AMERICAN DISPOSAL SERVICES INC, S-1/A, 1997-05-02

AMERICAN DISPOSAL SERVICES INC
S-1/A, 1997-05-02
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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1997

REGISTRATION NO. 333-24103
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

AMERICAN DISPOSAL SERVICES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 4953 13-3858494
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

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

745 MCCLINTOCK DRIVE
SUITE 305
BURR RIDGE, ILLINOIS 60521
(630) 655-1105
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------

ANN L. STRAW, ESQ.
AMERICAN DISPOSAL SERVICES, INC.
745 MCCLINTOCK DRIVE
SUITE 305
BURR RIDGE, ILLINOIS 60521
(630) 655-1105
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------

COPIES OF COMMUNICATIONS TO:

<TABLE>
<S> <C>
STEPHEN W. RUBIN, ESQ. HOWARD L. SHECTER, ESQ.
PROSKAUER ROSE GOETZ & MENDELSOHN LLP MORGAN, LEWIS & BOCKIUS LLP
1585 BROADWAY 101 PARK AVENUE
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10178
(212) 969-3000 (212) 309-6000
</TABLE>

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

Approximate date of commencement of proposed sale of securities to the
public: As soon as possible after the 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: / /

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(c)
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. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

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.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

CROSS REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1

<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
- ---------------------------------------------------------------------- ------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus................................... Facing Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus.... Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges.............................................. Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds............................................ Use of Proceeds
5. Determination of Offering Price............................ Underwriting
6. Dilution................................................... Not applicable
7. Selling Security Holders................................... Not applicable
8. Plan of Distribution....................................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered................. Description of Capital Stock
10. Interest of Named Experts and Counsel...................... Not applicable
11. Information With Respect to the Registrant
</TABLE>

<TABLE>
<C> <C> <S> <C>
(a) Description of Business.................... Prospectus Summary; Business;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
(b) Description of Property.................... Business
(c) Legal Proceedings.......................... Business
(d) Dividends and Related Stockholder
Matters.................................... Risk Factors; Capitalization; Dividend
Policy; Description of Capital Stock
(e) Financial Statements....................... Consolidated Financial Statements;
Unaudited Pro Forma Consolidated
Financial Statements; Financial
Statements of Waste Management, Inc.
Evansville, Indiana Operations;
Financial Statements of Liberty
Disposal, Inc.
(f) Selected Financial Data.................... Prospectus Summary; Unaudited Pro Forma
Consolidated Financial Statements;
Selected Consolidated Financial Data
(g) Supplementary Financial Information........ Not applicable
(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
(i) Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure................................. Experts
(j) Directors and Executive Officers........... Management
(k) Executive Compensation..................... Management
(l) Security Ownership of Certain Beneficial
Owners and Management...................... Principal Stockholders; Shares Eligible
for Future Sale
(m) Certain Relationships and Related
Transactions............................... Certain Transactions
</TABLE>

<TABLE>
<C> <S> <C>
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not applicable
</TABLE>
<PAGE>

SUBJECT TO COMPLETION, DATED MAY 2, 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE 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.
<PAGE>
3,500,000 SHARES

[LOGO]

COMMON STOCK
--------------

All of the shares of Common Stock offered hereby are being issued and sold
by American Disposal Services, Inc. (the "Company"). The Company's Common Stock
is traded on the Nasdaq National Market under the symbol "ADSI." On May 1, 1997,
the last sale price of the Common Stock as reported by the Nasdaq National
Market was $17.00 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF
COMMON STOCK OFFERED HEREBY.
-------------------

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

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................ $ $ $
Total(3)................................. $ $ $
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.

(2) Before deducting expenses of the offering payable by the Company estimated
at $800,000.

(3) The Underwriters have been granted an option, exercisable within 30 days
from the date hereof, to purchase up to 525,000 additional shares of Common
Stock, at the Price to Public per share, less the Underwriting Discount, for
the purpose of covering over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
-------------------

The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by them, subject to their right to withdraw, cancel or
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of the certificates representing the shares will be made
against payment on or about , 1997, at the offices of Oppenheimer &
Co., Inc., Oppenheimer Tower, World Financial Center, New York, New York 10281.
-------------------

OPPENHEIMER & CO., INC. CREDIT SUISSE FIRST BOSTON

The date of this Prospectus is , 1997.
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.
CURRENT OPERATIONS

[LOGO]

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS, PENALTY BIDS AND PASSIVE MARKET MAKING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING THE
NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL FINANCIAL INFORMATION, SHARE AND PER SHARE DATA IN THIS
PROSPECTUS: (I) GIVE EFFECT TO AN EXCHANGE OF THE COMPANY'S COMMON STOCK, PAR
VALUE $.01 PER SHARE ("COMMON STOCK"), IN CONNECTION WITH THE FORMATION OF A
HOLDING COMPANY, EFFECTIVE AS OF JANUARY 1, 1996; (II) GIVE EFFECT TO A 13.5 FOR
1 STOCK SPLIT CONSUMMATED ON MAY 31, 1996; (III) EXCLUDE 1,333,578 SHARES OF
COMMON STOCK OF THE COMPANY ISSUABLE UPON EXERCISE OF OUTSTANDING WARRANTS AND
STOCK OPTIONS; AND (IV) ASSUME NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION. AS USED IN THIS PROSPECTUS, THE TERMS "COMPANY" AND "AMERICAN DISPOSAL
SERVICES" REFER COLLECTIVELY TO AMERICAN DISPOSAL SERVICES, INC. AND ITS
SUBSIDIARIES, UNLESS THE CONTEXT OTHERWISE REQUIRES.

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

THE COMPANY

American Disposal Services is a regional, integrated, non-hazardous solid
waste services company that provides solid waste collection, transfer and
disposal services primarily in the Midwest and in the Northeast. The Company
owns six solid waste landfills and owns, operates or has exclusive contracts to
receive waste from 13 transfer stations. The Company's landfills and transfer
stations are supported by its collection operations, which currently serve over
155,000 residential, commercial and industrial customers. The Company has
adopted an acquisition-based growth strategy and intends to continue its
expansion, generally in its existing and proximate markets. Since January 1993,
the Company has acquired 39 solid waste businesses, including five solid waste
landfills and 34 solid waste collection companies. As part of its acquisition
strategy, the Company has recently acquired the Evansville, Indiana operations
of Waste Management of Indiana, LLC (the "Indiana Acquisition") and has entered
into a definitive agreement to acquire substantially all of the assets of
Liberty Disposal, Inc. in Rhode Island ("Liberty Disposal").

The Company began its operations in the Midwest and currently has operations
in Arkansas, Connecticut, Illinois, Indiana, Kansas, Massachusetts, Missouri,
Ohio, Oklahoma, Pennsylvania and Rhode Island. The Company's principal growth
strategy is to identify and acquire solid waste landfills located in markets
that are within approximately 125 miles of significant metropolitan centers and
to secure dedicated waste streams for such landfills by acquisition or
development of transfer stations and acquisition of collection companies. The
Company expects the current consolidation trends in the solid waste industry to
continue as many independent landfill and collection operators lack the capital
resources, management skills and technical expertise necessary to operate in
compliance with increasingly stringent environmental and other governmental
regulations. Further, several of the national waste management companies have
announced their intention to focus on their core markets and have recently begun
to divest certain of their non-core solid waste assets, which should present the
Company with additional acquisition opportunities, such as the Indiana
Acquisition. Due in part to these trends, the Company believes that significant
opportunities exist to expand and further integrate its operations in each of
its existing markets.

As part of the Indiana Acquisition, the Company acquired a landfill, two
collection companies, an exclusive transfer station contract and a permit to
develop a new transfer station, all located in the southwestern Indiana region.
The Indiana Acquisition provided the Company with the opportunity to enter the
southwestern Indiana region and to secure a significant market share position in
that region through the acquisition of a single, fully integrated solid waste
management operation.

The Liberty Disposal acquisition (the "Pending Acquisition") involves the
purchase by the Company of substantially all of the assets of Liberty Disposal.
The Company believes that Liberty Disposal, which operates 25 routes and offers
commercial, residential and industrial waste collection and recycling services,
is, on a revenue basis, the largest privately owned waste collection company in
Rhode Island. In addition, the Company believes that the Pending Acquisition
will substantially increase the Company's revenue base

3
<PAGE>
in the Rhode Island region, will result in the Company owning and operating one
of the three largest collection companies in Rhode Island and will position the
Company to expand further its market share in the region and the contiguous
markets.

The Company's operating program generally involves a four-step process: (i)
acquiring solid waste landfills in its target markets; (ii) securing captive
waste streams for its landfills through the acquisition or development of
transfer stations serving those markets, through acquisitions of collection
companies and by entering into long-term contracts directly with customers or
collection companies; (iii) making "tuck-in" acquisitions of collection
companies to further penetrate its target markets; and (iv) integrating these
businesses into the Company's operations to achieve operating efficiencies and
economies of scale. As part of its acquisition program, the Company has, and in
the future may, as specific opportunities arise, evaluate and pursue
acquisitions in the solid waste collection and disposal industry that do not
strictly conform to the Company's four-step operating program.

The implementation of the Company's operating program is substantially
complete in its Missouri and Ohio regions. In the Missouri region (which also
includes Arkansas, Kansas and Oklahoma), the Company has acquired one landfill
and 15 collection companies and has acquired, developed or secured exclusive
contracts with six transfer stations. In the Ohio region, the Company has
completed the acquisition of one landfill and 11 collection companies and has
acquired, developed or secured exclusive contracts with four transfer stations.
The Company is in the second phase of its operating program in its Illinois,
western Pennsylvania and Rhode Island regions, as well as in the southwestern
Indiana region, where the Company began its operations in 1997.

The Company's operating strategy emphasizes the integration of its solid
waste collection and disposal operations and the internalization of waste
collected. One of the Company's goals is for its captive waste streams (which
include the Company's collection operations and third-party haulers operating
under long-term collection contracts) to provide in excess of 50% of the volume
of solid waste disposed of at each of its landfills. During the year ended
December 31, 1996, the Company's captive waste constituted an average of
approximately 61% of the solid waste disposed of at its landfills. The Company
plans to continue to pursue its acquisition-based growth strategy to increase
the internalization of waste collected and expand its presence in its existing
and proximate markets.

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Common Stock offered......................... 3,500,000 shares
Common Stock outstanding after the
Offering................................... 12,372,501 shares(1)
Use of proceeds.............................. To repay indebtedness, to fund the Pending Acquisition and related
costs, for possible future acquisitions and for working capital
and general corporate purposes. See "Use of Proceeds."
Nasdaq National Market symbol................ ADSI
</TABLE>

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

(1) Does not include 1,333,578 shares of Common Stock issuable upon the exercise
of warrants and stock options outstanding as of April 30, 1997.

4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PRO FORMA YEAR ENDED
------------------------------- DECEMBER 31,
1994 1995 1996 1996(1)
--------- --------- --------- ---------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $ 18,517 $ 30,004 $ 56,804 $76,792
Cost of operations........................................ 12,647 17,286 30,376 41,518
Selling, general and administrative expenses.............. 4,910 5,882 8,328 10,438
Depreciation and amortization expense..................... 3,226 6,308 12,334 15,261
--------- --------- --------- -----------
Operating income (loss)................................... (2,266) 528 5,766 9,575
Interest expense.......................................... (1,497) (3,030) (5,745) (4,821)
Interest income........................................... 2 189 260 260
Other income, net......................................... -- -- 179 179
--------- --------- --------- -----------
Income (loss) before income taxes and extraordinary
item.................................................... (3,761) (2,313) 460 5,193
Income tax benefit (expense).............................. 1,372 (332) (245) (1,669)
--------- --------- --------- -----------
Income (loss) before extraordinary item................... (2,389) (2,645) 215 $3,524
-----------
-----------
Extraordinary item -- loss on early retirement of debt.... -- (908) (476)
--------- --------- ---------
Net income (loss)......................................... (2,389) (3,553) (261)
Preferred stock dividend.................................. -- (190) (109)
--------- --------- ---------
Net income (loss) to common stockholders.................. $ (2,389) $ (3,743) $ (370)
--------- --------- ---------
--------- --------- ---------
Pro forma net income per share of common stock............ $ 0.32
-----------
-----------
Pro forma weighted average common stock and common stock
equivalent shares used to calculate pro forma net income
per share............................................... 11,118,854
-----------
-----------
OTHER DATA:
EBITDA(2)................................................. $ 960 $ 6,836 $ 18,100 $24,836
EBITDA margin(3).......................................... 5.2% 22.8% 31.9% 32.3%
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(4)
--------- --------------
BALANCE SHEET DATA:
Cash and cash equivalents.............................................................. $ 2,301 $ 2,301
Working capital........................................................................ 1,219 2,154
Property and equipment, net............................................................ 93,692 117,117
Total assets........................................................................... 144,986 189,669
Long-term obligations, net of current portion.......................................... 65,445 54,554
Total stockholders' equity............................................................. 58,097 112,527
</TABLE>

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

(1) The pro forma information for the year ended December 31, 1996 gives effect
to the Indiana Acquisition, the Pending Acquisition, the Offering and the
application of the estimated proceeds therefrom, as described in "Use of
Proceeds," as if each of the foregoing had occurred or been in effect on
January 1, 1996.

(3) EBITDA margin represents EBITDA expressed as a percentage of revenues.

(4) Adjusted to give effect to the events described in (1) above as if each of
the foregoing had occurred on December 31, 1996.

5
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE SHARES OF COMMON STOCK BEING OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. IN ADDITION, THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. DISCUSSIONS
CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE MATERIAL SET
FORTH UNDER "PROSPECTUS SUMMARY," "RISK FACTORS," "THE COMPANY," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
"BUSINESS--INTRODUCTION," "BUSINESS--INDUSTRY BACKGROUND," "BUSINESS--STRATEGY,"
"BUSINESS--ACQUISITION PROGRAM," "BUSINESS--COMPLETED ACQUISITIONS" "BUSINESS--
OPERATIONS" AND "BUSINESS--ENVIRONMENTAL REGULATIONS," AS WELL AS IN THE
PROSPECTUS GENERALLY. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY
THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION CONCERNING THE
COMPANY AND ITS BUSINESS CONTAINED IN THIS PROSPECTUS, BEFORE PURCHASING THE
SHARES OF COMMON STOCK OFFERED HEREBY.

ABILITY TO MANAGE GROWTH

The Company's goal is to increase the scale of its operations significantly
through the acquisition of other solid waste businesses and through internal
growth. Consequently, the Company may experience periods of rapid growth with
significantly increased staffing level requirements. Such growth 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 develop 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 system capabilities, to implement and improve
its operational and financial systems and controls or to recruit appropriate
additional personnel in an efficient manner at a pace consistent with the
Company's business growth would have a material adverse effect on the Company's
business, financial condition and results of operations.

AVAILABILITY OF ADDITIONAL ACQUISITION TARGETS; INTEGRATION OF FUTURE
ACQUISITIONS

The Company's ongoing acquisition program is a key element of its
acquisition-based growth strategy for expanding its solid waste management
services. Consequently, the future growth of the Company depends in large part
upon the successful continuation of this acquisition program. The Company may
encounter substantial competition in its efforts to acquire landfills, transfer
stations and collection companies. There can be no assurance that the Company
will succeed in locating or acquiring appropriate acquisition candidates at
price levels and on terms and conditions that the Company considers appropriate.
In addition, if in the future the Company is successful in acquiring targeted
companies, it will need to integrate these acquired companies into the Company's
operations. There can be no assurance that the Company will successfully
integrate future acquisitions into its operations, including the Indiana
Acquisition and the Pending Acquisition. See "Business--Strategy,"
"--Acquisition Program" and "--Competition."

HISTORY OF LOSSES AND WORKING CAPITAL DEFICITS; INTEGRATION OF COMPLETED
ACQUISITIONS

The Company has recorded net losses to common stockholders of approximately
$2.4 million, $3.7 million and $370,000 during the fiscal years ended December
31, 1994, 1995 and 1996, respectively, and has had working capital deficits in
the past. See "--Funding of Future Capital Requirements" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Introduction." The financial position and results of operations of
the Company will depend to a large extent on the Company's ability to integrate
effectively the operations of the 37 companies it has acquired from January 1993
to date and to realize expected efficiencies and economies of scale from such
acquisitions. There can be no assurance that the Company's efforts to integrate
these operations will be effective, that expected efficiencies and economies of
scale will be realized or that the Company will be able to consolidate

6
<PAGE>
successfully its operations. The failure to achieve any of these results could
have a material adverse effect on the Company's business, financial condition
and results of operations.

SIGNIFICANT LEVERAGE

Historically, the Company has incurred significant debt obligations in
connection with financing its acquisitions and business growth. The Company has
a $125 million revolving credit and term loan facility with ING (U.S.) Capital
Corporation, as administrative agent, and Morgan Guaranty Trust Company of New
York, as documentation agent (the "Credit Facility"). As of December 31, 1996,
the Company's consolidated indebtedness was $68.0 million, its consolidated
total assets were $145.0 million and its stockholders' equity was $58.1 million.
The Company's ability to meet its debt service obligations will depend upon its
future performance, which, in turn, will be subject to general economic
conditions and to financial, business and other factors affecting the operations
of the Company, many of which are beyond the Company's control. If the Company
fails to generate sufficient cash flow to repay its debt, the Company may be
required to refinance all or a portion of its existing debt or to obtain
additional financing. There can be no assurance that such refinancing or any
additional financing could be obtained on terms favorable to the Company or at
all. The Company is currently in discussions to establish a significantly larger
credit facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

DISCRETION OF MANAGEMENT TO ALLOCATE OFFERING PROCEEDS

The Company intends to use the net proceeds of the Offering to repay
outstanding amounts under the expansion facility under the Credit Facility and
to fund the Pending Acquisition and related costs. However, closing of the
Pending Acquisition may not occur or may be delayed until the conditions to
closing are satisfied. There can be no assurance that the conditions to closing
will be fulfilled and that the Company will consummate the Pending Acquisition.
In addition, the net proceeds of the Offering may exceed the outstanding amounts
under the expansion facility under the Credit Facility and the purchase price
for the Pending Acquisition. The Company anticipates that any net proceeds not
used to repay such indebtedness or to fund the Pending Acquisition will be used
for working capital and general corporate purposes. The Company's management
will have complete discretion to allocate the balance of the net proceeds from
the Offering among acquisitions, working capital and general corporate purposes.
See "Use of Proceeds."

