issue letters of credit in substitution for the
Letters of Credit, if any, outstanding at the time of such succession or to make
other arrangements satisfactory to the retiring Issuing Lender to effectively
assume the obligations of the retiring Issuing Lender with respect to such
Letters of Credit. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this ARTICLE X and SECTIONS
11.4 and 11.5 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement. If no
successor administrative agent has accepted appointment as Administrative Agent
by the date which is 30 days following a retiring Administrative Agent's notice
of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above.

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         10.10 ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company, the Administrative Agent (irrespective of
whether the principal of any Loan or L/C Obligation shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Company)
shall be entitled and empowered, by intervention in such proceeding or otherwise

                  (a) to file and prove a claim for the whole amount of the
         principal and interest owing and unpaid in respect of the Loans, L/C
         Obligations and all other Obligations that are owing and unpaid and to
         file such other documents as may be necessary or advisable in order to
         have the claims of the Lenders and the Administrative Agent (including
         any claim for the reasonable compensation, expenses, disbursements and
         advances of the Lenders and the Administrative Agent and their
         respective agents and counsel and all other amounts due the Lenders and
         the Administrative Agent under SECTIONS 2.9, 3.8 and 11.4) allowed in
         such judicial proceeding; and

                  (b) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same;

         and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Lender to make such payments to the Administrative Agent and,
in the event that the Administrative Agent shall consent to the making of such
payments directly to the Lenders, to pay to the Administrative Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under SECTIONS 2.9 AND 11.4.

         Nothing contained herein shall be deemed to authorize the
Administrative Agent to authorize or consent to or accept or adopt on behalf of
any Lender any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding.

         10.11 OTHER AGENTS; ARRANGERS AND MANAGERS. None of the Lenders or
other Persons identified on the facing page or signature pages of this Agreement
as a "syndication agent," "documentation agent," "co-agent," "book manager,"
"lead manager," "arranger," "lead arranger" or "co-arranger" shall have any
right, power, obligation, liability, responsibility or duty under this Agreement
other than, in the case of such Lenders, those applicable to all Lenders as
such. Without limiting the foregoing, none of the Lenders or other Persons so
identified shall have or be deemed to have any fiduciary relationship with any
Lender. Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders or other Persons so identified in deciding to enter into this
Agreement or in taking or not taking action hereunder.

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                                   ARTICLE XI

                                  MISCELLANEOUS

         11.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Required Lenders
(or by the Administrative Agent at the written request of the Required Lenders)
and the Company and acknowledged by the Administrative Agent, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no such waiver, amendment or
consent shall increase or extend the Commitment of any Lender without the
written consent of such Lender; and PROVIDED, FURTHER, that no such waiver,
amendment or consent shall, unless in writing and signed by all Lenders and the
Company and acknowledged by the Administrative Agent, do any of the following:

                  (a) extend or increase the Commitment of any Lender without
         the written consent of such Lender or reinstate any Commitment
         terminated pursuant to SECTION 9.2;

                  (b) postpone or delay any date fixed by this Agreement or any
         other Loan Document for any payment of principal, interest, fees or
         other amounts due to the Lenders (or any of them) hereunder or under
         any other Loan Document;

                  (c) reduce the principal of, or the rate of interest specified
         herein on, any Loan, or reduce any fees (other than the fees referred
         to in SUBSECTION 2.9(A) or SUBSECTIONS 3.8(C) and (D) and the rate of
         interest referred to in SUBSECTION 2.8(C)) or other amounts payable
         hereunder or under any other Loan Document;

                  (d) change the percentage of the Commitments or of the
         aggregate unpaid principal amount of the Loans which is required for
         the Lenders or any of them to take any action hereunder; or

                  (e) amend this Section, or SECTION 2.13, or any provision
         herein providing for consent or other action by all Lenders;

and PROVIDED, FURTHER, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the applicable Issuing Lender in addition to the Required
Lenders or all Lenders, as the case may be, affect the rights or duties of such
Issuing Lender under this Agreement or any L/C-Related Document relating to any
Letter of Credit Issued or to be Issued by it, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Required Lenders or all Lenders, as the case may be, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document and (iii) no amendment, waiver or consent shall, unless in writing
and signed by the Swing Line Lender in addition to the Required Lenders or all
Lenders, as the case may be, affect the rights or duties of the Swing Line
Lender under this Agreement or any other Loan Document.

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         11.2 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES.

         (a) GENERAL. Unless otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
by facsimile transmission). All such written notices shall be mailed, faxed or
delivered to the applicable address, facsimile number or (subject to subsection
(c) below) electronic mail address, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to the
applicable telephone number, as follows:

                           (i) if to the Company, the Administrative Agent, the
                  applicable Issuing Lender or the Swing Line Lender, to the
                  address, facsimile number, electronic mail address or
                  telephone number specified for such Person on SCHEDULE 11.2 or
                  to such other address, facsimile number, electronic mail
                  address or telephone number as shall be designated by such
                  party in a notice to the other parties; and

                           (ii) if to any other Lender, to the address,
                  facsimile number, electronic mail address or telephone number
                  specified in its Administrative Questionnaire or to such other
                  address, facsimile number, electronic mail address or
                  telephone number as shall be designated by such party in a
                  notice to the Company, the Administrative Agent, the
                  applicable Issuing Lender and the Swing Line Lender.

