WASTE INDUSTRIES INC, S-4, 1998-09-17

WASTE INDUSTRIES INC
S-4, 1998-09-17
REFUSE SYSTEMS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1998
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

---------------
WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
NORTH CAROLINA 4953 56-0954929
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

3949 BROWNING PLACE
RALEIGH, NORTH CAROLINA 27609
(919) 782-0095
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

---------------
ROBERT H. HALL
CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
WASTE INDUSTRIES, INC.
3949 BROWNING PLACE
RALEIGH, NORTH CAROLINA 27609
(919) 782-0095
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

DONALD R. REYNOLDS, ESQ.
WYRICK ROBBINS YATES & PONTON LLP
4101 LAKE BOONE TRAIL, SUITE 300
RALEIGH, NORTH CAROLINA 27607
(919) 781-4000
FAX (919) 781-4865

---------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFER- REGISTRATION
BE REGISTERED REGISTERED PER SHARE (1) ING PRICE (1) FEE
<S> <C> <C> <C> <C>
Common Stock,
no par value per share .. 2,000,000 $ 19.75 $39,500,000 $ 11,652.50
</TABLE>

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(1) Estimated solely for the purpose of calculating the registration fee, based
upon the average of the high and low prices of the Common Stock on the
Nasdaq National Market on September 15, 1998, in accordance with Rule 457.

---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>

(A redherring appears on the left-hand side of this page, rotated 90 degrees.
Text follows.)

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO SECURITIES HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY
BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1998

2,000,000 SHARES

(logo)

WASTE INDUSTRIES, INC.
COMMON STOCK
---------------
This Prospectus covers the offer and sale of up to 2,000,000 shares of
Common Stock, no par value per share (the "Common Stock"), of Waste Industries,
Inc. (together with its subsidiaries, the "Company" or "Waste Industries"),
which the Company may issue from time to time in connection with future direct
and indirect acquisitions of other businesses, properties or securities in
business combination transactions in accordance with Rule 415(a)(1)(viii) under
the Securities Act of 1933, as amended (the "Securities Act").

The Company expects that the terms upon which it may issue the shares will
be determined through negotiations with the shareholders or principal owners of
the businesses whose securities or assets are to be acquired. It is expected
that the shares that are issued will be valued at prices reasonably related to
market prices for the Common Stock prevailing either at the time an acquisition
agreement is executed or at the time an acquisition is consummated.

This Prospectus will only be used in connection with the acquisition of
businesses, properties or securities in business combination transactions that
would be exempt from registration but for the issuance of Common Stock and the
possibility of integration with other transactions. If an acquisition of a
business, properties or securities in a business combination transaction is not
exempt from registration even if integration is not taken into account, then
the offerees of Common Stock in such acquisition will be furnished with copies
of this Prospectus as amended or supplemented by a post-effective amendment to
the Registration Statement on Form S-4 of which this Prospectus is a part. This
Prospectus will be furnished to security holders of the business, properties or
securities to be acquired.

Persons receiving Common Stock in connection with an acquisition may be
required to agree to hold all or some portion of the Common Stock for a period
of up to two years after the date of such acquisition. See "Plan of
Distribution."

If an acquisition has a material financial effect upon the Company, a
Current Report on Form 8-K and a post-effective amendment to the registration
statement of which this Prospectus is a part will be filed subsequent to the
acquisition containing financial and other information about the acquisition
that would be material to subsequent acquirers of Common Stock offered hereby,
including pro forma information for Waste Industries and historical financial
information about the company being acquired. A Current Report on Form 8-K and
a post-effective amendment to the registration statement of which this
Prospectus is a part will also be filed when an acquisition does not per se
have a material effect upon the Company, but if aggregated with other
acquisitions since the date of the Company's most recent audited financial
statements, would have such a material effect.

At September 10, 1998, the Company had 13,380,905 shares of Common Stock
outstanding. The Company's Common Stock is traded on the Nasdaq National
Market. On September 11, 1998, the last sale price of the Common Stock on the
Nasdaq National Market was $20.25 per share. See "Price Range of Common Stock".

All expenses of this offering will be paid by the Company. No underwriting
discounts or commissions will be paid in connection with the issuance of shares
by the Company in business combination transactions, although the Company may
pay finder's fees in shares of Common Stock with respect to specific
acquisitions. Any person receiving a finder's fee in shares of Common Stock may
be deemed to be an underwriter within the meaning of the Securities Act.
---------------

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. SEE "RISK FACTORS" FOR
INFORMATION THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE INVESTORS.
EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE TERMS "WASTE
INDUSTRIES" AND THE "COMPANY" REFER TO WASTE INDUSTRIES, INC. AND ITS
SUBSIDIARIES.

THE COMPANY

Waste Industries is a regional solid waste services company providing
solid waste collection, transfer, recycling, processing and disposal services
to customers primarily in North Carolina, South Carolina, Tennessee, Virginia,
Georgia and Mississippi.

As of June 30, 1998, the Company's principal operations consist of 28
branch collection operations, 18 transfer stations and four recycling
processing facilities that serve more than 260,000 municipal, residential,
commercial and industrial locations. Collection operations include front-end
and roll-off collection for commercial and industrial accounts and curbside
collection for residential customers. Transfer stations are located
strategically throughout the served market area to allow the Company to
consolidate its waste stream to gain more favorable disposal rates. Recycling
processing facilities receive almost all forms of recyclable materials from the
Company's approximately 100 convenience sites located in 15 counties in its
market area. In 1997, less than 3% of the Company's waste stream was recycled.
In addition to these services, the Company provides certain ancillary services
to customers to complement its primary operations, including the operation of
approximately 100 convenience sites, originally developed by the Company to
consolidate waste in rural areas. The Company has acquired 31 solid waste
collection operations since 1990. The Company does not currently own or operate
any landfills; however, future expansion may include the acquisition or
development of one or more landfills either independently or in partnership
with an experienced landfill operator. See " -- Recent Acquisition
Developments".

The Company's objective is to build the premier solid waste services
company in the Southeastern U.S. by expanding its operations and capitalizing
on its strong market presence. The Company's strategy for achieving this
objective is: (i) to generate internal growth by adding customers and services
to its existing operations; (ii) to acquire solid waste collection companies,
customers and, under appropriate circumstances, landfills in existing and new
areas of its target market; and (iii) to increase operating efficiencies and
enhance profitability in its existing and acquired operations.

The Company operates on a decentralized management basis, with each of its
branch facilities having service and decision-making authority. The Company
believes that a branch facilities structure gives the Company the flexibility
and speed to respond to customers' needs quickly and to implement
cost-effective solutions. Moreover, the Company believes that its branch
facilities structure provides a low-overhead, highly efficient operational
structure that allows the Company to branch into geographically contiguous
markets and operate in small communities which larger competitors may not find
attractive. The Company believes that branch facilities and decentralized
management of operations provide the Company with a strategic competitive
advantage given the relatively rural nature of the Southeastern U.S.

Members of the senior management team founded Waste Industries in 1970 and
are recognized for their leadership roles throughout the solid waste management
industry and its trade organizations. The Company's management team
collectively has over 240 years of experience in the solid waste industry and
over 150 years with the Company. The Company is a North Carolina corporation
with its principal executive offices located at 3949 Browning Place, Raleigh,
North Carolina 27609, and its telephone number at that location is (919)
782-0095.

RECENT ACQUISITION DEVELOPMENTS

On September 10, 1998, the Company acquired, in exchange for approximately
$10.0 million in cash plus 706,730 shares of Company Common Stock valued at
approximately $14.7 million, all of the outstanding stock of TransWaste
Services, Inc., a Georgia corporation engaged in solid waste collection and the
development, ownership and operation of four transfer stations and a landfill
in Albany, Georgia. This acquisition will be accounted for as a purchase, and
will expand the Company's operations in Georgia and provide the Company with
its second landfill.

On August 28, 1998, the Company acquired, in exchange for 388,311 shares
of Company Common Stock valued at approximately $8.5 million, all of the
outstanding stock of Railroad Avenue Disposal, Inc., a Mississippi corporation
that owns and operates a Class I rubbish pit and sand and gravel operation in
northwest Mississippi. This acquisition is expected to be accounted for as a
pooling of interests. As a result of this transaction, the Company now owns and
operates its first

3
<PAGE>

landfill. This acquisition also complements the Company's recently acquired
solid waste collection operations in and around Memphis, Tennessee.

Also on August 28, 1998, the Company acquired, in exchange for
approximately $7.6 million in cash plus 22,474 shares of Company Common Stock
valued at approximately $500,000, certain assets of Greater Atlanta Sanitation,
Inc., a solid waste collection business in and around Atlanta, Georgia. This
acquisition will be accounted for as a purchase, and will further expand the
Company's operations in Georgia.

In addition, the Company has entered into letters of intent to acquire, in
exchange for an aggregate of approximately $1.9 million in cash (a portion of
which is payable only if one of the targets achieves certain service revenue
targets), a solid waste collection and new home construction cleanup business
in Wake County, North Carolina and certain assets of a solid waste collection
business in southwestern Virginia. The Company expects to consummate these
acquisitions, which will be accounted for as purchases, by the end of the third
quarter of 1998. The first transaction is a "tuck-in" acquisition that will
increase the Company's route density and complement its current operations in
Wake County, North Carolina, and the second will expand its operations in
Virginia.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company .................... 2,000,000 shares to be issued by the Company in connection
with the acquisition of businesses, properties or securities in
business combinations
Common Stock to be outstanding after this offering ..... 15,380,905 shares(1)
Transfer of Shares ..................................... Persons acquiring shares of Common Stock in business
combinations pursuant to this offering may be required to
agree to hold all or some portion of such shares for a period
of up to two years after the date of acquisition.
Nasdaq National Market symbol .......................... WWIN
Quotation .............................................. Application will be made for quotation of the shares of
Common Stock offered hereby on the Nasdaq National
Market.
</TABLE>

- ---------
(1) Excludes 734,343 shares issuable upon the exercise of stock options
outstanding as of September 10, 1998 at a weighted average exercise price
of $6.50 per share. See "Management -- Executive Compensation; Stock
Options".

4
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(1)
--------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Service revenues ............. $ 59,749 $ 78,824 $ 95,022 $ 103,629 $ 126,649
Equipment sales .............. 3,868 1,909 2,080 1,769 1,601
------------ ------------ ------------ ------------ ------------
Total revenues ............... 63,617 80,733 97,102 105,398 128,250
Cost of service
operations ................. 33,946 44,216 56,629 65,015 78,007
Cost of equipment sales....... 2,730 1,888 1,646 1,240 1,171
------------ ------------ ------------ ------------ ------------
Total cost of operations ..... 36,676 46,104 58,275 66,255 79,178
Selling, general and
administrative ............. 15,543 19,171 19,403 19,891 24,295
Depreciation and
amortization ............... 6,647 8,440 8,919 9,217 11,620
------------ ------------ ------------ ------------ ------------
Merger costs ................. -- -- -- -- --
Operating income ............. 4,751 7,018 10,505 10,035 13,157
Interest expense ............. (1,857) (2,191) (2,390) (2,496) (2,993)
Other income ................. 214 334 430 806 634
------------ ------------ ------------ ------------ ------------
Income before income
taxes ...................... 3,108 5,161 8,545 8,345 10,798
Income taxes ................. -- -- -- -- 7,011
------------ ------------ ------------ ------------ ------------
Net income
(loss) -- historical
basis ...................... $ 3,108 $ 5,161 $ 8,545 $ 8,345 $ 3,787
============ ============ ============ ============ ============
Earnings (loss) per
share --
historical basis:
Basic ...................... $ 0.35 $ 0.50 $ 0.83 $ 0.81 $ 0.33
Diluted .................... $ 0.30 $ 0.50 $ 0.83 $ 0.80 $ 0.32
Pro forma income
taxes(2) ................... $ 1,265 $ 2,096 $ 3,425 $ 3,368 $ 4,208
------------ ------------ ------------ ------------ ------------
Pro forma net
income(2) .................. $ 1,843 $ 3,065 $ 5,120 $ 4,977 $ 6,590
============ ============ ============ ============ ============
Pro forma earnings per
share(2):
Basic ...................... $ 0.21 $ 0.30 $ 0.50 $ 0.48 $ 0.58
Diluted .................... $ 0.18 $ 0.30 $ 0.50 $ 0.47 $ 0.56
Weighted average shares
outstanding:
Basic ...................... 8,855,084 10,236,252 10,236,252 10,272,056 11,320,521
Diluted .................... 10,243,164 10,268,741 10,271,823 10,491,840 11,679,533
OTHER OPERATING DATA:
Net cash provided by
operating activities ....... $ 7,419 $ 14,701 $ 18,206 $ 16,915 $ 22,684
Net cash used in
investing activities ....... (12,032) (11,788) (8,912) (15,204) (58,962)
Net cash provided by
(used in) financing
activities ................. 5,792 (2,764) (9,336) (1,993) 35,347
EBITDA(3) .................... $ 11,612 $ 15,792 $ 19,854 $ 20,058 $ 25,411

<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1997 1998
-------------- --------------
<S> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Service revenues ............. $ 57,162 $ 79,974
Equipment sales .............. 791 778
------------ ------------
Total revenues ............... 57,953 80,752
Cost of service
operations ................. 35,242 49,447
Cost of equipment sales....... 506 501
------------ ------------
Total cost of operations ..... 35,748 49,948
Selling, general and
administrative ............. 11,022 13,862
Depreciation and
amortization ............... 5,216 7,508
------------ ------------
Merger costs ................. -- 78
Operating income ............. 5,967 9,356
Interest expense ............. (1,468) (1,979)
Other income ................. 218 336
------------ ------------
Income before income
taxes ...................... 4,717 7,713
Income taxes ................. 4,886 2,956
------------ ------------
Net income
(loss) -- historical
basis ...................... $ (169) $ 4,757
============ ============
Earnings (loss) per
share --
historical basis:
Basic ...................... $ (0.02) $ 0.39
Diluted .................... $ (0.02) $ 0.38
Pro forma income
taxes(2) ................... $ 1,878
------------
Pro forma net
income(2) .................. $ 2,839
============
Pro forma earnings per
share(2):
Basic ...................... $ 0.27
Diluted .................... $ 0.26
Weighted average shares
outstanding:
Basic ...................... 10,423,658 12,263,390
Diluted .................... 10,779,357 12,609,503
OTHER OPERATING DATA:
Net cash provided by
operating activities ....... $ 10,954 $ 13,318
Net cash used in
investing activities ....... (27,910) (22,603)
Net cash provided by
(used in) financing
activities ................. 16,342 9,399
EBITDA(3) .................... $ 11,401 $ 17,200
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1998
--------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......... $ 1,198
Shareholders' equity .............. $45,233
</TABLE>

(FOOTNOTES ON NEXT PAGE.)

5
<PAGE>

(2) For each of the fiscal years presented through 1996 (and for the period
from January 1, 1997 to May 8, 1997), the Company was an S Corporation
and, accordingly, was not subject to federal and certain state corporate
income taxes. The pro forma information has been computed as if the
Company were subject to federal and all applicable state corporate income
taxes for each of the periods presented assuming the tax rate that would
have applied had the Company been taxed as a C Corporation. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations".

(3) EBITDA is defined as income before income taxes plus interest expense and
depreciation and amortization. EBITDA should not be considered an
alternative to (i) operating income or net income (as determined in
accordance with generally accepted accounting principles ("GAAP")) as an
indicator of the Company's operating performance or (ii) cash flows from
operating activities (as determined in accordance with GAAP) as a measure
of operating performance or liquidity. However, the Company has included
EBITDA data (which are not a measure of financial performance under GAAP)
because it understands that such data are commonly used by certain
investors to evaluate a company's performance in the solid waste industry.
Furthermore, the Company believes that EBITDA data are relevant to an
understanding of the Company's performance because they reflect the
Company's ability to generate cash flows sufficient to satisfy its debt
service, capital expenditure and working capital requirements. The Company
therefore interprets the trends that EBITDA depicts as one measure of the
Company's operating performance. However, funds depicted by the EBITDA
measure may not be available for debt service, capital expenditures or
working capital due to legal or functional requirements to conserve funds
or other commitments or uncertainties. EBITDA, as measured by the Company,
might not be comparable to similarly titled measures reported by other
companies. Therefore, in evaluating EBITDA data, investors should
consider, among other factors: the non-GAAP nature of EBITDA data; actual
cashflows; the actual availability of funds for debt service, capital
expeditures and working capital; and the comparability of the Company's
EBITDA data to similarly titled measures reported by other companies.

6
<PAGE>

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Prospectus are forward-looking
statements that involve risks and uncertainties. Forward-looking statements
include the information concerning possible or future results of operations of
the Company set forth under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." To that extent, the
Company claims the protection of the disclosure liability safe harbor for
forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including particularly those important factors set forth below
under the heading "Risk Factors", that could cause actual results to differ
materially from those projected. Potential investors are cautioned not to place
undue reliance on such forward-looking statements, which are made only as of
the date hereof. The Company undertakes no obligations to publicly update or
release the results of any revision to such forward-looking statements that may
be made to reflect events or circumstances after the date hereof or to reflect
the accuracy of subsequent events. Readers are cautioned that the following
important "Risk Factors", in addition to those discussed elsewhere herein,
could affect the future results of the Company and cause those results to
differ materially from those expressed in such forward-looking statements.

RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE
SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS.

ABILITY TO MANAGE GROWTH. The Company's goal is to increase the scale of
its operations through internal growth and through the acquisition of other
solid waste businesses. Consequently, the Company may experience periods of
rapid growth with significantly increased staffing requirements. Such growth,
if it were to occur, could place a significant strain on the Company's
management and on its operational, financial and other resources. The Company's
ability to maintain and manage its growth effectively will require it to expand
its management information systems capabilities and improve its operational and
financial systems and controls. Moreover, the Company will need to attract,
train, motivate, retain and manage its senior managers, technical professionals
and other employees. Any failure to expand its management information systems
capabilities and its operational and financial systems and controls or to
recruit appropriate additional personnel in an efficient manner at a pace
consistent with any business growth the Company may experience would have a
material adverse effect on the Company's business, financial condition and
results of operations.

AVAILABILITY OF ACQUISITION TARGETS; INTEGRATION OF COMPLETED
ACQUISITIONS. Waste Industries' strategy envisions that a substantial part of
its future growth will come from acquiring and integrating independent solid
waste collection, transfer and disposal operations. There can be no assurance
that the Company will be able to identify suitable acquisition candidates or,
if identified, negotiate successfully their acquisition. Except as may be
disclosed herein or in any amendment or supplement hereto, the Company is not
currently a party to any letters of intent with respect to any other material
pending acquisitions. Failure by the Company to implement successfully its
acquisition strategy will limit the Company's growth potential. See "Business
- -- Strategy" and " -- Acquisition Program".

The recent consolidation and integration activity in the solid waste
industry, as well as the difficulties, uncertainties and expenses relating to
the development and permitting of solid waste landfills and transfer stations,
has increased competition for the acquisition of existing solid waste
collection, transfer and disposal operations. Increased competition for
acquisition candidates may result in fewer acquisition opportunities being made
available to the Company as well as less advantageous acquisition terms,
including increased purchase prices. These circumstances may increase
acquisition costs to levels beyond the Company's financial capability or
pricing parameters or which, as to acquisitions made by the Company, may have
an adverse effect on the Company's results of operations. Many of the Company's
competitors for acquisitions are larger, better known companies with
significantly greater resources than the Company. The Company also believes
that a significant factor in its ability to consummate acquisitions will be the
relative attractiveness of shares of the Company's Common Stock as an
investment instrument to potential acquisition candidates. This attractiveness
may, in large part, be dependent upon the relative market price and capital
appreciation prospects of the Common Stock compared to the equity securities of
the Company's competitors.

POTENTIAL INABILITY TO FINANCE THE COMPANY'S POTENTIAL GROWTH. Waste
Industries anticipates that any future business acquisitions will be financed
principally through the issuance of shares of the Company's Common Stock and/or
the payment of cash, and possibly through the assumption of debt of the
acquired businesses. If acquisition candidates are unwilling to accept shares
of the Company's Common Stock as part of the consideration for the sale of
their businesses, the Company would be required to utilize more of its
available cash resources or borrowings under its credit facilities in order to
effect such acquisitions. To the extent that then available sources are
insufficient to fund such requirements, the Company

7
<PAGE>

will require additional equity and/or debt financing in order to provide the
cash to effect such acquisitions. Additionally, growth through newly developed
or acquired landfills or transfer stations, as well as the ongoing maintenance
of such landfills or transfer stations, will require substantial capital
expenditures. There can be no assurance that the Company will have sufficient
existing capital resources or will be able to raise sufficient additional
capital resources on terms satisfactory to the Company, if at all, in order to
meet any or all of the foregoing capital requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources".

COMMODITY RISK UPON RESALE OF RECYCLABLES. One of the components of the
Company's internal growth strategy is to provide recycling services to
customers. The resale prices of, and demand for, recyclable commodities,
particularly wastepaper, can be volatile and subject to changing market
conditions. Accordingly, the Company's results of operations will be affected,
and may be affected materially, by changing resale prices or demand for certain
recyclable commodities, particularly wastepaper. These changes may also
contribute to significant variability in the Company's period-to-period results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations -- General".

HIGHLY COMPETITIVE INDUSTRY. The solid waste services industry is highly
competitive, very fragmented and requires substantial labor and capital
resources. Each of the markets in which the Company competes or will likely
compete is served by one or more of the large national solid waste companies,
as well as numerous regional and local solid waste companies of varying sizes
and resources. The Company also competes with those counties, municipalities,
and solid waste districts that maintain their own waste collection and disposal
operations. These counties, municipalities, and solid waste districts may have
financial advantages due to the availability to them of user fees, similar
charges or tax revenues and the greater availability to them of tax-exempt
financing. Intense competition exists not only to provide services to customers
but also to acquire other businesses within each market. The national solid
waste companies and some of the large regional companies have significantly
greater financial and other resources than the Company. From time to time,
these or other competitors may reduce the price of their services in an effort
to expand market share or to win a competitively bid municipal contract. These
practices may either require the Company to reduce the pricing of its services
or result in the Company's loss of business. The Company provides approximately
25% of its collection services under municipal contracts. As is generally the
case in the industry, these contracts are subject to periodic competitive
bidding. There can be no assurance that the Company will be the successful
bidder to obtain or retain these contracts. The Company's inability to compete
with larger and better capitalized companies, or to replace a significant
number of municipal contracts lost through the competitive bidding process with
comparable contracts or other revenue sources within a reasonable time period,
could have a material adverse effect on the Company's results of operations.
See "Business -- Competition".

GEOGRAPHIC CONCENTRATION. The Company's operations and customers are
currently located primarily in North Carolina, South Carolina, Tennessee,
Virginia, Georgia and Mississippi. Therefore, the Company's results of
operations are susceptible to downturns in the general economy in this
geographic area. There can be no assurance that the Company will be able to
complete a sufficient number of acquisitions in other markets to achieve
geographic diversification. See "Business -- Acquisition Program".

SEASONALITY OF BUSINESS. The Company's results of operations tend to vary
seasonally, with the first quarter of the year typically generating the least
amount of revenues, and with revenues higher in the second and third quarter,
followed by a decline in the fourth quarter. This seasonality reflects the
lower volume of waste generated and decreased revenues from project-based and
other integrated waste services during the fall and winter months, as well as
the operating difficulties experienced from inclement weather experienced
during the winter. Certain operating and other fixed costs remain relatively
constant throughout the calendar year, resulting in a similar seasonality of
operating income. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations; Seasonality" and
" -- Results of Operations; Quarterly Results".

INCURRENCE OF CHARGES RELATED TO CAPITALIZED EXPENDITURES. In accordance
with generally accepted accounting principles, the Company capitalizes certain
expenditures and advances relating to acquisitions, pending acquisitions and
landfill development projects. As of June 30, 1998, the Company had capitalized
approximately $204,000 of such expenses. Indirect acquisition costs, such as
executive salaries, general corporate overhead, public affairs and other
corporate services, are expensed as incurred. The Company's policy is to charge
against earnings any unamortized capitalized expenditures and advances (net of
any portion thereof that the Company estimates will be recoverable, through
sale or otherwise) relating to any operation that is permanently shut down, any
pending acquisition that is not consummated and any landfill development
project that is not expected to be successfully completed. Therefore, the
Company may be required to incur a charge against earnings in future periods,
which charge, depending upon the magnitude thereof, could materially adversely
affect the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial

8
<PAGE>

Condition and Results of Operations -- Liquidity and Capital Resources" for a
discussion of capitalized expenditures in connection with certain operations
and projects.

USE OF ALTERNATIVES TO LANDFILL DISPOSAL. Alternatives to landfill
disposal, such as recycling and composting, are increasingly being used. In
addition, incineration is an alternative to landfill disposal in certain of the
Company's markets. There also has been an increasing trend at the state and
local levels to mandate recycling and waste reduction at the source and to
prohibit the disposal of certain type of wastes, such as yard wastes, at
landfills. These developments may result in the volume of waste being reduced
in certain areas. North Carolina, South Carolina and Virginia have each adopted
plans or requirements which set goals for specified percentages of certain
solid waste items to be recycled. These recycling goals are being phased in
over the next few years. These alternatives, if and when adopted and
implemented, may have a material adverse effect on the business, financial
condition and results of operations of the Company. See "Business -- Landfill
and Other Disposal Alternatives".

GOVERNMENT REGULATION. The Company is subject to extensive and evolving
environmental laws and regulations which have become increasingly stringent in
recent years as a result of greater public interest in protecting the
environment. These laws and regulations impose substantial costs on the Company
and affect the Company's business in many ways, including as set forth below
and under "Business -- Regulation".

If the Company implements its strategy relating to landfill ownership and
operation, it will be necessary to obtain and maintain in effect one or more
licenses or permits as well as zoning, environmental and/or other land use
approvals. These licenses or permits and approvals are difficult and time
consuming to obtain and renew and are frequently subject to opposition by
various elected officials or citizens' groups. See "Business -- Legal
Proceedings." There can be no assurance that the Company will be successful in
obtaining and maintaining in effect the permits and approvals required for the
successful operation and growth of future landfill business, and the failure by
the Company to obtain or maintain in effect a permit or approval significant to
its landfill business could have a material adverse effect on the Company's
operations and financial condition.

The design, operation and closure of landfills is extensively regulated.
These regulations include, among others, the regulations ("Subtitle D
Regulations") establishing minimum federal requirements adopted by the U.S.
Environmental Protection Agency ("EPA") in October 1991 under Subtitle D of the
Resource Conservation and Recovery Act of 1976 ("RCRA"). Failure to comply with
these regulations could require the Company to undertake investigatory or
remedial activities, to curtail operations or to close a landfill temporarily
or permanently. Future changes in these regulations may in the future require
the Company to modify, supplement or replace equipment or facilities at costs
which may be substantial. The failure of regulatory agencies to enforce these
regulations vigorously or consistently may give an advantage to competitors of
the Company whose facilities do not comply with the Subtitle D Regulations or
its state counterparts. The Company's ultimate financial obligations related to
any failure to comply with these regulations could have a material adverse
effect on the Company's operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources".

Companies in the solid waste services business, including the Company, are
frequently subject in the normal course of business to judicial and
administrative proceedings involving federal, state or local agencies or
citizens' groups. These governmental agencies may seek to impose fines or
penalties on the Company or to revoke or deny renewal of the Company's
operating permits or licenses for violations or alleged violations of
environmental laws or regulations or require that the Company make expenditures
to remediate potential environmental problems relating to waste disposed of or
stored by the Company or its predecessors, or resulting from its or its
predecessors' transportation and collection operations. Any adverse outcome in
these proceedings could have a material adverse effect on the Company's
financial condition or results of operations and may subject the Company to
adverse publicity. The Company may be subject to actions brought by individuals
or community groups in connection with the permitting or licensing of its
operations, any alleged violation of such permits or licenses or other matters.
See "Potential Environmental Liability" below and "Business -- Legal
Proceedings".

POTENTIAL ENVIRONMENTAL LIABILITY. The Company is with respect to its
existing business and will be with respect to any future landfill business
subject to liability for any environmental damage that its solid waste
facilities may cause to neighboring landowners, particularly as a result of the
contamination of drinking water sources or soil, including damage resulting
from conditions existing prior to the acquisition of such facilities by the
Company. The Company may also be subject to liability for any off-site
environmental contamination caused by pollutants or hazardous substances whose
transportation, treatment or disposal was arranged by the Company or its
predecessors. Any substantial liability for environmental damage incurred by
the Company could have a material adverse effect on the Company's financial
condition and results of operations. See "Business -- Regulation".