HIGHLY COMPETITIVE INDUSTRY

The solid waste collection and disposal business is highly competitive and
requires substantial amounts of capital. The Company competes with numerous
solid waste management companies, many of which are significantly larger and
have greater financial resources than the Company. 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, charges or tax revenues and the greater
availability to them of tax-exempt financing. In addition, competitors may
reduce the price of their services in an effort to expand market share or to win
competitively bid municipal contracts. There can be no assurance that the
Company will be able to compete successfully. See "Business--Competition."

FUNDING OF FUTURE CAPITAL REQUIREMENTS

The Company's acquisition-based growth strategy has resulted in a steady
increase in its capital requirements, and such increase may continue in the
future as the Company pursues its strategy. The Company has incurred working
capital deficits in the past, and there can be no assurance that its available
working capital will be sufficient in the future as it pursues its growth
strategy. To the extent that internally generated cash, the cash available to
the Company from the net proceeds of the Offering and cash available under the
Credit Facility are not sufficient to provide the cash required for future
operations,

7
<PAGE>
capital expenditures, acquisitions, debt repayment obligations and financial
assurance obligations, the Company will require additional equity or debt
financing in order to provide such cash. There can be no assurance, however,
that such financing will be available or, if available, will be on terms
satisfactory to the Company. Where appropriate, the Company may seek to minimize
the use of cash to finance its acquisitions by using capital stock, assumption
of indebtedness or notes. However, there can be no assurance the owners of the
businesses the Company may wish to acquire will be willing to accept non-cash
consideration in whole or in part. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Business--Acquisition Program."

DEPENDENCE ON THIRD PARTY COLLECTION OPERATIONS

A portion of the solid waste delivered to the Company's landfills is
delivered by third party collection companies under informal arrangements or
without long-term contracts. If these third parties discontinued their
arrangements with the Company and if the Company were unable to replace these
third party arrangements without incurring significant additional costs, the
Company's business, financial condition and results of operations might be
materially adversely affected.

LIMITATIONS ON INTERNAL EXPANSION

The Company's operating program depends on its ability to expand and develop
its landfills, transfer stations and collection operations. The process of
obtaining required permits and approvals to operate or expand solid waste
management facilities, including landfills and transfer stations, has become
increasingly difficult and expensive, often taking several years, requiring
numerous hearings and compliance with zoning, environmental and other regulatory
requirements, and often being subject to resistance from citizen or other
groups. There can be no assurance that the Company will be successful in
obtaining the permits it requires or that such permits will not contain onerous
terms and conditions. An inability to receive such permits and approvals could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "--Extensive Environmental and Land Use Laws and
Regulations." In some areas, suitable land may be unavailable for new landfill
sites. There can be no assurance that the Company will be successful in
obtaining new landfill sites or expanding the permitted capacity of its current
landfills once its landfill capacity has been consumed. In such event, the
Company could be forced to dispose of collected waste at landfills operated by
its competitors, which could have a material adverse effect on the Company's
landfill revenues and collection expenses. See "Business--
Operations--Landfills."

EXTENSIVE ENVIRONMENTAL AND LAND USE LAWS AND REGULATIONS

The Company is subject to extensive and evolving environmental and land use
laws and regulations, which have become increasingly stringent in recent years
as a result of greater public interest in protecting and cleaning up the
environment. These laws and regulations affect the Company's business in many
ways, including as set forth below. See "Business--Environmental Regulations"
for further information concerning the matters set forth below.

EXTENSIVE PERMITTING REQUIREMENTS. In order to develop and operate a
landfill or other solid waste management facility, it is necessary to obtain and
maintain in effect one or more facility permits and other governmental
approvals, including those related to zoning, environmental and land use. In
addition, the Company may be required to obtain similar permits and approvals in
order to expand its existing landfill and solid waste management operations.
These permits and approvals are difficult and time consuming to obtain and are
frequently subject to community opposition, opposition by various local elected
officials or citizens and other uncertainties. In addition, after an operating
permit for a landfill or other facility is obtained, the permit may be subject
to modification or revocation by the issuing agency, and it may be necessary to
obtain periodically a renewal of the permit, which may reopen opportunities for
opposition to the permit. Moreover, from time to time, regulatory agencies may
delay the review or grant of these

8
<PAGE>
required permits or approvals or may modify the procedures or increase the
stringency of the standards applicable to its review or grant of such permits or
approvals. In addition, the Company may not be able to ensure that its landfill
operations are included and remain in the solid waste management plan of the
state or county in which such operations are conducted. The Company may also
have difficulty obtaining host agreements with counties or local communities, or
existing host communities may demand modifications of existing host agreements
in connection with planned expansions, either of which could adversely affect
the Company's operations and increase the Company's costs and reduce its
margins. 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 its business, including permits or approvals
required for planned landfill expansions, and the failure by the Company to
obtain or maintain in effect a permit significant to its business could
materially adversely affect the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

DESIGN, OPERATION AND CLOSURE REQUIREMENTS. The design, operation and
closure of landfills are subject to extensive regulations. These regulations
include, among others, the regulations (the "Subtitle D Regulations")
establishing minimum federal requirements adopted by the United States
Environmental Protection Agency (the "EPA") in October 1991 under Subtitle D of
the Resource Conservation and Recovery Act of 1976 ("RCRA"). The Subtitle D
Regulations generally became effective on October 9, 1993 (except for new
financial assurance requirements, which are scheduled to become effective April
9, 1997). The Subtitle D Regulations require all states to adopt regulations
regarding landfill design, operation and closure requirements that are as
stringent as, or more stringent than, the Subtitle D Regulations. All states in
which the Company's landfills are located have in place extensive landfill
regulations consistent with the Subtitle D requirements. These federal and state
regulations require the Company to design the landfill in accordance with
stringent technical requirements, monitor groundwater, post financial
assurances, and fulfill landfill closure and post-closure obligations. These
regulations could also require the Company to undertake investigatory, remedial
and monitoring activities, to curtail operations or to close a landfill
temporarily or permanently. Furthermore, future changes in these regulations may
require the Company to modify, supplement, or replace equipment or facilities at
costs which may be substantial.

LEGAL AND ADMINISTRATIVE PROCEEDINGS. In the ordinary course of its
business, the Company may become involved in a variety of legal and
administrative proceedings relating to land use and environmental laws and
regulations. These may include proceedings by federal, state or local agencies
seeking to impose civil or criminal penalties on the Company for violations of
such laws and regulations, or to impose liability on the Company under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA") or comparable state statutes, or to revoke or deny renewal of a
permit; actions brought by citizens' groups, adjacent landowners or governmental
entities opposing the issuance of a permit or approval to the Company or
alleging violations of the permits pursuant to which the Company operates or
laws or regulations to which the Company is subject; and actions seeking to
impose liability on the Company for any environmental damage at its landfill
sites or that its landfills or other properties may have caused to adjacent
landowners or others, or at sites to which it transported waste, including
groundwater or soil contamination. The Company could incur substantial legal
expenses during the course of the aforementioned proceedings, and the adverse
outcome of one or more of these proceedings could materially adversely affect
the Company's business, financial condition and results of operations. See
"Business--Legal Proceedings."

During the ordinary course of its operations, the Company has from time to
time received, and expects that it may in the future receive, citations or
notices from governmental authorities that its operations are not in compliance
with its permits or certain applicable environmental or land use laws and
regulations. The Company generally seeks to work with the authorities to resolve
the issues raised by such citations or notices. There can be no assurance,
however, that the Company will always be successful in this

9
<PAGE>
regard, and the failure to resolve a significant issue could result in one or
more of the adverse consequences to the Company described below under "Potential
Liabilities."

POTENTIAL LIABILITIES. There may be various adverse consequences to the
Company in the event that a facility owned or operated by the Company (or a
predecessor owner or operator whose liabilities the Company may have acquired
expressly or under successor liability theories) causes environmental damage, in
the event that waste transported by the Company (or a predecessor) causes
environmental damage at another site, in the event that the Company fails (or a
predecessor failed) to comply with applicable environmental and land use laws
and regulations or the terms of a permit or outstanding consent order or in the
event the Company's owned or operated facility or the soil or groundwater
thereunder is or becomes contaminated. These may include the imposition of
substantial monetary penalties on the Company; the issuance of an order
requiring the curtailment or termination of the operations involved or affected;
the revocation or denial of permits or other approvals necessary for continued
operation or landfill expansion; the imposition of liability on the Company in
respect of any environmental damage (including groundwater or soil
contamination) at its landfill sites or that its landfills or other facilities
or other Company-owned or operated facilities caused to adjacent landowners or
others or environmental damage at another site associated with waste transported
by the Company; the imposition of liability on the Company under CERCLA or under
comparable state laws; and criminal liability for the Company or its officers.
Any of the foregoing could materially adversely affect the Company's business,
financial condition and results of operations.

As described under "Business--Environmental Regulations," CERCLA and
analogous state laws impose retroactive strict joint and several liability on
various parties that are, or have been, associated with a site from which there
has been, or is threatened, a release of any hazardous substance (as defined by
CERCLA) into the environment. Liability under RCRA, CERCLA and analogous state
laws may include responsibility for costs of site investigations, site cleanup,
site monitoring, natural resources damages and property damages. Liabilities
under RCRA, CERCLA and analogous state laws can be very substantial and, if
imposed upon the Company, could materially adversely affect the Company's
business, financial condition and results of operations.

In the ordinary course of its landfill and waste management operations and
in connection with its review of landfill and other operations to be acquired,
the Company has discovered at one landfill, and may in the future discover at
other landfills or waste management facilities, indications of groundwater
contamination. In such events, the Company would seek or be required to
determine the magnitude and source of the problem and, if appropriate or
required by applicable regulations, to design and implement measures to remedy,
or halt the spread of, the contamination. There can be no assurance, however,
that contamination discovered at a landfill or at other Company sites will not
result in one or more of the adverse consequences to the Company described
above.

TYPE, QUANTITY AND SOURCE LIMITATIONS. 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 such legislation has not yet
been adopted by Congress, 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.

10
<PAGE>
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 United States 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, if adopted, could
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.

LIMITED OPERATING HISTORY

Following the Exchange (as defined in "The Company"), the Company began
operating as a consolidated entity effective as of January 1, 1996. Prior to
1996, the Company's operations were conducted by ADS, Inc. ("ADS") and County
Disposal, Inc. ("CDI"), two subsidiaries of the Company, the operations of which
were acquired by the Company's stockholders in 1993 and 1995, respectively.
Accordingly, the Company has a limited history of operating as a consolidated
entity and may experience difficulties as it integrates the operations of its
subsidiaries.

POTENTIAL LIABILITIES ASSOCIATED WITH ACQUISITIONS

The businesses acquired by the Company may have liabilities that the Company
did not discover or may have been unable to discover during its pre-acquisition
investigations, including liabilities arising from environmental contamination
or non-compliance by prior owners with environmental laws or regulatory
requirements, and for which the Company, as a successor owner or operator, may
be responsible. Any indemnities or warranties, due to their limited scope,
amount, or duration, the financial limitations of the indemnitor or warrantor or
other reasons, may not fully cover such liabilities.

DEPENDENCE ON SENIOR MANAGEMENT

The Company is highly dependent on its senior management team. The loss of
the services of any member of senior management may have a material adverse
effect on the Company's business, financial condition and results of operations.
In an effort to minimize this risk, the Company has entered into employment
contracts with certain members of senior management. The Company does not
maintain "key man" life insurance with respect to members of senior management
except for a $2.0 million policy maintained on the Company's President.

LIMITS ON INSURANCE COVERAGE

There can be no assurance that the Company's pollution liability insurance
will provide sufficient coverage in the event an environmental claim were made
against the Company or that the Company will be able to maintain in place such
insurance at reasonable costs. An uninsured or underinsured claim of sufficient
magnitude could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Liability
Insurance and Bonding."

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 and expansion projects. Indirect
acquisition costs, such as executive salaries, general corporate overhead,
public affairs

11
<PAGE>
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 or expansion project that is not or 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 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 going
to landfills being reduced in certain areas, which may affect the Company's
ability to operate its landfills at their full capacity or affect the prices
that can be charged for landfill disposal services. For example, Illinois, Ohio
and Pennsylvania, states in which the Company operates landfills, have adopted
bans on the disposal of yard waste or leaves in landfills located in those
states, and all of the states in which the Company operates landfills have
adopted rules restricting or limiting disposal of tires at landfills. In
addition, each of the states in which the Company operates landfills has 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--Environmental Regulations--State
and Local Regulations."

ABILITY TO MEET FINANCIAL ASSURANCE OBLIGATIONS

The Company is required to post a performance bond or a bank letter of
credit or to provide other forms of financial assurance in connection with
closure and post-closure obligations with respect to landfills or its other
solid waste management operations and may be required to provide such financial
assurance in connection with municipal residential collection contracts. As of
December 31, 1996, the Company had outstanding approximately $15.7 million of
performance bonds. If the Company were unable to obtain surety bonds in
sufficient amounts, or to provide other required forms of financial assurance,
it would be unable to remain in compliance with the Subtitle D Regulations or
comparable state requirements and, among other things, might be precluded from
entering into certain municipal collection contracts and obtaining or holding
landfill operating permits. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Business-- Liability Insurance and Bonding."

SEASONALITY

The Company's revenues tend to be somewhat lower in the winter months. This
is primarily attributable to the fact that: (i) the volume of waste relating to
construction and demolition activities tends to increase in the spring and
summer months; and (ii) the volume of industrial and residential waste in the
regions where the Company operates tends to decrease during the winter months.
In addition, particularly harsh weather conditions may delay the development of
landfill capacity and otherwise result in the temporary suspension of certain of
the Company's operations and could materially adversely affect the Company's
overall business, financial condition and results of operations.

12
<PAGE>
CONTROL BY EXISTING STOCKHOLDERS

Immediately following the Offering, certain of the Company's principal
stockholders (Charterhouse Environmental Holdings L.L.C., Charterhouse Equity
Partners II, L.P. and CDI Equity, LLC) will beneficially own approximately 40.6%
of the outstanding shares of the Company's Common Stock. See "Principal
Stockholders." As a result, such persons will have the ability to exercise
significant influence over all matters requiring stockholder approval, such as
the election of directors, mergers and acquisitions. Such a high level of
ownership by such persons and entities may have a significant effect in
delaying, deferring or preventing a change in control of the Company.

ANTI-TAKEOVER PROVISIONS

The Board of Directors may issue up to 5,000,000 shares of Preferred Stock
in the future without stockholder approval upon such terms as the Board of
Directors may determine. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of delaying or preventing a
change in control of the Company without further action by the stockholders. The
Company has no present plans to issue any shares of Preferred Stock. See
"Description of Capital Stock-- Undesignated Preferred Stock." In addition, the
Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change of control of the Company. See "Description of Capital
Stock--Delaware Anti-Takeover Law and Certain Charter Provisions."

SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET PRICE

Sale of substantial amounts of shares in the public market or the prospect
of such sales could adversely affect the market price of the Company's Common
Stock. Upon completion of the Offering, the Company will have outstanding
12,372,501 shares of Common Stock, of which 6,662,500 shares will be freely
tradeable. The Company's officers and directors and Charterhouse Environmental
Holdings L.L.C., Charterhouse Equity Partners II, L.P. and CDI Equity, LLC who
beneficially own an aggregate of 5,444,648 shares of Common Stock or options or
warrants to purchase shares of Common Stock, have agreed not to sell, offer to
sell, distribute, pledge, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, or encumber or exercise registration rights with
respect to such securities for 180 days after the date of this Prospectus
without the prior written consent of Oppenheimer & Co., Inc. In its sole
discretion and at any time without notice, Oppenheimer & Co., Inc. may release
all or any portion of the shares subject to lock-up agreements. In addition,
following 180 days after the Offering, the holders of 5,023,371 shares of Common
Stock and warrants to purchase 168,905 shares of Common Stock have demand and
"piggy-back" rights with respect to the registration of such shares of Common
Stock for sale to the public. If such holders, by exercising their registration
rights, cause a large number of shares to be sold in the public market, such
sales could have an adverse effect on the market price for the Company's Common
Stock. Furthermore, if the Company is required to include such shares in
Company-initiated registration statements, this could have an adverse effect on
the Company's ability to raise needed capital. See "Shares Eligible for Future
Sale" and "Underwriting." As of March 31, 1997, there were outstanding options
to purchase a total of 1,164,673 shares of Common Stock and warrants to purchase
a total of 168,905 shares of Common Stock. See "Management--1996 Stock Option
Plan."

ABSENCE OF DIVIDENDS

The Company has never declared or paid dividends on its Common Stock and
does not anticipate paying dividends in the foreseeable future. See "Dividend
Policy."

13
<PAGE>
THE COMPANY

American Disposal Services, Inc. was incorporated in the State of Delaware
in November 1995. The Company is the sole stockholder of ADS, an Oklahoma
corporation that was formed in January 1991, and CDI, a Delaware corporation
that was formed in April 1995. The Company acquired all the shares of the common
stock of ADS and CDI, effective as of January 1, 1996, in exchange for which the
previous stockholders of ADS and CDI received shares of the Company's Common
Stock (the "Exchange"). As part of the Exchange, all options and warrants that
had previously been granted by ADS and CDI were cancelled in exchange for
options and warrants granted by the Company. In addition, effective as of May
31, 1996, the Company completed a 13.5-for-1 stock split of the Company's Common
Stock (the "Stock Split"; together with the Exchange, the "Restructuring").