All such notices and other communications shall be deemed to be given or made
upon the earlier to occur of (i) actual receipt by the relevant party hereto and
(ii) (A) if delivered by hand or by courier, when signed for by or on behalf of
the relevant party hereto; (B) if delivered by mail, four Business Days after
deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent
and receipt has been confirmed by telephone; and (D) if delivered by electronic
mail (which form of delivery is subject to the provisions of subsection (c)
below), when delivered; PROVIDED, HOWEVER, that notices and other communications
to the Administrative Agent, the applicable Issuing Lender and the Swing Line
Lender pursuant to ARTICLES II AND III shall not be effective until actually
received by such Person. In no event shall a voicemail message be effective as a
notice, communication or confirmation hereunder.

         (b) EFFECTIVENESS OF FACSIMILE DOCUMENTS AND SIGNATURES. Loan Documents
may be transmitted and/or signed by facsimile. The effectiveness of any such
documents and signatures shall, subject to applicable law, have the same force
and effect as manually-signed originals and shall be binding on the Company, the
Administrative Agent and the Lenders. The Administrative Agent may also require
that any such documents and signatures be confirmed by a manually-signed
original thereof; PROVIDED, HOWEVER, that the failure to request or deliver the
same shall not limit the effectiveness of any facsimile document or signature.

         (c) LIMITED USE OF ELECTRONIC MAIL. Electronic mail and Internet and
intranet websites may be used only to distribute routine communications, such as
financial statements and other information as provided in SECTION 7.2, and to
distribute Loan Documents for execution by the parties thereto, and may not be
used for any other purpose.

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         (d) RELIANCE BY ADMINISTRATIVE AGENT AND LENDERS. The Administrative
Agent and the Lenders shall be entitled to rely and act upon any notices
(including telephonic Notices of Committed Borrowing and Notices of Swing Line
Loan) purportedly given by or on behalf of the Company even if (i) such notices
were not made in a manner specified herein, were incomplete or were not preceded
or followed by any other form of notice specified herein, or (ii) the terms
thereof, as understood by the recipient, varied from any confirmation thereof.
The Company shall indemnify each Administrative Agent-Related Person and each
Lender from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of the
Company. All telephonic notices to and other communications with the
Administrative Agent may be recorded by the Administrative Agent, and each of
the parties hereto hereby consents to such recording.

         11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.

         11.4 ATTORNEY COSTS, EXPENSES AND TAXES. The Company agrees (a) to pay
or reimburse the Administrative Agent and BAS for all reasonable costs and
expenses incurred by BofA (including in its capacity as Administrative Agent,
Swing Line Lender and an Issuing Lender) and BAS in connection with the
preparation, negotiation and execution of this Agreement and the other Loan
Documents and any amendment, waiver, consent or other modification of the
provisions hereof and thereof (whether or not the transactions contemplated
hereby or thereby are consummated), and the consummation and administration of
the transactions contemplated hereby and thereby, including all Attorney Costs
incurred by the Administrative Agent and BAS with respect thereto, and (b) to
pay or reimburse the Administrative Agent and each Lender for all reasonable
costs and expenses incurred in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
the other Loan Documents (including all such costs and expenses incurred during
any "workout" or restructuring in respect of the Obligations and during any
legal proceeding, including any proceeding under any insolvency laws), including
all Attorney Costs. The foregoing costs and expenses shall include all search,
filing, recording, title insurance and appraisal charges and fees and taxes
related thereto, and other out-of-pocket expenses incurred by the Administrative
Agent and the cost of independent public accountants and other outside experts
retained by the Administrative Agent or any Lender. All amounts due under this
SECTION 11.4 shall be payable within ten Business Days after demand therefor.
The agreements in this Section shall survive the termination of the Aggregate
Commitments and repayment of all other Obligations

         11.5 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless each Administrative Agent-Related Person, each Lender and their
respective Affiliates, directors, officers, employees, counsel, agents and
attorneys-in-fact (collectively the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
judgments, suits, costs, expenses and disbursements (including Attorney Costs)
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against any such Indemnitee in any way relating to or arising out

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of or in connection with (a) the execution, delivery, enforcement, performance
or administration of any Loan Document or any other agreement, letter or
instrument delivered in connection with the transactions contemplated thereby or
the consummation of the transactions contemplated thereby, (b) any Commitment,
Loan or Letter of Credit or the use of the proceeds therefrom (including any
refusal by the Applicable Issuing Lender to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (c) any presence
or release of Hazardous Materials on or from any property currently or formerly
owned or operated by the Company, any Subsidiary or any Affiliate of the
Company, or any Environmental Liability related in any way to the Company, any
Subsidiary or any Affiliate of the Company, or (d) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory (including any investigation of, preparation
for, or defense of any pending or threatened in writing claim, investigation,
litigation or proceeding) and regardless of whether any Indemnitee is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such liabilities, obligations, losses, damages, penalties,
claims, demands, actions, judgments, suits, costs, expenses or disbursements are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee. No Indemnitee shall be liable for any damages arising from the
use by others of any information or other materials obtained through IntraLinks
or other similar information transmission systems in connection with this
Agreement, nor shall any Indemnitee have any liability for any indirect or
consequential damages relating to this Agreement or any other Loan Document or
arising out of its activities in connection herewith or therewith (whether
before or after the Effective Date). In the event Indemnitees intend to seek
indemnity hereunder from the Company, Indemnitees shall give prompt written
notice of such Indemnified Liabilities to the Company and Company's counsel at
the addresses set forth in SCHEDULE 11.2. All amounts due under this SECTION
11.5 shall be payable within ten Business Days after demand therefor. The
agreements in this Section shall survive the resignation of the Administrative
Agent, the replacement of any Lender, the termination of the combined
Commitments and the repayment, satisfaction or discharge of all the other
Obligations.