9
<PAGE>

The Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("Superfund" or "CERCLA"), imposes strict, joint and
several liability on the present owners and operators of facilities from which
a release of hazardous substances into the environment has occurred, as well as
any party that owned or operated the facility at the time of disposal of the
hazardous substances regardless of when the hazardous substance was first
detected. Similar liability is imposed upon the generators of waste which
contains hazardous substances and upon hazardous substance transporters that
select the treatment, storage or disposal site. All such persons, who are
referred to as potentially responsible parties ("PRPs"), generally are jointly
and severally liable for the expense of waste site investigation, waste site
cleanup costs and natural resource damages, regardless of whether they
exercised due care and complied with all relevant laws and regulations. These
costs can be very substantial. Furthermore, such liability can be based upon
the existence of even very small amounts of the more than 700 "hazardous
substances" listed by the EPA and is not limited to the disposal of "hazardous
wastes," as statutorily defined. It is likely that hazardous substances have in
the past come to be located in landfills with which the Company has been
associated. The Company transported hazardous substances in the past and may do
so in the future, however, for the 12-month periods ended December 31, 1996 and
1997 and the six-month period ended June 30, 1998, the Company transported no
hazardous substances and there were no revenues associated with any such
transportation. If any of these sites or operations ever experiences
environmental problems, the Company could be subject to substantial liability
which could have a material adverse effect on its financial condition and
results of operations. See "Business -- Regulation".

With respect to each business that Waste Industries acquires, there may be
liabilities that the Company fails to or is unable to discover, including
liabilities arising from noncompliance with environmental laws by prior owners,
and for which the Company, as a successor owner, may be legally responsible.
Representations, warranties and indemnities from the sellers of such
businesses, if obtained and if legally enforceable, may not cover fully the
resulting environmental liabilities due to their limited scope, amount or
duration, the financial limitations of the warrantor or indemnitor or other
reasons. Certain environmental liabilities, even though expressly not assumed
by the Company, may nonetheless be imposed on the Company under certain legal
theories of successor liability, particularly under CERCLA. See "Business --
Acquisition Program".

POTENTIAL CLOSURE AND POST-CLOSURE COSTS. In the event that the Company
develops or acquires landfills, the Company will have material financial
obligations relating to closure and post-closure costs of disposal facilities
which it may operate in the future. The Company will provide accruals for
future obligations (generally for a term of 30 to 40 years after final closure
of any such landfill) based on engineering estimates of consumption of
permitted landfill airspace over the useful life of any such landfill. There
can be no assurance that the Company's ultimate financial obligations for
actual closing or post-closing costs will not exceed the amount accrued and
reserved or amounts otherwise receivable pursuant to insurance policies or
trust funds. Such a circumstance could have a material adverse effect on the
Company's financial condition and results of operation.

POTENTIAL UNINSURED RISKS AND INABILITY TO OBTAIN SURETY BONDS OR LETTERS
OF CREDIT. The Company's insurance program does not cover liabilities
associated with any environmental cleanup or remediation on the Company's own
sites. As a result, an uninsured claim against the Company, if successful and
of sufficient magnitude, could have a material adverse effect on the Company's
results of operations and financial condition. Any future difficulty in
obtaining insurance could also impair the Company's ability to secure future
contracts conditioned upon the contractor having adequate insurance coverage.
See "Business -- Risk Management, Insurance and Performance Bonds".

Municipal solid waste collection contracts may require performance bonds
or other means of financial assurance to secure contractual performance. If the
Company were unable to obtain surety bonds or letters of credit in sufficient
amounts or at acceptable rates, it could be precluded from entering into
additional municipal solid waste collection contracts or obtaining or retaining
landfill operating permits. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources".

DEPENDENCE ON MANAGEMENT. The Company is highly dependent upon the
services of the members of its senior management team, the loss of any of whom
may have an adverse effect on the Company. The Company does not maintain key-man
life insurance with respect to any members of management. See "Management --
Executive Officers and Directors".

CONTROL BY MANAGEMENT. As of September 10, 1998, executive officers and
directors of the Company as a group beneficially owned approximately 65.8% of
the outstanding Common Stock. See "Principal Shareholders". As a result, these
shareholders, if acting together, will be able to control the election of
individuals to the Board of Directors and the outcome of other matters
submitted for shareholder consideration.

POTENTIAL "YEAR 2000" PROBLEMS. It is possible that the Company's
currently installed computer systems, software products or other business
systems, or those of the Company's significant suppliers or customers, working
either alone or in conjunction with other software systems, will not accept
input of, store, manipulate and output dates for the years 1999, 2000 or

10
<PAGE>

thereafter without error or interruption (commonly known as the "Year 2000"
problem). The Company's major computer systems have been updated and other
systems are being analyzed for potential modifications. The Company is in the
process of formal communications with its significant suppliers, business
partners, and customers to determine the extent to which it may be affected by
these third parties' plans to remediate their own Year 2000 issues in a timely
manner. However, there can be no assurance that the Company will identify all
Year 2000 problems in its computer systems or those of its significant
suppliers and customers in advance of their occurrence or that the Company will
be able to successfully remedy any problems that are discovered. The expenses
of the Company's efforts to identify and address such problems, and the
expenses or liabilities to which the Company may become subject as a result of
such problems, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Year 2000
Technology Issues".

POTENTIAL ANTI-TAKEOVER PROVISIONS. The Company's Articles of
Incorporation authorize the Board of Directors to issue up to 10,000,000 shares
of Preferred Stock and to fix the rights and preferences thereof without
shareholder approval. Issuance of shares of Preferred Stock could have the
effect of delaying or preventing a change of control of the Company otherwise
desired by the shareholders.

The North Carolina Business Corporation Act contains a "Shareholder
Protection Act" which, with certain exceptions discussed below, requires
approval of certain business combinations between a North Carolina corporation
and any beneficial holder of more than 20% of the voting shares of the
corporation by the holders of at least 95% of the voting shares of the
corporation. Business combinations subject to this approval requirement include
any merger or consolidation of the corporation with or into any other
corporation, the sale or lease of all or any substantial part of the
corporation's assets, or any payment, sale or lease to the corporation or any
subsidiary thereof in exchange for securities of the corporation of any assets
(except assets having an aggregate fair market value of less than $5 million)
of any other entity. The principal exception to the special voting requirement
applies to business combinations that satisfy various complex statutory
provisions, including provisions relating to the fairness of the price and the
constituency of the Board of Directors. In addition, the special voting
requirement shall not be applicable to any corporation if (i) the corporation
was not a public corporation at the time such other entity acquired in excess
of 10% of the voting shares; (ii) the corporation adopted an amendment to its
bylaws or provided in its original articles of incorporation providing that the
provisions shall not apply to it in accordance with the statute; or (iii) the
business combination in question was the subject of an existing agreement of
the corporation on April 23, 1987. In addition, corporations with fewer than
2,000 shareholders of record and those whose stock is not listed on a national
securities exchange are exempt from the special voting requirement. The Company
has not "opted out" of the Shareholder Protection Act.

Certain North Carolina public corporations are also subject to "The North
Carolina Control Share Acquisition Act". This law provides that shares acquired
in a transaction that would cause the acquiring person's voting strength to
meet or exceed any of three thresholds (20%, 33.3% or a majority) of voting
power have no voting rights unless granted by a majority vote of all the
outstanding shares of the corporation (not including interested shares)
entitled to vote for the election of directors. "Interested shares" means the
shares of a corporation beneficially owned by (i) any person who has acquired
or proposes to acquire control shares in a control share acquisition; (ii) any
officer of the corporation; or (iii) any employee of the covered corporation
who is also a director of the corporation. This provision empowers an acquiring
person to require the North Carolina corporation to hold a special meeting of
shareholders to consider the matter within 50 days of its request. The Company
has not "opted out" of The North Carolina Control Share Acquisition Act.

The provisions of the Shareholder Protection Act and The North Carolina
Control Share Acquisition Act were designed to deter certain takeovers of North
Carolina corporations.

LIMITED PUBLIC TRADING HISTORY; POSSIBLE STOCK PRICE VOLATILITY. The
Company's Common Stock has been traded on the Nasdaq National Market only since
the Company's initial public offering of shares of its Common Stock on June 13,
1997. Since the Common Stock began trading on the Nasdaq National Market, such
stock has experienced a low trading volume and high price volatility.
Accordingly, there is a limited trading history of the Common Stock. The
initial public offering price of the Company's Common Stock in its initial
public offering was $13.50 per share. As of September 11, 1998, the last sale
price of the Company's Common Stock was $20.25 per share. There can be no
assurance that the future market price of the Common Stock will not decrease or
that the price of the Company's Common Stock will increase, if at all, to the
same extent as between the Company's initial public offering and September 11,
1998. See "Price Range of Common Stock".

The market price of the Common Stock may be subject to significant
fluctuations in response to numerous factors, including variations in the
annual or quarterly financial results of the Company or its competitors,
changes by financial research analysts in their estimates of the earnings of
the Company or other companies in the solid waste and environmental services

11
<PAGE>

industries, conditions in the economy in general or in the Company's industry
in particular, unfavorable publicity or changes in applicable laws and
regulations (or judicial or administrative interpretations thereof) affecting
the Company or the solid waste industry.

SHARES ELIGIBLE FOR FUTURE SALE. The shares of Common Stock offered hereby
will generally be, and the 2,150,000 shares of Common Stock issued in the
Company's initial public offering in June 1997 and an additional 1,824,533
other shares generally are, freely tradable without restriction in the public
market. An additional 9,406,372 shares of Common Stock held by parties that may
be deemed to be affiliates of the Company are currently eligible for sale
subject to the volume and other limitations of Rule 144 promulgated under the
Securities Act. As of September 10, 1998, an additional 734,343 shares of
Common Stock were subject to outstanding options and an additional 1,729,821
shares were reserved for grant under the Company's stock plans. All of these
shares will be available for sale in the public market upon exercise of these
options, subject in some cases to the volume and other restrictions of Rule
144. Sales of substantial amounts of the Company's Common Stock in the public
market pursuant to or after this offering could adversely affect prevailing
market prices for the Common Stock. See " -- Limited Public Market; Possible
Volatility of Stock Price."

POTENTIAL RESTRICTIONS ON RESALE OF COMMON STOCK. While shares of Common
Stock issued by the Company pursuant to this Prospectus in connection with the
acquisition by the Company of various businesses or properties or interests
therein will generally be freely resalable by recipients under the federal
securities laws (see "Outstanding Securities Covered by this Prospectus"),
there may be certain other restrictions on the recipients' ability to sell such
shares. Certain procedures need to be followed if the recipient desires to sell
shares received hereunder from the Company through a block trade, special
offering, exchange distribution or secondary distribution. See "Outstanding
Securities Covered by this Prospectus". If shares are issued by the Company to
recipients hereunder in connection with an acquisition which is to be accounted
for by the Company under the "pooling-of-interests" accounting method, then
former shareholders of the acquired company will generally be restricted by the
relevant acquisition agreement from selling virtually all of their received
shares until such time as the Company publishes its consolidated results of
operation covering at least 30 days of post-acquisition combined operations.
Additionally, should any recipient of shares issued by the Company hereunder
become an affiliate of the Company by reason of stock ownership or by becoming
an executive officer or director of the Company, such individual's ability to
dispose of shares of Common Stock will be subject to various restrictions under
the federal securities laws and the Company's corporate policies and practices.
Further, if a recipient of shares received hereunder is in possession of
material, non-public information relating to the Company, the recipient may be
restricted under applicable securities laws from engaging in transactions in
the Company's Common Stock or from advising others to engage in such
transactions. Recipients of shares received hereunder from the Company should
consult their professional and legal advisors for advice on any applicable
restrictions on their ability to dispose of shares of Common Stock received
under this Prospectus.

SUBSEQUENT SHARE ISSUANCES. No prediction can be made as to the effect, if
any, of the offer and sale of additional shares of Common Stock, or the
availability of additional shares for sale, on the market prices of the Common
Stock prevailing from time to time. Nevertheless, issuances of substantial
amounts of newly issued shares of Common Stock in the public market or to
effect business acquisitions could adversely affect prevailing market prices of
the Common Stock and the ability of the Company to raise equity capital in the
future.

DILUTION. Purchasers of shares of Common Stock pursuant to this Prospectus
may experience dilution as a result of additional shares of Common Stock being
issued by the Company to raise capital, for potential future business
acquisitions, as a result of the exercise of stock options or other purposes.

NO DIVIDENDS. The Company intends to retain all earnings for the
foreseeable future for use in the operation and expansion of its business.
Consequently, the Company does not anticipate paying any cash dividends on its
Common Stock for the foreseeable future. See "Dividend Policy".

12
<PAGE>

USE OF PROCEEDS

This Prospectus relates to shares of Common Stock that may be offered and
issued by the Company from time to time in connection with the acquisitions of
the securities and assets of other businesses. Other than the securities and
assets acquired, there will be no proceeds to the Company from this offering.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "WWIN". The following table sets forth the range of high and low
sales prices for the Common Stock for the period from June 13, 1997 (the date
trading commenced) through September 15, 1998.

<TABLE>
<CAPTION>
HIGH LOW
---------- ----------
<S> <C> <C>
1997
- ------
June 13, 1997 through June 30, 1997 ....... $ 18 $15 7/8
Third quarter ended September 30, 1997 .... $27 3/4 $17 1/4
Fourth quarter ended December 31, 1997 .... $24 1/8 $17 3/4

1998
- ------
First quarter ended March 31, 1998 ........ $21 1/4 $15 1/4
Second quarter ended June 30, 1998 ........ $22 3/4 $16 1/8
Third quarter through September 15, 1998 .. $23 1/2 $19 1/4
</TABLE>

DIVIDEND POLICY

Other than with respect to the period from 1986 until May 1997, during
which it was subject to taxation under Subchapter S of the Internal Revenue
Code of 1986, as amended (the "Code"), the Company has not paid cash dividends.
The Company currently intends to retain its future earnings, if any, to finance
the growth, development and expansion of its business and, accordingly, has no
present intention to declare or pay any cash dividends on its Common Stock. In
addition, the Company's credit facilities contain covenants restricting the
payment of cash dividends.

13
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table presents selected consolidated statements of
operations, other operating and balance sheet data of the Company for the
periods and the dates indicated. The selected statements of operations and
balance sheet data for each of the years ended, and as of each, December 31
were derived from the Company's consolidated financial statements, which have
been audited by Deloitte & Touche LLP, independent auditors. The selected
financial data for the six months ended June 30, 1997 and 1998 are derived from
consolidated financial statements that have not been audited. In the opinion of
management, the unaudited consolidated financial data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the consolidated financial position and results of operations
for that period. The results of operations for the six months ended June 30,
1997 and 1998 are not necessarily indicative of the results of operations for
any future period. The selected consolidated financial data below should be
read in conjunction with the Company's audited consolidated financial
statements and notes thereto at December 31, 1996 and 1997 and for each of the
three years in the period ended December 31, 1997 included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations". The Company's audited consolidated financial statements
at and for prior dates and periods are not included in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(1)
--------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------- -------------- -------------- -------------- --------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues .......................... $ 59,749 $ 78,824 $ 95,022 $ 103,629 $ 126,649
Equipment sales ........................... 3,868 1,909 2,080 1,769 1,601
------------ ------------ ------------ ------------ ------------
Total revenues ............................ 63,617 80,733 97,102 105,398 128,250
Cost of service operations ................ 33,946 44,216 56,629 65,015 78,007
Cost of equipment sales ................... 2,730 1,888 1,646 1,240 1,171
------------ ------------ ------------ ------------ ------------
Total cost of operations .................. 36,676 46,104 58,275 66,255 79,178
Selling, general and administrative ....... 15,543 19,171 19,403 19,891 24,295
Depreciation and amortization ............. 6,647 8,440 8,919 9,217 11,620
------------ ------------ ------------ ------------ ------------
Merger costs ..............................
Operating income .......................... 4,751 7,018 10,505 10,035 13,157
Interest expense .......................... (1,857) (2,191) (2,390) (2,496) (2,993)
Other income .............................. 214 334 430 806 634
------------ ------------ ------------ ------------ ------------
Income before income taxes ................ 3,108 5,161 8,545 8,345 10,798
Income taxes .............................. -- -- -- -- 7,011
------------ ------------ ------------ ------------ ------------
Net income (loss) -- historical basis ..... $ 3,108 $ 5,161 $ 8,545 $ 8,345 $ 3,787
============ ============ ============ ============ ============
Earnings (loss) per share -- historical
basis:
Basic .................................... $ 0.35 $ 0.50 $ 0.83 $ 0.81 $ 0.33
Diluted .................................. $ 0.30 $ 0.50 $ 0.83 $ 0.80 $ 0.32
Pro forma income taxes(2) ................. $ 1,265 $ 2,096 $ 3,425 $ 3,368 $ 4,208
------------ ------------ ------------ ------------ ------------
Pro forma net income(2) ................... $ 1,843 $ 3,065 $ 5,120 $ 4,977 $ 6,590
============ ============ ============ ============ ============
Pro forma earnings per share(2):
Basic .................................... $ 0.21 $ 0.30 $ 0.50 $ 0.48 $ 0.58
Diluted .................................. $ 0.18 $ 0.30 $ 0.50 $ 0.47 $ 0.56
Weighted average shares outstanding:
Basic .................................... 8,855,084 10,236,252 10,236,252 10,272,056 11,320,521
Diluted .................................. 10,243,164 10,268,741 10,271,823 10,491,840 11,679,533
OTHER OPERATING DATA:
Net cash provided by operating
activities ............................... $ 7,419 $ 14,701 $ 18,206 $ 16,915 $ 22,684
Net cash used in investing activities ..... (12,032) (11,788) (8,912) (15,204) (58,962)
Net cash provided by (used in)
financing activities ..................... 5,792 (2,764) (9,336) (1,993) 35,347
EBITDA(3) ................................. $ 11,612 $ 15,792 $ 19,854 $ 20,058 $ 25,411

<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1997 1998
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE
AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues .......................... $ 57,162 $ 79,974
Equipment sales ........................... 791 778
------------ ------------
Total revenues ............................ 57,953 80,752
Cost of service operations ................ 35,242 49,447
Cost of equipment sales ................... 506 501
------------ ------------
Total cost of operations .................. 35,748 49,948
Selling, general and administrative ....... 11,022 13,862
Depreciation and amortization ............. 5,216 7,508
------------ ------------
Merger costs .............................. 78
Operating income .......................... 5,967 9,356
Interest expense .......................... (1,468) (1,979)
Other income .............................. 218 336
------------ ------------
Income before income taxes ................ 4,717 7,713
Income taxes .............................. 4,886 2,956
------------ ------------
Net income (loss) -- historical basis ..... $ (169) $ 4,757
============ ============
Earnings (loss) per share -- historical
basis:
Basic .................................... $ (0.02) $ 0.39
Diluted .................................. $ (0.02) $ 0.38
Pro forma income taxes(2) ................. $ 1,878
------------
Pro forma net income(2) ................... $ 2,839
============
Pro forma earnings per share(2):
Basic .................................... $ 0.27
Diluted .................................. $ 0.26
Weighted average shares outstanding:
Basic .................................... 10,423,658 12,263,390
Diluted .................................. 10,779,357 12,609,503
OTHER OPERATING DATA:
Net cash provided by operating
activities ............................... $ 10,954 $ 13,318
Net cash used in investing activities ..... (27,910) (22,603)
Net cash provided by (used in)
financing activities ..................... 16,342 9,399
EBITDA(3) ................................. $ 11,401 $ 17,200
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------------------ ----------
1993 1994 1995 1996 1997 1998
----------- ----------- --------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .................. $ 2,114 $ 2,339 $ 2,296 $ 2,015 $ 1,084 $ 1,198
Working capital (deficit) .................. (3,448) (3,530) 2,084 2,179 1,882 1,131
Property and equipment, net ................ 34,946 36,585 36,579 42,783 64,465 78,381
Total assets ............................... 50,067 53,079 53,857 62,641 112,611 132,767
Long-term debt, net of current maturities .. 25,833 24,216 28,349 34,526 50,788 62,179
Shareholders' equity ....................... $ 9,480 $ 13,315 $14,499 $15,092 $ 41,110 $ 45,233
</TABLE>

(FOOTNOTES ON NEXT PAGE)

14
<PAGE>

- ---------
(1) On March 31, 1998, the Company exchanged 320,555 shares of its common stock
for all of the issued and outstanding shares of common stock of ECO
Services, Inc. ("ECO") and Air Cargo Services, Inc. ("ACS"). Certain of
the Company's executive officers, whom are also the Company's controlling
shareholders, owned substantially all of the common stock of ECO and ACS.
Effective April 1, 1996, Waste Industries completed a corporate
reorganization in which Waste Enterprises, Inc., Waste Industries East,
Inc., Waste Industries South, Inc., Waste Industries West, Inc., KABCO,
Inc., Conway 378, Inc. and AmLease, Inc. were merged with and into Waste
Industries. Simultaneously, certain real estate properties previously
leased to Waste Industries by Property Management Group, a partnership of
certain shareholders of Waste Industries, were transferred to Waste
Industries. These transactions were accounted for at historical cost in a
manner similar to that in pooling-of-interests accounting. Accordingly,
Waste Industries' financial statements have been restated to include these
accounts and transactions for all periods presented.
(2) For each of the fiscal years presented through 1996 (and for the period
from January 1, 1997 to May 8, 1997), the Company was an S Corporation
and, accordingly, was not subject to federal and certain state corporate
income taxes. The pro forma information has been computed as if the
Company were subject to federal and all applicable state corporate income
taxes for each of the periods presented assuming the tax rate that would
have applied had the Company been taxed as a C Corporation. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations".
(3) EBITDA is defined as income before income taxes plus interest expense and
depreciation and amortization. EBITDA should not be considered an
alternative to (i) operating income or net income (as determined in
accordance with GAAP) as an indicator of the Company's operating performance
or (ii) cash flows from operating activities (as determined in accordance
with GAAP) as a measure of operating performance or liquidity. However, the
Company has included EBITDA data (which are not a measure of financial
performance under GAAP) because it understands that such data are commonly
used by certain investors to evaluate a Company's performance in the solid
waste industry. Furthermore, the Company believes that EBITDA data are
relevant to an understanding of the Company's performance because they
reflect the Company's ability to generate cash flows sufficient to satisfy
its debt service, capital expenditure and working capital requirements. The
Company therefore interprets the trends that EBITDA depicts as one measure
of the Company's operating performance. However, funds depicted by the
EBITDA measure may not be available for debt service, capital expenditures
or working capital due to legal or functional requirements to conserve funds
or other commitments or uncertainties. EBITDA, as measured by the Company,
might not be comparable to similarly titled measures reported by other
companies. Therefore, in evaluating EBITDA data, investors should consider,
among other factors: the non-GAAP nature of EBITDA data; actual cashflows;
the actual availability of funds for debt service, capital expeditures and
working capital; and the comparability of the Company's EBITDA data to
similarly titled measures reported by other companies.

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS, INCLUDING WITHOUT LIMITATION THOSE SET FORTH IN "RISK FACTORS" AND THE
MATTERS SET FORTH IN THIS PROSPECTUS GENERALLY. SEE "NOTE REGARDING
FORWARD-LOOKING STATEMENTS".

OVERVIEW

Waste Industries was founded by members of the current senior management
team in 1970. The Company provides solid waste collection, transfer, recycling,
processing and disposal services to customers primarily in North Carolina,
South Carolina, Tennessee, Virginia, Georgia and Mississippi.

The Company made 31 acquisitions of solid waste collection operations from
1990 through June 30, 1998. All but four of these acquisitions were accounted
for as purchases. Accordingly, the results of operations of 27 of these
acquired businesses have been included in the Company's financial statements
only from the respective dates of acquisition and have affected
period-to-period comparisons of the Company's operating results. The other four
acquisitions, of Dumpsters, Inc. ("Dumpsters") and Reliable Trash Services,
Inc. ("RTS") in June 1998 and of ECO and ACS in March 1998, were poolings-
of-interests or common-control mergers accounted for similarly to
poolings-of-interests. Accordingly, the Company's financial statements have
been restated to include the accounts and operations of these acquired
businesses for all periods presented. The Company anticipates that a
substantial part of its future growth will come from acquiring additional solid
waste collection, transfer and disposal businesses and, therefore, it is
expected that additional acquisitions could continue to affect period-to-period
comparisons of the Company's operating results.

From 1986 until May 8, 1997, the Company was subject to taxation under
Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code"). As
a result, during that time the net income of the Company, for federal and
certain state income tax purposes, was reported by and taxable directly to the
Company's shareholders, rather than to the Company. To provide funds for tax
obligations payable by its shareholders on the Company's income in 1995, 1996
and 1997, the Company made cash distributions of approximately $3.1 million and
$1.8 million during 1996 and 1997, respectively, to its S Corporation
shareholders. In connection with its conversion from S Corporation to C
Corporation status, in June 1997 the Company effected an S Corporation
distribution (consisting of approximately $1.5 million in cash) to the
Company's S Corporation shareholders. The remaining S Corporation retained
earnings of approximately $8.5 million have been reclassified to additional
capital. The Company's S Corporation status was terminated in May 1997 and,
accordingly, the Company became fully subject to federal and state income taxes
at that time.

RESULTS OF OPERATIONS

GENERAL

The Company's branch waste collection operations generate revenues from
fees collected from commercial, industrial and residential collection and
transfer station customers. The Company derives a substantial portion of its
collection revenues from commercial and industrial services that are performed
under one-year to five-year service agreements. The Company's residential
collection services are performed either on a subscription basis with
individual households, or under contracts with municipalities, apartment
owners, homeowners associations or mobile home park operators. Residential
customers on a subscription basis are billed quarterly in advance and provide
the Company with a stable source of revenues. A liability for future service is
recorded upon billing and revenues are recognized at the end of each month in
which services are actually provided. Municipal contracts in the Company's
existing markets are typically awarded, at least initially, on a competitive
bid basis and thereafter on a bid or negotiated basis and usually range in
duration from one to five years. Municipal contracts provide consistent cash
flow during the term of the contracts.

The Company's prices for its solid waste services are typically determined
by the collection frequency and level of service, route density, volume, weight
and type of waste collected, type of equipment and containers furnished, the
distance to the disposal or processing facility, the cost of disposal or
processing, and prices charged in its markets for similar services. The
Company's ability to pass on price increases is sometimes limited by the terms
of its contracts. Long-term solid waste collection contracts typically contain
a formula, generally based on a predetermined published price index, for
automatic adjustment of fees to cover increases in some, but not all, operating
costs.

16
<PAGE>

The Company currently operates approximately 100 convenience sites under
contract with 15 counties in order to consolidate waste in rural areas. These
contracts, which are usually competitively bid, generally have terms of one to
five years and provide consistent cash flow during the term of the contract
because the Company is paid regularly by the local government. The Company also
operates four recycling processing facilities as part of its collection and
transfer operations where it collects, processes, sorts and recycles paper
products, aluminum and steel cans, pallets, certain plastics, glass, and
certain other items. The Company's recycling facilities generate revenues from
the collection, processing and resale of recycled commodities, particularly
recycled wastepaper. Through a centralized effort, the Company resells recycled
commodities using commercially reasonable practices and seeks to manage
commodity pricing risk by spreading the risk among its customers. The Company
also operates curbside residential recycling programs in connection with its
residential collection operations in most of the communities it serves.

Operating expenses for the Company's collection operations include labor,
fuel, equipment maintenance and tipping fees paid to landfills. From time to
time, the Company may enter into agreements obligating it to pay minimum annual
tipping fees or to make an up-front cash payment of tipping fees. As of June
30, 1998, the Company operated 18 transfer stations that reduce the Company's
costs by improving its utilization of collection personnel and equipment and by
consolidating the waste stream to gain more favorable disposal rates. As of
June 30, 1998, the Company did not own or operate any solid waste landfills.
See "Business -- Acquisition Program -- Recent Developments". In the event
that the Company develops or acquires landfills, operating expenses for such
landfill operations may include labor, equipment, legal and administrative
costs, ongoing environmental compliance, royalties to former owners, host
community fees, site maintenance and accruals for closure and post-closure
maintenance. Cost of equipment sales primarily consists of the Company's cost
to purchase the equipment that it resells.