In January 1993, affiliates of Charterhouse Group International, Inc.
("Charterhouse") acquired a majority interest in ADS, the primary asset of which
was the Pittsburg County landfill near McAlester, Oklahoma. In connection with
the Charterhouse investment, ADS recruited the Company's President in January
1993, and assembled the balance of the Company's senior management team from
1993 to the present. As a result of the management team's substantial experience
in the solid waste industry and the financial expertise and capital provided by
Charterhouse, the Company was able to finance its acquisition-based growth
strategy, which from the outset focused primarily on the identification and
acquisition of solid waste landfills located in secondary markets. Using this
strategy, CDI acquired three landfills in Illinois, Ohio and western
Pennsylvania in 1995 (the "CDI Acquisition"). Since January 1993, the Company
has acquired 39 solid waste businesses, including five solid waste landfills and
34 solid waste collection companies.

As part of its acquisition-based growth strategy, the Company has recently
consummated the Indiana Acquisition and has entered into a definitive agreement
to acquire substantially all of the assets of Liberty Disposal. The Indiana
Acquisition offers the Company the opportunity to enter a new market while the
Pending Acquisition will significantly enhance the Company's market share in the
Rhode Island region.

The Company's principal executive offices are located at 745 McClintock
Drive, Suite 305, Burr Ridge, Illinois 60521, and its telephone number is (630)
655-1105.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $ million ($ million if the
Underwriters' over-allotment option is exercised in full). The Company intends
to apply the net proceeds of the Offering to repay amounts outstanding under the
expansion facility under the Credit Facility and to fund the Pending
Acquisition. The net proceeds of the Offering that have not been applied to
repay amounts outstanding under the expansion facility under the Credit Facility
and to fund the Pending Acquisition will be available for possible future
acquisitions and for working capital and general corporate purposes. As of April
30, 1997, the expansion facility bears interest at a base rate plus 0.75% or at
a rate of LIBOR plus 2.50% per annum and has a maturity date of June 30, 2001.
As of April 30, 1997, $116.4 million of debt under the Credit Facility was
outstanding. The Company intends to draw down on the Credit Facility from time
to time in order to fund future acquisitions in whole or in part. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Risk Factors--Discretion of
Management to Allocate Offering Proceeds." While the Company has entered into
letters of intent for certain proposed acquisitions other than the Pending
Acquisition, these proposed transactions are not material to the Company's
business.

14
<PAGE>
PRICE RANGE OF COMMON STOCK

The Common Stock of the Company has been quoted on the Nasdaq National
Market under the symbol ("ADSI") since July 26, 1996, the date of the
commencement of the Company's initial public offering. The following table sets
forth, for the periods indicated, the high and low closing prices of the Common
Stock as reported on the Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1996
3rd Quarter......... $18.25 $9.00
4th Quarter......... $18.50 $15.50
1997
1st Quarter......... $18.00 $16.50
2nd Quarter (through
May 1, 1997)....... $19.75 $16.38
</TABLE>

On May 1, 1997, the last reported sales price of the Common Stock was $17.00
per share and there were approximately 72 registered holders of the Common
Stock.

DIVIDEND POLICY

The Company has never declared or paid any dividends on its Common Stock,
and neither ADS nor CDI has declared or paid any dividends on its common stock.
The Company and its Board of Directors currently intend to retain any earnings
for use in the operation and expansion of the Company's business and do not
anticipate paying any dividends on the Common Stock for the foreseeable future.
The Credit Facility prohibits the payment of cash dividends without prior bank
approval. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

15
<PAGE>
CAPITALIZATION

The following table sets forth: (i) the current portion of long-term
obligations and the actual capitalization of the Company at December 31, 1996;
and (ii) the capitalization of the Company at December 31, 1996 as adjusted to
reflect the sale of 3,500,000 shares of Common Stock offered hereby and the
application of the estimated net proceeds of the Offering to repay amounts
outstanding under the expansion facility under the Credit Facility and to fund
the Pending Acquisition and related costs. See "Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED
---------- ----------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term obligations.................................................. $ 2,572 $ 2,572
---------- ----------
---------- ----------
Long-term obligations..................................................................... $ 65,445 $ 54,554
Stockholders' equity (1):
Preferred stock: 5,000,000 shares authorized; no shares issued or outstanding........... -- --
Common stock: 20,000,000 shares authorized; 8,872,381 shares issued and outstanding;
12,372,381 shares issued and outstanding as adjusted.................................. 89 124
Warrants outstanding.................................................................... 107 107
Additional paid-in capital.............................................................. 66,170 120,565
Accumulated deficit..................................................................... (8,269) (8,269)
---------- ----------
Total stockholders' equity............................................................ 58,097 112,527
---------- ----------
Total capitalization................................................................ $ 123,542 $ 167,081
---------- ----------
---------- ----------
</TABLE>

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

(1) Excludes 525,000 additional shares of Common Stock that may be sold pursuant
to the Underwriters' over-allotment option and 1,332,039 shares of Common
Stock reserved for issuance pursuant to stock options and outstanding
warrants.

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents selected consolidated statement of operations,
balance sheet, other data and pro forma financial data of the Company for the
periods presented. See "The Company" and the Notes to Consolidated Financial
Statements and pro forma financial data included elsewhere herein for
information concerning the basis of presentation. The following selected
consolidated financial data as of December 31, 1995 and 1996 and for each of the
three years in the period ended December 31, 1996 have been derived from the
audited consolidated financial statements of the Company included elsewhere in
this Prospectus and should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The pro forma
financial data as of and for the year ended December 31, 1996 has been derived
from the pro forma consolidated financial statements included elsewhere in this
prospectus. The selected consolidated financial data as of December 31, 1992,
1993 and 1994 and for the years ended December 31, 1992 and 1993 are derived
from audited consolidated financial statements that are not included herein.

<TABLE>
<CAPTION>
PRO FORMA
YEARS ENDED DECEMBER 31, YEAR ENDED
----------------------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996(1)
---------- ----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ 146 $ 7,730 $ 18,517 $ 30,004 $ 56,804 $ 76,792
Cost of operations............................. 249 5,750 12,647 17,286 30,376 41,518
Selling, general and administrative expenses... 625 1,646 4,910 5,882 8,328 10,438
Depreciation and amortization expense.......... 100 1,166 3,226 6,308 12,334 15,261
---------- ----------- ---------- ---------- ---------- -------------
Operating income (loss)........................ (828) (832) (2,266) 528 5,766 9,575
Interest expense............................... (26) (417) (1,497) (3,030) (5,745) (4,821)
Interest income................................ -- 35 2 189 260 260
Other income................................... -- -- -- -- 179 179
---------- ----------- ---------- ---------- ---------- -------------
Income (loss) before income taxes and
extraordinary item........................... (854) (1,214) (3,761) (2,313) 460 5,193
Income tax benefit (expense)................... -- 391 1,372 (332) (245) (1,669)
---------- ----------- ---------- ---------- ---------- -------------
Income (loss) before extraordinary item........ (854) (823) (2,389) (2,645) 215 $ 3,524
-------------
-------------
Extraordinary item--gain (loss) on early
retirement of debt........................... -- 74 -- (908) (476)
---------- ----------- ---------- ---------- ----------
Net income (loss).............................. (854) (749) (2,389) (3,553) (261)
Preferred stock dividend....................... -- -- -- (190) (109)
---------- ----------- ---------- ---------- ----------
Net loss applicable to common stockholders..... $ (854) $ (749) $ (2,389) $ (3,743) $ (370)
---------- ----------- ---------- ---------- ----------
---------- ----------- ---------- ---------- ----------
Per share of common stock:
Income (loss) before extraordinary item........ $ (2.14) $ (.58) $ (.99) $ (.80) $ .02
Extraordinary item............................. -- .05 -- (.26) (.07)
---------- ----------- ---------- ---------- ----------
Net loss....................................... $ (2.14) $ (.53) $ (.99) $ (1.06) $ (.05)
---------- ----------- ---------- ---------- ----------
---------- ----------- ---------- ---------- ----------
Pro forma net income per share of common
stock........................................ $ 0.32
-------------
-------------
Weighted average common stock and common stock
equivalent shares used to calculate per share
amounts...................................... 399,465 1,406,219 2,411,381 3,527,688 7,063,928
Pro forma weighted average common stock and
common stock equivalent shares used to
calculate pro forma net income per share..... 11,118,854
OTHER DATA:
Net cash provided by (used in) operating
activities................................... $ (220) $ (388) $ (1,124) $ 5,601 $ 11,705
Net cash used in investing activities.......... (72) (23,061) (6,180) (68,374) (39,032)
Net cash provided by financing activities...... 200 25,571 5,718 68,608 23,245
EBITDA(2)...................................... (728) 334 960 6,836 18,100
EBITDA margin(3)............................... (498.6)% 4.3% 5.2% 22.8% 31.9%
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31, AS ADJUSTED
------------------------------------------------------- DECEMBER 31,
1992 1993 1994 1995 1996 1996(4)
--------- --------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA(5):
Cash and cash equivalents.......................... $ 12 $ 2,134 $ 548 $ 6,383 $ 2,301 $ 2,301
Working capital (deficit).......................... (332) 788 (2,237) (8,819) 1,219 2,154
Property and equipment, net........................ 467 15,156 17,062 81,250 93,692 117,117
Total assets....................................... 705 35,651 37,557 114,693 144,986 189,669
Long-term debt and capital lease obligations, net
of current portion............................... -- 16,073 18,487 48,789 65,445 54,554
Redeemable preferred stock......................... -- -- -- 1,908 -- --
Stockholders' equity............................... 89 12,531 12,132 33,855 58,097 112,527
</TABLE>

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

(2) EBITDA represents operating income plus depreciation and amortization. While
EBITDA data should not be construed as a substitute for operating income,
net income (loss) or cash flows from operations in analyzing the Company's
operating performance, financial position and cash flows, the Company has
included EBITDA data (which are not a measure of financial performance under
generally accepted accounting principles) because it understands that such
data are commonly used by certain investors to evaluate a company's
performance in the solid waste industry. EBITDA, as measured by the Company,
might not be comparable to similarly titled measures reported by other
companies. Funds depicted by the EBITDA measure are not available for
management's discretionary use due to required debt service and other
commitments or uncertainties.

(3) EBITDA margin represents EBITDA expressed as a percentage of revenues.

(4) Adjusted to give effect to the events described in (1) above as if each of
the foregoing had occurred on December 31, 1996.

(5) The Company has not declared or paid dividends on Common Stock in any of the
periods presented. The Credit Facility prohibits the payment of cash
dividends without prior bank approval.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the "Selected
Consolidated Financial Data," the Company's Consolidated Financial Statements
and the notes thereto, the Company's Unaudited Pro Forma Consolidated Financial
Statements and the notes thereto, Liberty Disposal's Financial Statements and
the notes thereto and Waste Management, Inc. Evansville, Indiana Operations
("WMX-Evansville") Financial Statements and the notes thereto, included
elsewhere herein.

INTRODUCTION

The Company has adopted an acquisition-based growth strategy that focuses
principally on: (i) the identification and acquisition of solid waste landfills
located in secondary markets that are within approximately 125 miles of
significant metropolitan centers; and (ii) securing dedicated waste streams for
such landfills by the acquisition or development of transfer stations and the
acquisition of collection companies. The Company has completed 37 acquisitions
since January 1993. All of these acquisitions were accounted for under the
purchase method of accounting for business combinations. Accordingly, the
amortization of goodwill and landfill airspace reflects the fair market value of
the Company's assets at the time of their acquisition rather than their
historical cost basis, and the results of operations for such acquired
businesses are included in the Company's financial statements only from the
applicable date of acquisition. As a result, the Company believes its historical
results of operations for the periods presented are not directly comparable.

There are several other aspects of the Company's growth strategy that cause
management to believe that the Company's historical results of operations may
not be consistent with future performance, including the following:

- CONCENTRATION OF LANDFILL ASSETS. Since the CDI Acquisition, the mix of
the Company's assets has been concentrated in landfills, as opposed to
collection and transfer station operations. As a result of goodwill
associated with the Company's acquisitions and the amortization expense
associated with its landfill assets and closure obligations, the amount of
depreciation and amortization as a percentage of the Company's revenues
for the year ended December 31, 1996 was relatively high as compared to
other solid waste companies (21.7%). Management believes that this
percentage will decline as the Company further penetrates the market in
its Illinois, southwestern Indiana, Missouri, Ohio, western Pennsylvania
and Rhode Island regions by acquiring or developing transfer stations,
acquiring collection operations and making "tuck-in" acquisitions of
collection companies.

- MANAGEMENT CAPABILITIES. Since 1993, the Company has assembled a
management team with substantial experience in the solid waste industry.
The Company believes that its senior management team has the ability to
manage the Company's operations as they expand. Therefore, the Company
believes that the amount of selling, general and administrative expenses
is likely to decline as a percentage of revenues as the Company grows.

- CELL DEVELOPMENT COSTS. Cells developed to date at the landfills acquired
in the CDI Acquisition have been constructed with double liner composite
systems. However, in September 1996, the Livingston, Illinois landfill
received a permit to construct cells utilizing a single liner composite
system. The Company continues to explore the possibility of using
alternative design systems at its Ohio landfill, which should result in
lower cell development costs.

Consistent with its operating program, the Company believes acquisitions of
solid waste companies will have a positive impact on its future results of
operations and, accordingly, believes that the Company's historical results
should be considered in conjunction with the Unaudited Pro Forma Consolidated
Financial Statements and the notes thereto included elsewhere herein.
Additionally, neither the historical nor the pro forma results of operations
fully reflect the operating efficiencies and improvements that are

19
<PAGE>
expected to be achieved by integrating acquired businesses, internalizing waste
flows to the Company's landfills and realizing other synergies. See
"Business--Strategy."

GENERAL

REVENUES. The Company's revenues are attributable primarily to fees charged
to customers for waste collection, transfer and disposal services. The Company's
collection services are generally provided under direct agreements with its
customers or pursuant to contracts with municipalities. Commercial and municipal
contract terms, where used, generally range from one to five years and commonly
have automatic renewal options. A relatively small portion of such agreements
also provide for the prepayment of certain fees, which fees are reflected as
deferred revenues. The table below shows, for the periods indicated, the
percentage of the Company's total revenues attributable to services provided:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Collection(1)......................................................................... 68.0% 55.3% 47.5%
Transfer.............................................................................. 9.1 5.0 2.1
Landfill(1)........................................................................... 22.8 39.0 49.9
Other................................................................................. 0.1 0.7 0.5
--------- --------- ---------
Total Revenues.................................................................... 100.0% 100.0% 100.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>

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

(1) The portion of collection revenues attributable to disposal charges for
waste collected by the Company and disposed of at the Company's landfills
has been excluded from collection revenues and included in landfill
revenues.

A component of the Company's business strategy is to maximize
internalization of waste it collects and thereby realize higher margins from its
operations. By disposing of waste at Company-owned landfills, the Company
retains the margin generated through disposal operations that would otherwise be
earned by third-party landfills. During the year ended December 31, 1996, 93% of
the total tonnage collected by the Company was disposed of at Company-owned
landfills. This represents approximately 34% of the total tonnage disposed of at
Company-owned landfills in the year ended December 31, 1996. During such period,
the Company's captive waste (consisting of waste collected by the Company and
delivered to any of its landfills and waste delivered to any of the Company's
landfills by third-party haulers under long-term collection contracts)
constituted an average of approximately 61% of the solid waste disposed of at
its landfills.

EXPENSES. Cost of operations include labor, maintenance and repairs,
equipment and facility rent, utilities and taxes, the costs of ongoing
environmental compliance, safety and insurance, disposal costs and costs of
independent haulers transporting Company waste to disposal sites. Disposal costs
include certain landfill taxes, host community fees, landfill site maintenance,
fuel and other equipment operating expenses and provision for post-closure
expenses, consisting of cap maintenance, groundwater monitoring, methane gas
control and recovery and leachate treatment/disposal, anticipated to be incurred
in the future.

Selling, general and administrative ("SG&A") expenses include management,
clerical and administrative compensation, overhead, sales costs, community
relations expenses, provisions for estimated uncollectible accounts receivable
and unrealizable acquisition costs and management fees paid to an affiliate of
Charterhouse (which terminated upon closing of the Company's initial public
offering in July 1996).

Depreciation and amortization expense includes depreciation of fixed assets,
closure costs and amortization of landfill airspace, goodwill, other intangibles
and loan origination fees. The amount of landfill amortization expense related
to airspace consumption can vary materially from landfill to landfill depending
upon the purchase price, landfill configuration and cell development costs.

20
<PAGE>

Certain direct landfill development costs, such as engineering, upgrading,
construction and permitting costs, are capitalized and amortized based on
airspace consumed. All of the Company's capitalized expenditures relating to
cell development and landfill expansion work are in connection with cells for
which the Company holds a permit for development. The Company believes that the
costs associated with engineering, owning and operating landfills will increase
in the future as a result of federal, state and local regulations and a growing
community awareness of the landfill permitting process. Although there can be no
assurance, the Company believes that it will be able to implement price
increases sufficient to offset these increased expenses. All indirect landfill
development costs, such as executive salaries, general corporate overhead,
public affairs and other corporate services, are expensed as incurred.

The Company capitalizes engineering, legal, accounting and other direct
costs incurred in connection with potential acquisitions, accounted for using
the purchase method for business combinations. The Company, however, routinely
evaluates such capitalized costs and expenses those costs related to
acquisitions not likely to occur. Indirect acquisition costs, such as executive
salaries, general corporate overhead and other corporate services, are expensed
as incurred.

Accrued closure and post-closure costs represent an estimate of the current
value of the future obligations associated with closure and post-closure
monitoring of non-hazardous solid waste landfills currently owned by the
Company. Site specific closure and post-closure engineering cost estimates are
prepared annually for landfills owned by the Company. Estimated costs are
accrued based on accepted tonnage as landfill airspace is consumed. The Company
periodically updates its estimates of future closure and post-closure costs.
These changes are accounted for on a prospective basis. The Company expects its
closure and post-closure costs per ton to decrease as it expands landfill
capacity and as such costs are amortized over greater airspace.

The Company has estimated that, as of December 31, 1996, closure costs
expected to occur during the operating lives of these facilities and expensed
over these facilities' useful lives will approximate $35.2 million. In addition,
the Company has estimated that, as of December 31, 1996, total costs for
post-closure activities, including cap maintenance, groundwater monitoring,
methane gas control and recovery and leachate treatment/disposal for up to 30
years after closure in certain cases, will be approximately $10.9 million. The
December 31, 1995 and 1996 accruals for landfill closure and post-closure costs
(including costs assumed through acquisitions) were approximately $6.2 million
and $7.6 million, respectively. The accruals reflect relatively young landfills
with estimated remaining lives, based on current waste flows, that range from
approximately three to 50 years, and an estimated average remaining life of
greater than 20 years.