         11.6 PAYMENTS SET ASIDE. To the extent that the Company makes a payment
to the Administrative Agent or the Lenders, or the Administrative Agent or any
Lender exercises its right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion) to be repaid to a trustee, a receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred and (b) each Lender
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent.

         11.7 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Lender.

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         11.8 ASSIGNMENTS, PARTICIPATIONS, ETC.

         (a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Company may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender and no Lender may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of subsection (b) of this Section, (ii) by way of participation in
accordance with the provisions of subsection (d) of this Section, (iii) by way
of pledge or assignment of a security interest subject to the restrictions of
subsection (f) or (i) of this Section, or (iv) to an SPC in accordance with the
provisions of subsection (h) of this Section (and any other attempted assignment
or transfer by any party hereto shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in subsection (d) of this
Section and, to the extent expressly contemplated hereby, the Indemnitees) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

         (b) Any Lender may at any time assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans (including for purposes of this
subsection (b), participations in L/C Obligations and in Swing Line Loans) at
the time owing to it); provided that (i) except in the case of an assignment of
the entire remaining amount of the assigning Lender's Commitment and the Loans
at the time owing to it or in the case of an assignment to a Lender or an
Affiliate of a Lender or an Approved Fund (as defined in subsection (g) of this
Section) with respect to a Lender, the aggregate amount of the Commitment (which
for this purpose includes Loans outstanding thereunder) subject to each such
assignment, determined as of the date the Assignment and Assumption with respect
to such assignment is delivered to the Administrative Agent or, if "Trade Date"
is specified in the Assignment and Assumption, as of the Trade Date, shall not
be less than $5,000,000 unless each of the Administrative Agent and, so long as
no Event of Default has occurred and is continuing, the Company otherwise
consents (each such consent not to be unreasonably withheld or delayed); (ii)
each partial assignment shall be made as an assignment of a proportionate part
of all the assigning Lender's rights and obligations under this Agreement with
respect to the Loans or the Commitment assigned, except that this clause (ii)
shall not apply to rights in respect of Swing Line Loans; (iii) any assignment
of a Commitment must be approved by the Administrative Agent, the applicable
Issuing Lender and the Swing Line Lender (each such approval not to be
unreasonably withheld or delayed) unless the Person that is the proposed
assignee is itself a Lender (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); and (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption, together with a processing and recordation fee of $3,500.
Subject to acceptance and recording thereof by the Administrative Agent pursuant
to subsection (c) of this Section, from and after the effective date specified
in each Assignment and Assumption, the Eligible Assignee thereunder shall be a
party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender's rights and obligations under

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this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of SECTIONS 4.1, 4.3, 4.4, 11.4 and 11.5 with
respect to facts and circumstances occurring prior to the effective date of such
assignment). Upon request, the Company (at its expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
subsection (d) of this Section.

         (c) The Administrative Agent, acting solely for this purpose as an
agent of the Company, shall maintain at the Administrative Agent's Payment
Office a copy of each Assignment and Assumption delivered to it and a register
for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans and L/C Obligations owing to,
each Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive, and the Company, the Administrative
Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Company and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.

         (d) Any Lender may at any time, without the consent of, or notice to,
the Company or the Administrative Agent, sell participations to any Person
(other than a natural person or the Company or any of the Company's Affiliates
or Subsidiaries ) (each, a "Participant") in all or a portion of such Lender's
rights and/or obligations under this Agreement (including all or a portion of
its Commitment and/or the Loans (including such Lender's participations in L/C
Obligations and/or Swing Line Loans) owing to it); provided that (i) such
Lender's obligations under this Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Company, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
SECTION 11.1 that directly affects such Participant. Subject to subsection (e)
of this Section, the Company agrees that each Participant shall be entitled to
the benefits of SECTIONS 4.1, 4.3 and 4.4 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of SECTION 11.10 as though it were a Lender, provided
such Participant agrees to be subject to SECTION 2.13 as though it were a
Lender.

         (e) A Participant shall not be entitled to receive any greater payment
under SECTION 4.1 or 4.3 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Company's prior
written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of SECTION 4.1 unless the Company

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is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Company, to comply with SECTION 11.15 as though
it were a Lender.

         (f) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement (including under its Note,
if any) to secure obligations of such Lender, including any pledge or assignment
to secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

         (g)      As used herein, the following terms have the following 
meanings:

                  "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a
         Lender; (c) an Approved Fund; and (d) any other Person (other than a
         natural person) approved by (i) the Administrative Agent, the Issuing
         Lenders and the Swing Line Lender, and (ii) unless an Event of Default
         has occurred and is continuing, the Company (each such approval not to
         be unreasonably withheld or delayed); provided that notwithstanding the
         foregoing, "Eligible Assignee" shall not include the Company or any of
         the Company's Affiliates or Subsidiaries.