The Company capitalizes certain expenditures related to pending
acquisitions or development projects. Indirect acquisition and project
development costs, such as executive and corporate overhead, public relations
and other corporate services, are expensed as incurred. The Company's policy is
to charge against net income any unamortized capitalized expenditures and
advances (net of any portion thereof that the Company estimates to be
recoverable, through sale or otherwise) relating to any operation that is
permanently shut down, any pending acquisition that is not consummated and any
landfill development project that is not expected to be successfully completed.
Engineering, legal, permitting, construction and other costs directly
associated with the acquisition or development of a landfill, together with
associated interest, are capitalized. At June 30, 1998, the Company had
recorded $85,510 of capitalized land acquisition costs in connection with the
development of a new LCID landfill and $118,338 relating to pending
acquisitions. Because it currently does not own any landfills, the Company does
not accrue for estimated landfill closure and post-closure maintenance costs.

Selling, general and administrative ("SG&A") expenses include management
salaries, clerical and administrative overhead, professional services, costs
associated with the Company's marketing and sales force, and community
relations expenses.

Property and equipment is depreciated over the estimated useful life of
the assets using the straight-line method.

Other income and expense, which is comprised primarily of interest income
and gains and losses on sales of equipment, has not historically been material
to the Company's results of operations.

To date, inflation has not had a significant impact on the Company's
operations.

17
<PAGE>

The following table sets forth for the periods indicated the percentage of
revenues represented by the individual line items reflected in the Company's
statements of income:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- -----------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues ................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Service revenues ................................. 97 .9 98.3 98.8 98.6 99.0
Equipment sales .................................. 2.1 1.7 1.2 1.4 1.0
------ ----- ----- ----- -----
Total cost of operations ......................... 60.0 62.9 61.7 61.7 61.9
Selling, general and administrative expenses ..... 20.0 18.9 18.9 19.0 17.2
Depreciation and amortization .................... 9.2 8.7 9.1 9.0 9.3
Merger costs ..................................... 0.0 0.0 0.0 0.0 0.1
------ ----- ----- ----- -----
Operating income ................................. 10.8 9.5 10.3 10.3 11.5
Interest expense ................................. ( 2.5) ( 2.4) ( 2.3) ( 2.5) ( 2.5)
Other income ..................................... 0.5 0.8 0.4 0.4 0.4
------ ----- ----- ----- -----
Income before income taxes ....................... 8.8 7.9 8.4 8.2 9.4
Income taxes ..................................... -- -- 5.4 8.4 3.7
------ ----- ----- ----- -----
Net income (loss) -- historical basis ............ 8.8% 7.9% 3.0% ( 0.2)% 5.7%
====== ===== ===== ===== =====
Pro forma income taxes (1) ....................... 3.5% 3.2% 3.3% 3.2%
------ ----- ----- -----
Pro forma net income (1) ......................... 5.3% 4.7% 5.1% 5.0%
====== ===== ===== =====
</TABLE>

- ---------
(1) For each of the fiscal years presented through 1996 and for the period from
January 1, 1997 to May 8, 1997, the Company was an S Corporation and,
accordingly, was not subject to federal and certain state corporate income
taxes. The pro forma information has been computed as if the Company were
subject to federal and all applicable state corporate income taxes for
each of the periods presented assuming the tax rate that would have
applied had the Company been taxed as a C Corporation. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
-- Overview".

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

REVENUES. Total revenues increased approximately $22.8 million, or 39.3%,
for the six-month period ended June 30, 1998, as compared to the same period in
1997. This increase was attributable primarily to the following factors: (i)
the effect of seven businesses acquired during the year ended December 31, 1997
and four businesses acquired during the six months ended June 30, 1998; and
(ii) to a lesser extent, increased collection volumes resulting from new
municipal and commercial contracts and residential subscriptions.

COST OF OPERATIONS. Total cost of operations increased $14.2 million, or
39.7%, for the six-month period ended June 30, 1998, compared to the same
period in 1997. This increase was attributable primarily to the following
factors: (i) the effect of seven businesses acquired during the year ended
December 31, 1997 and four businesses acquired during the six months ended June
30, 1998; and (ii) to a lesser extent, increased collection volumes resulting
from new municipal and commercial contracts and residential subscriptions.

SG&A. SGA increased $2.8 million, or 25.8%, for the six-month period ended
June 30, 1998. As a percentage of revenues, SG&A decreased from 19.0% to 17.2%
in the first half of 1998 compared to the first half of 1997, due primarily to
synergies achieved through acquisitions.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$2.3 million, or 43.9%, for the six-month period ended June 30, 1998, compared
to the same period in 1997. Depreciation and amortization, as a percentage of
revenues, has increased to 9.3% from 9.0% for the six-month period ended June
30, 1998, compared to the same period in 1997. The principal reasons for this
increase were depreciation of additional property and equipment acquired and
put into service due to higher collection volumes and depreciation and
amortization of the additional assets (including intangible assets) of
businesses acquired.

INTEREST EXPENSE. Interest expense increased $511,000, or 34.8%, for the
six-month period ended June 30, 1998, compared to the same period in 1997. This
increase was primarily due to the higher level of the average outstanding
indebtedness related to the Company's purchases of assets of businesses
acquired.

18
<PAGE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

REVENUES. Total revenues increased $22.9 million, or 21.7%, to $128.3
million in 1997 from $105.4 million in 1996. This increase was primarily
attributable to the following two factors: (i) the effect of a full year of
revenues from the four businesses acquired in 1996, as well as a partial year
of results from seven businesses acquired in 1997; and (ii) to a lesser extent,
increased collection volumes resulting from new municipal and commercial
contracts and residential subscriptions. Price increases in 1997 for the
Company's solid waste collection and disposal services did not contribute
materially to increased 1997 revenues.

COST OF OPERATIONS. Total cost of operations increased $12.9 million to
$79.2 million in 1997 from $66.3 million in 1996. The principal reason for the
increase was the addition of new customers and contracts during the year,
including those from the acquisition of new businesses acquired during 1996 and
1997. Total cost of operations as a percentage of revenues decreased to 61.7%
in 1997 from 62.9% in 1996. This decrease was primarily the result of increased
route density and synergy achieved through acquisitions.

SG&A. SG&A expenses increased $4.4 million to $24.3 million in 1997 from
$19.9 million in 1996. As a percentage of revenues, SG&A remained relatively
consistent at 18.9% in 1997 and 1996.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$2.4 million to $11.6 million in 1997 from $9.2 million for the prior year. The
principal reason for the increase was depreciation of the additional property
and equipment acquired and put into service due to higher collection volumes,
and depreciation of the additional assets of businesses acquired during 1996
and 1997. Depreciation and amortization, as a percentage of revenues, increased
to 9.1% in 1997 from 8.7% in 1996, primarily as a result of acquisitions in
1996 and 1997.

INTEREST EXPENSE. Interest expense increased $498,000 million to $3.0
million in 1997 from $2.5 million in 1996. This increase was due to the higher
level of average annual outstanding indebtedness, partially offset by a
decrease in interest rates. Interest expense as a percentage of revenues
decreased to 2.3% in 1997 from 2.4% in 1996.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

REVENUES. Total revenues increased $8.3 million, or 8.5%, to $105.4
million in 1996 from $97.1 million in 1995. This increase was primarily
attributable to the following two factors: (i) increased collection volumes
resulting from new municipal and commercial contracts and residential
subscriptions; and (ii) to a lesser extent, the effect of a full year of
revenues from the three businesses acquired in 1995, as well as a partial year
of results from four businesses acquired in 1996. The effect of these revenue
increases was partially offset by the approximately $311,000 decrease in
equipment sales and by a decrease in revenue from sales of recyclable
commodities. This recyclable commodities decrease was due to a significant
decrease in the weighted average price received by the Company for recyclable
commodities, primarily corrugated and newsprint materials, causing a 2.0%
decrease in 1996 revenue growth from commodity sales. Price increases in 1996
for the Company's solid waste collection and disposal services did not
contribute materially to increased 1996 revenues.

COST OF OPERATIONS. Total cost of operations increased $8.0 million to
$66.3 million in 1996 from $58.3 million in 1995. The principal reason for the
increase was the addition of new customers and contracts during the year,
including those from the acquisition of new businesses acquired during 1995 and
1996. Total cost of operations as a percentage of revenues increased to 62.9%
in 1996 from 60.0% in 1995. This increase was primarily the result of: (i)
proportionately more growth in lower margin services; (ii) lower margins in
recycling services as a result of the decline in the weighted average prices of
commodities; and (iii) an increase in waste stream processing and disposal
costs.

SG&A. SG&A expenses increased approximately $488,000 to $19.9 million in
1996 from $19.4 million in 1995. As a percentage of revenues, SG&A decreased to
18.9% in 1996 from 20.0% in 1995 primarily due to improved economies of scale
in the Company's collection operations as a result of additional collection
volumes from new customer contracts and acquisitions.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
approximately $297,000 to $9.2 million in 1996 from $8.9 million for the prior
year. The principal reason for the increase was depreciation of the additional
property and equipment acquired and put into service due to higher collection
volumes and depreciation of the additional assets of businesses acquired during
1995 and 1996. Depreciation and amortization, as a percentage of revenues,
decreased to 8.7% in 1996 from 9.2% in 1995, primarily as a result of increased
revenues.

19
<PAGE>

INTEREST EXPENSE. Interest expense increased approximately $106,000 to
$2.5 million in 1996 from $2.4 million in 1995. This increase was primarily due
to the higher level of average annual outstanding indebtedness and an increase
in the Company's interest rates on outstanding borrowings. Interest expense as
a percentage of revenues decreased from 2.5% in 1995 to 2.4% in 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital at June 30, 1998 was $1.1 million compared
to $1.9 million at December 31, 1997. The Company's strategy in managing its
working capital has been to apply the cash generated from its operations which
remains available after satisfying its working capital and capital expenditure
requirements to reduce its indebtedness under its bank revolving credit
facility and to minimize its cash balances. The Company finances its working
capital requirements from internally generated funds and bank borrowings. In
addition to internally generated funds, the Company has in place financing
arrangements to satisfy its currently anticipated working capital needs in
1998.

The Company has a revolving credit facility with BB&T allowing the Company
to borrow up to $50 million for acquisitions and capital expenditures and $10
million for working capital. As of June 30, 1998, approximately $11.0 million
was outstanding under the BB&T facility, which matures in November 2002. In
addition, on June 30, 1998, the Company increased and extended its credit
facilities with Prudential Insurance Company of America ("Prudential"). As a
result, the Company has two $25 million term loan facilities and a $50 million
shelf facility with Prudential. As of June 30, 1998, the Company had fully
drawn down both Prudential term facilities, leaving the Company with an
uncommitted shelf facility of $50 million. Both the BB&T and the Prudential
credit facilities require the Company to maintain certain financial ratios,
such as current debt to total capitalization, debt to earnings and fixed
charges to earnings, and satisfy other predetermined requirements, such as
minimum net worth, net income and deposit balances. Both facilities contain
covenants restricting the payment of cash dividends. The 12-month weighted
average interest rate on outstanding borrowings under the BB&T facility was
6.84% at June 30, 1998. Interest on the BB&T facility is payable monthly based
on an adjusting spread to LIBOR. Interest on the Prudential term facilities is
paid quarterly, based on fixed rates of 7.28% and 6.96%, respectively. Of the
Company's committed Prudential facilities, $25 million mature in April 2006 and
$25 million mature in June 2008, subject to renewal. As of June 30, 1998, the
Company had a compensating balance arrangement with BB&T for $370,000.

Net cash provided by operating activities totaled $13.3 million for the
six months ended June 30, 1998, compared to $11.0 million for the six months
ended June 30, 1997. This increase was caused principally by the increases in
net income and in depreciation and amortization, partially offset by a decrease
in the provision for deferred income taxes, primarily as a result of the change
in the Company's status from an S Corporation to a C Corporation in May 1997.
Net cash provided by operating activities totaled $22.7 million for the year
ended December 31, 1997, compared to $16.9 million for the year ended December
31, 1996. This increase was caused principally by the increases in trade
accounts payable, depreciation and amortization and income tax effect of a
change in tax status. Net cash provided by operations in 1996 decreased to
$16.9 million from $18.2 million in 1995. This decrease was primarily the
result of decreases in prepaid and other current assets and accounts receivable
- -- trade, as well as the gain on sale of property and equipment.

Net cash used in investing activities totaled $22.6 million for the six
months ended June 30, 1998, compared to $27.9 million for the six months ended
June 30, 1997. This decrease was caused principally by the acquisition of
certain assets employed or arising in connection with a residential collection
business in 1997 not recurring at the same level in 1998, which was offset by
an increase in purchases of property and equipment of approximately $7.5
million. Net cash used in investing activities totaled $59.0 million for the
year ended December 31, 1997, compared to $15.2 million in for the year ended
December 31, 1996. This increase was caused principally by the acquisition of
certain assets employed or arising in connection with a residential collection
and recycling business. Net cash used in investing activities totaled $15.2
million for 1996 compared to $8.9 million in 1995. This increase in 1996
compared to 1995 was caused principally by the increase in the amount of
capital expenditures for property and equipment acquired and put into service
due to higher collection volumes and, to a lesser extent, because (i) proceeds
from sale of property and equipment decreased, (ii) cash used for acquisitions
of related businesses decreased, (iii) the Company incurred debt issuance costs
of $0.6 million related to its new credit facilities, and (iv) in 1996 the
Company discontinued acquiring equipment through an operating lease.

Capital expenditures for 1998 are currently expected to be approximately
$23.8 million, compared to $23.8 million in 1997. In 1998, approximately $17.9
million is expected to be utilized for vehicle and equipment additions and
replacements, approximately $0.5 million for expansion of transfer station
services and approximately $5.4 million for facilities, additions

20
<PAGE>

and improvements. The Company intends to fund its planned 1998 capital
expenditures principally through internally generated funds and borrowings
under existing credit facilities. In addition, the Company anticipates that it
may require substantial additional capital expenditures to facilitate its
growth strategy of acquiring solid waste collection and disposal businesses. If
the Company is successful in acquiring landfill disposal facilities, the
Company may also be required to make significant expenditures to bring any such
newly acquired disposal facilities into compliance with applicable regulatory
requirements, obtain permits for any such newly acquired disposal facilities or
expand the available disposal capacity at any such newly acquired disposal
facilities. The amount of these expenditures cannot be currently determined,
since they will depend on the nature and extent of any acquired landfill
disposal facilities, the condition of any facilities acquired and the
permitting status of any acquired sites.

Net cash provided by financing activities totaled $9.4 million for the six
months ended June 30, 1998, compared to $16.3 million for the six months ended
June 30, 1997. The decrease was primarily attributable to: (i) the Company's
June 1997 initial public offering in which it issued 1,605,200 shares of common
stock at a price of $13.50 per share resulting in net proceeds after deduction
of underwriting discounts and commissions and other offering expenses to the
Company of approximately $19.1 million; and (ii) net borrowings of long-term
debt of approximately $10.0 million in 1998 as compared to net proceeds of
$324,000 in 1997. The Company made S Corporation distributions to the former
shareholders of RTS of approximately $731,000 in 1998 to fund 1997 and 1998
taxes owed. To provide funds for tax obligations payable by its shareholders on
account of the Company's income in 1996 and 1997, during the six months ended
June 30, 1997 the Company made cash distributions of approximately $1.8 million
to its S Corporation shareholders. In connection with its conversion from S
Corporation to C Corporation status, in June 1997 the Company effected an S
Corporation distribution (consisting of approximately $1.5 million in cash
payments) to the Company's S Corporation shareholders. Net cash provided by
financing activities totaled $35.3 million for the year ended December 31,
1997, compared to $2.0 million used in financing activities for the year ended
December 31, 1996. This increase was primarily attributable to: the Company's
initial public offering, which resulted in net proceeds, after deduction of
underwriting discounts and commissions and other offering expenses to the
Company, of approximately $23.2 million; and net proceeds from issuances of,
and lower principal payments on, long-term debt. Net cash used in financing
activities for 1996 was $2.0 million, compared to net cash used in financing
activities of $9.3 million for 1995. The difference between the 1996 and 1995
amounts was primarily attributable to: (i) the Company's increased level of
borrowings on bank notes payable in 1996 versus 1995; (ii) greater
distributions to shareholders and affiliates in 1996 compared to 1995; and
(iii) the discontinuance of acquiring equipment through operating leases in
1996.

At June 30, 1998, the Company had approximately $64.2 million of long-term
and short-term borrowings outstanding and approximately $580,000 in letters of
credit. At June 30, 1998, the ratio of the Company's long-term debt to total
capitalization was 57.9% compared to 55.3% at December 31, 1997.

YEAR 2000 TECHNOLOGY ISSUES

The Year 2000 Problem is the result of computer programs being written
using two digits rather than four digits to define the applicable year. Any of
the Company's computer programs that have data-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in other routine business activities.

The Company has made, and will continue to make, certain modifications to
its computer hardware and software systems and applications to ensure they are
capable of handling dates in the year 2000 and thereafter. The Company's major
computer systems have been updated and other systems are being analyzed for
potential modifications. The Company is in the process of formal communications
with its significant suppliers, business partners, and customers to determine
the extent to which it may be affected by these third parties' plans to
remediate their own year 2000 issues in a timely manner. Although there can be
no assurances as such, the financial impact on the Company is not anticipated
to be material to its financial position or results of operations.

The costs of necessary Year 2000 modifications and their timely completion
are based on management's best estimates. These estimates were derived using
numerous assumptions of future events, including the continued availability of
certain resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved, and actual
results could differ materially from such plans. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.

21
<PAGE>

QUARTERLY RESULTS

The following table presents the Company's unaudited consolidated
quarterly results and the percentages of revenues represented by the individual
line items reflected in the Company's consolidated statements of operations for
each of the four quarters in the period ended June 30, 1998. This information
has been presented on the same basis as the Company's audited consolidated
financial statements appearing elsewhere in this Prospectus and, in the
Company's opinion, contains all necessary adjustments (consisting only of
normal recurring adjustments) to present fairly the Company's unaudited
quarterly results when read in conjunction with the Company's audited financial
statements and notes thereto. Interim operating results, however, are not
necessarily indicative of the Company's results for any future period. See Note
13 of Notes to Consolidated Financial Statements for certain unaudited
consolidated financial information for 1996 and 1997.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
SEPTEMBER 30, 1997 DECEMBER 31, 1997
---------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues ......................... $34,746 100.0% $35,551 100.0%
Service revenues ....................... 34,372 98.9 35,115 98.8
Equipment sales ........................ 374 1.1 436 1.2
------- ----- ------- -----
Total cost of operations ............... 21,532 62.0 21,898 61.5
Selling, general and administrative .... 6,419 18.4 6,854 19.3
Depreciation and amortization .......... 3,020 8.7 3,385 9.6
Merger costs ........................... -- 0.0 -- 0.0
------- ----- ------- -----
Operating income ....................... 3,775 10.9 3,414 9.6
Interest expense ....................... (654) ( 1.9) (871) ( 2.5)
Other income ........................... 159 0.5 257 0.8
------- ----- ------- -----
Income before income taxes ............. 3,280 9.5 2,800 7.9
Income taxes ........................... 1,218 3.5 1,111 3.1
------- ----- ------- -----
Net income ............................. $ 2,062 6.0% $ 1,689 4.8%
======= ===== ======= =====
Earnings per share:
Basic ................................. $ 0.17 $ 0.14
Diluted ............................... $ 0.16 $ 0.14

<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, 1998 JUNE 30, 1998
---------------------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Total revenues ......................... $39,099 100.0% $ 41,653 100.0%
Service revenues ....................... 38,748 99.1 41,226 99.0
Equipment sales ........................ 351 0.9 427 1.0
------- ----- -------- -----
Total cost of operations ............... 24,259 62.0 25,689 61.7
Selling, general and administrative .... 6,819 17.4 7,043 16.9
Depreciation and amortization .......... 3,654 9.3 3,854 9.3
Merger costs ........................... -- 0.0 78 0.2
------- ----- -------- -----
Operating income ....................... 4,367 11.2 4,989 11.9
Interest expense ....................... (944) ( 2.4) (1,035) ( 2.5)
Other income ........................... 145 0.4 191 0.5
------- ----- -------- -----
Income before income taxes ............. 3,568 9.1 4,145 9.9
Income taxes ........................... 1,360 3.5 1,596 3.8
------- ----- -------- -----
Net income ............................. $ 2,208 5.6% $ 2,549 6.1%
======= ===== ======== =====
Earnings per share:
Basic ................................. $ 0.18 $ 0.21
Diluted ............................... $ 0.18 $ 0.20
</TABLE>

SEASONALITY

The Company's results of operations tend to vary seasonally, with the
first quarter typically generating the least amount of revenues, higher
revenues in the second and third quarters, and a decline in the fourth quarter.
This seasonality reflects the lower volume of waste during the fall and winter
months. Also, certain operating and fixed costs remain relatively constant
throughout the calendar year, which when offset by these revenues results in a
similar seasonality of operating income.

22
<PAGE>

BUSINESS

INTRODUCTION

Waste Industries, Inc. (the "Company") is a regional solid waste services
company providing solid waste collection, transfer, recycling, processing and
disposal services to customers primarily in North Carolina, South Carolina,
Tennessee, Virginia, Georgia and Mississippi. As of June 30, 1998, the
Company's principal operations consist of 28 branch collection operations, 18
transfer stations, and four recycling processing centers that serve more than
260,000 municipal, residential, commercial and industrial locations.

Members of the senior management team founded Waste Industries in 1970 and
are recognized for their leadership roles throughout the solid waste management
industry and trade organizations. The Company's management team collectively
has over 240 years of experience in the solid waste industry and over 150 years
with the Company.

INDUSTRY OVERVIEW

Based on industry information, the Company believes that the U.S.
nonhazardous solid waste collection and disposal industry generated estimated
revenues of approximately $36.9 billion in 1997. The Company also believes that
27% of the total revenues of the U.S. nonhazardous solid waste industry was
accounted for by more than 5,000 private, predominately small, collection and
disposal businesses; 41% by publicly-traded solid waste companies; and 32% by
municipal governments that provide collection and disposal services.

In recent years, the solid waste collection and disposal industry has
undergone a period of significant consolidation and integration. The Company
believes that this consolidation and integration has been caused primarily by:
(i) increasingly stringent environmental regulation and enforcement resulting
in increased capital requirements for collection companies and landfill
operators; (ii) the ability of larger integrated operators to achieve certain
economies of scale; (iii) the evolution of an industry competitive model which
emphasizes providing both collection and disposal/recycling capabilities; and
(iv) the continued privatization of solid waste collection and disposal
services by municipalities and other governmental bodies and authorities.
Despite the considerable consolidation and integration that has occurred in the
solid waste industry in recent years, the Company believes the industry remains
primarily regional in nature and highly fragmented.

The increasingly stringent industry regulations, such as the Subtitle D
Regulations, have resulted in rising operating and capital costs and have
caused consolidation and acquisition activities to accelerate in the solid
waste collection and disposal industry. Many of the smaller industry
participants have found these costs difficult to bear and have decided to
either close their operations or sell them to larger operators. In addition,
Subtitle D requires more stringent engineering of solid waste landfills
including liners, leachate collection and monitoring and gas collection and
monitoring. These on-going costs are coupled with increased financial reserves
from solid waste landfill operators for closure and post-closure monitoring. As
a result, the Company believes the number of solid waste landfills is declining
while the size of solid waste landfills is increasing.

Larger integrated operators achieve economies of scale in the solid waste
collection and disposal industry through vertical integration of their
operations. These integrated companies have increased their acquisition
activity levels to expand the breadth of services and density in their market
area. Control of the waste stream in these market areas coupled with access to
significant financial resources to make acquisitions has given larger solid
waste collection and disposal companies the ability to be more cost effective
and competitive.

The evolution of the industry competitive model is forcing remaining
operators to become more efficient by establishing an integrated network of
solid waste collection operations and transfer stations through which they
secure solid waste streams for disposal. These remaining operators have dealt
with disposal issues by a variety of methods which include owning landfills,
establishing strategic relationships to secure access to landfills, or by
otherwise capturing significant waste stream volumes to gain leverage in
negotiating lower landfill fees and securing long-term contracts with high
capacity landfills on most favored pricing status terms.

In the Southeastern U.S. solid waste market, city and county governments
have historically provided a variety of solid waste services using their own
personnel. Over time, many municipalities have opted to privatize or contract
out their collection and disposal services to the private sector. Landfills,
transfer stations and incinerators located in the Company's market area are
predominantly municipally owned. The Southeastern market is currently
undergoing significant economic and population growth. Certain of the states in
the Southeastern U.S. have in recent years exceeded the national average in
terms of economic growth as measured by gains in jobs, personal income and
population. For example, according to Moody's Investor Service, between 1990
and 1995, nonfarm jobs rose an average of 2.1% per year in North Carolina,
compared to

23
<PAGE>

1.4% for the U.S.; and in 1995, North Carolina personal income per capita grew
5.8%, the tenth largest gain among states, and grew 6.9% in 1996. According to
the U.S. Bureau of the Census, North Carolina's population grew 11.9% between
1990 and 1997, compared to 7.6% for the U.S.

There is an increasing trend at the state and local levels to encourage
waste reduction at the source and to prohibit the disposal of certain types of
wastes, such as yard wastes and recyclable materials, at landfills. For
example, North Carolina, South Carolina and Virginia have each established the
goal of reducing by 25% the solid waste disposed of in their respective
landfills. The Company believes that these trends and laws have created
significant opportunities for solid waste services companies to provide
additional recycling services to generators of solid waste who are not
otherwise able to dispose of such waste.

STRATEGY

INTERNAL GROWTH

In order to continue to achieve internal growth, the Company will focus on
increasing sales penetration in current and adjacent market areas, marketing
upgraded or additional services (such as on-site solid waste compaction) to
existing customers and implementing selective price increases. Current levels
of population growth and economic development in the Southeastern U.S. and the
strong market presence should provide an opportunity for the Company to
increase revenues and market share in its region. As customers are added in
existing markets, the Company's density is improved, which should increase the
Company's collection efficiencies and profitability. The Company has an
approximately 35-person sales force dedicated to maintaining and increasing the
Company's sales to new and existing commercial, industrial, municipal and
residential customers.

An important part of the Company's internal growth strategy is to
establish transfer stations strategically located throughout its geographic
area to improve the Company's consolidation of collected solid waste and permit
the Company to deliver the collected solid waste to landfills where the Company
has negotiated favorable volume rates with landfill operators. The Company
currently operates 18 transfer stations, three of which it owns. By operating
transfer stations, the Company engages in direct communication with
municipalities regarding waste disposal services, better positioning the
Company to gain additional business in its markets in the event any of these
municipalities privatize their solid waste operations.

EXPANSION THROUGH ACQUISITIONS

The Company's strategy for growth includes: (i) "tuck-in" and other
acquisitions of solid waste collection companies and customers in existing and
adjacent markets; (ii) the acquisition of solid waste collection companies and
customers in new markets; and (iii) the acquisition of landfills in certain
circumstances. The Company seeks to acquire companies with a significant market
presence, high service standards and an experienced management team willing to
remain with the Company.

The Company believes that numerous "tuck-in" acquisition opportunities
exist within its current market area. A "tuck-in" acquisition refers to an
acquisition in which the Company acquires a solid waste collection company, a
division of a company, or certain customers of a company located in the
Company's existing market area and integrates the acquired operations or
customers into the operations of one of the Company's existing branch
facilities. These acquisitions have become an integral part of the industry
competitive model due to the efficiencies involved. Company surveys indicate
that more than 150 entities provide collection services in North Carolina and
South Carolina, and many of these entities are suitable for acquisition by the
Company. Such acquisitions, if consummated, provide the Company opportunities
to improve market share and route density.

As the Company enters new markets through acquisitions, it intends to
continue to implement a regional expansion strategy. The regional expansion
strategy provides the Company with a base of operations to grow internally
through price

24
<PAGE>

increases, providing additional services to existing customers, adding new
private and public customers and tuck-in acquisitions. The Company can then
expand its presence in the targeted region by adding solid waste collection and
transfer operations in regional markets adjacent to or contiguous with the new
location.