THE INDIANA ACQUISITION AND THE PENDING ACQUISITION

Revenues of WMX-Evansville increased to $13.0 million in 1996 compared to
$9.8 million in 1995, primarily due to the full year impact of acquisitions
completed in 1995 and, to a lesser extent, internal growth in 1996. Direct
operating profit increased to $2.2 million in 1996 compared to $1.4 million in
1995, due to the same factors.

Revenues of Liberty Disposal were $7.0 million in 1996 compared to $7.3
million in 1995. Revenues in 1995 were positively impacted by one-time revenues
associated with large construction projects. Operating income decreased to
$303,000 in 1996 compared to $900,000 in 1995, primarily due to increased
related party compensation and, to a lesser extent, advertising expenses. Net
income decreased to $219,000 in 1996 compared to $787,000 in 1995 due to the
same factors.

21
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth items in the Company's consolidated statement
of operations as a percentage of revenues for the periods indicated.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues....................................................................... 100.0% 100.0% 100.0%
Cost of operations............................................................. 68.3 57.6 53.5
Selling, general and administrative expenses................................... 26.5 19.6 14.6
Depreciation and amortization expenses......................................... 17.4 21.0 21.7
--------- --------- ---------
Operating income (loss)........................................................ (12.2) 1.8 10.2
Interest expense, net.......................................................... (8.1) (9.5) (9.7)
Other income................................................................... -- -- 0.3
Income tax benefit (expense)................................................... 7.4 (1.1) (0.5)
Extraordinary loss, net of income tax.......................................... -- (3.0) (0.8)
--------- --------- ---------
Net loss................................................................... (12.9)% (11.8)% (0.5)%
--------- --------- ---------
--------- --------- ---------
EBITDA margin(1)............................................................... 5.2% 22.8% 31.9%
</TABLE>

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

(1) EBITDA margin represents EBITDA expressed as a percentage of revenues.

YEARS ENDED DECEMBER 31, 1996 AND 1995

REVENUES. Revenues in 1996 were $56.8 million compared to $30.0 million in
1995. Approximately $17.1 million of the increase was attributable to the impact
of the full year contribution from the CDI Acquisition, which was acquired by
the Company in separate closings in June, August and November of 1995. In
addition, the Company completed 16 acquisitions in 1996, which accounted for
approximately $6.3 million of the increase in revenues.

COST OF OPERATIONS. Cost of operations in 1996 was $30.4 million compared
to $17.3 million in 1995, an increase corresponding primarily to the Company's
revenue growth described above. As a percentage of revenues, cost of operations
declined to 53.5% in 1996 from 57.6% in 1995, due primarily to the following
factors. The Company's proportion of landfill operations, which generally have
lower operating costs than collection operations, has increased as a result of
the full year contribution of the CDI Acquisition. In addition, operating cost
savings occurred as a result of the consolidation of the acquired Missouri
collection operations and the full year impact of the new transfer stations
opened in the Missouri region.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. SG&A expenses were $8.3
million in 1996 compared to $5.9 million in 1995. The increase in the SG&A
expenses resulted from the full year impact of the CDI Acquisition as well as
increased expenses from the 16 acquisitions completed in 1996. As a percentage
of revenues, SG&A expenses declined to 14.6% in 1996 from 19.6% in 1995. The
decrease in SG&A expense as a percentage of revenues was due primarily to a
significant increase in revenue, while corporate and other related
administrative expenses increased moderately. In 1996, the Company terminated a
management agreement with an affiliate of its principal shareholder, pursuant to
which a management fee of $466,000 was paid in 1996.

DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense for 1996 was $12.3 million compared to $6.3 million in 1995. The
increase is due primarily to the CDI Acquisition which significantly increased
landfill airspace amortization and provision for closure costs, and to a lesser
extent, the capital expenditures and goodwill associated with acquisitions
consummated in 1996. As a percentage of revenues, depreciation and amortization
expense was 21.7% during 1996 versus 21.0% in 1995. The relatively high
percentages are primarily due to the configuration of the Wheatland landfill in
1995 and the

22
<PAGE>
high concentration of the Company's assets in landfills following the CDI
Acquisition in 1996. Depreciation and amortization expense is expected to
decline as a percentage of revenues in future periods as the concentration of
the Company's assets in landfills diminishes due to the full year impact of the
1996 collection company acquisitions and as the Company reduces future cell
development cost. Net fixed assets increased to $93.7 million in 1996 from $81.3
million in 1995 and goodwill, net of accumulated amortization expense, increased
to $31.2 million in 1996 from $15.7 million in 1995.

NET INTEREST EXPENSE. Net interest expense was $5.5 million in 1996
compared to $2.8 million in 1995. This increase is attributable to the full year
impact of additional debt incurred to complete the CDI Acquisition and the 16
acquisitions completed in 1996.

INCOME TAXES. The Company recorded an income tax provision of $245,000 and
$332,000 for 1996 and 1995, respectively. The 1996 provision reflects the
Company having consolidated taxable income of $460,000. Although the Company
recorded a net loss in 1995, the Company recorded an income tax provision
because the Company's subsidiaries were not then consolidated and CDI reported a
profit.

EXTRAORDINARY LOSS. In 1996, the Company recognized an extraordinary loss
of $476,000, representing the write-off of unamortized debt issuance costs in
connection with the refinancing of its prior credit facility.

YEARS ENDED DECEMBER 31, 1995 AND 1994

REVENUES. Revenues in 1995 were $30.0 million compared to $18.5 million in
1994. The increase in revenues was due primarily to the effects of the CDI
Acquisition and, to a lesser extent, price and volume increases attributable to
existing operations. Revenues of $10.1 million in 1995 were generated from
companies acquired during 1995, while increases in revenue attributable to
operations acquired prior to 1996 amounted to $1.3 million.

COST OF OPERATIONS. Cost of operations in 1995 was $17.3 million compared
to $12.6 million in 1994. This increase in costs was attributable primarily to
increases in the Company's revenues described above. As a percentage of
revenues, cost of operations was 57.6% in 1995 compared to 68.3% in 1994. This
decrease was due primarily to operating efficiencies and improvements from the
Company's development of its Missouri region and the impact of the CDI
Acquisition, which shifted the relative proportion of the Company's assets
toward landfills that typically operate at higher margins than collection
operations.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses were $5.9
million in 1995 compared to $4.9 million in 1994. The increase was a result of
expenses associated with the CDI Acquisition, expenses incurred in connection
with the Company's increase in personnel and other expenses related to the
anticipated expansion of the Company's operations. SG&A expenses as a percentage
of revenues were 19.6% in 1995 compared to 26.5% in 1994.

DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense in 1995 was $6.3 million compared to $3.2 million in 1994. The increase
in depreciation and amortization expense is due to the acquisition of the CDI
landfills, with their relatively higher depreciation and amortization expense
compared to depreciation and amortization expense of collection operations,
depreciation of increased capital expenditures and a one time write-off of
$505,000 following the Company's election in 1995 not to pursue the enforcement
of several covenants not to compete. Net fixed assets increased to $81.3 million
in 1995 from $17.1 million in 1994 and goodwill, net of accumulated amortization
expense, increased to $15.7 million in 1995 from $13.6 million in 1994.

NET INTEREST EXPENSE. Net interest expense increased to $2.8 million in
1995 from $1.5 million in 1994. This increase primarily reflects increased
indebtedness incurred in connection with acquisitions and capital expenditures.

INCOME TAXES. Although the Company recorded a net loss in 1995, the Company
recorded an income tax expense of $300,000 in 1995 because the Company's
subsidiaries were not then consolidated and CDI

23
<PAGE>
reported a profit in 1995. The Company recorded an income tax benefit of $1.4
million in 1994. See Note 6 of the Notes to Consolidated Financial Statements
included elsewhere herein.

EXTRAORDINARY LOSS. In 1995, the Company recognized an extraordinary loss
of $908,000, representing unamortized deferred debt issuance cost in connection
with the extinguishment of debt outstanding under a prior credit facility.

LIQUIDITY AND CAPITAL RESOURCES

Due to the capital intensive nature of the solid waste industry, the Company
has used, and expects to continue using, substantially all cash generated from
operations to fund acquisitions, capital expenditures and landfill development.
Certain operating equipment has also been acquired using leases which have short
and medium-term maturities. As a result, the Company has incurred working
capital deficits in the past, and there can be no assurance that its available
working capital will be sufficient in the future as it pursues its
acquisition-based growth strategy. Historically, the Company has satisfied its
acquisition, capital expenditure and working capital needs primarily through
equity and bank financings. There can be no assurance that such financing will
continue to be available.

Operating activities provided net cash of $11.7 million in the year ended
December 31, 1996, compared to $5.6 million in the year ended December 31, 1995.
From 1995 to 1996, depreciation and amortization expense increased by $6.0
million and accounts payable, accrued liabilities and accrued environmental and
landfill costs increased by $1.5 million. The increase in each of these items
was primarily due to increases in environmental and landfill costs, which
correlated with the significant increase in landfill revenues resulting from the
full year impact of the CDI Acquisition. From 1994 to 1995, depreciation and
amortization expense increased by $3.1 million and accounts payable, accrued
liabilities and accrued environmental and landfill costs increased by $1.8
million, primarily due to the CDI Acquisition.

Investing activities used net cash of $39.0 million and $68.4 million in the
years ended December 31, 1996 and 1995, respectively. The Company's capital
expenditure and working capital requirements have increased significantly,
reflecting the Company's rapid growth by acquisition and development of revenue
producing assets and will increase further as the Company continues to pursue
its acquisition-based growth strategy. During 1994, the Company spent $5.6
million on capital expenditures, of which $1.7 million was for cell development
at the Company's initial two landfills. During 1995, when the Company acquired
the three CDI landfills, the Company spent $6.2 million on capital expenditures,
of which $4.9 million was for cell development. In connection with such
acquisitions, the Company required $25.5 million in equity infusions from its
principal stockholders and $36.7 million in bank debt. In 1996, the Company
spent $14.0 million for capital expenditures, of which $9.0 million was used for
cell development. The increase in cell development costs in 1996 over 1995 was
due to the Company's ownership of the Clarion, Livingston and Wyandot landfills
for the entire year and the fact that increased volumes at the landfills
necessitated cell development prior to the winter season when construction
activities cease. In 1997, in addition to the Pending Acquisition, which will be
funded by the net proceeds of the Offering, the Company expects to spend
approximately $14.5 million for capital expenditures, of which $9.0 million is
anticipated to be used for cell development.

Financing activities provided net cash of $23.2 million, $68.6 million and
$5.7 million in the years ended December 31, 1996, 1995 and 1994, respectively.
Net cash provided by financing activities in 1996 reflects the application of
the net proceeds from the Company's initial public offering, net proceeds from
the refinancing of the Company's credit facilities and repayment of a note
payable to a stockholder. Net cash provided by financing activities in 1995
reflects the proceeds from the issuance of a $12.5 million note payable and
$25.5 million in equity to the Company's principal stockholders and increased
borrowings under the Company's prior credit facility incurred in connection with
the CDI Acquisiton.

In March 1997, the Company increased the amount of its revolving and term
loan credit facility with ING (U.S.) Capital Corporation, as administrative
agent for the lenders, and Morgan Guaranty Trust

24
<PAGE>
Company of New York, as documentation agent for the lenders, from $110 million
to $125 million. The Credit Facility provides the Company with a term loan of
$25 million, a $5 million revolving credit facility for working capital
purposes, and a $95 million expansion facility, that may only be used for
acquisitions. The various loans and lines of credit under the Credit Facility
bear interest at rates per annum equal to, at the Company's discretion, either:
(i) the higher of (a) the federal funds rate plus 0.5% and (b) the prime rate,
plus an applicable margin ranging from 0% to 1.5%; or (ii) the London Interbank
Offered Rate ("LIBOR"), plus an applicable margin ranging from 1.5% to 3.25%,
and have maturities ranging from 2001 to 2003. As of December 31, 1996, the
Company had borrowed $66.3 million under the Credit Facility. As of such date,
the interest rates on the various loans and lines of credit under the Credit
Facility ranged from 8.63% to 9.50% and the total unused availability under the
Credit Facility was $43.7 million, of which $10.0 million may be used for
working capital purposes and $33.7 million may be used for acquisitions. During
the year ended December 31, 1996, the Company's operating income plus
depreciation and amortization ("EBITDA") was $18.1 million and interest expense
during this period was $5.7 million. The Company's ability to use the expansion
facility is based upon a number of covenants, including the maintenance of
specified debt to equity and fixed charge coverage ratios. The Company is in
compliance with the terms of these covenants. Other covenants contain
limitations on the payments of dividends, the incurrence of additional debt and
the use of proceeds from certain debt or equity issuances. The Company may use
proceeds from the Offering to repay indebtedness and then reborrow under the
expansion facility. The Company is in discussions to establish a significantly
larger credit facility that would afford the Company greater financing
flexibility and reduce borrowing costs.

The Company intends to satisfy its interest obligations as well as future
capital expenditures and working capital requirements, with cash flows from
operations and borrowings under the Credit Facility. However, the Company may
need to raise additional capital to fund the acquisition and integration of
additional solid waste businesses. The Company may raise such funds through bank
financings or public or private offerings of its securities. There can be no
assurance that the Company will be able to secure such funding, if necessary, on
favorable terms, if at all. If the Company is not successful in securing such
funding, the Company's ability to pursue its business strategy may be impaired
and results of operations for future periods may be adversely affected. See
"Risk Factors--Funding of Future Capital Requirements."

The Company expects that Subtitle D and other regulations that apply to the
non-hazardous waste disposal industry will require the Company, as well as
others in the industry, to alter operations and to modify or replace existing
facilities. Such expenditures have been and will continue to be substantial.
Regulatory changes could accelerate expenditures for closure and post-closure
monitoring and obligate the Company to spend sums in addition to those presently
reserved for such purposes. These factors, together with the other factors
discussed above, could substantially increase the Company's operating costs. See
"Risk Factors--Extensive Environmental and Land Use Laws and Regulations."

INFLATION AND PREVAILING ECONOMIC CONDITIONS

To date, inflation has not had a significant impact on the Company's
operations. Consistent with industry practice, most of the Company's contracts
provide for a pass through of certain costs, including increases in landfill
tipping fees and, in some cases, fuel costs. The Company therefore believes it
should be able to implement price increases sufficient to offset most cost
increases resulting from inflation. However, competitive factors may require the
Company to absorb at least a portion of these cost increases, particularly
during periods of high inflation. The Company is unable to determine the future
impact of a sustained economic slowdown.

SEASONALITY

25
<PAGE>
BUSINESS

INTRODUCTION

American Disposal Services is a regional, integrated, non-hazardous solid
waste services company that provides solid waste collection, transfer and
disposal services primarily in the Midwest and in the Northeast. The Company
owns six solid waste landfills and owns, operates or has exclusive contracts to
receive waste from 13 transfer stations. The Company's landfills and transfer
stations are supported by its collection operations, which currently serve over
155,000 residential, commercial and industrial customers. The Company has
adopted an acquisition-based growth strategy and intends to continue its
expansion, generally in its existing and proximate markets. Since January 1993,
the Company has acquired 39 solid waste businesses, including five solid waste
landfills and 34 solid waste collection companies. As part of its acquisition
strategy, the Company has recently consummated the Indiana Acquisition and has
entered into a definitive agreement to acquire substantially all of the assets
of Liberty Disposal.

The Pending Acquisition involves the purchase by the Company of
substantially all of the assets of Liberty Disposal. The Company believes that
Liberty Disposal, which operates 25 routes and offers commercial, residential
and industrial waste collection and recycling services, is, on a revenue basis,
the largest privately owned waste collection company in Rhode Island. In
addition, the Company believes that the Pending Acquisition will substantially
increase the Company's revenue base in the Rhode Island region, will result in
the Company owning and operating one of the three largest collection companies
in Rhode Island and will position the Company to expand further its market share
in the region and the contiguous markets.

26
<PAGE>

INDUSTRY BACKGROUND

In the United States, landfilling is at present the most common means of
disposing of non-hazardous municipal solid waste ("MSW"), which consists
primarily of refuse and garbage from households and commercial establishments.
In addition, landfilling is one of the means of disposing of certain special
waste. Special waste, some types of which may require special handling, consists
of all waste not regulated as hazardous waste under federal or state laws other
than MSW and may include asbestos, petroleum contaminated soil, incinerator ash,
foundry sands and sewage and industrial sludges.

In October 1991, the EPA adopted the Subtitle D Regulations, which generally
became effective on October 9, 1993 (except for certain MSW landfills accepting
less than 100 tons per day, as to which the effective date was April 9, 1994,
and new financial assurance requirements, which are scheduled to become
effective April 9, 1997). The Subtitle D Regulations specify design, siting,
operating, monitoring, closure and financial requirements for landfill
operations and, among other things, require upgraded or new composite landfill
liners, leachate collection and treatment, groundwater and methane gas
monitoring, stricter siting and locational criteria, closure and extended
post-closure requirements and financial assurances (such as a surety bond) that
the owner or operator can meet certain of these obligations. Each state is
required to revise its applicable solid waste regulations or programs to meet
the requirements of the Subtitle D Regulations or such requirements
automatically will be imposed by the EPA. Many states have already adopted
regulations or programs as stringent as, or more stringent than, the Subtitle D
Regulations, including all of those in which the Company's landfills are
located.

The Company believes that in recent years there has been a trend towards
consolidation of landfill ownership and that a similar trend is emerging in the
solid waste collection industry, which historically has been characterized by
numerous small companies. The Company believes that these trends will continue
and are the result of several factors:

- The Subtitle D Regulations and related state regulations and programs have
significantly increased the amount of capital and the technical expertise
required in order to own and operate a landfill. As a result, many
landfill operators that lack the required capital or expertise are
electing to sell their landfills, as an alternative to closing them.