                  "Fund" means any Person (other than a natural person) that is
         (or will be) engaged in making, purchasing, holding or otherwise
         investing in commercial loans and similar extensions of credit in the
         ordinary course of its business.

                  "Approved Fund" means any Fund that is administered or managed
         by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
         Affiliate of an entity that administers or manages a Lender.

          (h) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender") may grant to a special purpose funding vehicle
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Company (an "SPC") the option to provide all or any
part of any Committed Loan that such Granting Lender would otherwise be
obligated to make pursuant to this Agreement; provided that (i) nothing herein
shall constitute a commitment by any SPC to fund any Committed Loan, and (ii) if
an SPC elects not to exercise such option or otherwise fails to make all or any
part of such Committed Loan, the Granting Lender shall be obligated to make such
Committed Loan pursuant to the terms hereof. Each party hereto hereby agrees
that (i) neither the grant to any SPC nor the exercise by any SPC of such option
shall increase the costs or expenses or otherwise increase or change the
obligations of the Company under this Agreement (including its obligations under
SECTION 4.3), (ii) no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement for which a Lender would be liable, and (iii)
the Granting Lender shall for all purposes, including the approval of any
amendment, waiver or other modification of any provision of any Loan Document,
remain the lender of record hereunder. The making of a Committed Loan by an SPC
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Committed Loan were made by such Granting Lender. In
furtherance of the foregoing, each party hereto hereby agrees (which agreement

                                       74

<PAGE>

shall survive the termination of this Agreement) that, prior to the date that is
one year and one day after the payment in full of all outstanding commercial
paper or other senior debt of any SPC, it will not institute against, or join
any other Person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency, or liquidation proceeding under the
laws of the United States or any State thereof. Notwithstanding anything to the
contrary contained herein, any SPC may (i) with notice to, but without prior
consent of the Company and the Administrative Agent and with the payment of a
processing fee of $3,500, assign all or any portion of its right to receive
payment with respect to any Committed Loan to the Granting Lender and (ii)
disclose on a confidential basis any non-public information relating to its
funding of Committed Loans to any rating agency, commercial paper dealer or
provider of any surety or Guaranty Obligations or credit or liquidity
enhancement to such SPC.

         (i) Notwithstanding anything to the contrary contained herein, any
Lender that is a Fund may create a security interest in all or any portion of
the Loans owing to it and the Note, if any, held by it to the trustee for
holders of obligations owed, or securities issued, by such Fund as security for
such obligations or securities, provided that unless and until such trustee
actually becomes a Lender in compliance with the other provisions of this
SECTION 11.8, (i) no such pledge shall release the pledging Lender from any of
its obligations under the Loan Documents and (ii) such trustee shall not be
entitled to exercise any of the rights of a Lender under the Loan Documents even
though such trustee may have acquired ownership rights with respect to the
pledged interest through foreclosure or otherwise.

         (j) Notwithstanding anything to the contrary contained herein, if at
any time BofA assigns all of its Commitment and Loans pursuant to subsection (b)
above, BofA may, (i) upon 30 days' notice to the Company and the Lenders, resign
as an Issuing Lender and/or (ii) upon 30 days' notice to the Company, resign as
Swing Line Lender. In the event of any such resignation as an Issuing Lender or
Swing Line Lender, the Company shall be entitled to appoint from among the
Lenders a successor Issuing Lender or Swing Line Lender hereunder; provided,
however, that no failure by the Company to appoint any such successor shall
affect the resignation of BofA as an Issuing Lender or Swing Line Lender, as the
case may be. If BofA resigns as an Issuing Lender, it shall retain all the
rights and obligations of an Issuing Lender hereunder with respect to all
Letters of Credit outstanding as of the effective date of its resignation as an
Issuing Lender and all L/C Obligations with respect thereto (including the right
to require the Lenders to make Base Rate Committed Loans or fund risk
participations in Unreimbursed Amounts pursuant to SECTION 3.3). If BofA resigns
as Swing Line Lender, it shall retain all the rights of the Swing Line Lender
provided for hereunder with respect to Swing Line Loans made by it and
outstanding as of the effective date of such resignation, including the right to
require the Lenders to make Base Rate Committed Loans or fund risk
participations in outstanding Swing Line Loans pursuant to SECTION 2.16(B).