The Company is currently examining opportunities to expand its presence in
the Southeastern U.S. The Company is analyzing potential acquisitions of solid
waste services operations in Alabama, Georgia, Mississippi, North Carolina,
South Carolina, Tennessee and Virginia.

While the Company does not currently operate any solid waste landfills,
the Company is actively engaged in identifying solid waste landfill acquisition
candidates in the Southeast. See " -- Acquisition Program -- Recent
Developments". The Company believes that the successful acquisition of
landfills would provide the Company with opportunities to integrate vertically
its collection, transfer and disposal operations while improving operating
margins. Although the Company is actively engaged in identifying these
candidates, the number of candidates is limited in the Company's current market
area. Generally, the Company will evaluate a landfill target by determining,
among other things, whether access to the landfill is economically feasible
from its existing market areas either directly or through strategically located
transfer stations, expected landfill life, the potential for landfill
expansion, and current disposal costs compared with the cost to acquire the
landfill. In addition, where the acquisition of a landfill site is either not
available or not economically feasible, the Company seeks to enter into
long-term disposal contracts with facilities that are located in proximity to
its market areas.

OPERATING ENHANCEMENTS

The Company has implemented advanced management information systems,
financial controls, shared support services and benchmarking systems designed
to improve productivity, efficiency and profitability of its existing and
acquired operations. Each branch facility has on-line real time access to the
Company's financial, operating, cost and customer information. This access
enables the Company's managers to evaluate continuously the Company's
performance record and to establish benchmarks in all phases of the Company's
operations. Management utilizes these systems to: improve collection and
transportation efficiencies; enhance equipment and personnel utilization;
reduce equipment acquisition and maintenance costs; reduce disposal costs by
maximizing waste streams directed to lower cost landfills; timely monitor and
collect customer accounts; and provide current information to the Company's
sales force to ensure properly structured pricing for new customers.

Through the utilization of its systems and controls, the Company will
continue to manage its landfill disposal costs and to negotiate long-term
disposal contracts with Subtitle D landfill operators. In addition, the Company
has developed an extensive network of transfer stations that it uses to
consolidate waste streams to gain greater leverage in negotiating landfill
disposal fees. Management believes the anticipated closing of landfills in
North Carolina will provide opportunities to open more transfer stations and to
gain greater volumes of the waste stream, further enhancing the Company's
negotiating position. Currently, approximately 30% of the Company's waste
volume is directed through Company owned or operated transfer stations.

ACQUISITION PROGRAM

The Company made 31 acquisitions, either by merger or asset purchase, of
solid waste collection operations from 1990 through June 30, 1998. The Company
believes that its reputation, decentralized management strategy and culture
make it an attractive buyer to certain solid waste collection and disposal
acquisition candidates. The Company has developed a set of financial,
geographic and management criteria designed to assist management in the
evaluation of acquisition candidates engaged in solid waste collection and
disposal. These criteria evaluate a variety of factors, including, but not
limited to: (i) historical and projected financial performance; (ii) internal
rate of return, return on assets and return on revenue; (iii) experience and
reputation of the candidate's management and customer service reputation and
relationships with the local communities; (iv) composition and size of the
candidate's customer base; (v) whether the geographic location of the candidate
will enhance or expand the Company's market area or ability to attract other
acquisition candidates; (vi) whether the acquisition will augment or increase
the Company's market share or help protect the Company's existing customer
base; (vii) any synergies gained by combining the acquisition candidate with
the Company's existing operations; and (viii) liabilities of the candidate.

Management of the Company has a proven record in the integration of solid
waste collection company acquisitions. The Company has an established
integration procedure for newly acquired companies designed to effect a prompt
and efficient integration of the acquired business while minimizing disruption
to the ongoing business of the Company and the acquired business. Once a solid
waste collection operation is acquired, programs designed to improve collection
and disposal routing, equipment maintenance and utilization, employee
productivity, operating efficiencies and overall profitability

25
<PAGE>

are implemented. To improve an acquired business' operational productivity,
administrative efficiency and profitability, the Company applies the same
benchmarking programs and systems to the acquired business as are employed at
the Company's existing operations. The Company also solicits new commercial,
industrial and residential customers in areas within and surrounding the
markets served by the acquired collection operations as a means of further
improving operating efficiencies and increasing the volumes of solid waste
collected by the acquired operation. The Company typically attempts to retain
the acquired company's management and key employees and to decentralize
operations, while consolidating administrative and management information
systems through the Company's corporate offices.

Prior to completing an acquisition, Waste Industries performs extensive
environmental, operational, engineering, legal, human resource and financial
due diligence. All acquisitions are subject to initial evaluation and approval
by the Company's management before being recommended to the Board of Directors.

The following table sets forth the Company's acquisitions completed from
1990 through June 30, 1998:

<TABLE>
<CAPTION>
YEAR
COMPANY ACQUIRED PRINCIPAL BUSINESS LOCATION MARKET AREA
- -------------------------- ---------- ---------------------------- ------------------ ---------------------------------
<S> <C> <C> <C> <C>
Reliable Trash Service, 1998 Commercial, Industrial Columbia, MD Tidewater, VA
Inc. and Residential
Collection and
Recycling
Dumpsters, Inc. 1998 Industrial Collection Memphis, TN Shelby County, TN
Cumberland Waste 1998 Commercial, Industrial Crossville, TN Cumberland, Bledsoe, Overton and
Disposal, LLC and Residential Putnam Counties, TN
Collection and
Recycling
ECO Systems, Inc. 1998 Commercial, Industrial Olive Branch, MS De Soto, Marshall, Tunica and
and Residential Tate Counties, MS; Crittenden
Collection County, AR; Fayette and Shelby
Counties, TN
Air Cargo Services, Inc. 1998 Commercial, Industrial Raleigh, NC Raleigh and Goldsboro, NC
and Residential
Collection and
Recycling; Solid Waste
Transportation
Action Waste Systems, 1998 Commercial, Industrial Lithia Springs, Barrow, Cherokee, Clarke, Cobb,
Inc. and Residential GA DeKalb, Douglas, Forsyth,
Collection and Fulton, Gwinnett, Jackson,
Recycling Rockdale and Walton Counties,
GA
Waste Disposal Services, 1998 Commercial Industrial Tunnel Hill, GA Catoosa, Murray and Whitfield
Inc. and Residential Counties, GA
Collection and
Recycling
L&M Garbage Service 1998 Commercial, Industrial Durham, NC Durham County, NC
and Residential
Collection and
Recycling
American Waste 1997 Industrial and Residential Lilburn, GA Gwinnett County, GA
Systems, Inc. Collection
Garner Area 1997 Residential Collection Garner, NC Wake County, NC
Disposal, Inc.
Royal DispozAll, Inc. 1997 Commercial and Easley, SC Greenville, SC
Industrial Collection
BFI Rocky Mount and 1997 Commercial, Industrial, Rocky Mount and Northeastern NC
Kinston and Residential Kinston, NC
Collection and
Recycling
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
YEAR
COMPANY ACQUIRED PRINCIPAL BUSINESS LOCATION MARKET AREA
- -------------------------- ---------- ------------------------ ------------------ ----------------------------------
<S> <C> <C> <C> <C>
Waste Management 1997 Commercial, Industrial Chattanooga, TN Bradley, Hamilton, Marion, Meigs,
Chattanooga and Residential Rhea and Sequatchie Counties,
Collection TN; Catoosa, Chattooga, Dade,
Gordon, Murray, Walker and
Whitfield Counties, GA; and
Jackson County, AL
BFI Charleston 1997 Commercial, Industrial Charleston, SC Charleston County, SC
and Residential
Collection and
Recycling
BFI Raleigh-Durham 1997 Residential Collection Raleigh, NC Wake and Durham Counties, NC
Wayco Sanitation, Inc. 1996 Residential Collection Goldsboro, NC Wayne County, NC
QA Refuse Systems, Inc. 1996 Residential Collection Wilson, NC Wilson County NC
Asi Sanitation 1996 Residential Collection Henderson, NC Vance County, NC
Bruce Kessler 1996 Residential Collection Wake Forest, NC Wake and Franklin Counties, NC
A. Windfish Disposal Co. 1995 Commercial, Industrial Hampstead, NC Coastal Southeastern, NC
and Residential
Collection
F & M Sanitation 1995 Commercial and Louisburg, NC Franklin County, NC
Services, Inc. Residential Collection
Shaw Sanitation Services 1995 Residential Collection Raleigh, NC Wake County, NC
A-OK Home Services, 1994 Residential Collection Chapel Hill, NC Orange and Durham Counties, NC
Inc.
Kerr Lake Area 1994 Residential Collection Wake Forest, NC Vance and Wake Counties, NC
Sanitation, Inc.
Sunshine Sanitation 1994 Residential Collection Raleigh, NC Wake County, NC
Service -- East Wake
Division
Chambers Development 1993 Commercial, Industrial Conway, SC Horry County, SC
Company -- Myrtle and Residential
Beach -- Conway Collection
Commercial Trash 1991 Container Rental Haw River, NC Alamance County, NC
Container Service
Thomas Sanitation, Inc. 1991 Commercial and Clinton, NC Sampson County, NC
Industrial Collection
Dependable Sanitation 1990 Commercial and Goldsboro, NC Wayne County, NC
Services, Inc. Industrial Collection
Clean Sweep, Inc. 1990 Commercial and Elizabeth City, Pasquotank County, NC
Industrial Collection NC
Joyner Service, Inc. 1990 Commercial and Fayetteville, NC Cumberland County, NC
Industrial Collection
</TABLE>

ACQUISITIONS DURING THE FIRST HALF OF 1998

On June 30, 1998, the Company exchanged 330,000 shares of its Common Stock
with a fair value of approximately $7.4 million for all of the issued and
outstanding shares of common stock of Reliable Trash Service, Inc., a Maryland
corporation based in Columbia, Maryland and engaged in the solid waste
collection business in Tidewater Virginia. This acquisition further expands the
Company's operations in Virginia.

On June 16, 1998, the Company exchanged 21,344 shares of its Common Stock
with a fair value of approximately $449,000 for all of the issued and
outstanding shares of common stock of Dumpsters, Inc., a Tennessee corporation
engaged in the industrial solid waste collection business in and around
Memphis, Tennessee. This "tuck-in" acquisition complements the recent ECO
Systems, Inc. acquisition, increasing the Company's route density in the Shelby
County, Tennessee.

On May 13, 1998, the Company purchased equipment and customer contracts
related to the commercial, industrial and residential solid waste collection
business of Cumberland Waste Disposal, LLC, located in Crossville, Tennessee.
This acquisition further expands the Company's operations in Tennessee.

27
<PAGE>

On March 31, 1998, the Company exchanged 300,933 shares of its Common
Stock with a fair value of approximately $5.75 million for all of the issued
and outstanding shares of common stock of ECO Systems, Inc., a Georgia
corporation based in Olive Branch, Mississippi and engaged in the solid waste
collection business in Mississippi, Tennessee and Arkansas. This acquisition
expands the Company's operations into western Tennessee, as well as Mississippi
and Arkansas. See "Certain Transactions".

On March 31, 1998, the Company exchanged 19,622 shares of its Common Stock
with a fair value of approximately $375,000 for all of the issued and
outstanding shares of common stock of Air Cargo Systems, Inc., a North Carolina
corporation engaged in the business of collection and processing of
recyclables, intermediate transportation of solid waste, and local and long
distance freight pick-up and delivery in Raleigh and Greensboro, North
Carolina. This "tuck-in" acquisition increases the Company's route density and
expands its business into complementary transportation and freight operations.
See "Certain Transactions".

In March 1998, the Company purchased equipment and customer contracts
related to the commercial, industrial and residential solid waste collection
businesses of: Action Waste Systems, Inc., located in Lithia Springs, Georgia;
Waste Disposal Services, Inc., located in Tunnel Hill, Georgia; and L&M Garbage
Service, located in Durham, North Carolina. The total purchase price for these
assets was approximately $4.7 million in cash. The Waste Disposal Services and
L&M acquisitions are "tuck-in" acquisitions that increase the Company's route
density in areas already served. The Action Waste Systems acquisition further
expands the Company's operations in Georgia.

RECENT DEVELOPMENTS

Also on August 28, 1998, the Company acquired, in exchange for
approximately $7.6 million in cash plus 22,474 shares of Company Common Stock
valued at approximately $500,000, certain assets of Greater Atlanta Sanitation,
Inc., a solid waste collection business in and around Atlanta, Georgia. This
acquisition will be accounted for as a purchase and will further expand the
Company's operations in Georgia.

CONTRACTS PROGRAM

The Company devotes significant resources to securing large contracts from
municipal and other governmental agencies and has been awarded approximately
108 contracts since 1992. The Company believes that opportunities for gaining
larger contracts are increasing due to trends among municipalities to privatize
or outsource solid waste services. In most cases, only larger disposal services
companies such as the Company are financially acceptable to the municipality.
Historically, in the Southeastern U.S., city and county governments have
provided a variety of solid waste services using their own personnel. Over
time, many municipalities have opted to privatize or contract out their
collection and disposal services to the private sector. Typically, these
contracts are competitively bid and have initial terms of one to five years. In
bidding for large contracts, the Company's management team draws on its
experience in the waste industry and its knowledge of local

28
<PAGE>

service areas in existing and target markets. The Company engages in extensive
due diligence using its advanced management information systems and
productivity and cost modeling analyses to respond to requests for proposals to
provide services. The Company's reputation for service in the municipal market
is one of its strongest marketing tools for contract maintenance. The Company's
regional managers are responsible for managing the relationships with local
governmental officials within their respective service area and sales
representatives may be assigned specific municipalities for coverage. The
Company may be required to bid for renewal of a contract previously awarded to
the Company, or in certain cases to renegotiate the contract as a result of
changed market conditions. Since 1992, the Company has been successful in
retaining more than 95% of its major contracts at the time of renewal.

SERVICES

COMMERCIAL, INDUSTRIAL AND RESIDENTIAL WASTE SERVICES

The Company's commercial and industrial collection and disposal services
are performed under one-year to five-year service agreements, and fees are
determined by such factors as collection frequency, level of service, route
density, the type, volume and weight of the waste collected, type of equipment
and containers furnished, the distance to the disposal or processing facility,
the cost of disposal or processing and prices charged in its markets for
similar service. Collection of larger volumes associated with commercial and
industrial waste streams generally helps improve the Company's operating
efficiencies and, through consolidation of these volumes, enables the Company
to negotiate more favorable disposal prices. The Company's commercial and
industrial customers utilize portable containers for storage thereby enabling
the Company to service many customers with fewer collection vehicles.
Commercial and industrial collection vehicles normally require one operator.
The Company provides two to eight cubic yard containers to commercial customers
and 10 to 42 cubic yard containers to industrial customers. As a part of the
services provided by the Company and for an additional fee under its waste
services contract, stationary compactors that compact waste prior to collection
are installed on the premises of a substantial number of large volume
customers. No single commercial or industrial contract is individually material
to the Company's results of operations.

The Company's residential solid waste collection and disposal services are
performed either on a subscription basis with individual households, or under
contracts with municipalities, homeowners associations, apartment owners or
mobile home park operators. Municipal contracts grant the Company the right to
service all or a portion of the residences in a specified community or to
provide a central repository for residential waste drop-off. The Company had
more than 150 municipal contracts in place as of June 30, 1998. No single
municipal or other residential contract is individually material to the
Company's results of operations. Municipal contracts in the Company's market
areas are typically awarded on a competitive bid basis and thereafter on a bid
or negotiated basis and usually range in duration from one to five years.
Residential contract fees are based primarily on route density, the frequency
and level of service, the distance to the disposal or processing facility, the
cost of disposal or processing and prices charged in its markets for similar
service. Municipal collection fees are paid either by the municipalities from
tax revenues or through direct service charges to the residents receiving the
service.

TRANSFER STATION SERVICES

The 18 transfer stations operated by the Company receive, compact and
transfer solid waste to larger Company-owned vehicles for transport to
landfills. The Company believes that transfer stations benefit the Company by:
(i) providing access to multiple landfills; (ii) improving utilization of
collection personnel and equipment; (iii) concentrating the waste stream to
gain leverage in negotiating for more favorable disposal rates; and (iv)
building relationships with municipalities that can lead to opportunities for
additional business in the future. The Company expects to develop, own and
operate one additional transfer station in 1998. Depending on the location,
size and local regulatory environment, transfer stations can be constructed for
as little as $150,000 for a small rural facility or as much as $1.0 million for
larger sites. The Company believes that it has obtained all permits and
authorizations necessary to operate its existing transfer stations and that
each of its existing transfer stations has been operated in compliance in all
material respects with applicable environmental regulations.

The Company owns three of the transfer stations it operates, and operates
the remaining fifteen transfer stations pursuant to operating agreements. These
operating agreements have terms ranging from annual one-year renewals to an
indefinite period. The Company generally receives a fixed monthly operating fee
for its services under these agreements, together with a variable fee based
upon the number of hauls made by the Company from the station. Approximately
30% of waste directed to the transfer stations operated by the Company is
delivered by third parties, who pay the Company a fee based on the tonnage
delivered. Control of these third-party waste streams coupled with the
Company's waste stream adds to the bargaining power exerted by the Company in
its negotiations for favorable solid waste disposal rates with landfill
operators.

29
<PAGE>

RECYCLING SERVICES

Recycling involves the removal of reusable materials from the waste stream
for processing and sale in various applications. The Company believes that
recycling will continue to be an important component of local and state solid
waste management plans as a result of the public's increasing environmental
awareness and expanding regulations mandating or encouraging waste recycling.
The Company offers commercial, industrial and residential customers recycling
for office paper, cardboard, newspaper, aluminum and steel cans, plastic,
glass, pallets and yard waste. The Company operates approximately 100
convenience sites located in 15 counties in its market area where residents can
dispose of recyclables. These commodities are delivered either to third-party
processing facilities in exchange for a fee or to one of four Company-operated
facilities for processing prior to resale.

During the last five years, the Company has invested approximately $5
million in infrastructure to develop regionally located recycling facilities
and equipment. Through these facilities, the Company recycles office paper,
cardboard, aluminum and steel cans, plastic, glass, pallets and yard waste. In
1997, less than 3% of the Company's waste stream was recycled. Through a
centralized effort, the Company resells recycled waste products using
commercially reasonable practices and seeks to manage commodity-pricing risk by
spreading the risk among its customers.

CONVENIENCE SITES AND OTHER SPECIALIZED SERVICES

The Company is a leader in the design and marketing of innovative waste
disposal services in its markets. In 1982, the Company developed the concept of
a convenience site in response to increasing volumes of waste dumped randomly
in rural areas. Each site typically consists of a ramp for easy disposal
access, a trash compactor and trash and recycling containers. Most sites have
posted operating hours during which Company personnel assist residents with the
deposit of waste and recyclables while monitoring the types of waste deposited
at the sites. Because these convenience sites reduce the amount of trash dumped
along roads and adjacent to recreational areas, the Company believes that
county and local governments will contract for these sites to be strategically
located. The Company operates approximately 100 of these convenience sites.

In addition, the Company has increased its efforts to secure additional
contracts to manage comprehensive disposal services for large corporations and
municipalities. For example, after thorough review and evaluation, the Company
may provide a lump sum quote for handling all the waste in a Company's
facility. This would include source separating various wastes into commodities
for resale and non-recyclables for disposal. The process of sorting at the
source, processing through a compaction system and scheduling waste and
recyclable removals only when the containers are full reduces the Company's
cost and increases the operating efficiency. Furthermore, confidential
documents can be controlled throughout the process and destroyed to the
customer's satisfaction.

OPERATIONS

BRANCH FACILITY STRUCTURE

The Company believes that a branch facilities structure retains
decision-making authority close to the customer, which enables it to identify
customers' needs quickly and implement cost-effective solutions. Furthermore,
the Company believes that it provides a low-overhead, highly efficient
operational structure that allows the Company to branch into geographically
contiguous markets and operate in small communities which larger competitors
may not find attractive. The Company believes that branch facilities and
decentralized management of operations provide the Company with a strategic
competitive advantage given the relatively rural nature of the Southeastern
U.S.

30
<PAGE>

The Company delivers its waste services from branch locations, generally
in contiguous service areas, which permit the Company's branch facilities to
provide back-up services and support to one another. Each manager of a branch
facility has autonomous service and decision-making authority for the local
market area. Each designated region is overseen by a regional manager, who is
typically located at one of the Company's branch facilities. As of June 30,
1998, the branch network was divided into the six regions set forth below:

<TABLE>
<CAPTION>
CENTRAL SOUTH WEST COASTAL TENNESSEE VALLEY
- --------------------- ---------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Durham, NC Wilmington, NC Graham, NC Newport, NC Chattanooga, TN
Elizabeth City, NC Bolivia, NC Greensboro, NC Jacksonville, NC Crossville, TN
Garner, NC Charleston, SC Henderson, NC Dalton, GA
Goldsboro, NC Conway, SC Oxford, NC Lilburn, GA
Greenville, NC Sumter, SC Easley, SC
Hope Mills, NC OTHER
------------------
Kinston, NC Norfolk, VA
Morrisville, NC Olive Branch, MS
Rocky Mount, NC
Wilson, NC
</TABLE>

The managerial philosophy of the Company centers on the principle that
customers' needs can best be served at the local level by a staff of
well-trained personnel led by a branch manager. Each branch manager is
responsible for implementing sales programs, maintaining service quality,
promoting safety in the branch's operations and overseeing the day-to-day
operations for the branch, including contract administration. Branch managers
also assist regional managers in identifying potential acquisition candidates.
Frequently, the branch manager is also the branch facility's sales manager; but
in larger market areas, branch facilities will have one or more sales persons.
Branch managers are compensated based on the performance of their branch. Each
branch manager reports to a regional manager or Vice President, who reports
directly to the Company's Executive Vice President.

In addition to delivering the Company's services, branch staff
responsibilities include setting up customer accounts, answering customer
questions, processing accounts payable and maintaining accurate payroll and
personnel information. Maintenance support for collection equipment is also
provided at the branch facility. The facility size, number of maintenance
personnel and capabilities are determined by the number of vehicles operated
and the type of services provided within the branch facility's market area.

On a monthly basis, the corporate and/or regional officers meet with each
branch manager to discuss and evaluate the branch operations. This evaluation
is conducted through the use of flash reports on a weekly basis at the branch
and regional levels and monthly at the corporate level. Flash reports highlight
key operating data such as man-hours, overtime hours, truck hours, revenues and
extraordinary costs. These meetings are oriented to identifying trends,
opportunities and strategies in the branch facility's proximate geographic
area. Using a decentralized approach, but with strong corporate monitoring and
strict budgetary and operating guidelines and quality control standards, each
branch manager has the authority to exercise discretion in business decisions.
The Company's management information systems provide corporate management
timely oversight of branch performance.

INFORMATION TECHNOLOGIES

A cornerstone of the Company's desire to deliver responsive and
cost-effective waste services is its management information system network.
Many of the Company's information systems, controls and services are designed
to assist branch facilities' personnel in making decisions based upon
centralized information. Financial control is maintained through personnel,
fiscal and accounting policies which are established at the corporate level for
implementation at the branch locations. The Company's systems allow for
centralized billing and collection through a lock-box system, thus enhancing
cash management. An internal audit program monitors compliance with Company
policies and the benchmarks are monitored continuously using an advanced
management information system. This information system links the Company's IBM
AS400 computer to each branch using satellite technology which allows each
branch on-line, real-time financial, productivity, maintenance and customer
information.

31
<PAGE>

SUPPORT SERVICES

In order to ensure focus at the branch facility level and to support
branch operations, the Company established its Support Services Team during
1995. Support services include: (i) safety and training services; (ii) risk
management; (iii) capital expenditure evaluation; (iv) human resources
services; (v) equipment maintenance; (vi) location of most economical disposal
facilities; (vii) purchasing; (viii) sales and marketing support; (ix)
productivity analysis; (x) research and development services; and (xi)
acquisition due diligence. The Support Services Team provides significant
assistance to the branch facilities in the integration of newly acquired
operations and in securing new and retaining existing customers. Successful
integration of an acquired business is critical to achieving operational and
administrative efficiencies and improved profitability of the incremental
business.

Support services include a comprehensive safety and risk management
program that has strong management support and includes strict safety rules and
policies, accident investigations, tracking and statistical analysis, employee
safety awards, branch safety committees and random facility inspections by both
corporate staff and an outside loss control specialist. Management believes
that its safety program has resulted in accident rates and insurance loss
ratios that are consistently lower than industry averages.

LANDFILL AND OTHER DISPOSAL ALTERNATIVES

Waste Industries currently utilizes approximately 100 disposal sites in
the markets it serves. The Company has historically opted to contract for
landfill services due to the availability of disposal space at favorable
tipping fees in close proximity to its current markets. In certain markets, the
Company has been able to control disposal costs by negotiating long-term
disposal contracts with Subtitle D landfill operators. In addition, the Company
operates an extensive network of transfer stations to consolidate waste streams
and receive volume discounts on disposal costs.

The Company believes that many landfills not in compliance with Subtitle D
Regulations will close in its market area in the next few years. Despite this,
the absolute volume of disposal capacity is increasing due both to the
expansion of capacity at existing landfills and the opening of new landfills.
Landfill operators are aggressively soliciting solid waste volumes to ensure
cash flows sufficient to support the expansion costs and other capital
expenditures made to achieve compliance with the provisions of Subtitle D.
Management believes there will continue to be a significant supply of low-cost
disposal capacity in its current markets and that by controlling a large volume
of the waste stream it will be able to continue to negotiate favorable disposal
costs. The Company plans to continue to secure long-term disposal contracts
with Subtitle D landfill operators and to continue expansion of transfer
stations. Transfer stations allow the Company access to additional disposal
sites and are substantially less expensive to develop than landfills. The
Company believes that landfills that have been targeted for closure may provide
prime sites to develop transfer stations.

Although as of June 30, 1998 the Company did not own or operate a landfill
site, it may decide to acquire a landfill, develop a landfill, or partner with
an experienced landfill operator for the acquisition, development or assumption
of the operation of a landfill. See " -- Acquisition Program -- Recent
Developments". In its current markets, such action would be pursued if the
Company believed that ownership or operation of a landfill in a particular
market would provide significant cost benefits compared to its traditional
system of consolidating waste and negotiating favorable disposal rates. In a
new market, the Company may become a landfill owner or operator if that market
lacks the amount of disposal capacity that the Company has experienced in its
current markets.

The Company intends to develop land clearing and inert debris ("LCID")
landfills in the near future. Such development would provide the Company an
opportunity to dispose of a portion of the Company's waste stream in its own
landfill, rather than paying a third party to do so. LCID landfills can only
take limited kinds of waste (namely land-clearing and inert debris such as
trees, rocks and concrete), as opposed to traditional solid waste landfills,
which can take any kind of waste (except hazardous waste). Traditional solid
waste landfills are therefore subject to more stringent regulation than LCID
landfills. As a result, LCID landfills generally can be constructed in a
relatively short time and involve fewer regulatory hurdles compared to
traditional solid waste landfills.

MARKETING AND SALES

Waste Industries markets its services locally through its regional and
branch managers and approximately 35 direct sales representatives who focus on
commercial, industrial and residential customers. The Company also obtains new
customers from referral sources, its general reputation and local market print
advertising. Leads are also developed from a construction reporting service,
new building permits, business licenses and other public records. Additionally,
each branch facility advertises in the yellow pages and other local business
print media that cover its service area. A variety of methods are

32
<PAGE>

used to market services directly to individual households. Some branch
locations have dedicated sales representatives that market residential
services. The Company engages in direct mail campaigns and door-to-door
marketing and works with real estate agents and developers to sell services to
new developments. The Company recently installed telemarketing programs to sell
residential services. All Company containers display the Company logo, name and
telephone number. Additionally, the Company attends and makes presentations at
municipal and state conferences and advertises in governmental associations'
membership publications.

The Company's sales representatives visit customers on a regular basis and
make sales calls to potential new customers. These sales representatives
receive a significant portion of their compensation based upon certain
incentive formulas. The Company emphasizes providing quality services and
customer satisfaction and retention, and believes that its focus on quality
service will help retain existing and attract additional customers. Maintenance
of a local presence and identity is an important aspect of the Company's
marketing plan, and many of the Company's managers are involved in local
governmental, civic and business organizations.

No single Company customer accounted for more than 4% of the Company's
revenues in 1997. The Company does not believe that the loss of any single
customer would have a material adverse effect on the Company's results of
operations.