- A number of municipalities are electing to privatize the operations of
their municipal landfills as an alternative to funding the changes to
these landfills that are required in order to comply with the Subtitle D
Regulations and related state regulations and programs.

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<PAGE>
- As a result of heightened sensitivity to environmental concerns by many
communities, it is becoming increasingly desirable in many markets for
collection companies to provide waste reuse and reduction programs, such
as recycling and composting, in addition to conventional waste collection
services. This development, as well as more stringent bonding requirements
being imposed on waste collection companies by various municipalities,
have increased the amount of capital generally required for waste
collection operations, causing private collection companies that lack the
requisite capital to sell their operations to better capitalized
companies.

In addition to the ongoing consolidation trend involving independent
landfill and collection operators, several of the national waste management
companies have announced their intention to focus on their core markets and have
recently begun to divest certain of their non-core solid waste assets, which
should present the Company with other acquisition opportunities, such as the
Indiana Acquisition. Due in part to these trends, the Company believes that
significant opportunities exist to expand and further integrate its operations
in each of its existing markets, as well as in new markets that meet the
Company's acquisition criteria.

STRATEGY

The Company's objective is to build a large regional fully-integrated solid
waste services company with an established market presence in secondary markets.
The Company's strategy for achieving this objective is to establish a market
presence generally anchored by its landfills; to increase volume in its markets
through "tuck-in" acquisitions of collection companies and marketing to new
customers; to provide a high level of customer service; to implement selective
price increases; and to continue to implement strict cost controls and reduce
corporate overhead as a percentage of revenues. The Company believes that this
strategy of building an integrated entity should provide it with competitive
cost advantages in its targeted regional markets. The Company's ability to
implement its strategy is enhanced by the experience of its senior managers and
their knowledge of the solid waste industry. There can be no assurance, however,
that the Company will be successful in the execution of its strategy. See "Risk
Factors."

The Company targets acquisitions in geographic areas characterized by one or
more of the following criteria: (i) the availability of permitted and
underutilized landfill capacity located outside of, but within 125 miles of, a
significant metropolitan center; (ii) the absence of a dominant competitor in
the area which would preclude the Company from implementing its business
strategy; (iii) anticipated economic and population growth; and (iv) near- or
medium-term scheduled closures of competing landfills.

The Company has adopted the following four-step operating program in
executing its business strategy:

1. LANDFILL ACQUISITIONS. Once the Company identifies an area that
qualifies under its target market criteria, the Company seeks to establish a
market presence, generally by acquiring one or more landfills in that area
that can be accessed economically from the metropolitan center or from the
regional market area, either through direct hauling or through strategically
located transfer stations. In evaluating a landfill acquisition, the Company
considers, among others, the following factors: (i) current disposal costs
together with transportation costs to the targeted landfill relative to
transportation and disposal costs of potential competitors; (ii) expected
landfill life; (iii) opportunities for landfill expansion; and (iv)
projected short-term ability to secure a minimum of 500 tons per day of
disposal volume.

2. SECURE CAPTIVE WASTE VOLUMES. After the Company has acquired a
landfill, it seeks to build a market presence and increase the utilization
of the landfill by securing captive waste streams, which includes developing
and acquiring transfer stations, entering into waste collection contracts
and acquiring waste collection companies. Generally, the Company pursues the
acquisition of collection companies that: (i) have well-established
residential or commercial collection routes and accounts; (ii) own and
operate transfer stations; or (iii) do not own landfills and are vulnerable
to volatile disposal pricing, which the Company believes it can minimize
through landfill ownership.

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<PAGE>
3. "TUCK-IN" ACQUISITIONS. The Company acquires service rights,
obligations, machinery and equipment in "tuck-in" acquisitions of collection
companies to: (i) increase the waste stream directed to its landfills; (ii)
maximize its market presence; and (iii) take advantage of economies of scale
which should increase earnings and return on capital.

4. INTEGRATION AND EXPANSION OF OPERATIONS. Immediately upon closing
any acquisition, the Company integrates the acquired company into its
operations by: (i) instituting strict cost control procedures; (ii)
consolidating and rationalizing collection routes and pricing; (iii)
implementing Company operating policies and procedures (including programs
designed to improve employee productivity and equipment utilization); (iv)
establishing a sales and marketing force; and (v) converting the acquired
company to the Company's accounting, data processing and management
reporting systems. During the transition period following acquisitions, the
Company retains the management of certain companies it acquires in order to
benefit from management's local operating knowledge and the goodwill it has
developed. Additionally, on a selective basis, the Company seeks to expand
the capacity of its landfills to accommodate increasing waste volumes and
improve profitability.

In addition, the Company may, as specific opportunities arise, evaluate and
pursue acquisitions in the solid waste collection and disposal industry that do
not strictly conform to the Company's four-step operating program.

ACQUISITION PROGRAM

In January 1993, representatives of Charterhouse and the Company's
management formulated an acquisition-based growth strategy to establish a large
regional fully-integrated solid waste management services company. To execute
its strategy, affiliates of Charterhouse acquired a majority interest in ADS,
which owned one landfill in Oklahoma, and began assembling a senior management
team. See "The Company." Using ADS as a platform for this strategy, the Company
has increased the number of landfills it owns from one to six and has completed
39 acquisitions of solid waste companies since January 1993.

The Company has assembled an experienced acquisition team comprised of
operations, environmental, engineering, legal, financial and accounting
personnel, each engaged in identifying and evaluating acquisition opportunities
in order to execute its operating program. The Company has established pre-
acquisition review procedures for acquisition candidates, including legal,
financial, engineering, operational and environmental reviews. The environmental
review includes, where appropriate, investigation of geologic, hydrogeologic and
other site conditions, past and current operations (including types of waste
deposited), design and construction records, permits, regulatory compliance
history, regulatory agency records and available soil sampling, groundwater and
air monitoring results. The Company uses regional managers to assist in the
acquisition process by identifying suitable candidates and performing pre-
acquisition review and evaluation tasks.

In considering whether to proceed with an acquisition, in addition to
determining whether the candidate meets the Company's criteria described above,
the Company evaluates a number of factors, including: (i) the acquisition
candidate's historical and projected financial results; (ii) any expected
synergies with one or more of the Company's existing operations; (iii) the
proposed purchase price and the Company's expected resultant internal rate of
return on investment and the expected impact on the Company's earnings per
share; (iv) whether the candidate will enhance the Company's ability to effect
other acquisitions in the vicinity; (v) the candidate's customer service
reputation and relationships with the local communities; (vi) the composition
and size of the candidate's customer base; (vii) the types of services provided
by the candidate; and (viii) whether the candidate has definable and
controllable liabilities, including potential environmental liabilities. The
Company believes that significant opportunities exist to acquire new landfills
and to develop its existing markets, and reviews acquisition opportunities on an
ongoing basis.

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<PAGE>
COMPLETED ACQUISITIONS

The Company has completed 39 acquisitions of solid waste companies since
January 1993, which are summarized in the table below.

<TABLE>
<CAPTION>
COMPANY BUSINESS PRINCIPAL LOCATION DATE ACQUIRED
- ------------------------------ ------------------------------ ------------------------------ ----------------
<S> <C> <C> <C>

MISSOURI REGION:
Wheatland Landfill Scammon, KS January 1993
Pittsburg Sanitation Collection Pittsburg, KS January 1993
Ozark Sanitation Collection Carthage, MO January 1993
Trashmaster Collection Joplin, MO January 1993
A-1 Trash Service Collection Verona/Aurora, MO April 1993
Tate's Transfer Transfer Station Verona/Aurora, MO April 1993
Renfro Sanitation Collection Branson, MO June 1993
B&B Trash Collection Pittsburg, KS July 1993
B&B Refuse Collection Neosho, MO December 1993
Apex Sanitation Collection Grove, OK and December 1993
Green Forest, AR
Epps Sanitation Collection Branson, MO December 1993
Cummings Sanitation Collection Nixa, MO May 1994
Light Hauling Collection Branson, MO August 1994
Poole's Sanitation Collection Bentonville, AR August 1994
Southwest Waste Collection Springfield, MO July 1996
Nesvold Sanitation Collection Seneca, MO December 1996
Sparky's Waste Control Collection Springfield, MO January 1997
OHIO REGION:
Wyandot Landfill Upper Sandusky, OH August 1995
Environmental Transportation Collection Findlay, OH May 1996
and Management
R&R Waste Disposal Collection Findlay, OH May 1996
Jerry's Rubbish Collection Findlay, OH June 1996
Seneca Disposal Collection Tiffin, OH June 1996
Ross Bros. Waste & Recycling Collection and Transfer Mt. Vernon, OH September 1996
Station
D&L Hauling Collection Findlay, OH October 1996
Rutledge Trucking Collection Delaware, OH November 1996
Morrow Sanitary Company Collection Mt. Gilead, OH November 1996
Bowers-Phase II, Inc. Collection and Transfer Vickery, OH December 1996
Station
Cargo Services Collection Mt. Gilead, OH December 1996
Rumpke Waste, Inc. (routes) Collection Fostoria, OH December 1996
ILLINOIS REGION:
Livingston Landfill Pontiac, IL November 1995
WESTERN PENNSYLVANIA REGION:
Clarion Landfill and Collection Leeper, PA June 1995
Mauthe Sanitation Collection Strattanville, PA March 1996
Allied Waste Systems, Inc. Collection Youngstown, OH February 1997
Horodyski Collection Warren, OH April 1997
RHODE ISLAND REGION:
T&J Trucking Collection Johnston, RI September 1996
American Disposal Services, Collection Johnston, RI September 1996
Inc./ N.E.E.D.
A-1 Container Collection Rehoboth, MA January 1997
BFI--Derby District Collection and Transfer Seymour, CT April 1997
Station
SOUTHWESTERN INDIANA REGION:
WMX-Evansville Landfill, Collection and Evansville, IN April 1997
Transfer Station
</TABLE>

MISSOURI REGION. The Company established a market presence in the southwest
Missouri region in January 1993 with the acquisition of its Wheatland landfill.
The implementation of the Company's operating program is substantially complete
in its Missouri region. Since purchasing the Wheatland landfill, the Company has
acquired one transfer station and independently developed three transfer

30
<PAGE>

stations. The Company also has exclusive contracts to accept waste from two
other transfer stations. Additionally, the Company acquired 15 collection
companies, including the three operations purchased simultaneously with the
Wheatland landfill. The collection operations and transfer stations have been
consolidated into three divisions. The Company has integrated acquired companies
by consolidating and rationalizing routes and pricing, reducing overhead through
consolidating an acquired company's operations, implementing the Company's cost
controls and operating procedures, converting acquired companies to the
Company's management reporting systems and implementing a sales and marketing
team. The Company continues to pursue "tuck-in" acquisitions of collection
companies to increase its per ton margins through internalizing waste streams.
The Company also seeks to expand its operations by taking advantage of the
economic efficiencies provided by its integrated operations and is in the
process of developing another transfer station. Since the acquisition of its
Wheatland landfill, the Company has increased the waste volume at its landfill
by approximately 1,000 tons per day.

OHIO REGION. The Company established a market presence in north-central
Ohio in August 1995 with the acquisition of its Wyandot landfill, which is
located within approximately 125 miles of Cleveland, Ohio and within
approximately 75 miles of Toledo and Columbus, Ohio. The implementation of the
Company's operating program is substantially complete in its Ohio region. To
date, the Company has acquired 11 collection companies and has acquired,
developed or secured exclusive contracts with four transfer stations in the Ohio
region. Since the acquisition of the Wyandot landfill, the Company has increased
the waste volume at this landfill by approximately 300 tons per day, primarily
through the acquisition of collection companies, new operating contracts with
two transfer stations and implementation of a new sales focus. To further expand
its operations, the Company is seeking to increase capacity at the Wyandot
landfill. See "Business--Operations--Landfills." Prior to the acquisition by the
Company, the Wyandot landfill's waste volume was composed primarily of special
waste. As part of its ongoing strategy in the Ohio region, the Company seeks to
continue to increase its volume of internalized waste through additional
"tuck-in" acquisitions in order to increase per ton margins.

ILLINOIS REGION. The Company established a market presence in north-central
Illinois in November 1995 with the acquisition of its Livingston landfill, which
is located approximately 90 miles from downtown Chicago. The acquisition of the
Livingston landfill was attractive to the Company's management because of the
expected closing of two competing landfills (one of which closed in October
1996) that accepted an aggregate of approximately 15,000 tons per day and the
management team's experience with the Chicago market. Since the acquisition of
the Livingston landfill, the Company has increased the waste volume at this
landfill by approximately 3,500 tons per day through intensified sales and
marketing efforts. Approximately 74% of the waste volume at the Livingston
landfill is delivered under long-term disposal contracts.

WESTERN PENNSYLVANIA REGION. The Company entered the western Pennsylvania
region in June 1995 with the acquisition of its Clarion landfill and an
affiliated collection company. The Clarion landfill is located within 80 miles
of both Pittsburgh and Erie, Pennsylvania. The Company began the second phase of
its operating program in the western Pennsylvania region in March 1996 by
acquiring a second collection company. Since the acquisition of the Clarion
landfill, the Company has increased deliveries to this landfill by approximately
300 tons per day to the maximum daily limit, primarily through the acquisition
of collection companies. In addition, the Company acquired Allied Waste Systems
in February 1997, a collection company located in Youngstown, Ohio, which
services the western Pennsylvania region. As a result of this acquisition, the
volume of the Company's internalized waste has increased in the western
Pennsylvania region. In April 1997, the Company acquired Horodyski, a collection
company located in Warren, Ohio. The Horodyski acquisition is a "tuck-in"
acquisition to complement the operations of Allied Waste Systems. As part of its
ongoing strategy in the western Pennsylvania market, the Company seeks to
continue to increase its volume of internalized waste through additional
"tuck-in" acquisitions in order to increase per ton margins.

31
<PAGE>

RHODE ISLAND REGION. The Company began operating in the Rhode Island region
in September 1996 with the acquisition of two collection companies. Although the
Company's initial entry into the Rhode Island region did not strictly conform to
its four-step operating program in that the Company did not own a landfill in
the region, the opportunities presented by the Rhode Island region met the
Company's overall business and operating objectives. Expansion into the Rhode
Island region allows the Company to expand its presence in the Northeast, an
unconsolidated market.

In January 1997, the Company acquired A-1 Container in Rehoboth,
Massachusetts, a "tuck-in" acquisition, which has been integrated into the
Company's Rhode Island region. In April 1997, the Company acquired a collection
facility and a transfer station contract from Browning-Ferris Industries of
Connecticut, Inc. in Seymour, Connecticut. The Town of Stratford, Connecticut
holds the permit to the transfer station, which the Company will operate. In
connection with the Pending Acquisition, the Company has agreed to purchase
substantially all of the assets of Liberty Disposal. The Company believes that
Liberty Disposal, which operates 25 routes and offers commercial, residential
and industrial waste collection and recycling services, is, on a revenue basis,
the largest privately owned waste collection company in Rhode Island. In
addition, the Company believes that the Pending Acquisition will substantially
increase the Company's revenue base in the Rhode Island region, will result in
the Company owning and operating one of the three largest collection companies
in Rhode Island and will position the Company to expand further its market share
in the region and the contiguous markets.

SOUTHWESTERN INDIANA REGION. As part of the Indiana Acquisition, the
Company acquired a landfill, two collection companies, an exclusive transfer
station contract and a permit to develop a new transfer station, all located in
the southwestern Indiana region. The Indiana Acquisition provided the Company
with the opportunity to enter the southwestern Indiana region and to secure a
significant market share position in that region through the acquisition of a
single, fully integrated solid waste management operation. The Company plans to
pursue additional "tuck-in" acquisitions of collection companies to increase its
per ton margins through internalizing waste streams.

There can be no assurance that the Company will be successful in
implementing its operating program in any of these existing markets or in any
future markets. See "Risk Factors--Ability to Manage Growth," "--Availability of
Additional Acquisition Targets; Integration of Future Acquisitions," "--History
of Losses and Working Capital Deficits; Integration of Completed Acquisitions,"
"--Funding of Future Capital Requirements," "--Limitations on Internal
Expansion" and "--Limited Operating History."

OPERATIONS

The Company's waste management operations include the ownership and
operation of solid waste landfills, transfer stations and waste collection
services. The Company's landfills are relatively underutilized given their
potential size and the fact that the Company's operating program in a majority
of its markets has not yet been completed. There can be no assurance, however,
that the Company will be successful in executing its operating program. See
"Risk Factors." The Company believes that all of its landfills and transfer
stations comply with or exceed the requirements mandated by the Subtitle D
Regulations and the applicable state regulations. The Company regularly monitors
incoming waste at its landfills to determine if such wastes are in compliance
with its permits.

LANDFILLS

The Company currently owns six landfill operations permitted to receive
solid waste. These landfill operations are located in Illinois, Indiana, Ohio,
Pennsylvania, Kansas and Oklahoma.

Each of the Company's landfill operations is located on land owned by the
Company. The permitted waste streams at each of these landfills include both MSW
and certain special waste (the type of special waste varying from landfill to
landfill). During the year ended December 31, 1996, the Company's captive waste
(including the Company's collection operations and third party haulers operating
under long-term contracts) constituted an average of approximately 61% of the
solid waste disposed of at its landfills.

32
<PAGE>
The table and landfill descriptions below provide certain additional
information, as of March 31, 1997 regarding the six landfills that the Company
owns and operates.