         11.9 CONFIDENTIALITY. Each Lender agrees to take, and to cause its
Affiliates to take, normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Administrative Agent on the Company's or such Subsidiary's behalf, under

                                       75

<PAGE>

this Agreement or any other Loan Document, and neither such Lender nor any of
its Affiliates shall use any such information other than in connection with or
in enforcement of this Agreement and the other Loan Documents or in connection
with other business now or hereafter existing or contemplated with the Company
or any Subsidiary; except to the extent such information (i) was or becomes
generally available to the public other than as a result of disclosure by such
Lender, or (ii) was or becomes available on a non-confidential basis from a
source other than the Company, provided that such source is not bound by a
confidentiality agreement with the Company or any Subsidiary known to such
Lender; PROVIDED, HOWEVER, that any Lender may disclose such information (A) at
the request or pursuant to any requirement of any Governmental Authority to
which such Lender is subject or in connection with an examination of such Lender
by any such authority; (B) pursuant to subpoena or other court process; (C) when
required to do so in accordance with the provisions of any applicable
Requirement of Law; (D) to the extent reasonably required in connection with any
litigation or proceeding to which the Administrative Agent or any Lender or any
of their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Lender's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Lenders hereunder; (H) as to any
Lender or any of its Affiliates, as expressly permitted under the terms of any
other document or agreement regarding confidentiality to which the Company or
any Subsidiary is party or is deemed party with such Lender or such Affiliate;
and (I) to its Affiliates.

         11.10 SET-OFF. In addition to any rights and remedies of the Lenders
provided by law, if any Event of Default exists, each Lender is authorized at
any time and from time to time, without prior notice to the Company, any such
notice being expressly waived by the Company to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness at any
time owing by, such Lender to or for the credit or the account of the Company
against any and all Obligations owing to such Lender, now or hereafter existing,
irrespective of whether or not the Administrative Agent or such Lender shall
have made demand under this Agreement or any other Loan Document and although
such Obligations may be contingent or unmatured. Each Lender agrees promptly to
notify the Company and the Administrative Agent after any such set-off and
application made by such Lender; PROVIDED, HOWEVER, that the failure to give
such notice shall not affect the validity of such set-off and application.

         11.11 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Lender
shall notify the Administrative Agent in writing of any change in the address to
which notices to such Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.

         11.12 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.

                                       76

<PAGE>

         11.13 SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.

         11.14 NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Administrative Agent and the Administrative Agent-Related Persons and the
Indemnified Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.

         11.15 TAX FORMS.

         (a) (i) Each Lender that is not a "United States person" within the
meaning of Section 7701(a)(30) of the Code (a "Foreign Lender") shall deliver to
the Administrative Agent, prior to receipt of any payment subject to withholding
under the Code (or upon accepting an assignment of an interest herein), two duly
signed completed copies of either IRS Form W-8BEN or any successor thereto
(relating to such Foreign Lender and entitling it to an exemption from, or
reduction of, withholding tax on all payments to be made to such Foreign Lender
by the Company pursuant to this Agreement) or IRS Form W-8ECI or any successor
thereto (relating to all payments to be made to such Foreign Lender by the
Company pursuant to this Agreement) or such other evidence satisfactory to the
Company and the Administrative Agent that such Foreign Lender is entitled to an
exemption from, or reduction of, U.S. withholding tax, including any exemption
pursuant to Section 881(c) of the Code. Thereafter and from time to time, each
such Foreign Lender shall (A) promptly submit to the Administrative Agent such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to the
Company and the Administrative Agent of any available exemption from or
reduction of, United States withholding taxes in respect of all payments to be
made to such Foreign Lender by the Company pursuant to this Agreement, (B)
promptly notify the Administrative Agent of any change in circumstances which
would modify or render invalid any claimed exemption or reduction, and (C) take
such steps as shall not be materially disadvantageous to it, in the reasonable
judgment of such Lender, and as may be reasonably necessary (including the
re-designation of its Lending Office) to avoid any requirement of applicable
laws that the Company make any deduction or withholding for taxes from amounts
payable to such Foreign Lender.

         (ii) Each Foreign Lender, to the extent it does not act or ceases to
act for its own account with respect to any portion of any sums paid or payable
to such Lender under any of the Loan Documents (for example, in the case of a
typical participation by such Lender), shall deliver to the Administrative Agent
on the date when such Foreign Lender ceases to act for its own account with
respect to any portion of any such sums paid or payable, and at such other times
as may be necessary in the determination of the Administrative Agent (in the
reasonable exercise of its discretion), (A) two duly signed completed copies of
the forms or statements required to be provided by such Lender as set forth
above, to establish the portion of any such sums paid or payable with respect to
which such Lender acts for its own account that is not subject to U.S.

                                       77

<PAGE>

withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or
any successor thereto), together with any information such Lender chooses to
transmit with such form, and any other certificate or statement of exemption
required under the Code, to establish that such Lender is not acting for its own
account with respect to a portion of any such sums payable to such Lender.

         (iii) The Company shall not be required to pay any additional amount to
any Foreign Lender under SECTION 4.1 (A) with respect to any Taxes required to
be deducted or withheld on the basis of the information, certificates or
statements of exemption such Lender transmits with an IRS Form W-8IMY pursuant
to this SECTION 11.15(A) or (B) if such Lender shall have failed to satisfy the
foregoing provisions of this SECTION 11.15(A); provided that if such Lender
shall have satisfied the requirement of this SECTION 11.15(A) on the date such
Lender became a Lender or ceased to act for its own account with respect to any
payment under any of the Loan Documents, nothing in this SECTION 11.15(A) shall
relieve the Company of its obligation to pay any amounts pursuant to SECTION 4.1
in the event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the interpretation,
administration or application thereof, such Lender is no longer properly
entitled to deliver forms, certificates or other evidence at a subsequent date
establishing the fact that such Lender or other Person for the account of which
such Lender receives any sums payable under any of the Loan Documents is not
subject to withholding or is subject to withholding at a reduced rate.