COMPETITION

The solid waste management industry is highly competitive, very fragmented
and requires substantial labor and capital resources. Intense competition
exists within the industry not only for collection, transportation and disposal
volume, but also for acquisition candidates. The industry includes four large
national waste companies: Allied Waste Industries, Inc. (which has announced
its impending merger with American Disposal Services, Inc.); Browning-Ferris
Industries, Inc.; Republic Services, Inc.; and Waste Management, Inc. (which
recently merged with USA Waste Services, Inc. and has announced its impending
merger with Eastern Environmental Services, Inc.) There are several other
public companies with annual revenue in excess of $100 million, including:
American Disposal Services, Inc.; Casella Waste Systems, Inc.; Eastern
Environmental Services, Inc.; and Superior Services, Inc. The Company competes
with a number of these and other regional and local companies, including
publicly or privately owned providers of incineration services.

The Company also competes with certain municipalities that operate their
own solid waste collection and disposal facilities. These municipalities may
have certain advantages over the Company due to the availability of tax
revenues and tax-exempt financing.

The Company competes for collection and recycling accounts primarily on
the basis of price and quality of its services. From time to time, competitors
may reduce the price of their services in an effort to expand market share or
to win a competitively bid municipal contract. These practices may also lead to
reduced pricing for the Company's services or the loss of business. The Company
provides a substantial portion of its residential collection services under
municipal contracts. As is generally the case in the industry, municipal
contracts are subject to periodic competitive bidding. The balance of the
Company's residential services are provided on a subscription basis.

PROPERTY AND EQUIPMENT

As of June 30, 1998, the Company owned facilities which covered in the
aggregate more than 140 acres and approximately 118,000 square feet of space.

As of June 30, 1998, the Company leased facilities which covered in the
aggregate approximately 50 acres and approximately 99,000 square feet. The
Company's corporate headquarters is leased under a traditional real property
lease and contains approximately 10,000 square feet of space.

The major types of equipment used by the Company to service its customers
are (i) containers in which customers deposit their waste and (ii) vehicles for
collecting and transporting waste.

CONTAINERS

Some type of container is used in almost every service provided by the
Company, and the Company therefore has an extensive inventory on-hand or
on-site at customers' locations. The Company owns all of its containers and
centrally manages its inventory located at the branch facility level. The
Company also owns a significant number of on-site compaction containers, which
provide efficiency for high-volume solid waste generators. Container life is
dependent on the location of the container, the type of waste that is deposited
into the container and how the container is maintained. Proper maintenance

33
<PAGE>

of commercial and industrial front loader and roll-off containers consists of
regular repainting, scheduled repairs and switch-outs, quality cleaning,
sanding and priming and monitoring of the container by Company employees to
check for needed repairs. Residential collection containers require minor
maintenance.

COLLECTION VEHICLES

The Company utilizes a fleet of specialized collection vehicles to collect
and transport waste and to provide recycling and convenience site services. The
Company owns approximately 93% of its transportation fleet and leases the
remainder. The Company has implemented an aggressive and reliable maintenance
program to extend the useful lives of its equipment. Preventative and long-term
maintenance is performed on regularly scheduled cycles that are more frequent
than most manufacturers' suggested schedules. Preventative maintenance is
performed on collection vehicles after every 150 to 250 hours of operation
depending on its class, and long-term maintenance (reconstruction of engines,
transmissions, etc.) is performed every four to six years. Additionally,
cosmetic repairs (painting, interior upholstery repairs) are performed as
needed. The majority of the maintenance program is done by Company personnel
located in branch facilities.

EMPLOYEES

At June 30, 1998, the Company employed approximately 1,200 full-time
employees. None of the Company's employees are represented by unions, and the
Company has no knowledge of any organizational efforts among its employees. The
Company has experienced low turnover among its employees and believes that its
relations with its employees are good.

RISK MANAGEMENT, INSURANCE AND PERFORMANCE BONDS

Waste Industries actively maintains an environmental and other risk
management programs appropriate for its business. The Company's environmental
risk management program includes evaluating both existing facilities, as well
as potential acquisitions, for environmental law compliance and operating
procedures. The Company also maintains a worker safety program that encourages
safe practices in the workplace. Operating practices at all existing Company
operations stress minimizing the possibility of environmental contamination and
litigation. The Company believes that all of its facilities are in compliance
in all material respects with applicable state and federal regulations.

The Company carries a range of insurance intended to protect its assets
and operations, including a commercial general liability policy and a property
damage policy. A partially or completely uninsured claim against the Company
(including liabilities associated with cleanup or remediation at its own
facilities) if successful and of sufficient magnitude, could have a material
adverse effect on the Company's results of operations or financial condition.
Any future difficulty in obtaining insurance could also impair the Company's
ability to secure future contracts, which may be conditioned upon the
availability of adequate insurance coverage.

Municipal solid waste collection contracts may require performance bonds
or other means of financial assurance to secure contractual performance. The
Company has not experienced difficulty in obtaining performance bonds or
letters of credit for its current operations. At June 30, 1998, the Company had
provided customers and various regulatory authorities with bonds and letters of
credit of approximately $3.0 million to secure its obligations. If the Company
were unable to obtain surety bonds or letters of credit in sufficient amounts
or at acceptable rates, it may be precluded from entering into additional
municipal solid waste collection contracts or obtaining or retaining landfill
operating permits. If the Company develops or owns landfills in the future, the
Company will attempt to obtain insurance coverage for its long-term care and
final closure obligations with respect to any such landfills.

REGULATION

INTRODUCTION

The Company is currently subject to extensive and evolving federal, state
and local environmental laws and regulations that have been enacted in response
to technological advances and increased concern over environmental issues.
These regulations not only strictly regulate the conduct of the Company's
operations but also are related directly to the demand for many of the services
offered by the Company.

The regulations affecting the Company are administered by the EPA and
various other federal, state and local environmental, zoning, health and safety
agencies. The Company believes that it is currently in substantial compliance
with applicable federal, state and local laws, permits, orders and regulations,
and it does not currently anticipate any material environmental costs (although
there can be no assurance in this regard). The Company anticipates there will
continue to be increased

34
<PAGE>

regulation, legislation and regulatory enforcement actions related to the solid
waste services industry. As a result, the Company attempts to anticipate future
regulatory requirements and to plan accordingly to remain in compliance with
the regulatory framework.

In order to transport waste, it is necessary for the Company to possess
one or more permits from state or local agencies. These permits also must be
periodically renewed and are subject to modification and revocation by the
issuing agency. No Company permit has ever been revoked.

In the future, the Company may expand its activities to include ownership
and operation of landfill sites. See " -- Acquisition Program -- Recent
Developments". In order to develop, own or operate a landfill, a transfer
station or most other solid waste facilities, the Company is required to go
through several governmental review processes and obtain one or more permits
and often zoning or other land use approvals. Obtaining these permits and
zoning or land use approvals is difficult, time consuming and expensive and is
often opposed by various local elected officials and citizens' groups. Once
obtained, operating permits generally must be periodically renewed and are
subject to modification and revocation by the issuing agency.

If the Company is successful in acquiring or developing landfill sites,
the Company's facilities will be subject to a variety of operational,
monitoring, site maintenance, closure, post-closure and financial assurance
obligations which change from time to time and which could give rise to
increased capital expenditures and operating costs. In connection with any such
landfills, it is often necessary to expend considerable time, effort and money
in complying with the governmental review and permitting process necessary to
maintain or increase the capacity of these landfills. Governmental authorities
have broad power to enforce compliance with these laws and regulations and to
obtain injunctions or impose civil or criminal penalties in the case of
violations.

The principal federal, state and local statutes and regulations applicable
to the Company's various operations are as follows:

THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976

RCRA regulates the generation, treatment, storage, handling,
transportation and disposal of solid waste and requires states to develop
programs to ensure the safe disposal of solid waste. RCRA divides solid waste
into two groups, hazardous and nonhazardous. Wastes are generally classified as
hazardous if they (i) either (a) are specifically included on a list of
hazardous wastes or (b) exhibit certain hazardous characteristics and (ii) are
not specifically designated as nonhazardous. Wastes classified as hazardous
under RCRA are subject to much stricter regulation than wastes classified as
nonhazardous.

Among the wastes that are specifically designated as nonhazardous waste
are household waste and "special" waste, including items such as petroleum
contaminated soils, asbestos, foundry sand, shredder fluff and most
nonhazardous industrial waste products.

Although the Company is currently not involved with transportation or
disposal of hazardous substances, the Company transported hazardous substances
in the past and may become involved with hazardous substance transportation and
disposal in the future. The EPA regulations issued under Subtitle C of RCRA
impose a comprehensive "cradle to grave" system for tracking the generation,
transportation, treatment, storage and disposal of hazardous wastes. The
Subtitle C regulations provide standards for generators, transporters and
disposers of hazardous wastes, and for the issuance of permits for sites where
such material is treated, stored or disposed. Subtitle C imposes detailed
operating, inspection, training and emergency preparedness and response
standards, as well as requirements for manifesting, record keeping and
reporting, facility closure, post-closure and financial responsibilities.

In October 1991, the EPA adopted the Subtitle D Regulations governing
solid waste landfills. The Subtitle D Regulations, which generally became
effective in October 1993, include location restrictions, facility design
standards, operating criteria, closure and post-closure requirements, financial
assurance requirements, groundwater monitoring requirements, groundwater
remediation standards and corrective action requirements. In addition, the
Subtitle D Regulations require that new landfill sites meet more stringent
liner design criteria (typically, composite soil and synthetic liners or two or
more synthetic liners) designed to keep leachate out of groundwater and have
extensive collection systems to carry away leachate for treatment prior to
disposal. Groundwater monitoring wells must also be installed at virtually all
landfills to monitor groundwater quality and, indirectly, the leachate
collection system operation. The Subtitle D Regulations also require, where
threshold test levels are present, that methane gas generated at landfills be
controlled in a manner that protects human health and the environment. Each
state is required to revise its landfill regulations to meet these requirements
or such requirements will be automatically imposed upon it by the EPA. Each
state is also required to adopt and implement a permit program or other

35
<PAGE>

appropriate system to ensure that landfills within the state comply with the
Subtitle D Regulations criteria. Various states into which the Company operates
or may enter have adopted regulations or programs as stringent as, or more
stringent than, the Subtitle D Regulations.

THE FEDERAL WATER POLLUTION CONTROL ACT OF 1972

The Federal Water Pollution Control Act of 1972, as amended ("Clean Water
Act"), establishes rules regulating the discharge of pollutants from a variety
of sources, including solid waste disposal sites and transfer stations, into
waters of the U.S. If run-off from the Company's transfer stations or if
run-off or collected leachate from the Company's potentially owned or operated
landfills is discharged into streams, rivers or other surface waters, the Clean
Water Act would require the Company to apply for and obtain a discharge permit,
conduct sampling and monitoring and, under certain circumstances, reduce the
quantity of pollutants in such discharge. Also, virtually all landfills are
required to comply with the EPA's storm water regulations issued in November
1990, which are designed to prevent possibly contaminated landfill storm water
runoff from flowing into surface waters. The Company believes that its
facilities are in compliance in all material respects with Clean Water Act
requirements, particularly as they apply to treatment and discharge of leachate
and storm water.

THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT
OF 1980 ("CERCLA")

CERCLA established a regulatory and remedial program intended to provide
for the investigation and cleanup of facilities from which there has been, or
is threatened, a release of any hazardous substance into the environment.
CERCLA's primary mechanism for remedying such problems is to impose strict
joint and several liability for cleanup of facilities on current owners and
operators of the site, former owners and operators of the site at the time of
the disposal of the hazardous substances, as well as the generators of the
hazardous substances and the transporters who arranged for disposal or
transportation of the hazardous substances. The costs of CERCLA investigation
and cleanup can be very substantial. Liability under CERCLA does not depend
upon the existence or disposal of "hazardous waste" as defined by RCRA, but can
also be founded upon the existence of even very small amounts of the more than
700 "hazardous substances" listed by the EPA, many of which can be found in
household waste. If the Company were to be found to be a responsible party for
a CERCLA cleanup, the enforcing agency could hold the Company, or any other
generator, transporter or the owner or operator of the facility, completely
responsible for all investigative and remedial costs even if others may also be
liable. CERCLA also authorizes the imposition of a lien in favor of the U.S.
upon all real property subject to, or affected by, a remedial action for all
costs for which a party is liable. CERCLA provides a responsible party with the
right to bring legal action against other responsible parties for their
allocable share of investigative and remedial costs. The Company's ability to
get others to reimburse it for their allocable share of such costs would be
limited by the Company's ability to find other responsible parties and prove
the extent of their responsibility and by the financial resources of such other
parties.

THE CLEAN AIR ACT

The Clean Air Act provides for regulation, through state implementation of
federal requirements, of the emission of air pollutants from certain landfills
based upon the date of the landfill construction and volume per year of
emissions of regulated pollutants. The EPA has proposed new source performance
standards regulating air emissions of certain regulated pollutants (methane and
non-methane organic compounds) from municipal solid waste landfills. Landfills
located in areas with air pollution problems may be subject to even more
extensive air pollution controls and emission limitations. In addition, the EPA
has issued standards regulating the disposal of asbestos-containing materials.

Some of the federal statutes described above contain provisions
authorizing under certain circumstances, the institution of lawsuits by private
citizens to enforce the provisions of the statutes.

THE OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970

OSHA establishes employer responsibilities and authorizes the promulgation
by the Occupational Safety and Health Administration of occupational health and
safety standards, including the obligation to maintain a workplace free of
recognized hazards likely to cause death or serious injury, to comply with
adopted worker protection standards, to maintain certain records, to provide
workers with required disclosures and to implement certain health and safety
training programs. Various of those promulgated standards may apply to the
Company's operations, including those standards concerning notices of hazards,
safety in excavation and demolition work, the handling of asbestos and
asbestos-containing materials, and worker training and emergency response
programs. The Company's employees are trained to respond appropriately in the
event there is an accidental spill or release of packaged asbestos-containing
materials or other regulated substances during transportation or landfill
disposal.

36
<PAGE>

STATE AND LOCAL REGULATIONS

Each state in which the Company now operates or may operate in the future
has laws and regulations governing the generation, storage, treatment,
handling, transportation and disposal of solid waste, water and air pollution
and, in most cases, the siting, design, operation, maintenance, closure and
post-closure maintenance of landfills and transfer stations. In addition, many
states have adopted Superfund statutes comparable to, and in some cases more
stringent than, CERCLA. These statutes impose requirements for investigation
and cleanup of contaminated sites and liability for costs and damages
associated with such sites, and some provide for the imposition of liens on
property owned by responsible parties. Furthermore, many municipalities also
have ordinances, local laws and regulations affecting Company operations. These
include zoning and health measures that limit solid waste management activities
to specified sites or activities, flow control provisions that direct the
delivery of solid wastes to specific facilities, laws that grant the right to
establish franchises for collection services and then put out for bid the right
to provide collection services, and bans or other restrictions on the movement
of solid wastes into a municipality.

Certain permits and approvals may limit the types of waste that may be
accepted at a landfill or the quantity of waste that may be accepted at a
landfill during a given time period. In addition, certain permits and
approvals, as well as certain state and local regulations, may limit a landfill
to accepting waste that originates from specified geographic areas or seek to
restrict the importation of out-of-state waste or otherwise discriminate
against out-of-state waste. Generally, restrictions on the importation of
out-of-state waste have not withstood judicial challenge. However, from time to
time federal legislation is proposed which would allow individual states to
prohibit the disposal of out-of-state waste or to limit the amount of
out-of-state waste that could be imported for disposal and would require
states, under certain circumstances, to reduce the amounts of waste exported to
other states. Although Congress has not yet passed such legislation, if this or
similar legislation is enacted, states in which the Company operates landfills
could act to limit or prohibit the importation of out-of-state waste. Such
state actions could materially adversely affect landfills within those states
that receive a significant portion of waste originating from out-of-state.

In addition, certain states and localities may for economic or other
reasons restrict the exportation of waste from their jurisdiction or require
that a specified amount of waste be disposed of at facilities within their
jurisdiction. In 1994, the U.S. Supreme Court held unconstitutional, and
therefore invalid, a local ordinance that sought to impose flow controls on
taking waste out of the locality. However, certain state and local
jurisdictions continue to seek to enforce such restrictions and, in certain
cases, the Company may elect not to challenge such restrictions based upon
various considerations. In addition, the aforementioned proposed federal
legislation would allow states and localities to impose certain flow control
restrictions. These restrictions could result in the volume of waste going to
landfills being reduced in certain areas, which may materially adversely affect
the Company's ability to operate its landfills at their full capacity and/or
affect the prices that can be charged for landfill disposal services. These
restrictions may also result in higher disposal costs for the Company's
collection operations. If the Company were unable to pass such higher costs
through to its customers, the Company's business, financial condition and
results of operations could be materially adversely affected.

There has been an increasing trend at the state and local level to mandate
and encourage waste reduction at the source and waste recycling, and to
prohibit or restrict the disposal of certain types of solid wastes, such as
yard wastes, leaves and tires, in landfills. The enactment of regulations
reducing the volume and types of wastes available for transport to and disposal
in landfills could affect the Company's ability to operate its facilities at
their full capacity.

LEGAL PROCEEDINGS

In the normal course of its business and as a result of the extensive
governmental regulation of the waste industry, the Company may periodically
become subject to various judicial and administrative proceedings involving
federal, state or local agencies. In these proceedings, an agency may seek to
impose fines on the Company or to revoke, or to deny renewal of, an operating
permit held by the Company. In addition, the Company may become party to
various claims and suits pending for alleged damages to persons and property,
alleged violation of certain laws and for alleged liabilities arising out of
matters occurring during the normal operation of the waste management business.
However, there is no current proceeding or litigation involving the Company
that it believes will have a material adverse effect upon the Company's
financial condition or results of operations.

37
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the
executive officers and directors of the Company as of June 30, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- -------------------------------- ----- --------------------------------------------------------------
<S> <C> <C>
Lonnie C. Poole, Jr. ...... 61 Chairman, Chief Executive Officer and Director
Jim W. Perry .............. 53 President, Chief Operating Officer and Director
Robert H. Hall ............ 51 Vice President, Chief Financial Officer, Secretary, Treasurer
and Director
Henry E. Dick ............. 50 Executive Vice President
J. Gregory Poole, Jr.(1) .. 63 Director
Thomas F. Darden(1) ....... 43 Director
</TABLE>

- ---------
(1) Member of the Audit and Compensation Committees.

Lonnie C. Poole, Jr. founded the Company in 1970 and has served as Chief
Executive Officer and Chairman of the Board of Directors of the Company since
that time. Mr. Poole holds a B.S. in Civil Engineering from North Carolina
State University and an M.B.A. from the University of North Carolina at Chapel
Hill. Mr. Poole has more than 27 years' experience in the solid waste industry.
He has served in the Environmental Industry Association, a non-profit business
association established to, among other things, inform, educate and assist its
members in cost-effective, safe and environmentally responsible management of
waste ("EIA", formerly the National Solid Waste Management Association or the
"NSWMA"), in the following positions: Chairman, Vice-Chairman, Board Member. In
addition, Mr. Poole has served in the EIA Research and Education Foundation as
Chairman and now is a member of its Board of Directors. Mr. Poole was inducted
into the EIA Hall of Fame in 1994.

Jim W. Perry joined the Company in 1971 and has served as the Company's
President and Chief Operating Officer since 1987 and as a director since 1974.
Mr. Perry holds a B.S. in Agricultural and Biological Engineering from North
Carolina State University and an M.S. in Systems Management from the University
of Southern California. Mr. Perry has more than 27 years' experience in the
solid waste industry and has received the Distinguished Service Award from the
NSWMA. In addition, Mr. Perry has served in the Carolinas Chapter of NSWMA as
Chairman and on the Membership Committee. Mr. Perry was inducted into the EIA
Hall of Fame in 1997.

Robert H. Hall joined the Company in 1978 and has served as the Company's
Chief Financial Officer, Vice President, Secretary and Treasurer since 1983 and
as a director since 1983. Mr. Hall is a Certified Public Accountant and holds a
B.S. in Business Administration from East Carolina University. Mr. Hall has
more than 19 years' experience in the solid waste industry.

Henry E. Dick has served as the Company's Executive Vice President,
responsible for all operating divisions and all sales and marketing activities,
since 1991. Prior thereto, he served in various positions, most recently as the
Company's Vice President of Sales and Marketing from 1987 to 1991. Mr. Dick
holds a B.A. in Political Science from Guilford College. Mr. Dick has more than
15 years' experience in the solid waste industry. Mr. Dick has served the
Carolinas Chapter of NSWMA as Chairman for two years, Vice-Chairman for four
years, Legislative Chairman for four years and member of the Waste Hauler's
Council. Mr. Dick was voted EIA Member of the Year for 1997.

J. Gregory Poole, Jr. an original investor in the Company in 1970, has
served as a member of the Board of Directors since 1994. Mr. Poole has been
Chairman of the Board and Chief Executive Officer of Gregory Poole Equipment
Company, a retail distributor of Caterpillar equipment, for over five years.
Mr. Poole is a member of the Board of Directors of First Union Corporation. Mr.
Poole holds a B.S. in Business Administration from the University of North
Carolina at Chapel Hill. Mr. Poole has more than 23 years' experience in the
solid waste industry.

Thomas F. Darden has served as a director of the Company since June 1997.
Since 1984, Mr. Darden has served as Chairman of Cherokee Industries, which
includes Cherokee Sanford Group (a brick manufacturing company) and a group of
environmental companies, and as a principal of Franklin Street/Fairview
Capital, a private investment company. Since 1990, Mr. Darden has twice been
appointed to and currently serves on the North Carolina Board of
Transportation. He also acts as a Trustee of the Triangle Transit Authority and
of Shaw University, and is a director of Winston Hotels, Inc. In addition, Mr.
Darden has served on the Board of Visitors and currently serves on the Honors
Advisory Board at the University

38
<PAGE>

of North Carolina at Chapel Hill. Mr. Darden holds a B.A. with Highest Honors
and an M.R.P. in Environmental Planning from the University of North Carolina
at Chapel Hill, and a J.D. from Yale University.

OTHER KEY EMPLOYEES

The following table sets forth certain information concerning the other
key employees of the Company as of June 30, 1998:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------------------ ----- ------------------------------------------------
<S> <C> <C>
Lonnie C. Poole, III ............ 36 Vice President and Director of Support Services
Steven C. Goode ................. 48 Vice President of Marketing
Joseph W. Peacock, Jr. .......... 48 Vice President
Stephen C. Shaw ................. 38 Vice President of Finance and Controller
Joe H. Lowry, Jr. ............... 43 Director of Human Resources
Ralph A. Ford ................... 42 Director of Risk Management
Harrell J. Auten ................ 50 Vice President
Roger C. Davis .................. 54 West Regional Manager
Dallas D. Goodwin ............... 47 Coastal Regional Manager
Richard D. Lauck ................ 52 Vice President
James M. Roberts ................ 48 Vice President
William A. Williams ............. 52 Division Manager
</TABLE>

Lonnie C. Poole, III has served as the Company's Vice President, Director
of Support Services since 1995. From 1990 to 1995, he served as the Company's
Risk Management Director. Mr. Poole holds a B.S. in Aerospace Engineering from
North Carolina State University. Mr. Poole is the son of Lonnie C. Poole, Jr.
Mr. Poole has more than eight years' experience in the solid waste industry.

Steven C. Goode has served as Vice President of Marketing since 1995.
Prior thereto, he served in various managerial capacities for the Company,
including as Vice President from 1991 to 1995. Mr. Goode studied Business
Administration at Virginia Commonwealth University and holds an A.S. in
Business Administration from John Tyler Community College. Mr. Goode has more
than 14 years' experience in the solid waste industry.

Joseph W. Peacock, Jr. has served as Vice President of the Company since
1994. He has been employed by the Company since 1983, beginning as the parts
manager. Since that time, he has been promoted to Operations Manager, General
Manager and, in 1994, Vice President. Mr. Peacock received a business
management degree from North Carolina State University in 1974. Mr. Peacock has
more than 15 years' experience in the solid waste industry.

Stephen C. Shaw has served as the Company's Controller since he joined the
Company in 1985 and as Vice President of Finance since 1991. Mr. Shaw is a
Certified Public Accountant, and holds a B.S. in Business Administration from
the University of North Carolina at Chapel Hill. Mr. Shaw has more than 13
years' experience in the solid waste industry.

Joe H. Lowry, Jr. has served as the Company's Director of Human Resources
since he joined the Company in October 1995. Prior to joining the Company, he
worked for over 13 years for Carolina Power and Light Company, most recently as
the Senior Human Resources Representative for its Southern Division. Mr. Lowery
holds an A.S. degree from Lees-McRae College and a B.A. in Education from
Western Carolina University. Mr. Lowry has more than three years' experience in
the solid waste industry.

Ralph A. Ford has served as the Company's Risk Manager since he joined the
Company in September 1996. Prior to joining the Company, he worked for over
five years for Chambers Development Company, most recently as the Northern
Region Safety Manager following that company's merger with USA Waste in 1995.
Mr. Ford holds a B.S. in Industrial Education and an M.A. in
Vocation/Industrial Education from Tennessee State University. Mr. Ford has
more than seven years' experience in the solid waste industry.

Harrell J. Auten has served as a Vice President of the Company since March
1998. From 1993 until March 1998, he served as the Company's South Regional
Manager since 1993. From 1991 to 1993, he owned and operated his own company,
Lodal-South, Inc. Mr. Auten holds a B.S. in Business Administration from the
University of North Carolina at Chapel Hill. Mr. Auten has more than 27 years'
experience in the solid waste industry.

39
<PAGE>

Roger C. Davis has served as the Company's West Regional Manager since
1995. Since he joined the Company in 1987, he has served in various positions,
including as Division Manager from 1990 to 1995. Mr. Davis holds a B.S. in
Business Administration from the University of New York at Albany and an A.S.
in Applied Science in Industrial Management from El Paso Community College. Mr.
Davis has more than 11 years' experience in the solid waste industry.

Dallas D. Goodwin has served as the Company's Coastal Regional Manager
since 1990. He holds a B.S. in Business Administration from Pembroke State
University and attended the North Carolina School of Banking and the Graduate
School of Retail Banking at the University of Virginia. Mr. Goodwin has more
than eight years' experience in the solid waste industry.

Richard D. Lauck has served as a Vice President of the Company since March
1998. From November 1995 until March 1998, he served as the Company's Central
Regional Manager. Prior to joining the Company, Mr. Lauck worked for 14 years
with Waste Management, Inc., where he held various operational positions
including General Manager, Vice President and Region Manager. Mr. Lauck holds a
B.S. degree, specializing in Marketing, from the University of Northern
Colorado and an M.S. from Colorado State University. Mr. Lauck has more than 16
years' experience in the solid waste industry.

James M. Roberts has served as a Vice President of the Company since 1995.
From 1990 until December 1997, he served as the Company's East Regional
Manager. Since he joined the Company in 1978 he has served in various positions
including Division Manager from 1985 until 1990. Mr. Roberts studied Forestry
and Business Administration at Wayne Community College. Mr. Roberts has more
than 19 years' experience in the solid waste industry.

William A. Williams has served as a Division Manager of the Company since
1978. Since joining the Company in 1973, he has served in various positions,
including Branch Manager from 1973 to 1978. Mr. Williams has more than 25
years' experience in the solid waste industry.

None of the executive officers, directors or other key employees of the
Company is related to any other executive officer, director or other such key
employee, except that Lonnie C. Poole, Jr. and Lonnie C. Poole, III are father
and son.

BOARD COMMITTEES

The Audit Committee is responsible for recommending to the Board of
Directors the appointment of independent auditors, reviewing and approving the
scope of the annual audit activities of the auditors, approving the audit fee
payable to the auditors, reviewing audit results and approving related party
transactions. J. Gregory Poole, Jr. and Thomas F. Darden are the members of the
Audit Committee.

The Compensation Committee is responsible for reviewing and recommending
to the Board of Directors the compensation structure for the Company's
directors, officers and other managerial personnel, including salaries,
bonuses, participation in incentive compensation and benefit plans, fringe
benefits, non-cash perquisites and other forms of compensation, and will
administer the Company's stock plans. J. Gregory Poole, Jr. and Thomas F.
Darden are members of the Compensation Committee.