<TABLE>
<CAPTION>
APPROXIMATE ACREAGE APPROXIMATE
---------------------------- UNUSED PERMITTED
LANDFILLS LOCATION TOTAL PERMITTED (1) AIRSPACE (2)
- ----------------------------------- ----------------------------------- --------- ----------------- -------------------
<S> <C> <C> <C> <C>
(IN MILLIONS OF
CUBIC YARDS)
Livingston......................... Pontiac, IL 556 255 30.0
Wyandot(3)......................... Upper Sandusky, OH 344 87 6.2
Clarion............................ Leeper, PA 606 60 4.1
Wheatland.......................... Scammon, KS 68 55 1.3
Pittsburg County(4)................ Pittsburg, OK 76 15 0.4
Blackfoot.......................... Evansville, IN 379 166 17.9
--------- --- -----
Total.......................... 2,029 638 59.9
--------- --- -----
--------- --- -----
</TABLE>

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

(1) Permitted acreage, as used in this table and in this Prospectus, represents
the portion of the total acreage on which disposal cells and supporting
facilities have been constructed (including any that may have been filled or
capped) or may be constructed based upon an approval issued by the state
generally authorizing the development or siting of a landfill on the
acreage. Prior to actually constructing and/or operating each new disposal
cell on the permitted acreage, it may be necessary, depending upon the
regulatory requirements of the particular state, for the Company to obtain
additional authorizations with respect to such cell. The portion of total
acreage that is not currently permitted acreage is not currently available
for waste disposal.

(2) Unused permitted airspace represents in cubic yards the estimated portion of
the permitted acreage that has not yet been used for waste disposal but may
be available for waste disposal after certain approvals are secured and, in
some instances, new disposal cells are constructed. Prior to actually
constructing and/or operating a new disposal area or cell on permitted
acreage, it may be necessary, depending upon the regulatory requirements of
the particular state or locality, for the Company to obtain additional
authorizations.

(3) The Company has applied for a permit to increase the permitted acreage and
permitted cubic airspace at the Wyandot landfill by approximately 98 acres
and approximately 19.1 million cubic yards, respectively.

(4) The Company has applied for a permit to increase the permitted acreage and
permitted cubic airspace at the Pittsburg County landfill by approximately
15 acres and approximately 975,000 cubic yards, respectively.

The Company monitors the available permitted in-place disposal capacity at
each of its landfills on an ongoing basis and evaluates whether to seek to
expand this capacity. In making this evaluation, the Company considers various
factors, including the volume of waste projected to be disposed of at the
landfill, the size of the unpermitted acreage included in the landfill, the
likelihood that the Company will be successful in obtaining the necessary
approvals and permits required for the expansion and the costs that would be
involved in developing the expanded capacity. The Company also considers on an
ongoing basis the extent to which it is advisable, in light of changing market
conditions and/or regulatory requirements, to seek to expand or change the
permitted waste streams at a particular landfill or to seek other permit
modifications. Set forth below is certain information concerning certain of the
new permits, permit modifications and approvals that the Company is currently
seeking to enable it to expand its disposal capacity. There can be no assurance
that the Company will succeed in obtaining any of such permits, permit
modifications or approvals, or that additional permits, permit modifications or
approvals will not be required or that additional requirements will not be
imposed by regulatory agencies. See "Risk

33
<PAGE>
Factors--Limitations on Internal Expansion" and "--Extensive Environmental Land
Use Laws and Regulations."

LIVINGSTON. The Livingston landfill consists of approximately 556 acres, of
which approximately 255 are permitted acres. There are approximately 30.0
million cubic yards of unused permitted airspace. Previously, cells developed at
the Livingston landfill have been constructed with double composite liner
systems. In September 1996, the Livingston landfill received a permit to
construct cells using a single liner composite system. In February 1997,
Livingston received a significant modification permit from the Illinois
Environmental Protection Agency for a major lateral and vertical expansion and
re-permitting of the site. This significant modification permit includes
authorization to expand the residual waste monofill into a facility capable of
accepting various special wastes and MSW, and thereby increases the permitted
acreage by approximately 200 acres to approximately 255 acres and increased the
site's available capacity from approximately 6.0 million cubic yards to an
estimated available capacity of approximately 30.0 million cubic yards. The
Livingston landfill has approximately 14 years of total site life at current
disposal levels, which have increased substantially since its acquisition by the
Company.

WYANDOT. The Wyandot landfill consists of approximately 344 acres in three
proximate locations, and the Company has an option to purchase up to
approximately 94 adjacent additional acres in the vicinity. Approximately 87 of
the owned acres are permitted, and there are approximately 6.2 million cubic
yards of unused permitted airspace. Cells developed to date at the Wyandot
landfill have been constructed with double composite liner systems. The Company
has applied for a permit from applicable regulatory authorities to use a single
composite liner in constructing new cells, which the Company believes should
reduce cell development costs. In addition, the Company has applied for a permit
from the Ohio Environmental Protection Agency to expand its landfill capacity by
using the valley between two of the hills that are currently permitted for waste
disposal, as well as the option acreage. The Company anticipates that if it
exercised its option, obtained the required permits and constructed the
additional landfill areas, the Wyandot landfill would have approximately 50
years of total site life at current disposal levels.

CLARION. The Clarion landfill consists of approximately 606 acres, of which
approximately 60 are permitted acres. There are approximately 4.1 million cubic
yards of unused permitted airspace. Cells developed at the Clarion landfill have
been, and due to regulatory requirements will continue to be, constructed with
double liner systems. The Clarion landfill has approximately 11 years of total
site life at current disposal levels.

WHEATLAND. The Wheatland landfill consists of approximately 68 acres, and
the Company has an option to purchase up to approximately 800 additional acres
in the vicinity. Approximately 55 of the owned acres are permitted acres and
there are approximately 1.3 million cubic yards of unused permitted airspace.
The Company anticipates that after a planned expansion, the Wheatland landfill
would have approximately eight years of total site life at current disposal
levels (three years if such expansion is not approved by the Cherokee County
Board of Commissioners). In addition, the Company has an option to purchase an
undeveloped parcel in Missouri, which has been granted a permit to develop a
landfill.

PITTSBURG COUNTY. The Pittsburg County landfill consists of approximately
76 acres, of which approximately 15 are permitted acres. There are approximately
0.4 million cubic yards of unused permitted airspace. The Company applied for a
permit in October 1996 to build a lateral expansion that would increase
permitted capacity to approximately 30 acres. The Company anticipates that after
the planned expansion, the Pittsburg County landfill would have approximately 25
years of total site life at current disposal levels.

BLACKFOOT. The Blackfoot landfill in Evansville, Indiana consists of
approximately 379 acres, of which approximately 166 are permitted acres. The
site recently received a permit which increases the available capacity to
approximately 17.9 million cubic yards of airspace. The Blackfoot landfill has
approximately 45 years of total site life at current disposal levels.

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<PAGE>
TRANSFER STATIONS

The Company has an active program to acquire, develop, own, operate and
contract to receive waste volumes from transfer stations in markets which are
proximate to its operations. The use of transfer stations reduces the Company's
costs associated with the transportation of its collected waste and also
increases the market area served by the Company's landfills. Presently, the
Company owns, operates or has exclusive contracts to receive waste from a total
of 13 transfer stations. In addition, two new transfer stations are under
construction, each of which will replace an existing transfer station.

MISSOURI REGION. The Company owns, operates or has exclusive agreements
with six transfer stations in the Missouri region. In 1993, the Company acquired
its first transfer station in the Missouri region. Concurrently, the Company
entered into exclusive agreements with three municipal transfer stations to
receive their waste at the Company's Wheatland landfill. The Company currently
has one transfer station under development which will replace one of the
exclusive agreements in Bentonville, Arkansas. In 1995, the Company developed
and began operating two additional transfer stations.

OHIO REGION. The Company owns, operates or has exclusive agreements with
four transfer stations in the Ohio region. The Company entered into exclusive
contracts in 1995 to receive waste from two transfer stations in its Ohio
region. The Company has recently acquired two transfer stations through its
acquisition of the Ross Bros. Waste & Recycling Co., located in Mt. Vernon, Ohio
and Bowers-Phase II, Inc. in Vickery, Ohio. In 1996, the Company applied for a
permit to develop and operate a new transfer station for Marion County, Ohio.
Currently, this transfer station is under construction and when completed will
replace the Marion County transfer station.

ILLINOIS REGION. In August 1996, the Company secured additional volume
under an exclusive, long-term agreement with a transfer station in Bloomington,
Illinois.

RHODE ISLAND REGION. The Company operates under an exclusive, long-term
agreement with a municipal transfer station in Stratford, Connecticut.

SOUTHWESTERN INDIANA REGION. The Company operates under an exclusive,
long-term agreement with a transfer station in Evansville, Indiana. In addition,
the Company has a permit to develop a new transfer station in the region.

COLLECTION OPERATIONS

The Company collects solid waste from over 155,000 residential, commercial
and industrial customers through its own collection operations and through
brokerage arrangements with other haulers. The Company's collection operations
are conducted generally within a 50-mile radius of either its transfer stations
or landfills, which allows the Company to serve a geographic area within a
radius of approximately 125 miles from its landfills. The Company also contracts
with local generators of solid waste and directs the waste to either its own
landfill or to a third-party landfill or for additional handling at one of its
transfer stations. During the year ended December 31, 1996, the Company's
captive waste (including the Company's collection operations and third party
haulers operating under long-term contracts) constituted an average of
approximately 61% of the solid waste disposed of at its landfills. See "Risk
Factors-- Dependence on Third Party Collection Operations."

Fees for the Company's commercial and industrial collection services are
determined by such factors as collection frequency, type of equipment and
containers furnished, the type, volume and weight of the waste collected, the
distance to the disposal or processing facility and the cost of disposal or
processing. A majority of the Company's commercial and industrial waste
collection services are performed under contracts. Substantially all of the
Company's municipal solid waste collection services are performed under
contracts with municipalities. These contracts grant the Company exclusive
rights to service all or a portion of the residential homes in a specified
community or provide a central repository for residential waste

35
<PAGE>

drop-off. The Company currently has 55 municipal contracts in place. Municipal
contracts in the Company's market areas are typically awarded, at least
initially, on a competitive bid basis and usually range in duration from one to
five years. Fees are based primarily on the frequency and type of service, the
distance to the disposal or processing facility and the cost of disposal or
processing. Municipal collection fees are usually paid either by the
municipalities from tax revenues or through direct service charges to the
residents receiving the service. The Company also provides subscription
residential collection services directly to households.

SALES AND MARKETING

The Company has a coordinated marketing strategy which is formulated at the
corporate level and implemented at the regional level to achieve its desired mix
of MSW and special waste in each of its regions. For example, certain employees
of the Company in its Illinois, Indiana, Ohio and western Pennsylvania regions
focus on securing special waste generated by industrial customers. In addition
to competitive pricing, the Company's marketing strategy emphasizes quality
service particularly with respect to rapid turnaround time at its landfills.
Each manager implements the Company's marketing strategy, which is overseen by
senior management. Depending upon the size of the region and its customer mix,
each manager may focus on commercial, industrial, residential or municipal
accounts to a varying degree. The Company maintains periodic contact with all of
its accounts to increase customer retention. Company salespersons call on
prospective customers in a specified geographic territory.

Since the Company acquires its waste collection operations primarily from
entrepreneurs who generally do not have independent sales forces, the Company
often retains these entrepreneurs during the transition period following the
acquisition of such operations to acquaint the Company's sales force with the
acquired companies' customer base.

The Company has a diverse customer base, with no single customer accounting
for more than 10% of the Company's revenues in 1996. 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 collection and disposal business is highly competitive and
requires substantial amounts of capital. The Company competes with numerous
local and regional companies and, in selected areas, with the large national
waste management companies. The industry is led by four national waste
management companies, WMX Technologies, Inc., Browning-Ferris Industries, Inc.,
USA Waste Services, Inc. and Allied Waste Industries, Inc. (having completed its
acquisition of the solid waste management operations of Laidlaw Inc.), and
includes numerous local and regional companies of varying sizes and competitive
resources such as Republic Industries, Inc., Superior Services, Inc. and Eastern
Environmental Services, Inc. The large national companies, as well as a number
of the regional companies, are significantly larger and have greater financial
resources than the Company. The Company also competes with those counties and
municipalities that maintain their own waste collection and disposal operations.
These counties and municipalities may have financial advantages due to the
availability to them of tax revenues and tax exempt financing. The Company
competes primarily by charging competitive prices and offering quality service.
Competitors may reduce the price of their services in an effort to expand market
share or to win competitively bid municipal contracts.

The solid waste collection and disposal industry is currently undergoing
significant consolidation, and the Company encounters competition in its efforts
to acquire landfills and collection operations. Accordingly, it may become
uneconomical for the Company to make further acquisitions or the Company may be
unable to locate or acquire suitable acquisition candidates at price levels and
on terms and conditions that the Company considers appropriate, particularly in
markets the Company does not already serve.

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<PAGE>
Competition in the disposal industry may also be affected by the increasing
national emphasis on recycling and other waste reduction programs, which may
reduce the volume of waste deposited in landfills. See "Risk Factors--Highly
Competitive Industry and "--Use of Alternatives to Landfill Disposal."

LIABILITY INSURANCE AND BONDING

The Company carries a broad range of insurance for the protection of its
assets and operations that it believes is customary to the waste management
industry, including pollution liability coverage. Specifically, each of the
Company's six landfills has pollution liability coverage of $10.0 million per
occurrence or $10.0 million in the aggregate subject to a $10,000 deductible.
Nevertheless, if the Company were to incur liability for environmental damage
which exceeds coverage limits or is not covered by insurance, its business,
financial condition and results of operations could be materially adversely
affected.

The Company is required to post a performance bond or a bank letter of
credit or to provide other forms of financial assurance in connection with
closure and post-closure obligations with respect to landfills and its other
solid waste management operations and may be required to provide such financial
assurance in connection with municipal residential collection contracts. As of
December 31, 1996, the Company had outstanding approximately $15.7 million of
performance bonds. If the Company were unable to obtain surety bonds or letters
of credit in sufficient amounts, or to provide other required forms of financial
assurance, it would be unable to remain in compliance with the Subtitle D
Regulations or comparable state requirements and, among other things, might be
precluded from entering into certain municipal collection contracts and
obtaining or holding landfill operating permits.

EMPLOYEES

As of March 31, 1997, the Company employed approximately 580 employees, 75
of whom were managers or professionals, 414 of whom were hourly paid employees
involved in collection, transfer and disposal operations, and 91 of whom were
sales, clerical, data processing or other administrative employees. None of the
Company's employees is represented by unions, and the Company has no knowledge
of any organizational efforts among its employees. The Company believes that its
relations with its employees are good.

ENVIRONMENTAL REGULATIONS

The Company is subject to extensive and evolving environmental laws and
regulations that have been enacted in response to technological advances and
increased concern over environmental issues. These regulations are administered
by the EPA and various other federal, state and local environmental,
transportation, health and safety agencies. The Company believes that there will
continue to be increased regulation, legislation and regulatory enforcement
actions related to the solid waste management, collection and disposal industry.
In light of these developments, the Company attempts to anticipate future
regulatory requirements that might be imposed and plans accordingly to remain in
compliance with the regulatory framework.

In order to develop and operate a landfill, transfer station or other solid
waste management facility, the Company typically must go through several
governmental review processes and obtain one or more permits and often zoning or
other land use approvals. These permits and zoning or land use approvals are
difficult and time consuming to obtain or to secure renewal of and sometimes are
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.

The Company's operation of solid waste management facilities subject it to
certain operational, monitoring, site maintenance, closure and 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

37
<PAGE>
connection with the Company's acquisition of existing 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 the power to enforce
compliance with these laws and regulations and to obtain injunctions or impose
civil or criminal penalties in the case of violations. During the ordinary
course of its landfill operations, the Company has from time to time received
citations or notices from such authorities that such operations are not in
compliance with certain applicable environmental laws and regulations. Upon
receipt of such citations or notices, the Company generally works with the
authorities in an attempt to resolve the issues raised by such citations or
notices. Failure to correct the problems to the satisfaction of the authorities
could lead to curtailed operations or even closure of a landfill.

In order to transport solid waste, it is generally necessary for the Company
to possess one or more permits and approvals from state or local agencies. These
permits must also be periodically renewed and are subject to modification and
revocation by the issuing agency. In addition, the Company's waste
transportation operations are subject to evolving law and regulations that
impose operational, monitoring, training and safety requirements. The Company
believes that its operations are in substantial conformity with its permits.

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

THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA"). RCRA regulates
the generation, treatment, storage, handling, transportation and disposal of
solid waste and requires states to develop programs to insure the safe disposal
of solid waste. RCRA divides solid waste into two groups, hazardous and
non-hazardous. Wastes are generally classified as hazardous wastes 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 non-hazardous. Wastes classified as hazardous under RCRA are
subject to much stricter regulation than wastes classified as non-hazardous.
Among the wastes that are specifically designated as non-hazardous waste are
household waste and special wastes. These wastes, which will be accepted at the
Company's landfills, may contain substances that may be as toxic or prone to
cause contamination as some wastes classified and regulated as hazardous.

In October 1991, the EPA adopted the Subtitle D Regulations. These new
regulations became generally effective in October 1993 (except for new financial
assurance requirements, which become effective April 9, 1997) and include
location restrictions, siting criteria, 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, these new regulations
require that new landfill units meet more stringent liner design criteria
(typically, composite soil and synthetic liners or two or more synthetic liners)
designed to keep leachate out of the groundwater and have extensive collection
systems to carry away leachate for treatment prior to disposal. Groundwater
wells must also be installed at virtually all landfills to monitor groundwater
quality. The Company believes that there is no groundwater contamination at its
landfills that is material to its financial condition. The regulations also
require, where threshold test levels are present, that methane gas generated at
landfills be controlled in a manner that will protect 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 appropriate system to ensure that landfills within the state comply with
the Subtitle D criteria. All states in which the Company owns landfills have
adopted regulations or programs as stringent as or more stringent than the
Subtitle D Regulations, which were first proposed by the EPA in August 1988. All
states in which the Company's landfills are located have adopted the required
plans and have submitted them to the EPA for review. Pennsylvania, Oklahoma,
Ohio, Illinois, Kansas and Indiana have each received full EPA approval for
their programs.