         (iv) The Administrative Agent may, without reduction, withhold any
Taxes required to be deducted and withheld from any payment under any of the
Loan Documents with respect to which the Company is not required to pay
additional amounts under this SECTION 11.15(A).

         (b) Upon the request of the Administrative Agent, each Lender that is a
"United States person" within the meaning of Section 7701(a)(30) of the Code
shall deliver to the Administrative Agent two duly signed completed copies of
IRS Form W-9. If such Lender fails to deliver such forms, then the
Administrative Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable back-up withholding tax imposed by the Code,
without reduction.

         (c) If any Governmental Authority asserts that the Administrative Agent
did not properly withhold or backup withhold, as the case may be, any tax or
other amount from payments made to or for the account of any Lender, such Lender
shall indemnify the Administrative Agent therefor, including all penalties and
interest, any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, and costs and expenses (including
Attorney Costs) of the Administrative Agent. The obligation of the Lenders under
this Section shall survive the termination of the combined Commitments,
repayment of all other Obligations hereunder and the resignation of the
Administrative Agent.

         11.16 GOVERNING LAW AND JURISDICTION.

                  (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
         CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF FLORIDA; PROVIDED
         THAT THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS
         ARISING UNDER FEDERAL LAW.

                                       78

<PAGE>

                  (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
         AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF
         THE STATE OF FLORIDA OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT
         OF FLORIDA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF
         THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS CONSENTS, FOR
         ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
         JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE ADMINISTRATIVE
         AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
         OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
         CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
         ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT
         OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE AGENT
         AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT
         OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
         FLORIDA LAW.

         11.17 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

         11.18 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents (and any agreement relating to fees referred in SUBSECTION 2.9(A)),
embodies the entire agreement and understanding among the Company, the Lenders
and the Administrative Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.

         11.19 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by
the Administrative Agent or any Lender or on their behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Event of Default or Unmatured Event of Default at the time of any Credit
Extension, and shall continue in full force and effect as long as any Loan or
any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter
of Credit shall remain outstanding.

                            [SIGNATURE PAGES FOLLOW]

                                       79

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                   REPUBLIC SERVICES, INC.


                                   By: /s/ Edward A. Lang, III
                                      ----------------------------------------
                                   Name:    Edward A. Lang, III
                                   Title:   Vice President Finance & Treasurer


                                   BANK OF AMERICA, N.A.,
                                   as Administrative Agent


                                   By: /s/ Timothy H. Spanos
                                      ----------------------------------------
                                   Name: Timothy H. Spanos
                                   Title:   Managing Director



                                   BANK OF AMERICA, N.A., as Swing Line 
                                   Lender, as an Issuing Lender and as a Lender


                                   By: /s/ Timothy H. Spanos
                                      -----------------------------------------
                                   Name:    Timothy H. Spanos
                                   Title:   Managing Director



                                   CITIBANK, N.A., as a Lender


                                   By: /s/ David L. Harris
                                      -----------------------------------------
                                   Name:    David L. Harris
                                   Title:   Vice President



                                   BANK ONE, NA


                                   By: /s/ Steven P. Sullivan
                                      -----------------------------------------
                                   Name:    Steven P. Sullivan
                                   Title:   Associate Director


                                 Signature Page

                                       80





<PAGE>
                                   BARCLAYS BANK PLC



                                   By: /s/ L. Peter Yetman
                                      -----------------------------------------
                                   Name:    L. Peter Yetman
                                   Title:   Director



                                   SUNTRUST BANK


                                   By: /s/ Karen C. Copeland
                                      -----------------------------------------
                                   Name:    Karen C. Copeland
                                   Title:   Vice President



                                   BNP PARIBAS


                                   By: /s/ Mike Shryock
                                      -----------------------------------------
                                   Name:    Mike Shryock
                                   Title:   Vice President


                                   By: /s/ John Stacy
                                      -----------------------------------------
                                   Name:    John Stacy
                                   Title:   Managing Director


                                   WACHOVIA BANK, NATIONAL ASSOCIATION


                                   By: /s/ William R. Goley
                                      -----------------------------------------
                                   Name:    William R. Goley
                                   Title:   Director


                                   CREDIT LYONNAIS NEW YORK BRANCH


                                   By: /s/ Attila Koc
                                      -----------------------------------------
                                   Name:    Attila Koc
                                   Title:   Senior Vice President


                                 Signature Page

                                       81

<PAGE>


                                   FLEET NATIONAL BANK


                                   By: /s/ David C. Brecht
                                      -----------------------------------------
                                   Name:    David C. Brecht
                                   Title:   Vice President


                                   THE BANK OF NEW YORK


                                   By: /s/ David C. Siegel
                                      -----------------------------------------
                                   Name:    David C. Siegel
                                   Title:   Vice President


                                   WELLS FARGO BANK, NATIONAL ASSOCIATION


                                   By: /s/ Robert Neubauer
                                      -----------------------------------------
                                   Name:    Robert Neubauer
                                   Title:   Vice President


                                   COMERICA BANK


                                   By: /s/ Gerald R. Finney, Jr.
                                      -----------------------------------------
                                   Name:    Gerald R. Finney, Jr.
                                   Title:   Vice President


                                 Signature Page

                                       82

<PAGE>



                                  Schedule 1.1

                                Pricing Schedule


         The Facility Fee Rate, the Applicable Margin, the L/C Fee Rate and the
Utilization Fee Rate, for any fiscal quarter, shall be the applicable rate per
annum set forth in the table below, determined as of the day next following
receipt by the Administrative Agent from the Company of evidence satisfactory to
the Administrative Agent of the then Rating.