40
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

The following table sets forth all compensation paid by the Company for
services rendered to it in all capacities for the fiscal years ended December
31, 1996 and 1997 to the Company's Chief Executive Officer and the Company's
other executive officers who earned at least $100,000 in the respective fiscal
year (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
FISCAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) COMPENSATION(1)
- --------------------------------------------------- -------- ----------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Lonnie C. Poole, Jr. .............................. 1997 $ 224,324 $141,127 -- $ 42,632 (2)
Chairman and Chief Executive Officer 1996 $ 219,154 $212,229 199,320 $ 42,019 (2)
Jim W. Perry, President ........................... 1997 $ 201,676 $ 90,835 -- $ 42,760 (2)
1996 $ 197,060 $148,561 96,836 $ 40,831 (2)
Robert H. Hall .................................... 1997 $ 135,600 $ 52,997 -- $ 42,695 (2)
Chief Financial Officer, Secretary and Treasurer 1996 $ 120,467 $ 63,669 13,456 $ 40,610 (2)
Henry E. Dick ..................................... 1997 $ 122,720 $ 52,020 -- $ 11,626
Executive Vice President 1996 $ 109,611 $ 52,864 7,740 $ 9,593
</TABLE>

- ---------
(1) Includes profit sharing contributions and an automobile allowance for each
of the Named Executive Officers of $3,169 and $4,200, respectively, in
1996 and $4,511 and $4,200, respectively, in 1997. Includes life insurance
premiums paid by the Company on executive group policy insurance coverage
in excess of $50,000 payable to the Named Executive Officers or their
respective families in the following amounts in 1996 and 1997,
respectively; Mr. Poole, $1,715 and $2,448; Mr. Perry, $953 and $874; Mr.
Hall $463 and $493; and Mr. Dick, $272 and $419. Also includes Company
contributions to the Company's 401(k) Plan in the following amounts in
1996 and 1997, respectively: Mr. Poole, $2,135 and $673; Mr. Perry, $1,709
and $2,375; Mr. Hall, $1,978 and $2,691; Mr. Dick, $1,952 and $2,496.

(2) Includes director's fees of $30,800 for periods prior to the Company's
initial public offering. See " -- Director Compensation".

OPTION GRANTS, EXERCISES AND HOLDINGS AND FISCAL YEAR-END OPTION VALUES

No Named Executive Officer was granted or exercised a stock option during
the year ended December 31, 1997. The following table sets forth certain
information concerning the number and value of unexercised options held by the
Named Executive Officers as of December 31, 1997:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1997 AT DECEMBER 31, 1997(1)
----------------------------------- ----------------------------------
NAME EXERCISABLE(2) UNEXERCISABLE(2) EXERCISABLE(2) UNEXERCISABLE(1)
- ------------------------------ ---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Lonnie C. Poole, Jr. ......... 199,320 -- $2,690,820 $ --
Jim W. Perry ................. 76,800 20,036 1,036,416 270,486
Robert H. Hall ............... 3,200 10,256 43,200 138,456
Henry E. Dick ................ -- 11,740 -- 158,490
</TABLE>

- ---------
(1) Options are considered in-the-money if the market value of the shares
covered thereby is greater than the option exercise price. Value is
calculated based on the difference between the fair market value of the
shares of Common Stock at December 31, 1997 ($18.625), as quoted on the
Nasdaq Stock Market, and the exercise price of the options.

(2) The first number represents the number or value (as called for by the
appropriate column) of exercisable options; the second number represents
the number or value (as appropriate) of unexercisable options.

STOCK PLANS

The Company's 1997 Stock Plan (the "Stock Plan") was adopted by the
Company's Board of Directors in April 1997 and approved by the Company's
shareholders in June 1997. A total of 1,800,000 shares of Common Stock have
been reserved

41
<PAGE>

for issuance under the Stock Plan. At the same time that the Stock Plan was
adopted, the Board terminated the Company's Employee Non-Qualified Stock Option
Plan (the "Option Plan" and, together with the Stock Plan, the "Plans") as to
future grants. As of August 11, 1998, 1,416,972 shares of Common Stock had been
issued upon exercise of options granted under the Option Plan and options to
purchase 734,343 shares of Common Stock at a weighted average exercise price of
$6.50 per share were outstanding under the Plans. The Plans provide for grants
of "incentive stock options," within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), to employees (including officers
and employee directors), and each of the Plans provides for grants of
nonstatutory options to employees and consultants. The Stock Plan also allows
for the grant of purchase rights. The Plans are administered by the
Compensation Committee of the Board of Directors. The Stock Plan will terminate
in April 2007, unless sooner terminated by the Board of Directors.

The exercise price of incentive stock options granted under the Stock Plan
must not be less than the fair market value of the Common Stock on the date of
grant, and the exercise price of nonstatutory options under the Stock Plan must
not be less than 85% of the fair market value of the Common Stock on the date
of grant. With respect to any optionee who owns stock representing more than
10% of the voting power of all classes of the Company's outstanding capital
stock, the exercise price of any incentive stock option must be equal to at
least 110% of the fair market value of the Common Stock on the date of grant,
and the term of the option must not exceed five years. The terms of all other
options may not exceed 10 years. The aggregate fair market value of Common
Stock (determined as of the date of the option grant) for which incentive stock
options may for the first time become exercisable by any individual in any
calendar year may not exceed $100,000.

401(K) PLAN

The Company maintains an Employees' Retirement Savings Plan (the "401(k)
Plan") for employees who elect to participate. Subject to certain limitations,
participants may contribute up to 15% of their compensation on a pre-tax basis
to the 401(k) Plan and the Company may contribute matching funds in an amount
equal to 25% of each dollar up to the amount allowed by applicable federal law.
In addition, the 401(k) Plan has an annually discretionary profit sharing plan
rider where the Company makes tax deferred contributions based on eligible
employees' compensation. Amounts attributable to participant contributions
under the 401(k) Plan are fully vested at all times (with Company contributions
vesting in increments of 20% per year after the first two years of employment).
Participants are entitled to receive their vested 401(k) Plan accounts,
including investment earnings, upon death, retirement or other termination of
employment.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors consists of J.
Gregory Poole, Jr. and Thomas F. Darden, neither of whom was at any time during
the fiscal year ended December 31, 1997 or at any other time an officer or
employee of the Company. Mr. Perry, President and a director of the Company, is
also a member of the compensation committee of Gregory Poole Equipment Company,
of which J. Gregory Poole, Jr., a member of the Company's Compensation
Committee, is the Chairman and Chief Executive Officer. No other executive
officer of the Company serves as a member of the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Board of Directors or the Compensation Committee of
the Company.

DIRECTOR COMPENSATION

Non-employee directors (J. Gregory Poole, Jr., and Thomas F. Darden) are
entitled to receive an annual retainer fee in cash or stock of the Company
equal in value to $5,000, plus $500 in cash or stock value at the option of the
individual director for attending each meeting of the Board of Directors and
each Board of Directors' committee meeting, in addition to reimbursement of
out-of-pocket expenses. For the portion of 1997 prior to the Company's initial
public offering, employee directors of the Company each received $30,800 as
compensation for service as members of the Board of Directors. Directors who
are also employees of the Company no longer receive compensation for serving as
directors.

LIMITATION ON DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION

The Company's Articles of Incorporation eliminate, to the fullest extent
permitted by the North Carolina Business Corporation Act (the "Business
Corporation Act"), the personal liability of each director to the Company or
its shareholders for monetary damages for breach of duty as a director. This
provision in the Articles of Incorporation will not change a director's duty of
care, but will eliminate monetary liability for certain violation of that duty,
including violations based on grossly negligent business decisions that may
include decisions relating to attempts to change control of the Company. The
provision will not affect the availability of equitable remedies for a breach
of the duty of care, such as an action to enjoin or rescind a transaction
involving a breach of fiduciary duty; in certain circumstances, however,
equitable remedies may not be

42
<PAGE>

available as a practical matter. Under the Business Corporation Act, the
limitation of liability provision is ineffective against liabilities for (i)
acts or omissions that the director knew or believed at the time of the breach
to be clearly in conflict with the best interests of the Company, (ii) unlawful
distributions described in Business Corporation Act Section 55-8-33, (iii) any
transaction from which the director derived an improper personal benefit, or
(iv) acts or omissions occurring prior to the date the provision became
effective. The provision also in no way affects a director's liability under
the federal securities laws.

Also, to the fullest extent permitted by the Business Corporation Act, the
Company's Bylaws provide, in addition to the indemnification of directors and
officers otherwise provided by the Business Corporation Act, for
indemnification of the Company's current or former directors, officers, and
employees against any and all liability and litigation expense, including
reasonable attorneys' fees, arising out of their status or activities as
directors, officers and employees, except for liability or litigation expense
incurred on account of activities that were at the time known or believed by
such director, officer or employee to be clearly in conflict with the best
interests of the Company.

The Company has director and officer liability insurance with respect to
liabilities arising out of certain matters, including matters arising under the
Securities Act.

At present, there is no pending litigation or proceeding involving any
director or officer, employee or agent of the company where indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.

43
<PAGE>

CERTAIN TRANSACTIONS

On March 31, 1998, the Company acquired ECO Services, Inc., a Georgia
corporation engaged in the solid waste collection business in Mississippi,
Tennessee and Arkansas ("ECO"), in exchange for 300,933 shares of Common Stock
(the "ECO Merger Consideration"). Pursuant to such exchange, Lonnie C. Poole,
Jr., the Company's Chairman and Chief Executive Officer, Jim W. Perry, the
President and a director of the Company, and Robert H. Hall, the Chief
Financial Officer and a director of the Company, and Henry E. Dick, an
executive officer of the Company, received approximately 61.0%, 14.6%, 1.4% and
1.3%, respectively, of the ECO Merger Consideration by virtue of each of their
respective shareholdings in ECO. The shares of Common Stock issued in this
transaction have registration rights. The ECO Merger Consideration (valued at
$5,750,000) was within the range of values attributed to the equity of ECO
($5,500,000 to $6,000,000) as determined by the independent investment bank
hired by the Company to perform such valuation.

On March 31, 1998, the Company also acquired Air Cargo Services, Inc., a
North Carolina corporation engaged in the business of collection and processing
of recyclables, intermediate transportation of solid waste, and local and long
distance freight pick-up and delivery in Raleigh and Greensboro ("ACS"), in
exchange for 19,622 shares of Common Stock (the "ACS Merger Consideration").
Pursuant to such exchange, Lonnie C. Poole, Jr., Jim W. Perry and Robert H.
Hall, as the shareholders of ACS, received the entire ACS Merger Consideration.
The shares of Common Stock issued in this transaction have registration rights.
The ACS Merger Consideration (valued at $375,000) was within the range of
values attributed to the equity of ACS ($350,000 to $400,000) as determined by
the independent investment bank hired by the Company to perform such valuation.

The Company performs or has performed certain management and accounting
services on behalf of Lonnie Poole's Servicenter, Inc. ("LPSC") and ECO, for
which the Company is reimbursed for its costs for providing these services,
plus a specified percentage of net income of LPSC and ECO. LPSC is owned by the
wife and two sons of Lonnie C. Poole, Jr., one of whom, Lonnie C. Poole, III,
is a key employee of the Company, and the other of whom is an employee of the
Company. Prior to the Company's acquisition of ECO in March 1998, Lonnie C.
Poole, Jr. was a significant shareholder of ECO, and Jim W. Perry, Robert H.
Hall and Henry E. Dick also were shareholders of ECO. In 1997, the Company
earned $112,262 under these arrangements.

In November 1986, the Company guaranteed a promissory note payable to J.
Gregory Poole, Jr. by Lonnie C. Poole, Jr., Jim W. Perry and Robert H. Hall.
This note bore interest at 7.5% per annum. Outstanding principal under this
note did not exceed $100,000 during 1997, and the note was paid in full on
December 15, 1997.

Lonnie C. Poole, Jr., Jim W. Perry, Robert H. Hall and J. Gregory Poole,
Jr. were each indebted to the Company for certain amounts payable in connection
with the purchase of shares of Company Common Stock and for premiums paid by
the Company on life insurance policies under a Cross Purchase Agreement which
expired upon completion of the Company's initial public offering in June 1997.
These debts were repaid in full in April 1998. Prior to such repayment, these
debts bore interest at 7.5% per annum and were payable in full on demand.
Outstanding amounts of such indebtedness at December 31, 1997 were: Lonnie C.
Poole, Jr., $33,845; Mr. Perry, $30,973; Mr. Hall, $2,219; and J. Gregory
Poole, Jr., $16,667.

In each of 1993 and 1995, the Company and Lonnie C. Poole, Jr. loaned
$100,000 and $85,185, respectively, and in 1996 Mr. Poole loaned an additional
$40,000, all to ECO under demand notes bearing interest at 5.5% and 7.19%,
respectively. As of December 31, 1997, ECO owed the Company and Mr. Poole
approximately $428,030 in principal and accrued interest on these notes. ECO
repaid the full amount under these notes following the Company's acquisition of
ECO in March 1998.

In February 1997, prior to the Company's appointment of Thomas F. Darden
to its Board of Directors, the Company purchased 37 acres of land from the
Cherokee Sanford Group, of which Mr. Darden is Chairman and a significant
shareholder, for $62,253, which the Company believes represented fair market
value at that time. Mr. Darden became a director of the Company in June 1997.

The Company has a policy that all transactions between the Company and its
executive officers, directors and other affiliates must be approved by a
majority of the members of the Company's Board of Directors and by a majority
of the disinterested members of the Company's Board of Directors, and must be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.

44
<PAGE>

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the ownership
of shares of the Company's Common Stock as of September 10, 1998 by (i) each
person known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each of the
Named Executive Officers, as listed under
"Management -- Executive Compensation -- Summary Compensation" above, and (iv)
all directors and executive officers of the Company as a group. Except as
indicated in footnotes to this table, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
indicated below. Share ownership in each case includes shares issuable upon
exercise of warrants and options that may be exercised within 60 days after the
date of this Prospectus for purposes of computing the percentage of Common
Stock owned by such person but not for purposes of computing the percentage
owned by any other person.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED OWNED(1)
- --------------------------------------------------------------- -------------- -----------
<S> <C> <C>
Lonnie C. Poole, Jr.(2) ....................................... 6,626,578 48.8%
3949 Browning Place
Raleigh, North Carolina 27609
Lonnie C. Poole, III(3) ....................................... 2,391,317 17.8%
3949 Browning Place
Raleigh, North Carolina 27609
Scott J. Poole(4) ............................................. 2,377,760 17.7%
2408 Mt. Vernon Church Road
Raleigh, North Carolina 27614
Jim W. Perry(5) ............................................... 1,625,448 12.1%
3949 Browning Place
Raleigh, North Carolina 27609
J. Gregory Poole, Jr.(6) ...................................... 635,880 4.8%
Robert H. Hall(7) ............................................. 88,088 *
Henry E. Dick ................................................. 16,337 *
Thomas F. Darden(8) ........................................... 2,000 *
All directors and executive officers as a group (6 persons)(9) 8,994,331 65.8%
</TABLE>

- ---------
* Less than one percent.

(1) As of September 10, 1998 the Company had 13,380,905 shares of Common Stock
outstanding.

(2) Includes 199,320 vested shares underlying options, 1,000 shares owned by
Mr. Poole's wife and 4,380,090 shares held by three grantor trusts of
which Lonnie C. Poole, III and Scott J. Poole, Mr. Poole's children, are
beneficiaries and/or trustees.

(3) Includes 60,280 vested shares underlying options, 989,260 shares held by a
trust of which Mr. Poole is a co-trustee and beneficiary and 989,258
shares held by a trust of which he is a beneficiary with shared investment
power.

(4) Includes 60,400 vested shares underlying options, 989,260 shares held by a
trust of which Mr. Poole is a co-trustee and beneficiary and 989,258
shares held by a trust of which he is a beneficiary with shared investment
power.

(5) Includes 76,800 vested shares underlying options.

(6) Includes 540,000 shares owned by Mr. Poole's three adult children and 2,520
shares held by Mr. Poole's children as custodian for his three
grandchildren. As to all of such shares, Mr. Poole disclaims beneficial
ownership.

(7) Includes 3,200 vested shares underlying options, 580 shares held by Mr.
Hall as custodian for his two minor children and 1,000 shares held by Mr.
Hall's wife. As to the shares held by his wife, Mr. Hall disclaims
beneficial ownership.

(8) The shares are held in a custodial account managed by Mr. Darden's wife for
the benefit of Mr. Darden's minor child.

(9) Includes the shares (including shares underlying options) discussed in
footnotes (2) and (5) - (8).

45
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital of the Company consists of 80,000,000 shares of
Common Stock, no par value per share, and 10,000,000 shares of undesignated
Preferred Stock, par value $0.01 per share.

COMMON STOCK

As of September 10, 1998, assuming no exercise of options, there were
13,380,905 shares of Common Stock outstanding, held of record by approximately
95 shareholders. The holders of the Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of shareholders.
Holders of the Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all
assets remaining after payment of all liabilities. The outstanding shares of
the Common Stock are fully paid and nonassessable. No preemptive rights,
conversion rights, redemption rights or sinking fund provisions are applicable
to the Common Stock. The Common Stock is quoted on the Nasdaq National Market.

PREFERRED STOCK

No shares of Preferred Stock are outstanding. The Company's Board of
Directors is authorized, without further shareholder action, to issue Preferred
Stock in one or more series and to fix the voting rights, liquidation
preferences, dividend rights, repurchase rights, conversion rights, redemption
rights and terms, including sinking fund provisions, and certain other rights
and preferences, of the Preferred Stock. Although there is no current intention
to do so, the Board of Directors of the Company may, without shareholder
approval, issue shares of a class or series of Preferred Stock with voting and
conversion rights which could adversely affect the voting power or dividend
rights of the holders of Common Stock and may have the effect of delaying,
deferring or preventing a change in control of the Company.

CERTAIN STATUTORY AND OTHER PROVISIONS

STATUTORY PROVISIONS

The North Carolina Business Corporation Act contains a "Shareholder
Protection Act" which, with certain exceptions discussed below, requires
approval of certain business combinations between a North Carolina corporation
and any beneficial holder of more than 20% of the voting shares of the
corporation by the holders of at least 95% of the voting shares of the
corporation. Business combinations subject to this approval requirement include
any merger or consolidation of the corporation with or into any other
corporation, the sale or lease of all or any substantial part of the
corporation's assets to, or any payment, sale or lease to the corporation or
any subsidiary thereof in exchange for securities of the corporation of any
assets (except assets having an aggregate fair market value of less than $5
million) of any other entity. The principal exception to the special voting
requirement applies to business combinations that satisfy various complex
statutory provisions, including provisions relating to the fairness of the
price and the constituency of the Board of Directors. In addition, the special
voting requirement shall not be applicable to any corporation if (i) the
corporation was not a public corporation at the time such other entity acquired
in excess of 10% of the voting shares; (ii) the corporation adopted an
amendment to its bylaws or provided in its original articles of incorporation
providing that the provisions shall not apply to it in accordance with the
statute; or (iii) the business combination in question was the subject of an
existing agreement of the corporation on April 23, 1987. In addition,
corporations with fewer than 2,000 shareholders of record and those whose stock
is not listed on a national securities exchange are exempt from the special
voting requirement. The Company has not "opted out" of the Shareholder
Protection Act.

These provisions were designed to deter certain takeovers of North
Carolina corporations.

TRANSFER AGENT AND REGISTRAR

The transfer agent for the Common Stock is Continental Stock Transfer &
Trust Company, New York, New York.

46
<PAGE>

OUTSTANDING SECURITIES COVERED BY THIS PROSPECTUS

This Prospectus, as appropriately amended or supplemented, may be used
from time to time by persons who have received shares of Waste Industries
Common Stock covered by the Registration Statement in acquisitions of
businesses or properties by Waste Industries, or their transferees, and who
wish to offer and sell such shares (such persons are herein referred to as the
"Selling Shareholder" or "Selling Shareholders") in transactions in which they
and any broker-dealer through whom such shares are sold may be deemed to be
underwriters within the meaning of the Securities Act.

The shares of Common Stock covered by the Registration Statement and
issued in acquisitions of businesses or properties by Waste Industries have
been registered under the Securities Act. In such an acquisition, persons who
are not affiliates of the business acquired, or whose properties are acquired,
by Waste Industries (in either case, the "Acquired Business") and are not
affiliates of Waste Industries may resell their shares of Common Stock without
restriction. Under present law, any public reoffering or sale of such shares by
any person who is an affiliate of the Acquired Business at the time the
transaction is approved by its shareholders will require either (i) the further
registration of such shares under the Securities Act, (ii) compliance with Rule
145 promulgated under the Securities Act, with permits sales under certain
conditions, as discussed below, or (iii) availability of another exemption from
such further registration. In general, under Rule 145, assuming that such
person is not, at any time, an affiliate of Waste Industries, such a person may
publicly sell such stock if the person: (1) (a) sells during any three-month
period no more than the number of shares permitted under Rule 144(e)
promulgated under the Securities Act (which is generally the greater of (i) 1%
of the total number of shares of Common Stock outstanding, or (ii) the average
weekly volume of trading of Common Stock for the four calendar weeks prior to
the sale); (b) sells in a "brokers' transaction" (which means, generally, that
the broker can do no more than execute the order as agent for the seller, can
receive no more than the usual broker's commission, cannot solicit orders to
buy in connection with the transaction, and cannot believe that the seller is
an underwriter of the securities being sold); (c) does not solicit orders to
buy in connection with the transaction and does not make any payment in
connection with such sale to anyone other than the selling broker; and (d)
sells at a time when there is adequate current public information about Waste
Industries (which will be satisfied so long as Waste Industries' Common Stock
remains registered under the Exchange Act and Waste Industries continues to
file the necessary reports under such act); or (2) (a) holds the shares for at
least one year and (b) sells at a time when there is adequate current public
information about Waste Industries (as in 1(d) above); or (3) holds the shares
for at least two years.

Waste Industries will receive none of the proceeds from any such sales.
Any commissions paid or concessions allowed to any broker-dealer and, if any
broker-dealer purchases such shares as principal, any profits received on the
resale of such shares, may be deemed to be underwriting discounts and
commissions under the Securities Act. Printing, certain legal, filing and other
similar expenses of this offering will be paid by Waste Industries. Selling
Shareholders will bear all other expenses of this offering, including any
brokerage fees, underwriting discounts or commissions.

At June 30, 1998, there were no arrangements or understandings, formal or
informal, pertaining to the distribution of the shares as described herein
known to Waste Industries. Upon the Company's being notified by a Selling
Shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution, a supplemental Prospectus will
be filed, pursuant to Rule 424 under the Securities Act, setting forth (i) the
name of such Selling Shareholder and of the participating broker-dealer(s);
(ii) the number of shares involved; (iii) the price at which such shares were
sold; (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable; (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out in this Prospectus;
and (vi) other facts material to the transaction.

Selling Shareholders may sell the shares being offered hereby from time to
time in transactions on the Nasdaq National Market or on a securities exchange
on which Waste Industries' Common Stock may then be listed, in negotiated
transactions or otherwise, at market prices prevailing at the time of sale or
at negotiated prices. Selling Shareholders may sell some or all of the shares
in transactions involving broker-dealers, who may act solely as agent and/or
may acquire shares as principal. Broker-dealers participating in such
transactions as agent may receive commissions from Selling Shareholders (and,
if they act as agent for the purchaser of such shares, from such purchaser).
Participating broker-dealers may agree with Selling Shareholders to sell a
specified number of shares at a stipulated price per share and, to the extent
such broker-dealer is unable to do so acting as agent for Selling Shareholders,
to purchase as principal any unsold shares at the price required to fulfill the
broker-dealer's commitment to Selling Shareholders.

In addition or alternatively, shares may be sold by Selling Shareholders
and/or by or through other broker-dealers in special offerings, exchange
distributions or secondary distributions pursuant to and in compliance with the
governing rules of the Nasdaq National Market or on a securities exchange on
which Waste Industries' Common Stock may then be listed,

47
<PAGE>

and in connection therewith, commissions in excess of the customary commission
prescribed by the rules of such securities exchange may be paid to
participating broker-dealers, or, in the case of certain secondary
distributions, a discount or concession from the offering price may be allowed
to participating broker-dealers in excess of such customary commission.
Broker-dealers who acquire shares as principal thereafter may resell such
shares from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described in the preceding two sentences)
on the Nasdaq National Market or on a securities exchange on which Waste
Industries' Common Stock may be listed, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale or at negotiated
prices and, in connection with such resales, may pay to or receive commissions
from the purchasers of such shares.

Each Selling Shareholder may indemnify any broker-dealer that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Wyrick Robbins Yates & Ponton LLP,
Raleigh, North Carolina.

EXPERTS

The consolidated financial statements as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 included
herein have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all exhibits, schedules and amendments relating thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, filed as part of the Registration
Statement, does not contain all the information contained in the Registration
Statement, certain portions of which have been omitted in accordance with the
rules and regulations of the Commission. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document filed as an exhibit to the
Registration Statement accurately describes the material provisions of such
document and are qualified in their entirety by reference to such exhibits for
complete statements of their provisions. All of these documents may be
inspected without charge at the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the following regional offices of the Commission: Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies can also be obtained from the
Public Reference Section of the Commission at prescribed rates. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.

The Company is subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities and other regional offices referred to above.