38
<PAGE>
THE FEDERAL WATER POLLUTION CONTROL ACT OF 1977, AS AMENDED (THE "CLEAN
WATER ACT"). The Clean Water Act establishes rules regulating the discharge of
pollutants from a variety of sources, including solid waste disposal sites, into
waters of the United States. If runoff or collected leachate from the Company's
landfills is discharged into waters of the United States, 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 federal storm water regulations, which are designed to prevent
possibly contaminated storm water from flowing into surface waters. These
regulations required that applications for stormwater discharge permits be
submitted by October 1992. The Company is working with the appropriate
regulatory agencies to ensure that its facilities are in compliance with Clean
Water Act requirements, particularly as they apply to treatment and discharge of
leachate and storm water. The Company has secured or has applied for the
required discharge permits under the Clean Water Act or comparable
state-delegated programs. In those instances where the Company's applications
for discharge permits are pending and a final discharge permit has not been
issued, the Company is substantially in compliance with applicable substantive
standards set by the respective states in administering the Clean Water Act. To
ensure compliance with the Clean Water Act pretreatment and discharge
requirements, the Company has arranged to discharge its effluent to municipal
wastewater treatment facilities, except at the Pittsburg County landfill, where
the state regulatory agency has allowed recirculation of the Company's leachate
to a lined area of the landfill.

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" but can also be founded upon the
existence of even very small amounts of the many hundreds of "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,
either at one of the Company's owned or operated facilities, or at a site where
waste transported by the Company has been stored or disposed of, the Company
could be held 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 United States upon all real property subject to or affected
by a remedial action for all costs for which a party is liable. The Company's
ability to obtain reimbursement from others 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. In the past, legislation has been introduced in
Congress to limit the liability of municipalities and others under CERCLA as
generators and transporters of municipal solid waste. Although such legislation
has not been enacted, if it were to pass it would limit the Company's ability to
seek full contribution from municipalities for CERCLA cleanup costs even if the
hazardous substances that were released and caused the need for cleanup at one
of the Company's facilities were generated by or transported to the facility by
a municipality.

Continued funding for implementation of RCRA, the Clean Water Act and CERCLA
is scheduled for re-authorization by Congress this year. Depending upon whether
and how Congress acts, it is possible that each of these laws may be changed in
ways that may significantly affect the Company's business.

THE CLEAN AIR ACT. The Clean Air Act, including the 1990 amendments,
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

39
<PAGE>
pollutants. The EPA has recently promulgated new source performance standards
regulating air emissions of certain regulated pollutants (methane and
non-methane organic compounds) from municipal solid waste landfills. The EPA has
also issued regulations controlling the emissions of particular regulated air
pollutants from municipal solid waste landfills. Landfills located in areas
designated as having 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.

Each of the federal statutes described above contains provisions
authorizing, under certain circumstances, the bringing of lawsuits by private
citizens to enforce the provisions of the statutes.

THE OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970 ("OSHA"). 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.

STATE AND LOCAL REGULATION. 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 for 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
such legislation has not been passed by Congress yet, 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 United States Supreme Court held unconstitutional,
and therefore invalid, a

40
<PAGE>
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, if adopted, could 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.

PROPERTY AND EQUIPMENT

The principal fixed assets used by the Company in connection with its
landfill operations are its landfills which are described under
"Business--Operations--Landfills." The six landfills currently owned by the
Company are situated on sites owned by the Company.

The principal fixed assets used by the Company in its collection operations
and transfer stations are approximately 93 acres of land used for transfer
stations and other facilities related to collection operations (of which
approximately 47 acres are owned and 46 acres are leased); and approximately 90
landfill equipment and machinery units, 41,000 collection containers and small
equipment units and 445 trucks and trailers (in each instance, such number
includes owned and leased units).

The Company's corporate headquarters are located in Burr Ridge, Illinois,
where it leases approximately 4,000 square feet of space.

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 to revoke, or to deny renewal of, an operating
permit held by the Company. From time to time, the Company also may be subject
to actions brought by citizens' groups or adjacent landowners in connection with
the permitting and licensing of its landfills or transfer stations, or alleging
environmental damage or violations of the permits and licenses pursuant to which
the Company operates.

In addition, the Company is or 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. In the opinion of
management, the liability, if any, under these claims and suits would not
materially adversely affect the business, financial condition or results of
operations of the Company.

41
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the Company's
executive officers and directors as of April 30, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
David C. Stoller..................................... 46 Chairman; Director
Richard De Young..................................... 43 President; Director
Richard Kogler....................................... 37 Vice President; Chief Operating Officer
Stephen P. Lavey..................................... 35 Vice President; Chief Financial Officer
Ann L. Straw......................................... 43 Vice President; General Counsel and Secretary
Lawrence R. Conrath, Sr.............................. 40 Vice President; Controller
John J. McDonnell.................................... 42 Vice President--Engineering
Mary T. Ryan......................................... 43 Vice President--Corporate Affairs
Merril M. Halpern.................................... 62 Director
A. Lawrence Fagan (1)................................ 67 Director
Richard T. Henshaw, III (2).......................... 58 Director
G.T. Blankenship (2)................................. 68 Director
Norman Steisel (1)................................... 54 Director
</TABLE>

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

(1) Member of audit committee

(2) Member of compensation committee

DAVID C. STOLLER has been Chairman and a director of the Company since the
Exchange. He has served in the same capacities for ADS (since January 1993) and
CDI (since May 1995). Since January 1997, he has been a Managing Director of
Charterhouse, which is a private investment firm specializing in leveraged
buy-out acquisitions. From August 1992 through December 1996, Mr. Stoller served
as the Chairman of Charterhouse Environmental Capital Group, Inc. ("Charterhouse
Environmental Capital"), which provided management and consulting services to
companies with environmental operations including the Company. Charterhouse
Environmental Capital is an affiliate of Charterhouse. Mr. Stoller was a partner
at the law firm of Milbank, Tweed, Hadley & McCloy (where he remains as "Of
Counsel") from January 1989 through July 1992.

RICHARD DE YOUNG has been President and a director of the Company since the
Exchange. He has also served as President of ADS since April 1994 and as a
director since September 1993 and was the Chief Operating Officer and Vice
President for ADS from January 1993 through April 1994. Mr. De Young has been a
director of CDI since May 1995, and its President since July 31, 1996. From June
1982 through January 1993 he was employed by Waste Management of North America,
a subsidiary of WMX Technologies, Inc. ("WMX"), most recently as a Regional
Operations Vice President, with responsibility for landfill and collection
operations in the Midwest region.

RICHARD KOGLER has been a Vice President and the Chief Operating Officer of
the Company since the Exchange. He previously served in the same capacities for
ADS since May 1995 and as President of CDI between May 1995 and July 1996. He
has been Vice President of CDI since July 31, 1996. From October 1984 through
May 1995 Mr. Kogler was employed by WMX, most recently as a Regional Operations
Vice President.

STEPHEN P. LAVEY has been a Vice President and the Chief Financial Officer
of the Company since February 1997. He was previously employed by Bank of
America from June 1990 through January 1997,

42
<PAGE>

most recently as a Vice President in its Environmental Services Lending Group,
specializing in the solid waste, environmental engineering and water
purification industries. Mr. Lavey is also a Certified Public Accountant.

ANN L. STRAW has been a Vice President and the General Counsel of the
Company since the Exchange. She previously served in the same capacities for ADS
(since June 1995) and for CDI (since June 1995). She has been the Secretary of
the Company since the Exchange, and of ADS and CDI since July 31, 1995. From
1986 through May 1995 she was employed by WMX, most recently as a Group Counsel
for WMX's Midwest Group.

LAWRENCE R. CONRATH, SR. has been Controller of the Company since the
Exchange and a Vice President since May 1996. He previously served as Controller
for ADS since May 1994. Prior to joining the Company, Mr. Conrath spent two
years with United Waste Systems, Inc., as Regional Controller of its Michigan
region. From 1978 through 1990, Mr. Conrath was employed by WMX in several
financial positions, most recently as Director of Accounting for the WMX Urban
Services Group. Mr. Conrath is also a Certified Public Accountant.

JOHN J. MCDONNELL has been a Vice President--Engineering of the Company
since the Exchange. He previously served as Environmental Engineer for ADS
(since February 1993) and CDI (since June 1995). From 1985 through February
1993, Mr. McDonnell was employed by WMX, most recently as an Engineering
Manager.

MARY T. RYAN has been a Vice President--Corporate Affairs since March 1997
after joining the Company in November 1996. From May 1996 to November 1996, she
was employed by Ketchum Public Relations as Senior Vice President, Corporate
Issues. From July 1984 to April 1995 she was employed by WMX Technologies, Inc.,
most recently as Vice President, Management Services.

MERRIL M. HALPERN has served as a director of the Company since the
Exchange. Since October 1984, Mr. Halpern has served as Chairman of the Board of
Charterhouse. From 1973 to October 1984, Mr. Halpern served as President and
Chief Executive Officer of Charterhouse. Mr. Halpern is also a director of
Designer Holdings Ltd., a developer and marketer of designer sportswear lines
("Designer Holdings"); Insignia Financial Group, Inc., a real estate management
firm; and Microwave Power Devices, Inc., a manufacturer of highly linear power
amplifiers primarily for the wireless telecommunications market ("MPD").

A. LAWRENCE FAGAN has served as a director of the Company since the
Exchange. He has been President of Charterhouse since January 1997 and formerly
served as Executive Vice President of Charterhouse since 1984. Mr. Fagan is also
a director of Designer Holdings and MPD.

RICHARD T. HENSHAW, III has been a director of the Company since the
Exchange. He has served as a director of ADS (since January 1993) and CDI (since
May 1995). Mr. Henshaw has been a Managing Director of Charterhouse since
January 1997 and formerly served as a Senior Vice President of Charterhouse
since 1991. Prior thereto he was a Senior Vice President of The Bank of New
York. Mr. Henshaw is also a director of Cornell Corrections, Inc., a provider of
privatized correctional services.

G.T. BLANKENSHIP has been a director of the Company since the Exchange. He
previously served as a director of ADS (since January 1991). Mr. Blankenship has
been a self-employed private investor since 1990.

NORMAN STEISEL has been a director of the Company since July 1996. He has
been the President of EnEssCo Strategies, a strategic consulting services firm
specializing in government regulated markets, since January 1994. From January
1990 through December 1993, Mr. Steisel was the First Deputy Mayor of the City
of New York. Prior to 1990, he was a Senior Vice President at Lazard Freres &
Co., specializing in environmental corporate and municipal finance.

43
<PAGE>
See "Certain Transactions" and "Principal Stockholders" for certain
information concerning the Company's directors and executive officers.

Directors of the Company hold office until the next annual meeting of
stockholders and until their successors are elected and qualified, or until
their earlier resignation or removal. All officers are appointed by and serve at
the discretion of the Board of Directors. There are no family relationships
among any directors or officers of the Company.

The Board of Directors has established a compensation committee and an audit
committee. The compensation committee reviews executive salaries, administers
any bonus, incentive compensation and stock option plans of the Company,
including the American Disposal Services, Inc. 1996 Stock Option Plan, and
approves the salaries and other benefits of the executive officers of the
Company. In addition, the compensation committee consults with the Company's
management regarding pension and other benefit plans and compensation policies
and practices of the Company. The audit committee reviews the professional
services provided by the Company's independent auditors, the independence of
such auditors from management of the Company, the annual financial statements of
the Company and the Company's system of internal accounting controls. The audit
committee also reviews such other matters with respect to the accounting,
auditing and financial reporting practices and procedures of the Company as it
may find appropriate or may be brought to its attention, and meets from time to
time with members of the Company's internal audit staff.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1996, the Company's compensation committee determined the
compensation of all the Company's executive officers. The compensation committee
of the Board of Directors consists of Messrs. Blankenship and Henshaw. No member
of the compensation committee or executive officer of the Company has a
relationship that would constitute an interlocking relationship with the
executive officers or directors of another entity.

DIRECTOR COMPENSATION

The only directors who are compensated for services as a director are
Messrs. Blankenship and Steisel, each of whom receives $2,000 for each meeting
of the Board of Directors that he attends and $500 for each meeting of a
committee of the Board of Directors that he attends.

EXECUTIVE COMPENSATION

The following table sets forth, for the years ended December 31, 1996 and
1995, the cash compensation paid and shares underlying options granted to each
of the five most highly compensated executive officers whose salary for each
such fiscal year was in excess of $100,000. The Company did not pay bonuses to
these individuals during the years ended December 31, 1996 and 1995.

44
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
SHARES
UNDERLYING
YEAR SALARY OPTIONS GRANTED
--------- ---------- ----------------
<S> <C> <C> <C>
Richard De Young, President(1)............................................. 1996 $ 275,442 282,743
1995 $ 230,092 0
Scott Flamm(2)(3).......................................................... 1996 $ 225,000 83,989
1995 $ 122,106 0
David C. Stoller(4)........................................................ 1996 $ 125,000 218,371
1995 0 0
Richard Kogler(5).......................................................... 1996 $ 160,500 52,082
1995 $ 93,246 0
Ann L. Straw(6)............................................................ 1996 $ 142,500 34,863
1995 $ 73,125 0
</TABLE>

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

(1) Options to purchase 282,743 shares were granted to Mr. De Young in 1996 as
part of the Exchange to replace options to purchase shares of ADS and CDI
granted in prior years.

(2) Mr. Flamm resigned from the Company in February 1997.

(3) Options to purchase 83,989 shares were granted to Mr. Flamm in 1996 as part
of the Exchange to replace options to purchase shares of ADS and CDI granted
in prior years.

(4) Options to purchase 218,371 shares were granted to Mr. Stoller in 1996 as
part of the Exchange to replace options to purchase shares of ADS and CDI
granted in prior years. Mr. Stoller's 1996 compensation figure reflects
employment during the period from August 1996 through December 1996.

(5) Options to purchase 29,857 shares were granted to Mr. Kogler in 1996 as part
of the Exchange to replace options to purchase shares of ADS and CDI granted
in prior years. Mr. Kogler's 1995 compensation figure reflects employment
during the period from May 1995 to year ended December 31, 1995.

(6) Options to purchase 19,863 shares were granted to Ms. Straw in 1996 as part
of the Exchange to replace options to purchase shares of ADS and CDI granted
in prior years. Ms. Straw's 1995 compensation figure reflects employment
during the period from June 1995 to year ended December 31, 1995.

STOCK OPTIONS

The following table contains information concerning the grant of options to
purchase shares of the Company's Common Stock to each of the named executive
officers of the Company during the year ended December 31, 1996. No stock
appreciation rights ("SARS") were granted in 1996.

45
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
---------------------------------- RATES OF STOCK
NUMBER OF PERCENT OF TOTAL APPRECIATION FOR OPTION
SECURITIES OPTIONS GRANTED TERM (1)
UNDERLYING TO EMPLOYEES EXERCISE PRICE EXPIRATION ---------------------------
NAME OPTIONS GRANTED IN FISCAL YEAR ($/SHARE) DATE (2) 5% 10%
- ------------------------------- --------------- ----------------- --------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Richard De Young (3)........... 0 0% N/A N/A $ 0 $ 0
Scott Flamm(3)(4).............. 0 0% N/A N/A $ 0 $ 0
David C. Stoller(3)............ 0 0% N/A N/A $ 0 $ 0
Richard Kogler(3).............. 22,225 32.6% $ 9.00 07/30/06 $ 125,795 $ 318,788
Ann L. Straw(3)................ 15,000 22.0% $ 9.00 07/30/06 $ 84,901 $ 215,155
</TABLE>

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

(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) on the
Company's Common Stock over the term of the options. The potential
realizable values set forth above do not take into account applicable tax
and expense payments that may be associated with such option exercises.
Actual realizable value, if any, will be dependent on the future price of
the Common Stock on the actual date of exercise, which may be earlier than
the stated expiration date. The 5% and 10% assumed annualized rates of stock
price appreciation over the exercise period of the options used in the table
above are mandated by the rules of the Securities and Exchange Commission
and do not represent the Company's estimate or projection of the future
price of the Common Stock on any date. There is no representation either
express or implied that the stock price appreciation rates for the Common
Stock assumed for purposes of this table will actually be achieved.

(2) Each option is subject to earlier termination if the officer's employment
with the Company is terminated for certain reasons.

(3) Options granted in 1996 as part of the Exchange to replace options to
purchase shares of ADS and CDI granted in prior years are excluded.

(4) Mr. Flamm resigned from the Company in February 1997.

46
<PAGE>
The following table sets forth information for each of the named executive
officers with respect to the value of options outstanding as of December 31,
1996. There were no options exercised during 1996.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 AT DECEMBER 31, 1996 (1)
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- ------------- ------------ -------------
Richard De Young......................................... 111,376 171,367 $ 1,244,921 $ 1,907,651
Scott Flamm(2)........................................... 47,759 36,230 $ 529,647 $ 401,791
David C. Stoller......................................... 124,171 94,200 $ 1,377,056 $ 1,044,678
Richard Kogler........................................... 9,169 42,913 $ 101,967 $ 441,697
Ann L. Straw............................................. 6,103 28,760 $ 67,869 $ 295,844
</TABLE>

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

(1) Represents the difference between $18.50, the last reported sales price per
share of the Common Stock on December 31, 1996, and the exercise price per
share of the in-the-money options, multiplied by the number of shares
underlying the in-the-money options.

(2) Mr. Flamm resigned from the Company in February 1997.

EMPLOYMENT AGREEMENTS

In May 1996, Mr. Stoller entered into an employment agreement with the
Company, under which he serves as the Company's Chairman. The employment
agreement provides for a current annual base salary of $300,000 and terminates
on July 30, 1997, but is automatically renewed for successive one-year terms
unless either party terminates the agreement on 180 days' notice. The employment
agreement provides that Mr. Stoller will receive a $600,000 payment in the event
his employment is terminated following a "change-in-control" of the Company.

In May 1996, Mr. De Young entered into an employment agreement with the
Company, under which he serves as the Company's President. The employment
agreement provides for a current annual base salary of $300,000 and terminates
in July 1999. The employment agreement provides that Mr. De Young will receive a
$600,000 payment in the event his employment is terminated following a
"change-in-control" of the Company. In addition, if the Company retains an
officer (other than the Chairman of the Board) in a capacity that is senior to
Mr. De Young, or if his responsibilities are materially diminished (other than
for cause), Mr. De Young will have the right to terminate his employment in
which event he will be entitled to receive payments equal to the greater of
$750,000 or the remaining aggregate amount of base salary otherwise payable
under the employment agreement.

In May 1995, Mr. Kogler entered into an employment agreement with the
Company, which provides for a current annual base salary of $172,000 and an
initial term of three years (continuing on an at-will basis thereafter).