--------------------------------------------------------------------------------
                                (In Basis Points)
--------------------------------------------------------------------------------
                                    Facility       Applicable      Utilization
  Tier         Rating (1)              Fee          Margin/            Fee
                                                    L/C Fee
                                                     Rate
--------- ---------------------- ----------------- ------------- ---------------
   I       BBB+/Baa1 or higher         12.5            50.0            12.5
--------- ---------------------- ----------------- ------------- ---------------
  II            BBB/Baa2               17.5            70.0            12.5
--------- ---------------------- ----------------- ------------- ---------------
 III            BBB-/Baa3              20.0            80.0            25.0
--------- ---------------------- ----------------- ------------- ---------------
 IV        less than BBB-/Baa3         25.0           100.0            25.0
--------- ---------------------- ----------------- ------------- ---------------


(1) Unless otherwise indicated, in the event of a single split Rating, the
higher Rating shall apply. In the event of a multiple split Rating, the
applicable Rating shall be one higher than the lower Rating.






<PAGE>
                                                                    EXHIBIT 21.1



SUBSIDIARY NAME                                 STATE OF INCORPORATION
---------------                                 ----------------------
A-Best Disposal, Inc.                                    OH
Ace Disposal Services, Inc.                              OH
ADAJ Corporation                                         CA
Anderson Refuse Co., Inc.                                IN
Anderson Solid Waste, Inc.                               CA
Arc Disposal Company, Inc.                               IL
Ariana, LLC                                              DE
Astro Waste Services, Inc.                               ME
Atlas Transport, Inc.                                    CA
Barker Brothers Waste Incorporated                       TN
Barker Brothers, Inc.                                    TN
Bay Collection Services, Inc.                            CA
Bay Environmental Management, Inc.                       CA
Bay Landfills, Inc.                                      CA
Bay Leasing Company, Inc.                                CA
Berkeley Sanitary Service, Inc.                          CA
Berrien County Landfill, Inc.                            MI
BLT Enterprises of Oxnard, Inc.                          CA
Bluegrass Recycling & Transfer Company                   KY
Bom Ambiente Insurance Company                           Cayman Islands
Bosman Bros., Inc.                                       IL
Calvert Trash Service Incorporated                       MD
Calvert Trash Systems, Incorporated                      MD
Capital Waste & Recycling, Inc.                          NY
Commercial Waste Disposal , Inc.                         KY
Compactor Rental Systems of Delaware, Inc.               DE
Consolidated Disposal Service, LLC                       DE
Continental Waste Industries - Gary, Inc.                IN
Continental Waste Industries, L.L.C.                     DE
Covington Waste, Inc.                                    TN
Crockett Sanitary Service, Inc.                          CA
CWI of Florida, Inc.                                     FL
CWI of Illinois, Inc.                                    IL
CWI of Missouri, Inc.                                    MO
CWI of Northwest Indiana, Inc.                           IN
E & P Investment Corporation                             IL
Envirocycle, Inc.                                        FL
Environmental Specialists, Inc.                          MO
FLL,
 Inc.                                                MI
G.E.M. Environmental Management, Inc.                    DE
Gilliam Transfer, Inc.                                   MO
Greenfield Environmental Development Corp.               DE
Hanks Disposal, Inc.                                     IN



<PAGE>

SUBSIDIARY NAME                                 STATE OF INCORPORATION
---------------                                 ----------------------

HMD Waste, L.L.C.                                        DE
Honeygo Run Reclamation Center, Inc.                     MD
Indiana Recycling, LLC                                   IN
Jamax Corporation                                        IN
K & K Trash Removal, Inc.                                MD
L.R. Stuart and Son, Inc.                                VA
McCusker Recycling, Inc.                                 PA
M-G Disposal Service, LLC                                DE
Midwest Material Management, Inc.                        IN
Noble Risley, Jr. & Sons, Inc.                           IL
Northwest Tennessee Disposal Corp.                       TN
Nove Investments I, LLC                                  CA
Oceanside Waste & Recycling Services                     CA
Ohio Republic Contracts, II, Inc.                        DE
Ohio Republic Contracts, Inc.                            OH
Peninsula Waste Systems, LLC                             MD
Perdomo & Sons, Inc.                                     CA
Perdomo/BLT Enterprises, LLC                             CA
Potrero Hills Landfill, Inc.                             CA
Prichard Landfill Corporation                            WV
Reliable Disposal, Inc.                                  MI
Republic Acquisition Company                             DE
Republic Dumpco, Inc.                                    NV
Republic Enivronmental Technologies, Inc.                NV
Republic Indiana Merger, LLC                             DE
Republic Services Aviation, Inc.                         FL
Republic Services Financial LP, Inc.                     DE
Republic Services Financial, Limited Partnership         DE
Republic Services Holding Company, Inc.                  DE
Republic Services of Arizona Hauling, LLC                AZ
Republic Services of California Holding Company, Inc.    DE
Republic Services of California I, LLC                   DE
Republic Services of California II, LLC                  DE
Republic Services of Canada, Inc.                        Canada
Republic Services of Colorado Hauling, LLC               CO
Republic Services of Colorado I, LLC                     CO
Republic Services of Florida GP, Inc.                    DE
Republic Services of Florida LP, Inc.                    DE
Republic Services of Florida, Limited Partnership        DE
Republic Services of Georgia GP, LLC                     DE
Republic Services of Georgia LP, LLC                     DE
Republic Services of Georgia, Limited Partnership        DE
Republic Services of Indiana LP, Inc.                    DE
Republic Services of Indiana Transportation, LLC         DE