48
<PAGE>

WASTE INDUSTRIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report ............................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997, and (unaudited) June 30, F-3
1998
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and
1997, and the
(unaudited) Six Months Ended June 30, 1997 and 1998 ..................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
1997, and the
(unaudited) Six Months Ended June 30, 1997 and 1998 ..................................... F-5
Notes to Consolidated Financial Statements ............................................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Waste Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Waste
Industries, Inc. (the "Company") as of December 31, 1996 and 1997 and the
related consolidated statements of operations and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1996 and 1997 and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP

Raleigh, North Carolina
August 24, 1998

F-2
<PAGE>

WASTE INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- JUNE 30,
1996 1997 1998
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................................. $ 2,014,821 $ 1,083,922 $ 1,197,673
Accounts receivable -- trade, less allowance for uncollectible accounts
(1996-$648,900; 1997-$907,800; 1998-$797,000) ......................... 10,579,926 13,754,078 15,655,793
Inventories ............................................................ 2,139,500 842,439 1,353,807
Prepaid expenses and other current assets .............................. 466,783 615,750 1,329,967
Deferred income taxes (Note 12) ........................................ -- 597,835 597,835
----------- ------------ ------------
Total current assets ................................................. 15,201,030 16,894,024 20,135,075
PROPERTY AND EQUIPMENT, net (Notes 2 and 3) .............................. 42,783,363 64,464,923 78,380,853
INTANGIBLE ASSETS, NET (Note 2) .......................................... 3,731,463 29,977,579 32,630,627
OTHER NONCURRENT ASSETS .................................................. 925,393 1,274,912 1,620,800
----------- ------------ ------------
TOTAL ASSETS ............................................................. $62,641,249 $112,611,438 $132,767,355
=========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Notes 2 and 4) ................... $ 681,934 $ 1,428,149 $ 2,029,891
Accounts payable -- trade .............................................. 6,169,316 8,399,155 10,909,755
Accrued expenses and other liabilities (Note 8) ........................ 3,435,397 3,715,247 3,869,011
Accrued distributions (Note 6) ......................................... 1,820,000 -- --
Income taxes payable (Note 12) ......................................... -- 445,100 998,615
Deferred revenue ....................................................... 915,819 1,023,883 1,196,352
----------- ------------ ------------
Total current liabilities ............................................ 13,022,466 15,011,534 19,003,624
----------- ------------ ------------
LONG-TERM DEBT, net of current maturities (Notes 2 and 4) ................ 34,526,383 50,787,684 62,179,050
NONCURRENT DEFERRED INCOME TAXES (Note 12) ............................... -- 5,702,000 6,352,000
COMMITMENTS AND CONTINGENCIES (Notes 5, 7, 9 and 10)
SHAREHOLDERS' EQUITY (Notes 6 and 7):
Common stock, no par value, 80,000,000 shares authorized; shares
issued and outstanding: 1996 -- 10,272,056; 1997 and
1998 -- 12,263,390 .................................................... 2,631,581 27,064,567 27,066,411
Paid-in capital ........................................................ -- 8,520,000 6,981,000
Retained earnings ...................................................... 12,701,709 5,787,256 11,351,571
Shareholders' loans .................................................... (240,890) (261,603) (166,301)
----------- ------------ ------------
Total shareholders' equity ........................................... 15,092,400 41,110,220 45,232,681
----------- ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................... $62,641,249 $112,611,438 $132,767,355
=========== ============ ============
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE>

WASTE INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------- -----------------------------
1995 1996 1997 1997 1998
-------------- --------------- --------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Service revenues ........................... $95,021,948 $103,629,270 $126,649,166 $57,161,797 $79,973,703
Equipment sales ............................ 2,079,827 1,768,518 1,601,279 791,416 778,027
----------- ------------ ------------ ----------- -----------
Total revenues .......................... 97,101,775 105,397,788 128,250,445 57,953,213 80,751,730
----------- ------------ ------------ ----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of service operations ................. 56,628,668 65,015,103 78,006,928 35,242,569 49,446,354
Cost of equipment sales .................... 1,646,126 1,239,786 1,171,002 505,710 501,337
----------- ------------ ------------ ----------- -----------
Total cost of operations
(Notes 5, 7 and 9) ..................... 58,274,794 66,254,889 79,177,930 35,748,279 49,947,691
----------- ------------ ------------ ----------- -----------
Selling, general and administrative
(Notes 5 and 8) .......................... 19,403,381 19,891,436 24,295,566 11,022,408 13,862,340
Depreciation and amortization .............. 8,919,400 9,216,781 11,620,114 5,215,683 7,507,526
Merger costs ............................... -- -- -- -- 78,426
----------- ------------ ------------ ----------- -----------
Total operating costs and expenses ...... 86,597,575 95,363,106 115,093,610 51,986,370 71,395,983
----------- ------------ ------------ ----------- -----------
OPERATING INCOME 10,504,200 10,034,682 13,156,835 5,966,843 9,355,747
----------- ------------ ------------ ----------- -----------
OTHER EXPENSE (INCOME):
Interest expense (Note 4) .................. 2,389,653 2,495,316 2,993,091 1,467,837 1,979,011
Interest income ............................ (360,760) (194,082) (311,586) (119,950) (71,611)
Other (Note 7) ............................. (69,593) (611,962) (322,430) (98,206) (264,422)
----------- ------------ ------------ ----------- -----------
Total other expense (income) ............ 1,959,300 1,689,272 2,359,075 1,249,681 1,642,978
----------- ------------ ------------ ----------- -----------
INCOME BEFORE INCOME TAXES .................. 8,544,900 8,345,410 10,797,760 4,717,162 7,712,769
INCOME TAX EXPENSE (Note 12):
Current and deferred ....................... -- -- 2,711,250 586,250 2,956,000
Effect of change in tax status ............. -- -- 4,300,000 4,300,000 --
----------- ------------ ------------ ----------- -----------
NET INCOME (LOSS) -- Historical basis ....... $ 8,544,900 $ 8,345,410 $ 3,786,510 $ (169,088) $ 4,756,769
=========== ============ ============ =========== ===========
EARNINGS (LOSS) PER SHARE --
Historical basis (As adjusted -- Notes 6
and 12):
Basic .................................... $ 0.83 $ 0.81 $ 0.33 $ (0.02) $ 0.39
Diluted .................................. $ 0.83 $ 0.80 $ 0.32 $ (0.02) $ 0.38
PRO FORMA INCOME BEFORE INCOME TAXES
(Note 12) .................................. $ 8,544,900 $ 8,345,410 $ 10,797,760 $ 4,717,162
PRO FORMA INCOME TAXES (Note 12) ............ 3,425,000 3,368,000 4,208,000 1,878,000
=========== ============ ============ ===========
PRO FORMA NET INCOME (Note 12) .............. $ 5,119,900 $ 4,977,410 $ 6,589,760 $ 2,839,162
=========== ============ ============ ===========
PRO FORMA EARNINGS PER SHARE
(As adjusted -- Notes 6 and 12):
Basic ...................................... $ 0.50 $ 0.48 $ 0.58 $ 0.27
Diluted .................................... $ 0.50 $ 0.47 $ 0.56 $ 0.26
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
(As adjusted -- Notes 6 and 12):
Basic ...................................... 10,236,252 10,272,056 11,320,521 10,423,658 12,263,390
Diluted .................................... 10,271,823 10,491,840 11,679,533 10,779,357 12,609,503
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE>

WASTE INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1995 1996 1997
--------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) -- historical basis ................. $ 8,544,900 $ 8,345,410 $ 3,786,510
Adjustments to reconcile net income (loss) --
historical basis to net cash provided by operating
activities:
Depreciation and amortization ........................ 8,919,400 9,216,781 11,620,114
Gain on sale of property and equipment ............... (31,812) (429,293) (210,965)
Effect of change in tax status ....................... -- -- 4,300,000
Provision for deferred income taxes .................. -- -- 804,165
Changes in assets and liabilities, net of effects
from acquisitions of related businesses:
Accounts receivable -- trade ....................... (1,089,109) (1,409,044) (1,314,890)
Inventories ........................................ (581,863) (436,587) 1,334,603
Prepaid and other current assets ................... 499,063 (91,294) (137,191)
Accounts payable -- trade .......................... 1,274,892 1,088,286 2,157,611
Accrued expenses and other liabilities ............. 590,148 425,524 302,515
Income taxes payable ............................... -- -- 445,100
Deferred revenue ................................... 79,956 204,984 (403,149)
------------- -------------- --------------
Net cash provided by operating activities ........ 18,205,575 16,914,767 22,684,423
------------- -------------- --------------
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment .......... 1,207,229 1,067,063 808,887
Purchases of property and equipment ................... (8,383,460) (15,242,068) (23,788,582)
Acquisition of related business ....................... (1,685,000) (268,927) (35,438,171)
Other noncurrent assets ............................... (51,179) (759,670) (544,029)
------------- -------------- --------------
Net cash used in investing activities ............ (8,912,410) (15,203,602) (58,961,895)
------------- -------------- --------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .............. 5,760,185 36,251,662 39,931,396
Principal payments on long-term debt .................. (8,004,779) (31,669,289) (23,771,753)
Proceeds from issuance of notes payable to
shareholders ......................................... 286,620 146,200 --
Repayments of notes payable to shareholders ........... -- (318,884) --
Repayments of notes receivable from shareholders ...... 823,625 270,286 32,161
Increase in shareholder loans ......................... -- -- (53,882)
Net proceeds from stock issuance ...................... -- 18,500 23,157,924
Proceeds from exercise of stock options ............... -- 44,756 --
Changes in partners' capital .......................... (900,233) (1,716,215) 19,719
Subchapter S distributions to shareholders ............ (7,301,461) (5,019,702) (3,968,992)
Other ................................................. -- -- --
------------- -------------- --------------
Net cash provided by (used in) financing
activities ...................................... (9,336,043) (1,992,686) 35,346,573
------------- -------------- --------------
NET INCREASE (DECREASE) ................................ (42,878) (281,521) (930,899)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ......... 2,339,220 2,296,342 2,014,821
------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............... $ 2,296,342 $ 2,014,821 $ 1,083,922
============= ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION --
Cash paid for interest ................................ $ 2,303,000 $ 2,076,000 $ 2,412,000
============= ============== ==============
Cash paid for income taxes ............................ $ -- $ -- $ 1,484,000
============= ============== ==============

<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------
1997 1998
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) -- historical basis ................. $ (169,088) $ 4,756,769
Adjustments to reconcile net income (loss) --
historical basis to net cash provided by operating
activities:
Depreciation and amortization ........................ 5,215,683 7,507,526
Gain on sale of property and equipment ............... (52,792) (159,167)
Effect of change in tax status ....................... 4,300,000 --
Provision for deferred income taxes .................. 321,165 650,000
Changes in assets and liabilities, net of effects
from acquisitions of related businesses:
Accounts receivable -- trade ....................... (1,109,741) (1,560,809)
Inventories ........................................ 541,624 (511,368)
Prepaid and other current assets ................... (482,133) (714,217)
Accounts payable -- trade .......................... 2,109,492 2,510,600
Accrued expenses and other liabilities ............. (17,732) 153,764
Income taxes payable ............................... 287,000 553,515
Deferred revenue ................................... 10,711 131,020
-------------- --------------
Net cash provided by operating activities ........ 10,954,189 13,317,633
-------------- --------------
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment .......... 323,327 305,971
Purchases of property and equipment ................... (10,323,411) (17,807,170)
Acquisition of related business ....................... (17,803,766) (4,655,908)
Other noncurrent assets ............................... (106,209) (445,730)
-------------- --------------
Net cash used in investing activities ............ (27,910,059) (22,602,837)
-------------- --------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .............. 19,563,645 69,682,464
Principal payments on long-term debt .................. (19,239,798) (59,649,766)
Proceeds from issuance of notes payable to
shareholders ......................................... -- --
Repayments of notes payable to shareholders ........... (23,543) --
Repayments of notes receivable from shareholders ...... -- 95,302
Increase in shareholder loans ......................... -- --
Net proceeds from stock issuance ...................... 19,143,474 --
Proceeds from exercise of stock options ............... -- --
Changes in partners' capital .......................... 154,356 --
Subchapter S distributions to shareholders ............ (3,256,405) (730,889)
Other ................................................. -- 1,844
-------------- --------------
Net cash provided by (used in) financing
activities ...................................... 16,341,729 9,398,955
-------------- --------------
NET INCREASE (DECREASE) ................................ (614,141) 113,751
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ......... 2,014,821 1,083,922
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............... $ 1,400,680 $ 1,197,673
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION --
Cash paid for interest ................................ $ 1,847,000 $ 1,912,559
============== ==============
Cash paid for income taxes ............................ $ -- $ 1,694,000
============== ==============
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE>

SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS --
During 1997, the Company issued common stock with a fair value of
$1,275,062 as partial consideration for certain business acquisitions. Also
during 1997, the Company reclassified undistributed S Corporation earnings to
paid-in capital as a result of the Company terminating its S corporation
election on May 9, 1997. At December 31, 1996, the Company accrued $1,820,000
distributions to shareholders as partial reimbursement for 1996 taxes owed.

On March 31, 1998, the Company exchanged 320,555 shares of its common
stock (with a fair value of $6,125,000) for all of the issued and outstanding
shares of common stock of ECO Services, Inc. ("ECO") and Air Cargo Services,
Inc. ("ACS"). Certain of the Company's executive officers, who are also Company
shareholders, owned substantially all of the common stock of ECO and ACS.
Accordingly, all assets and liabilities transferred have been accounted for at
historical cost in a manner similar to that of pooling of interests accounting
pursuant to the provisions of AIN #39 of APB Opinion No. 16. The Company's
financial statements have been restated to include the accounts and operations
for all periods presented.

On June 16, 1998, the Company exchanged 21,344 shares of its common stock
(with a fair value of $449,000) for all of the issued and outstanding shares of
common stock of Dumpsters, Inc. On June 30, 1998, the Company exchanged 330,000
shares of its common stock (with a fair value of $7,400,000) for all of the
issued and outstanding shares of common stock of Reliable Trash Services, Inc.
These business combinations have been accounted for as poolings-of-interests.
These poolings-of-interests are immaterial to the Company's financial
statements. However, the financial statements have been restated to include the
accounts and operations for all periods presented.

F-6
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

BUSINESS OPERATIONS -- Waste Industries, Inc. (the "Company") is a
regional solid waste services company providing solid waste collection,
transfer, recycling, processing and disposal services to customers in North
Carolina, South Carolina, Tennessee, Virginia, Georgia and Mississippi. The
Company's financial statements include its consolidated subsidiaries: Waste
Industries South, Inc.; Waste Industries East, Inc.; Waste Industries West,
Inc.; and Kabco, Inc.

In April 1996, the Company exchanged 2,118,457 shares of its common stock
on a share-for-share basis for all of the outstanding common stock of the
following companies affiliated through common ownership: Waste Enterprises,
Inc.; Waste Industries South, Inc.; Waste Industries West, Inc.; Waste
Industries East, Inc.; Kabco, Inc.; Conway 378, Inc.; and AmLease, Inc. As a
result, common stock increased by $18,208, treasury stock decreased by $85,098
and additional paid-in capital decreased by $103,306. Simultaneously, certain
real estate properties previously leased to the Company by Property Management
Group ("PMG"), a partnership of certain shareholders of the Company, were
transferred to the Company. The property previously leased to the Company by
PMG was acquired by the Company on April 1, 1996 for approximately $4.9
million. PMG's depreciated basis in the property was approximately $3.2
million. Pursuant to the provisions of AIN #39 of APB No. 16, the Company
recorded the transfer of property at its carryover basis (approximately $3.2
million) and the difference between the amount paid and the carryover basis
(approximately $4.9 million less approximately $3.2 million, or $1,686,021) was
recorded as a cash distribution to PMG. As a result, retained earnings
decreased by $404,171 and additional capital decreased by $1,281,850 to $0.

The controlling shareholder of the Company owned a controlling interest in
each of the companies and partnership that were combined. Additionally, the
Company's other shareholders held substantially the same pro rata ownership in
each of these companies and partnership. Accordingly, the assets and
liabilities transferred are accounted for at historical cost in a manner
similar to that in pooling of interests accounting. The Company's financial
statements have been restated to include the accounts and operations for all
periods prior to the merger.

On March 31, 1998, the Company exchanged 320,555 shares of its common
stock for all of the issued and outstanding shares of common stock of ECO
Services, Inc. ("ECO") and Air Cargo Services, Inc. ("ACS"). Certain of the
Company's executive officers, who are also Company shareholders, owned
substantially all of the common stock of ECO and ACS. Accordingly, all assets
and liabilities transferred have been accounted for at historical cost in a
manner similar to that of pooling of interests accounting pursuant to the
provisions of AIN #39 of APB Opinion No. 16. The Company's financial statements
have been restated to include the accounts and operations for all periods
presented.

On June 16, 1998, the Company exchanged 21,344 shares of its common stock
for all of the issued and outstanding shares of common stock of Dumpsters, Inc.
On June 30, 1998, the Company exchanged 330,000 shares of its common stock for
all of the issued and outstanding shares of common stock of Reliable Trash
Services, Inc. These business combinations have been accounted for as
poolings-of-interests. These poolings-of-interests are immaterial to the
Company's financial statements. However, the financial statements have been
restated to include the accounts and operations for all periods presented.

SIGNIFICANT ACCOUNTING POLICIES -- The significant accounting policies are
summarized below:

a. UNAUDITED FINANCIAL STATEMENTS -- In the opinion of management, the
statements of operations and cash flows for the six months ended June 30, 1997
and 1998 and the balance sheet as of June 30, 1998 include all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position and results of operations and cash flows for the periods
then ended in accordance with generally accepted accounting principles.
Operating results for interim periods are not necessarily indicative of the
results for the full year or any other period.

b. CASH AND CASH EQUIVALENTS -- For the purposes of presentation in the
financial statements, cash equivalents include highly liquid investments with
original maturities of three months or less.

c. INVENTORIES -- Inventories consist of (i) trucks and containers held
for sale and (ii) operating materials and supplies held for use and are stated
at the lower of cost or market using the specific-identification method of
costing.

F-7
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES -- (Continued)

d. PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation expense is calculated on the straight-line method. Estimated
useful lives are as follows:

<TABLE>
<S> <C>
Machinery and equipment .................. 3 to 10 years
Furniture, fixtures and vehicles ......... 3 to 10 years
Building ................................. 30 years
</TABLE>

e. INTANGIBLE ASSETS -- Intangible assets primarily consist of goodwill,
customer lists and noncompete and consulting agreements acquired in business
combinations. Intangible assets are net of accumulated amortization and
consisted of the following:

<TABLE>
<CAPTION>
1996 1997
------------- --------------
<S> <C> <C>
Goodwill .................................. $3,584,096 $34,049,443
Customer lists ............................ 270,250 270,250
Noncompete and consulting agreements ...... 1,321,537 1,866,503
---------- -----------
5,175,883 36,186,196
Less accumulated amortization ............. 1,444,420 6,208,617
---------- -----------
Intangible assets, net .................... $3,731,463 $29,977,579
</TABLE>

Customer lists are amortized using the straight-line method over 5 to 10
years. Noncompete and consulting agreements are amortized using the
straight-line method over the lives of the agreements. Goodwill is amortized
using the straight-line method, generally over 15 to 25 years. Such estimated
useful lives assigned to goodwill are based on the period over which management
believes that such goodwill can be recovered through undiscounted future
operating cash flows of the acquired operations.

Should events or circumstances occur subsequent to the acquisition of a
business which bring into question the realizable value or impairment of the
related goodwill, the Company will evaluate the remaining useful life and
balance of goodwill and make appropriate adjustments in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of.

f. OTHER NONCURRENT ASSETS -- Included in other noncurrent assets are debt
issue costs relating to the new borrowings (see Note 4). Debt issue costs are
amortized to interest expense using the effective interest method over the life
of the related debt.

g. LONG-LIVED ASSETS -- As required, the Company adopted SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of. Accordingly, long-lived assets are reviewed for impairment on a
market-by-market basis whenever events or changes in the circumstances indicate
that the carrying amount of an asset may not be recoverable. If an evaluation
is required, the projected future undiscounted future cash flows attributable
to each market would be compared to the carrying value of the long-lived assets
(including an allocation of goodwill, if appropriate) of that market if a
write-down to fair value is required. The Company also evaluates the remaining
useful lives to determine whether events and circumstances warrant revised
estimates of such lives.

h. PRO FORMA EARNINGS PER SHARE -- The pro forma information has been
computed as if the Company were subject to federal and all applicable state
corporate income taxes for each of the periods presented assuming the tax rate
that would have been applied had the Company been taxed as a C Corporation (see
Note 12).

In 1997, the Company adopted SFAS No. 128, Earnings Per Share. SFAS No.
128 requires the presentation of both basic and diluted earnings per share,
regardless of materiality unless per share amounts are equal. Earnings per
share amounts for all periods presented have been restated to conform to the
requirements of SFAS No. 128.

F-8
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES -- (Continued)

Pro forma basic earnings per share computations are based on the
weighted-average common stock outstanding. Pro forma diluted earnings per share
includes the dilutive effect of stock options using the treasury stock method
(using the initial public offering price of $13.50 per share for periods prior
to the Company's initial public offering). Common stock outstanding used to
compute the weighted-average shares was retroactively adjusted for the exchange
of shares resulting from the merger of affiliated companies, for the conversion
of nonvoting to voting stock, and for the 1-for-2.5 reverse stock split as
discussed in Note 6.

i. STOCK OPTION PLAN -- The Company accounts for employee stock
compensation in accordance with Accounting Principles Board Opinion ("APB") No.
25, Accounting for Stock Issued to Employees. Under APB No. 25, the total
compensation expense is equal to the difference between the award's exercise
price and the intrinsic value at the measurement date, which is the first date
that both the exercise price and number of shares to be issued is known.

SFAS No. 123, Accounting for Stock-Based Compensation, is effective
January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are, however, permitted to continue to apply APB
No. 25. The Company will continue to apply APB No. 25 to its stock-based
compensation awards to employees and will disclose the required pro forma
effect on net income and earnings per share.

j. DEFERRED REVENUE -- Deferred revenue consists of collection fees billed
in advance. Revenue is recognized as services are provided.

k. INCOME TAXES -- From 1986 until May 8, 1997, the Company was subject to
taxation under Subchapter S of the Internal Revenue Code of 1986, as amended
(the "Code"). As a result, during that time the net income of the Company, for
federal and certain state income tax purposes, was reported by and taxable
directly to the Company's shareholders, rather than to the Company.

The Company's S Corporation status was terminated on May 8, 1997 and,
accordingly, the Company became fully subject to federal and state income taxes
on May 9, 1997. In accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, the
financial statements give effect to the recognition of deferred tax assets of
$800,000 and the assumption of a deferred tax liability of $5,100,000 as a
result of the Company's S Corporation election on May 9, 1997. Deferred income
taxes (benefits) are provided on temporary differences between financial
statement carrying values and the tax basis of assets and liabilities.

l. USE OF ESTIMATES -- In preparing financial statements that conform with
generally accepted accounting principles, management must use estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and amounts of revenue and expenses reflected during the reporting
period. Actual results could differ from those estimates.

m. RECLASSIFICATIONS -- Certain 1995 and 1996 financial statement amounts
have been reclassified to conform with the 1997 presentation.

F-9
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

2. ACQUISITIONS
During 1996 and 1997, the Company acquired the net assets of various waste
collection and disposal services businesses to expand its operations. The
assets acquired and liabilities assumed were accounted for by the purchase
method of accounting and included the following:

<TABLE>
<CAPTION>
1996 1997
----------- ---------------
<S> <C> <C>
Accounts receivable, net ......................... $ 1,902,062
Inventories ...................................... 37,542
Prepaid expenses and other current assets ........ 11,616
Accrued expenses and other liabilities ........... (41,306)
Deferred revenue ................................. (511,213)
Property and equipment ........................... $150,620 8,933,098
Noncompete and consulting agreements ............. 105,000 159,118
Customer lists and goodwill ...................... 255,472 27,070,188
-------- -----------
Total assets acquired ............................ 511,092 37,561,105
Less obligations financed under notes payable 242,165 847,872
-------- -----------
Net acquisition costs ............................ $268,927 $36,713,233
======== ===========
</TABLE>

Net acquisition costs include the issuance of 63,634 shares of the
Company's common stock with a fair value of $1,275,062 as partial consideration
for certain business acquisitions.

Related to the above acquisitions, the Company entered into noncompete
agreements with the former owners of these businesses. These amounts are being
amortized on a straight-line basis over the terms of the agreements (5 years).

The following pro forma results of operations assume the transactions
described above occurred as of January 1, 1996 and 1997 after giving effect to
certain adjustments, including the amortization of the excess of cost over the
underlying assets and as if the Company were subject to federal and all
applicable state corporate income taxes for the period assuming the tax rate
that would have applied had the Company been taxed as a C Corporation:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1997
----------------- -----------------
<S> <C> <C>
Total revenues ..................... $ 133,795,000 $ 148,842,000
Operating income ................... 15,042,000 16,730,000
Pro forma net income ............... 6,772,000 7,908,000
Pro forma earnings per common share:
Basic .............................. 0.66 0.70
Diluted ............................ 0.65 0.68
</TABLE>

The pro forma financial information does not purport to be indicative of
the results of operations that would have occurred had the transactions taken
place at the beginning of the periods presented or of future operating results.

During the six months ended June 30, 1998, the Company purchased equipment
and customer contracts related to commercial, industrial and residential solid
waste collection of four businesses, located in Durham, North Carolina, Dalton,
Georgia, Crossville, Tennessee and Lilburn, Georgia. The total purchase price
in these acquisitions was approximately $4,656,000.

F-10
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996 and
1997 and June 30, 1998:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------- -------------
1996 1997 1998
------------- -------------- -------------
<S> <C> <C> <C>
Land and buildings ............. $ 8,288,939 $ 11,699,643 13,748,629
Machinery and equipment ........ 84,243,944 104,677,133 126,052,776
Furniture, fixtures and vehicles 1,922,619 2,631,987 2,807,220
In-process equipment ........... -- 4,304,890 --
----------- ------------ -----------
Total property and equipment .. 94,455,502 123,313,653 142,608,625
Less accumulated depreciation .. 51,672,139 58,848,730 64,227,772
----------- ------------ -----------
Property and equipment, net .... $42,783,363 $ 64,464,923 78,380,853
=========== ============ ===========
</TABLE>

In-process equipment at December 31, 1997 was acquired in connection with
the opening of six new transfer stations in January 1998.

During the six months ended June 30, 1998, the Company opened six new
transfer stations for the consolidation, transportation and disposal of
municipal solid waste. The opening of the transfer stations resulted from
implementation of Subtitle D regulations which caused the closure of several
sites in North Carolina. Two of these transfer stations are Company-owned and
four are operated under municipal contracts with terms ranging from 3 to 20
years.

4. NOTES PAYABLE

Notes payable consisted of the following at December 31, 1996 and 1997 and
June 30, 1998:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------- --------------
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
Bank notes payable .................. $34,426,027 $50,814,841 $63,698,011
Other --
Other installment notes payable,
interest ranging from 1% to 7% .... 748,957 1,400,992 426,793
Present value of noncompete agreement
liabilities with the former
shareholders of related businesses
acquired, due in various monthly
installments through 1997 ......... 33,333 -- 84,137
----------- ----------- -----------
Total notes payable ....................... 35,208,317 52,215,833 64,208,941
Less current portion ................ 681,934 1,428,149 2,029,891
----------- ----------- -----------
Long-term portion ................... $34,526,383 $50,787,684 $62,179,050
=========== =========== ===========
</TABLE>

On April 3, 1996, the Company entered into agreements with two lenders
under which the Company may borrow up to $75,000,000. One lender authorized the
Company to borrow up to $25,000,000 under a senior unsecured promissory note
and an additional $25,000,000 under an uncommitted, senior unsecured promissory
note ("shelf note"). The committed note matures on April 3, 2006 and bears an
interest rate of 7.28%. The shelf note matures on June 30, 2008 and bears an
interest rate of 6.96%. The repayment term under the note agreements is ten
years; interest only is payable for the first three years, with principal
payments beginning in April 1999 and continuing for the following seven years.
Effective November 17, 1997, the Company amended the agreement with the other
lender which authorized the Company to borrow $20,000,000 and $5,000,000 under
two separate unsecured notes to authorized borrowings of $50,000,000 and
$10,000,000, respectively. The amended borrowings mature on November 1, 2002.
The amended repayment term under the note agreements is five years; with
interest only payable monthly with principal due and payable in full upon
maturity. Both notes with this lender bear interest at the monthly London
Interbank Offered Rate (7.3125% and 6.9688% at December 31, 1996 and 1997,
respectively).

F-11
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

4. NOTES PAYABLE -- (Continued)

The note agreements provide for certain covenants and restrictions
regarding, among other things, debt and senior debt to earnings before
interest, depreciation and amortization ratios, minimum net worth, compensating
balance and net income requirements, as well as liens, debt and capital
expenditure limitations, as defined. At December 31, 1997, the Company was in
compliance with all covenants.

Annual aggregate principal maturities for the other notes payable for the
five fiscal years succeeding December 31, 1997 are as follows:

<TABLE>
<S> <C>
1998 .................. $ 1,428,149
1999 .................. 711,926
2000 .................. 3,631,520
2001 .................. 3,618,259
2002 .................. 3,576,340
Thereafter ............ 39,249,639
-----------
Total ................. $52,215,833
===========
</TABLE>

On June 30, 1998, the Company increased and extended its credit facilities
with Prudential Insurance Company of America ("Prudential"), as a result, the
Company had two $25 million term loan facilities and a $50 million shelf
facility with Prudential, as of June 30, 1998, the Company had fully drawn both
Prudential term facilities, leaving the Company with an uncommitted shelf
facility of $50 million. Interest on the Prudential term facilities is paid
quarterly, based on fixed rates of 7.28% and 6.96%, respectively.

5. LEASES

OPERATING LEASES -- The future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year at December 31, 1997 are as follows:

The total rental expense for all operating leases for the years ended
December 31, 1995, 1996 and 1997 was as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Buildings and sites ........... $ 645,921 $ 621,977 $ 916,792
Trucks and equipment .......... 1,251,897 15,248,520 1,656,686
---------- ----------- ----------
Total ......................... $1,897,818 $15,870,497 $2,573,478
========== =========== ==========
</TABLE>

Direct rental expense is included in cost of operations in the statements
of operations and indirect rental expense is included in selling, general and
administrative in the statements of operations.

F-12
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

6. SHAREHOLDERS' EQUITY
Shareholders' equity consisted of the following for the years ended
December 31, 1995, 1996, 1997 and June 30, 1998:

<TABLE>
<CAPTION>
SHARES
------------------------------------------
$
AUTHORIZED OUTSTANDING AMOUNT
------------ --------------- -------------
<S> <C> <C> <C>
Balance,
January 1, 1995 .................... 4,020,395 3,638,956 $ 2,613,032
Stock dividend of nine
nonvoting shares for each
voting share ..................... 14,273,001
Net income .........................
Change in partners' capital ........
Decrease in shareholders'
loans ............................
Subchapter S distributions .........
---------- ---------- -----------
Balance,
December 31, 1995 .................. 4,020,395 17,911,957 2,613,032
Retroactive effect of 1-for-2.5
reverse stock split .............. (9,794,162)
Effect of merger of affiliates ..... 75,979,605 2,118,457 18,208
Net income .........................
Change in partners' capital ........
Decrease in shareholders'
loans ............................
Exercise of stock options .......... 35,804 341
Subchapter S distributions .........
---------- ---------- -----------
Balance,
December 31, 1996 .................. 80,000,000 10,272,056 2,631,581
Net income .........................
Issuance of stock, net ............. 1,991,334 24,432,986
Reclassification of
undistributed S Corporation
earnings .........................
Capital contribution ...............
Increase in shareholders'
loans ............................
Subchapter S distributions .........
---------- ---------- -----------
Balance,
December 31, 1997 .................. 80,000,000 12,263,390 27,064,567
Net income .........................
Subchapter S Distributions .........
Reclassification of net S
Corporation deficit ..............
Decrease in shareholders'
loans ............................
Other .............................. 1,844
---------- ---------- -----------
Balance,
June 30, 1998 ...................... 80,000,000 12,263,390 $27,066,411
========== ========== ===========

<CAPTION>
ADDITIONAL SHAREHOLDERS' RETAINED TREASURY
CAPITAL LOANS EARNINGS STOCK
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Balance,
January 1, 1995 .................... $ 2,371,168 $ (1,338,919) $ 10,356,733 $ (85,098)
Stock dividend of nine
nonvoting shares for each
voting share .....................
Net income ......................... 8,544,900
Change in partners' capital ........ (900,233)
Decrease in shareholders'
loans ............................ 823,625
Subchapter S distributions ......... (7,301,461)
--------------- --------------- -------------- -------------
Balance,
December 31, 1995 .................. 1,470,935 (515,294) 11,600,172 (85,098)
Retroactive effect of 1-for-2.5
reverse stock split ..............
Effect of merger of affiliates ..... (103,306) 85,098
Net income ......................... 8,345,410
Change in partners' capital ........ (1,412,044) (404,171)
Decrease in shareholders'
loans ............................ 274,404
Exercise of stock options .......... 44,415
Subchapter S distributions ......... (6,839,702)
--------------- --------------- -------------- -------------
Balance,
December 31, 1996 .................. (240,890) 12,701,709
Net income ......................... 3,786,510
Issuance of stock, net .............
Reclassification of
undistributed S Corporation
earnings ......................... 8,500,000 (8,500,000)
Capital contribution ............... 20,000
Increase in shareholders'
loans ............................ (20,713)
Subchapter S distributions ......... (2,200,963)
--------------- --------------- -------------- -------------
Balance,
December 31, 1997 .................. 8,520,000 (261,603) 5,787,256
Net income ......................... 4,756,769
Subchapter S Distributions ......... (730,889)
Reclassification of net S
Corporation deficit .............. (1,539,000) 1,539,000
Decrease in shareholders'
loans ............................ 95,302
Other .............................. (565)
--------------- --------------- -------------- -------------
Balance,
June 30, 1998 ...................... $ 6,981,000 $ (166,301) $ 11,351,571 $
============= ============ ============ =========
</TABLE>

In May 1995, the Company issued nonvoting common stock in a stock dividend
of nine shares of nonvoting common stock for each one share of voting common
stock. Subsequently, substantially all issuances of stock by the Company were
made in the ratio of nine shares of nonvoting common stock for every one share
of voting common stock issued.

In April 1997, the Company's Board of Directors authorized a 1-for-2.5
reverse stock split and the conversion of all nonvoting common shares to voting
common shares. The Board of Directors also approved an increase in the
authorized capital of common stock from 4,020,395 shares to 80,000,000 shares
and canceled the nonvoting common shares outstanding. The common stock
previously had a par value of $.0380286 per share and was converted to no par
common stock. All share and per share information in the financial statements
has been adjusted to give retroactive effect to the reverse stock split and
conversion of nonvoting stock.

F-13
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

6. SHAREHOLDERS' EQUITY -- (Continued)

In April 1997, the Company's Board of Directors also authorized 10,000,000
shares of $0.01 par value preferred stock. Such shares have not been issued.
The Board of Directors can establish the series, the designation and number of
shares to be issued and the rights, preferences, privileges and restrictions of
the shares of each series, and to determine the voting powers, if any, of such
shares.

In June 1997, the Company completed an initial public offering in which it
issued 1,605,200 shares of common stock at a price of $13.50 per share
resulting in net proceeds after deduction of underwriting discounts and
commissions and other offering expenses to the Company of approximately $19.1
million. The proceeds from the offering were used to repay revolving bank debt.

On July 2, 1997, the Company's underwriters exercised their option to
purchase an additional 322,500 shares. The net proceeds after deduction of
underwriting discounts and commissions and other offering expenses to the
Company were approximately $4.0 million. The Company used the proceeds to repay
revolving bank debt.

During 1997, the Company issued 63,634 shares of common stock with a fair
value of $1,275,062 as partial consideration for certain business acquisitions.

Also during 1997, the Company reclassified undistributed S Corporation
earnings to additional capital as a result of the Company terminating its S
Corporation election on May 9, 1997.

Shareholder loans at December 31, 1995, 1996 and 1997 include $66,502,
$33,169 and $-0-, respectively, for advances made to shareholders initiated
during the exercise of stock options (see Note 11). These notes bear interest
at annual rates of 7.5% and are payable in various installments.

Change in partners' capital consists of cash contributions from, or
distributions to, PMG.

At December 31, 1996, the Company accrued $1,820,000 of distributions to
shareholders as partial reimbursement for 1996 taxes owed.

F-14
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

7. RELATED PARTY TRANSACTIONS
MERGERS -- On March 31, 1998, the Company exchanged 320,555 shares of its
common stock (with a fair value of $6,125,000) for all of the issued and
outstanding shares of common stock of ECO Services, Inc. ("ECO") and Air Cargo
Services, Inc. ("ACS"). Certain of the Company's executive officers, who are
also Company shareholders, owned substantially all of the common stock of ECO
and ACS. Accordingly, all assets and liabilities transferred have been
accounted for at historical cost in a manner similar to that of pooling of
interests accounting pursuant to the provisions of AIN #39 of APB Opinion No.
16. The Company's financial statements have been restated to include the
accounts and operations for all periods presented.

MANAGEMENT AND ACCOUNTING SERVICES -- The Company provides management and
accounting services to other companies affiliated by common shareholder
interests ("other affiliated companies"). Agreements state that management and
accounting services shall be provided to such companies on an approximate cost
reimbursement basis, plus a specified percentage of net income these affiliated
companies generate. Management and accounting revenue earned from providing
services to these other affiliated companies was $8,726, $10,800 and $10,800 in
1995, 1996 and 1997, respectively, and are included in other income (expense)
in the accompanying statements of operations.

SHAREHOLDER LOANS -- Shareholder loans, included in shareholders' equity
of the accompanying balance sheets, are notes receivable (including unpaid
interest thereon) from shareholders of $448,792, $207,721 and $261,603 at
December 31, 1995 and 1996 and 1997, respectively. The notes bear interest at
an annual rate of 7% and are payable on demand. Shareholder loans at December
31, 1995 and 1996 and 1997 include $66,502, $33,169 and $-0-, respectively, for
advances made to shareholders initiated during the exercise of stock options
(see Note 11). These notes bear interest at annual rates of 7.5% and are
payable in various installments.

8. BENEFIT PLANS

401(K) PROFIT SHARING AND RETIREMENT PLAN -- The Company has a 401(k)
Savings and Retirement Plan and Trust (the "401(k) Plan") for the benefit of
its full time employees who have more than one year of service and are over 21
years of age. The 401(k) Plan also benefits employees of certain related
parties through separate funding arrangements. Contributions to the 401(k) Plan
are made by employees and by the Company through matching contributions and
discretionary profit sharing contributions. The discretionary profit sharing
contribution is made annually as determined by management based on the
Company's financial performance. Effective October 1, 1997, the Company amended
the 401(k) Plan to discontinue the profit sharing contribution and increase the
employer's matching contribution percentage. The Company's matching
contributions to the 401(k) Plan were $50,812, $158,804 and $234,767 for the
years ended December 31, 1995, 1996 and 1997, respectively. The Company's
profit sharing contributions were $461,244, $333,936 and $284,994 for the years
ended December 31, 1995, 1996 and 1997, respectively. Contributions by the
Company are included in operating costs and expenses in the accompanying
statements of operations.

SELF-INSURED MEDICAL PLAN -- The Company has a self-insured plan for
employee medical benefits. The plan covers all full-time employees of the
Company beginning on the first day of the month on, or following, their 90th
day of employment. The Company pays premiums for its employees to the plan and
withholds from employees additional amounts for elected covered dependents. As
claims are processed by the plan's third-party administrator, the insurance
carrier requests funds from the Company. The Company maintains stop loss
coverage for the plan. The Company's expense relating to the plan for 1995,
1996 and 1997 was $56,005, $49,933 and $149,226, respectively.

9. CONTINGENCIES

Certain claims and lawsuits arising in the ordinary course of business
have been filed or are pending against the Company. In the opinion of
management, all such matters have been adequately provided for, are adequately
covered by insurance, or are of such kind that if disposed of unfavorably,
would not have a material adverse effect on the Company's financial position or
results of operations.

F-15
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

10. LETTERS OF CREDIT
At December 31, 1996 and 1997, the Company has entered into irrevocable
letters of credit totaling approximately $362,000 and $580,000, respectively.
According to the terms of the $5,000,000 unsecured note, the availability of
funds on that note are reduced by the amount of outstanding letters of credit
(see Note 4 to financial statements).

11. STOCK OPTION PLAN

The Company's 1997 Stock Plan (the "Stock Plan") was adopted by the
Company's Board of Directors in April 1997 and approved by the Company's
shareholders prior to completion of the Company's initial public offering. A
total of 1,800,000 shares of Common Stock have been reserved for issuance under
the Stock Plan. At the same time that the Stock Plan was adopted, the Board
terminated the Company's Employee Non-Qualified Stock Option Plan (the "Option
Plan"; together with the Stock Plan the "Plans") as to future grants. As of
December 31, 1997, 1,416,972 shares of Common Stock had been issued upon
exercise of options granted under the Option Plan and options to purchase
526,000 shares of Common Stock at a weighted average exercise price of $5.10
per share were outstanding under the Stock Plan. The Stock Plan provides for
grants of "incentive stock options," within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), to employees (including
officers and employee directors), and each of the Plans provides for grants of
nonstatutory options to employees and consultants. The Stock Plan also allows
for the grant of purchase rights. The Plans are administered by the
Compensation Committee of the Board of Directors. The Stock Plan will terminate
in April 2007, unless sooner terminated by the Board of Directors. Options have
been retroactively adjusted for the exchange of shares resulting from the
merger of affiliated companies on April 1, 1996, for the stock dividend of nine
nonvoting shares for each voting share in 1995, and for the 1-for-2.5 reverse
stock split and the conversion of all nonvoting shares to common shares, each
effective prior to the consummation of the Company's public offering. A summary
of the status of the Plans as of December 31, 1995, 1996 and 1997 and changes
during the years ending on those dates is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARE
SHARES PRICE
------------ ---------
<S> <C> <C>
Balance, January 1, 1995 ................. 35,804 $ 1.25
Granted -- May 5, 1995 ................... 6,000 2.88
------
Balance, December 31, 1995 ............... 41,804 1.48
Exercised ................................ (35,804) (1.25)
Granted -- April 1, 1996 ................. 520,000 5.13
-------
Balance, December 31, 1996 and 1997 ...... 526,000 5.10
=======
</TABLE>

The following table summarizes information about the Company's Stock Plan
at December 31, 1997:

<TABLE>
<CAPTION>
EXERCISABLE
-----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE AVERAGE
EXERCISE OF SHARES CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE OF SHARES PRICE
- ------------------ ------------- -------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 1.25-$5.31 6,000 2 $ 2.88
$ 5.13 520,000 3.25 $ 5.13 400,000 $ 5.13
</TABLE>

F-16
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

11. STOCK OPTION PLAN -- (Continued)

The Company applies ABP No. 25 and related Interpretations in accounting
for the Plans. Accordingly, no compensation cost has been recognized for the
Plans. Had compensation cost for the Plans been determined based on the fair
value at the grant dates for awards under the Plans consistent with the method
of SFAS No. 123, the Company's net income -- historical basis, pro forma net
income and pro forma earnings per share for the years ended December 31, 1995
and 1996, would have been reduced to the pro forma amounts indicated below. Pro
forma amounts have not been presented.

<TABLE>
<CAPTION>
1995 1996
--------------- ---------------
<S> <C> <C>
Net income -- historical basis:
As reported ........................... $ 8,544,900 $ 8,345,410
Pro forma ............................. 8,541,900 8,105,410
Earnings per share -- historical basis:
Basic:
As reported ........................... $ 0.83 $ 0.81
Pro forma ............................. $ 0.83 $ 0.79
Diluted:
As reported ........................... $ 0.83 $ 0.80
Pro forma ............................. $ 0.83 $ 0.77
</TABLE>

As permitted under SFAS No. 123, the fair value of options granted under
the Plans during 1995 and 1996 was estimated on the Black-Scholes option
pricing model without considering volatility of the underlying stock and using
the following assumptions:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Weighted-average grant-date fair value of
options granted ....................... $ 5.11 $ 5.13
Weighted-average expected lives (years) . 3.67 2.83
Risk-free interest rate ................. 6.25% 6.25%
</TABLE>

Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that expected in future years.

During the six months ended June 30, 1998, pursuant to its 1997 Stock
Plan, the Company granted certain employees options to purchase 88,164 shares
of common stock at an exercise price of $19.67 per share, which was the fair
market value on the date of grant.

12. INCOME TAXES

From 1986 until May 8, 1997, the Company was subject to taxation under
Subchapter S of the Code. The Company's S Corporation status was terminated on
May 8, 1997 and, accordingly, the Company became fully subject to federal and
state income taxes on May 9, 1997. In accordance with SFAS No. 109, the
financial statements give effect to the recognition of deferred tax assets of
$800,000 and the assumption of a deferred tax liability of $5.1 million as a
result of the termination of the Company's S Corporation election on May 8,
1997.

F-17
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

12. INCOME TAXES -- (Continued)

The balance of deferred income tax assets and liabilities at December 31,
1997 were as follows:

<TABLE>
<S> <C>
Current deferred income tax assets relate to:
Allowance for bad debts ......................... $ 337,000
Accrued vacation ................................ 177,000
Accruals to related parties ..................... 25,000
Other accruals not currently deductible ......... 19,000
Other ........................................... 39,835
----------
Net current deferred tax assets ................. $ 597,835
==========
Noncurrent deferred income tax liabilities
relate to:
Basis and depreciation differences .............. $5,654,000
Other ........................................... 48,000
----------
Net noncurrent deferred tax liabilities ......... $5,702,000
==========
</TABLE>

The components of income tax expense for the period from May 9, 1997 to
December 31, 1997 were as follows:

<TABLE>
<S> <C>
Current income taxes:
Federal ............................ $1,628,250
State .............................. 262,000
----------
Total current income taxes ........... 1,890,250
Deferred income taxes ................ 821,000
Total ................................ $2,711,250
==========
</TABLE>

The following is a reconciliation of income tax expense to that computed
by applying the federal statutory rate of 34% to income before income taxes for
the year ended December 31, 1997:

<TABLE>
<S> <C>
Federal tax at the statutory rate ........................ $3,671,000
State income taxes, net of federal tax benefit ........... 311,000
Goodwill ................................................. 6,000
Other .................................................... 138,250
----------
4,126,250
Less federal taxes at the statutory rates for the period
prior to C Corporation Status ......................... 1,415,000
----------
Total .................................................... $2,711,250
==========
</TABLE>

F-18
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Total revenues .................................. 1996 $ 23,641,246 $ 25,972,025 $ 28,135,316 $ 27,649,201
1997 27,126,708 30,826,505 34,745,816 35,551,416
Gross profit .................................... 1996 8,839,128 9,860,739 10,193,535 10,249,497
1997 10,474,426 11,730,508 13,213,883 13,653,698
Net income (loss) -- historical basis ........... 1996 1,829,388 2,153,601 2,147,653 2,214,768
1997 2,130,234 (2,299,322) 2,190,283 1,765,3158
Earnings (loss) per share -- historical basis:
Basic .......................................... 1996 $ 0.18 $ 0.21 $ 0.21 $ 0.22
1997 $ 0.21 $ (0.22) $ 0.18 $ 0.14
Diluted ........................................ 1996 $ 0.18 $ 0.20 $ 0.20 $ 0.21
1997 $ 0.20 $ (0.21) $ 0.17 $ 0.14
Pro forma net income (1) ........................ 1996 1,091,388 1,283,601 1,280,653 1,321,768
1997 1,270,234 1,568,928
Pro forma earnings per share (1):
Basic .......................................... 1996 $ 0.11 $ 0.12 $ 0.12 $ 0.13
1997 $ 0.12 $ 0.15
Diluted ........................................ 1996 $ 0.11 $ 0.12 $ 0.12 $ 0.12
1997 $ 0.12 $ 0.14
Weighted average number of shares outstanding:
Basic .......................................... 1996 10,272,056 10,272,056 10,272,056 10,272,056
1997 10,272,056 10,575,260 12,192,589 12,242,179
Diluted ........................................ 1996 10,276,778 10,599,371 10,599,371 10,599,371
1997 10,599,371 10,930,959 12,590,673 12,642,140
</TABLE>

- ---------
(1) From 1986 until May 8, 1997, the Company was subject to taxation under
Subchapter S of the Code. The Company's S Corporation status was
terminated on May 8, 1997 and, accordingly, the Company became fully
subject to federal and state income taxes on May 9, 1997. In accordance
with SFAS No. 109, the financial statements give effect to the recognition
of a deferred tax expense of $4,300,000 as a result of the termination of
the Company's S Corporation election on May 8, 1997.

The pro forma information has been computed as if the Company was subject to
federal and all applicable state corporate income taxes for each of the
periods presented assuming the tax rate that would have been applied had the
Company been taxed as a C Corporation.

14. SUBSEQUENT EVENTS (UNAUDITED)

F-19
<PAGE>

WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED AS TO JUNE 30, 1998 INFORMATION)

14. SUBSEQUENT EVENTS (UNAUDITED) -- (Continued)

to be accounted for as a pooling of interests. As a result of this transaction,
the Company now owns and operates its first landfill. This acquisition also
complements the Company's recently acquired solid waste collection operations
in and around Memphis, Tennessee.

Also on August 28, 1998, the Company acquired, in exchange for
approximately $7.6 million in cash plus 22,474 shares of Company Common Stock
valued at approximately $500,000, certain assets of Greater Atlanta Sanitation,
Inc., a solid waste collection business in and around Atlanta, Georgia. This
acquisition will be accounted for as a purchase and will further expand the
Company's operations in Georgia.

F-20
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
--------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary .................................. 3
Note Regarding Forward-Looking Statements ........... 7
Risk Factors ........................................ 7
Use of Proceeds ..................................... 13
Price Range of Common Stock ......................... 13
Dividend Policy ..................................... 13
Selected Consolidated Financial and Operating
Data ............................................. 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ....................................... 16
Business ............................................ 23
Management .......................................... 38
Certain Transactions ................................ 44
Principal Shareholders .............................. 45
Description of Capital Stock ........................ 46
Outstanding Securities Covered By This
Prospectus ....................................... 47
Legal Matters ....................................... 48
Experts ............................................. 48
Available Information ............................... 48
Index to Consolidated Financial Statements .......... F-1
</TABLE>

--------------------------------

2,000,000 SHARES

(logo)

WASTE INDUSTRIES, INC.

COMMON STOCK

--------------------------
PROSPECTUS
--------------------------

, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Registrant's Articles of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the fullest extent permitted
by Section 55-8-30(e) of the North Carolina Business Corporation Act (the
"Business Corporation Act"), and (ii) require the Registrant to indemnify its
directors and officers to the fullest extent permitted by Sections 55-8-50
through 55-8-58 of the Business Corporation Act, including circumstances in
which indemnification is otherwise discretionary. Pursuant to Sections 55-8-51
and 55-8-57 of the Business Corporation Act, a corporation generally has the
power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate the directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Business
Corporation Act. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant, for
acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its shareholders, for any transaction from which
the director deprived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
shareholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its shareholders, for acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Registrant or its shareholders, for
improper transactions between the director and the Registrant and for improper
distributions to shareholders and loans to directors and officers. These
provisions do not affect a director's responsibilities under any other laws,
such as the federal securities laws or state or federal environmental laws.

The Registrant's Bylaws require the Registrant to indemnify its directors
and officers against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any such
person may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interest of the Registrant and,
with respect to any proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The Registrant's Bylaws also set forth certain procedures
that will apply in the event of a claim for indemnification thereunder.

At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.

II-1
<PAGE>

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ----------------------------------------------------------------------------------------------------
<S> <C>
2.1* Sale of Assets Agreement, dated as of August 30, 1997, by and among the Registrant and
Browning-Ferris Industries of South Atlantic, Inc.
3.1 + Articles of Incorporation, as currently in effect.
3.2 + Bylaws.
5.1 Opinion of Wyrick Robbins Yates & Ponton LLP.
10.1 + 1997 Stock Plan.
10.2 + Credit Agreement with Branch Banking and Trust Company dated April 3, 1996.
10.3 + Note Purchase and Private Shelf Agreement with The Prudential Insurance Company of America dated
April 3, 1996.
10.4** Note Purchase and Private Shelf Agreement with the Prudential Insurance Company of America dated as
of June 30, 1998.
11.1 Computation re Earnings per Share.
21.1 List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Wyrick Robbins Yates & Ponton LLP (contained in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1** Financial Data Schedule.
</TABLE>

- ---------
* Incorporated by reference to the similarly numbered Exhibit to the
Registrant's Current Report on Form 8-K dated September 15, 1997.

+ Incorporated by reference to the similarly numbered Exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 333-25631).

** Incorporated by reference to the similarly numbered Exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.

(b) FINANCIAL STATEMENT SCHEDULES.

All financial statement schedules for which provision is made in
Regulation S-X are omitted because they are not required under the related
instructions, are inapplicable, or the required information is given in the
financial statements, including the notes thereto and, therefore, have been
omitted.

ITEM 22. UNDERTAKINGS

The undersigned registrant hereby undertakes as follows:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-2
<PAGE>

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.

(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.

(5) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(7) That, for the purpose of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934) and
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.

(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it
became effective.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Raleigh, State of North
Carolina, on this 16th day of September 1998.

WASTE INDUSTRIES, INC.

By: /s/ LONNIE C. POOLE, JR.
-------------------------------------
LONNIE C. POOLE, JR.

CHAIRMAN

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Lonnie
C. Poole, Jr. and Robert H. Hall, and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any related Registration
Statements filed pursuant to Rule 462(b) promulgated under the Securities Act
of 1993, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ----------------------------------- ------------------------------------------- -------------------
<S> <C> <C>
/s/ LONNIE C. POOLE, JR. Director, Chairman and Chief Executive September 16, 1998
- ---------------------------------- Officer (Principal Executive Officer)
LONNIE C. POOLE, JR.

/s/ ROBERT H. HALL Director, Vice President, Chief Financial September 16, 1998
- ---------------------------------- Officer and Treasurer (Principal
ROBERT H. HALL Financial and Accounting Officer)

/s/ JIM W. PERRY Director September 16, 1998
- ----------------------------------
JIM W. PERRY

Director September 16, 1998
- ----------------------------------
J. GREGORY POOLE, JR.

/s/ THOMAS F. DARDEN Director September 16, 1998
- ----------------------------------
THOMAS F. DARDEN
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

- ---------
* Incorporated by reference to the similarly numbered Exhibit to the
Registrant's Current Report on Form 8-K dated September 15, 1997.

+ Incorporated by reference to the similarly numbered Exhibit to the
Registrant's Registration Statement on Form S-1 (File No. 333-25631).

** Incorporated by reference to the similarly numbered Exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.

September 17, 1998

Waste Industries, Inc.
3949 Browning Place
Raleigh, North Carolina 27609

Re: Registration Statement on Form S-4

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-4 filed by Waste
Industries, Inc., a North Carolina corporation (the "Company"), with the
Securities and Exchange Commission on and on or about the date hereof (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 2,000,000 shares of the Company's Common
Stock, no par value per share (the "Shares"). The Shares are to be issued in
exchanges as described in the Registration Statement. In our examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with the original of
all documents submitted to us as copies thereof.

As our legal counsel, we have examined the proceedings taken, and are
familiar with the proceedings proposed to be taken, in connection with the sale
and issuance of the Shares.

It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, including the proceedings being taken in order to permit such
transaction to be carried out in accordance with applicable state securities
laws, the Shares when issued and sold in the manner referred to in the
Registration Statement and in accordance with the resolutions adopted by the
Board of Directors of the Company, will be legally and validly issued, fully
paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name whenever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.

Very truly yours,

/s/ WYRICK ROBBINS YATES & PONTON LLP

EXHIBIT 11.1
WASTE INDUSTRIES, INC.
COMPUTATION RE: EARNINGS PER SHARE

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,

Pro forma (1) Pro forma (1)
------------------------------------------- ----------------------------
Six Months Ended June 30,
------------------------------------------- ----------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income .......................................... $ 5,119,900 $ 4,977,410 $ 6,589,760 $ 2,839,162 $ 4,756,769
=========== ============ ============ ============ ============
Weighted average number of common shares issued
and outstanding - Basic .......................... 10,236,252 10,272,056 11,320,521 10,423,658 12,263,390
Common stock equivalents -
Options for common stock .......................... 39,721 352,667 526,000 526,000 570,082
----------- ------------ ------------ ------------ ------------
Weighted average common stock equivalents ........... 10,275,973 10,624,723 11,846,521 10,949,658 12,833,472
Less treasury shares to be repurchased ..............) (4,150) (132,883) (166,988) (170,302) (223,969
----------- ------------ ------------ ------------ ------------
Weighted average shares outstanding - Diluted ....... 10,271,823 10,491,890 11,679,533 10,779,357 12,609,503
----------- ------------ ------------ ------------ ------------
Basic earnings per share ............................ $ 0.50 $ 0.48 $ 0.58 $ 0.27 $ 0.39
=========== ============ ============ ============ ============

Diluted earnings per share .......................... $ 0.50 $ 0.47 $ 0.56 $ 0.26 $ 0.38
=========== ============ ============ ============ ============
</TABLE>

(1) Pro forma basic and diluted earnings per share computations are based on the
weighted-average common stock outstanding and include the dilutive effect of
stock options using the treasury stock method (using the initial offering
price of $13.50 per share for periods prior to the initial public offering.
Common stock outstanding used to compute the weighted-average shares was
retroactively adjusted for the (i) 1996 exchange of shares resulting from
the merger of affiliated companies; (ii) 1997 conversion of nonvoting to
voting stock; (iii) 1997 1-for-2.5 reverse stock split; (iv) acquisition of
entities under common control during the quarter ending March 31, 1998; and
(v) Dumpsters and RTS mergers accounted for as poolings-of-interests during
the quarter ending June 30,1998.

The Company's S Corporation status was terminated on May 8, 1997 and,
accordingly, the Company became fully subject to federal and state income taxes
on May 9, 1997. Pro forma net income and earnings per share amounts have been
computed as if the Company was subject to federal and all applicable state
corporate income taxes for the three months and six months ended June 30, 1998.
Prior to the mergers, Dumpsters and RTS had elected S-Corporation status for
income tax purposes. The recognition of the cumulative deferred tax provision
associated with Dumpsters' and RTS's conversions from S Corporations to a C
Corporations was immaterial to the Company's consolidated financial statements.

EXHIBIT 21.1

LIST OF SUBSIDIARIES

Jurisdiction of
Name of Subsidiary Incorporation
- ------------------- ---------------
Waste Industries South , Inc. South Carolina
Waste Industries East, Inc. North Carolina
Waste Industries West, Inc. North Carolina
Kabco, Inc. North Carolina
Waste Industries of Georgia, Inc. North Carolina
ECO Services, Inc. North Carolina
Air Cargo Services, Inc. North Carolina
Railroad Avenue Disposal, Inc. Mississippi
Dumpsters, Inc. Tennessee
Reliable Trash Services, Inc. Maryland
TransWaste Services, Inc. Georgia

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Waste Industries,
Inc. on Form S-4 of our report dated August 24, 1998, appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the headings "Summary
Consolidated Financial and Operating Data" and "Experts" in such Prospectus.

/s/ DELOITTE & TOUCHE LLP
-------------------------
Raleigh, North Carolina
September 15, 1998