                                       2

<PAGE>
SUBSIDIARY NAME                                 STATE OF INCORPORATION
---------------                                 ----------------------

Republic Services of Indiana, Limited Partnership        DE
Republic Services of Kentucky, LLC                       KY
Republic Services of Maryland, LLC                       MD
Republic Services of Michigan Hauling, LLC               MI
Republic Services of Michigan Holding Company, Inc.      DE
Republic Services of Michigan I, LLC                     MI
Republic Services of Michigan II, LLC                    MI
Republic Services of Michigan III, LLC                   MI
Republic Services of Michigan IV, LLC                    MI
Republic Services of Michigan V, LLC                     MI
Republic Services of New Jersey II, LLC                  DE
Republic Services of New Jersey, LLC                     DE
Republic Services of New York Hauling, LLC               NY
Republic Services of New York, Inc.                      DE
Republic Services of North Carolina, LLC                 NC
Republic Services of Ohio Hauling, LLC                   OH
Republic Services of Ohio I, LLC                         OH
Republic Services of Ohio II, LLC                        OH
Republic Services of Ohio III, LLC                       OH
Republic Services of Ohio IV, LLC                        OH
Republic Services of Pennsylvania, LLC                   DE
Republic Services of South Carolina, LLC                 DE
Republic Services of Tennessee, LLC                      DE
Republic Services of Virginia, LLC                       VA
Republic Services of Wisconsin GP, LLC                   DE
Republic Services of Wisconsin LP, LLC                   DE
Republic Services of Wisconsin, Limited Partnership      DE
Republic Services Real Estate Holding, Inc.              NC
Republic Services Risk Management, Inc.                  DE
Republic Services Vasco Road, LLC                        DE
Republic Services, Inc.                                  DE
Republic Silver State Disposal, Inc.                     NV
Republic Wabash Company                                  DE
Republic Waste Services of Louisiana, LLC                DE
Republic Waste Services of Texas GP, Inc.                DE
Republic Waste Services of Texas LP, Inc.                DE
Republic Waste Services of Texas, Ltd.                   TX
RI/Alameda Corp.                                         CA
Richmond Sanitary Service, Inc.                          CA
RITM, LLC                                                DE
RS/WM Holding Company, LLC                               DE
RSG Cayman Group, Inc.                                   DE
Rubbish Control, LLC                                     DE
Sandy Hollow Landfill Corp.                              WV


                                       3

<PAGE>
SUBSIDIARY NAME                                 STATE OF INCORPORATION
---------------                                 ----------------------

Sanifill, Inc.                                           TN
Schofield Corporation of Orlando                         FL
Solano Garbage Company                                   CA
South Trans, Inc.                                        NJ
Southern Illinois Regional Landfill, Inc.                IL
Suburban Sanitation Services, Inc.                       AZ
Sunrise Disposal, Inc.                                   IN
Taormina Industries, LLC                                 DE
Tay-Ban Corporation                                      MI
Terre Haute Recycling, Inc.                              IN
The LETCO Group, Limited Partnership                     DE
Tri-County Refuse Service, Inc,                          MI
Triple G Landfills, Inc.                                 IN
United Refuse Co., Inc.                                  IN
Victory Environmental Services, Inc.                     DE
Victory Waste Incorporated                               CA
Wabash Valley Development Corporation                    IN
Wabash Valley Landfill Company, Ltd.                     PA
Water Recovery Systems, LLC                              SC
West Contra Costa Energy Recovery Company                CA
West Contra Costa Sanitary Landfill, Inc.                CA
West County Landfill, Inc.                               CA
West County Resource Recovery, Inc.                      CA
Wilshire Disposal Services, Inc.                         CA
Zakaroff Services                                        CA



                                       4


<PAGE>

                                                                    EXHIBIT 23.1


              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


We consent to the incorporation by reference in the Registration Statements
(Forms S-8 Nos. 333-81801, 333-78125, 333-45542 and 333-10408) pertaining to the
Republic Services 401(k) Plan, 1998 Stock Incentive Plan, Republic Services,
Inc. Amended and Restated Employee Stock Purchase Plan and Republic Services,
Inc. Amended and Restated 1998 Stock Incentive Plan, respectively, of our report
dated February 3, 2003, with respect to the consolidated financial statements
and schedule of Republic Services, Inc. included in the Annual Report (Form
10-K) for the year ended December 31, 2002.


                                                           /s/ Ernst & Young LLP


Fort Lauderdale, Florida
March 24, 2003