In June 1995, Ms. Straw entered into an employment agreement with the
Company, under which she serves as its Vice President and General Counsel. The
employment agreement currently provides for a current annual base salary of
$158,000 and terminates on June 2, 1998, but is automatically renewed for
successive one-year terms unless either party terminates on 30 days' notice.

47
<PAGE>
1996 STOCK OPTION PLAN

Effective as of January 1, 1996, the Company adopted the American Disposal
Services, Inc. 1996 Stock Option Plan (the "Plan"). The Plan is a stock plan
providing for the grant of incentive stock options and nonqualified stock
options to key employees and consultants of the Company and its subsidiaries.

ADMINISTRATION. The Plan is administrated by the compensation committee of
the Company's Board of Directors (the "Committee"). The Committee determines the
key employees and consultants eligible to receive options and the terms thereof,
all in a manner consistent with the Plan.

SHARES SUBJECT TO OPTIONS. The Plan provides that the total number of
shares of Common Stock that may be subject to options shall be 1,100,000 shares.
Shares subject to any option which terminates or expires unexercised will be
available for subsequent grants. In March 1997, the Board of Directors approved
an amendment to the Plan to increase the total number of shares of Common Stock
that may be subject to option grants to 1,600,000 shares. The effectiveness of
such amendment is conditioned upon the approval thereof by the stockholders of
the Company.

OPTIONS. The Plan provides for the grant of incentive stock options and
nonqualified stock options to key employees and consultants, as determined by
the Committee. The exercise price of incentive stock options granted under the
Plan shall be at least 100% of fair market value of the Common Stock on the date
of grant and the exercise price of nonqualified stock options shall be at least
equal to the par value of the Common Stock. Nonqualified stock options shall be
exercisable for not more than ten years, and incentive stock options may be
exercisable for up to ten years except as otherwise provided. The Committee may
provide that an optionee may pay for shares upon exercise of an option: (i) in
cash; (ii) in already-owned shares of Common Stock; (iii) by agreeing to
surrender then exercisable options equivalent in value; (iv) by payment through
a cash or margin arrangement with a broker; (v) in shares otherwise issuable
upon exercise of the option; or (vi) by such other medium or by any combination
of (i), (ii), (iii), (iv) or (v) as authorized by the Committee. The grant of an
option may be accompanied by a reload option, which gives an optionee who pays
the exercise price of an option with shares of Common Stock an additional option
to acquire the same number of shares that was used to pay for the original
option. Under certain circumstances, including termination of employment upon
retirement, disability or death, the option may be exercised during an extended
period.

In connection with the Exchange, all options to purchase shares of ADS and
CDI were exchanged for options to purchase shares of Common Stock under the
Plan.

48
<PAGE>
CERTAIN TRANSACTIONS

Mr. Stoller is an officer of Charterhouse Environmental Capital, an
affiliate of Charterhouse, which provided management and consulting services to
the Company from 1993 through the closing of the Company's initial public
offering on July 30, 1996. These services included: services relating to the
Company's banking and other financial relationships including assistance in
connection with the financing and refinancing of corporate indebtedness;
analysis and assistance from both a financial and operational standpoint in
connection with the expansion of the Company's business operations; assistance
with strategic planning; and advice related to acquisitions. Fees paid by the
Company to Charterhouse Environmental Capital were $515,000 in 1994, $659,000 in
1995 and $466,000 in 1996.

On November 16, 1995, the Company borrowed $12.5 million from Charterhouse
Equity Partners II, L.P. See "Principal Stockholders." The loan was scheduled to
mature on November 15, 1996 and bore interest at a rate per annum equal to the
prime rate plus 3%. The Company repaid this loan in June 1996 with $7.5 million
of borrowings under the Credit Facility and the remaining $5.0 million was
repaid with existing cash.

Effective as of January 1, 1996, the Company entered into agreements with
each of its executive officers providing that, upon such officer's exercise of
stock options granted in exchange for options previously granted by CDI, the
Company will pay to such officer an amount equal to the tax savings actually
recognized by the Company as a result of the deductions attributable to such
exercise. In no event can the payment to be received by an executive officer
under such agreement exceed the difference between the federal income tax
actually paid by such officer as a result of such option exercise and the amount
of federal income tax that would have been paid by such officer had such option
exercise been taxed at the capital gains rate.

All future transactions, including loans, between the Company and its
officers, directors, principal stockholders or their affiliates will be subject
to approval of a majority of the independent and disinterested outside
directors, and will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.

49
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of April 30, 1997 and as adjusted to
reflect the sale of the Common Stock offered hereby, by: (i) each person known
by the Company to be the beneficial owner of more than 5% of the Company's
Common Stock; (ii) each of the Company's directors; (iii) the Company's Chief
Executive Officer and each of the Company's other current executive officers;
and (iv) the Company's directors and executive officers as a group.

<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP (1)
------------------------
<S> <C> <C> <C>
NUMBER OF SHARES
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNED OFFERING OFFERING
- --------------------------------------------------------------------------- ----------------- ----------- -----------
Charterhouse Environmental Holdings, L.L.C. (2)............................ 1,867,289 21.05% 15.09%
Charterhouse Equity Partners II, L.P. (3).................................. 2,511,973 28.31% 20.30%
CDI Equity, LLC (4)........................................................ 644,109 7.26% 5.21%
The Equitable Companies Incorporated (5)................................... 927,200 10.45% 7.49%
The Capital Group Companies, Inc. (5)...................................... 575,000 6.48% 4.65%
David C. Stoller (6)(7).................................................... 124,172 1.38% *
Richard De Young (6)(8).................................................... 121,536 1.35% *
Stephen P. Lavey........................................................... -- -- --
Merril M. Halpern (7)...................................................... -- -- --
A. Lawrence Fagan (7)...................................................... -- -- --
Richard T. Henshaw, III (7)................................................ -- -- --
G.T. Blankenship (9)....................................................... 100,935 1.14% *
Norman Steisel............................................................. -- -- --
Richard Kogler (6)......................................................... 10,345 * *
Ann L. Straw (6)........................................................... 6,103 * *
John J. McDonnell (6)(10).................................................. 33,940 * *
Lawrence R. Conrath (6)(11)................................................ 20,246 * *
Mary T. Ryan (12).......................................................... 4,000 * *
All directors and executive officers as a group (13 persons)(6)............ 421,277 4.59% 3.32%
</TABLE>

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

* Less than one percent.

(1) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to 525,000 additional shares of Common Stock from the Company. See
"Underwriting."

(2) The address of Charterhouse Environmental Holdings, L.L.C. ("Charter
Environmental") is c/o Charterhouse Group International, Inc., 535 Madison
Avenue, New York, New York 10022. Charterhouse Equity Partners, L.P. ("CEP")
and StollerCo Partners, L.P. ("StollerCo") are the members of Charter
Environmental, with a majority of the ownership interests being held by CEP.
The general partner of CEP is CHUSA Equity Investors, L.P., whose general
partner is Charterhouse Equity, Inc., a wholly-owned subsidiary of
Charterhouse. As a result of the foregoing, all of the shares of Common
Stock held by Charter Environmental would, for purposes of Section 13(d) of
the Securities Exchange Act of 1934, be considered to be beneficially owned
by Charterhouse. Mr. Stoller is a partner of StollerCo and disclaims
beneficial ownership of shares of Common Stock held of record by Charter
Environmental.

(3) The address of Charterhouse Equity Partners II, L.P. ("CEP II") is c/o
Charterhouse Group International, Inc., 535 Madison Avenue, New York, New
York 10022. The general partner of CEP II is CHUSA Equity Investors II,
L.P., whose general partner is Charterhouse Equity II, Inc., a wholly-owned
subsidiary of Charterhouse. As a result of the foregoing, all of the shares
of Common Stock

50
<PAGE>
held by CEP II would, for purposes of Section 13(d) of the Securities
Exchange Act of 1934, be considered to be beneficially owned by
Charterhouse.

(4) The address of CDI Equity, LLC ("CDI Equity") is c/o Aetna Life and Casualty
Company, Conveyor IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156.
The member interests in CDI Equity, LLC are held as follows: 99% by Aetna
Life Insurance Company, which is a wholly-owned subsidiary of Aetna Life and
Casualty Company, and 1% by CDI Equity, Inc., a wholly-owned subsidiary of
Aetna Life Insurance Company.

(5) Information regarding The Equitable Companies Incorporated ("Equitable") and
The Capital Group Companies, Inc. ("Capital Group") is based on Schedules
13G filed by such persons with the Securities and Exchange Commission as of
December 31, 1996. Equitable filed its 13G jointly on behalf of itself, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances
I.A.R.D. Mutuelle, Alpha Assurances Vie Mutuelle, AXA Courtage Assurance
Mutuelle and AXA. The address of Equitable is 787 Seventh Avenue, New York,
NY 10019. The address of the Capital Group is 353 South Hope Street, Los
Angeles, CA 90071.

(6) Includes options exercisable within 60 days of March 31, 1997 to purchase
124,172, 119,069, 10,345, 32,944, 19,348 and 6,103 shares granted under the
American Disposal Services, Inc. 1996 Stock Option Plan to Messrs. Stoller,
De Young, Kogler, McDonnell and Conrath and Ms. Straw, respectively. For
purposes of computing the percentage of outstanding shares beneficially held
by each person or group of persons named above on a given date, any security
which such person or persons has the right to acquire within 60 days after
such date is deemed to be beneficially owned for the purpose of computing
the percentage ownership of such person or group of persons, but is not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.

(7) Merril M. Halpern and A. Lawrence Fagan are executive officers, directors
and stockholders of Charterhouse and Richard T. Henshaw, III and David C.
Stoller are executive officers of Charterhouse. Messrs. Halpern, Fagan,
Henshaw and Stoller each disclaim beneficial ownership of the shares of
Common Stock beneficially owned by Charterhouse.

(8) Includes 2,467 shares held jointly by Mr. De Young and his wife.

(9) Includes 7,995 shares held by Mr. Blankenship's wife, of which Mr.
Blankenship disclaims beneficial ownership.

(10) Includes 996 shares held by Mr. McDonnell's minor children.

(11) Includes 498 shares held jointly by Mr. Conrath and his wife and 400 shares
held in an IRA for the benefit of Mr. Conrath.

(12) Shares held jointly by Ms. Ryan and her husband.

51
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock"). The discussions of the Common
Stock and Preferred Stock here and elsewhere in this Prospectus are qualified in
their entirety by reference to: (i) the Certificate of Incorporation of the
Company, as amended, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part; and (ii) the
applicable Delaware law.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Stockholders casting a plurality of votes of the stockholders entitled
to vote in an election of directors may elect all of the directors standing for
election. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor, subject to any preferential dividend rights of
Preferred Stock that may be issued at such future time or times. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company after the
payment of all debts and other liabilities and subject to the prior rights of
Preferred Stock that may be outstanding at such time. Holders of Common Stock
have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company in the Offering will be, when issued and paid for, fully paid and
nonassessable. The rights, preferences and privileges of holders of Common Stock
are subject to the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future.

As of March 31, 1997, there were 8,872,501 shares of Common Stock
outstanding. After giving effect to the issuance of the 3,500,000 shares of
Common Stock offered by the Company hereby (assuming no exercise of the
Underwriters' over-allotment option), there will be 12,372,501 shares of Common
Stock outstanding upon the closing of the Offering.

UNDESIGNATED PREFERRED STOCK

The Company's Certificate of Incorporation authorizes 5,000,000 shares of
Preferred Stock. The Board of Directors has the authority to issue the Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series,
without further vote or action by the stockholders. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the stockholders and may
adversely affect the voting and other rights of the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control of others. At present, the Company has no plans to issue any of
the Preferred Stock.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the

52
<PAGE>
voting stock of the corporation outstanding at the time the transaction
commenced (for the purposes of determining the number of shares outstanding,
under Delaware law, those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer are excluded from the
calculation); or (iii) on or subsequent to such date, the business combination
is approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.

Section 203 defines a business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

Certain provisions of the Company's Certificate of Incorporation and
Delaware law may have a significant effect in delaying, deferring or preventing
a change in control of the Company and may adversely affect the voting and other
rights of other holders of Common Stock. In particular, the ability of the Board
of Directors to issue Preferred Stock without further stockholder approval may
have the effect of delaying, deferring or preventing a change in control of the
Company and may adversely affect the voting and other rights of other holders of
Common Stock.

REGISTRATION RIGHTS

After the Offering, the holders of 5,023,371 shares of Common Stock and
warrants to purchase 168,905 shares of Common Stock will be entitled to certain
rights with respect to the registration of such shares under the Securities Act.
Under the terms of the agreements between the Company and the holders of such
registrable securities, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include shares
of such Common Stock therein. The holders of such registrable securities may
also require the Company on two separate occasions to file a registration
statement under the Securities Act at the Company's expense with respect to
their shares of Common Stock, and the Company is required to use its diligent
reasonable efforts to effect such registration. These rights are subject to
certain conditions and limitations, among them the right of the underwriters of
an offering to limit the number of shares included in such registration.

TRANSFER AGENT

The Transfer Agent for the Common Stock is the Continental Stock Transfer &
Trust Company, 2 Broadway, New York, New York 10004. Its telephone number is
(212) 509-4000.

53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have approximately
12,372,501 shares of Common Stock outstanding (assuming no exercise of the
Underwriters' overallotment option). Of these shares, the 3,162,500 shares sold
in the Company's initial public offering and the 3,500,000 shares sold in the
Offering will be freely transferable without restriction or registration under
the Securities Act, except for any shares purchased by an existing "affiliate"
of the Company, as that term is defined by the Securities Act (an "Affiliate"),
which shares will be subject to the resale limitations of Rule 144 adopted under
the Securities Act.

After the Offering, the holders of 5,023,371 shares of Common Stock, and
warrants to purchase 168,905 shares of Common Stock, will be entitled to certain
rights with respect to the registration of such shares under the Securities Act.
See "Description of Capital Stock--Registration Rights." Registration of such
shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by Affiliates) immediately upon the effectiveness of such
registration.

The Company's officers and directors and Charter Environmental, CEP II and
CDI Equity, who beneficially own an aggregate of 5,444,648 shares of Common
Stock or options or warrants to purchase shares of Common Stock, have agreed not
to sell, offer to sell, distribute, pledge, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, or encumber, or exercise any
registration rights with respect to, any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock, or any securities convertible
into or exchangeable for shares of Common Stock now owned by them or hereafter
acquired or with respect to which they have acquired or hereafter acquire the
power of disposition for a period of 180 days after the date of this Prospectus,
without the prior written consent of Oppenheimer & Co., Inc. Additionally, the
Company has agreed not to sell, offer to sell, distribute, pledge, grant any
option for the sale of, or otherwise dispose of, directly or indirectly, or
encumber, or exercise registration rights with respect to, any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock now owned
by them or hereafter acquired or with respect to which they have acquired or
hereafter acquire the power of disposition for a period 180 days after the date
of this Prospectus, without the prior written consent of Oppenheimer & Co.,
Inc., subject to certain limited exceptions.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who owns shares that were purchased from the
Company (or any Affiliate) at least one year previously, including persons who
may be deemed Affiliates of the Company, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the then outstanding shares of the Company's Common Stock or the average weekly
trading volume of the Company's Common Stock in the Nasdaq National Market
during the four calendar weeks preceding the date on which notice of the sale is
filed with the Securities and Exchange Commission (the "Commission"). Sales
under Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an Affiliate of the Company at any time during the 90 days
preceding a sale, and who owns shares within the definition of "restricted
securities" under Rule 144 under the Securities Act that were purchased from the
Company (or any Affiliate) at least two years previously, would be entitled to
sell such shares under Rule 144(k) without regard to the volume limitations,
manner of sale provisions, public information requirements or notice
requirements. Upon completion of the Offering, 265,353 shares of Common Stock
not subject to the 180 day restriction described above will be eligible for sale
under Rule 144.

54
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
the Underwriters, for whom Oppenheimer & Co., Inc. and Credit Suisse First
Boston Corporation are acting as Representatives, has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth opposite the name of such Underwriter below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ------------------------------------------------------------------------------ --------------
<S> <C>
Oppenheimer & Co., Inc........................................................
Credit Suisse First Boston Corporation........................................ .............

--------------
Total......................................................................... 3,500,000
--------------
--------------
</TABLE>

The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of $ per share. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
changed by the Representatives. The Underwriters are obligated to take and pay
for all of the shares of Common Stock offered hereby (other than those covered
by the over-allotment option described below) if any are taken.

The Company has granted the Underwriters an option, exercisable for up to 30
days after the date of this Prospectus, to purchase up to an aggregate of
525,000 additional shares of Common Stock to cover over-allotments, if any. If
the Underwriters exercise such option, the Underwriters have severally agreed,

55
<PAGE>

subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them as shown in
the foregoing table bears to the 3,500,000 shares of Common Stock offered
hereby. The Underwriters may exercise such option only to cover over-allotments
made in connection with the sale of the shares of Common Stock offered hereby.

The Company has agreed to indemnify the representatives of the Underwriters
and the several Underwriters against certain liabilities, including, without
limitation liabilities under the Securities Act.

The Company's officers and directors and Charter Environmental, CEP II and
CDI Equity, who beneficially own an aggregate of 5,444,648 shares of Common
Stock or options or warrants to purchase shares of Common Stock, have agreed not
to sell, offer to sell, distribute, pledge, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, or encumber, or exercise
registration rights with respect to, any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock, or any securities convertible
into or exchangeable for shares of Common Stock now owned by them or hereafter
acquired or with respect to which they have acquired or hereafter acquire the
power of disposition for a period of 180 days after the date of this Prospectus
without the prior written consent of Oppenheimer & Co., Inc. The Company has
also agreed not to sell, offer to sell, distribute, pledge, grant any option for
the sale of, or otherwise dispose of, directly or indirectly, or encumber, or
exercise registration rights with respect to, any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock, or any securities
convertible into or exchangeable for shares of Common Stock now owned by them or
hereafter acquired or with respect to which they have acquired or hereafter
acquire the power of disposition for a period of 180 days after the date of this
Prospectus, without the prior written consent of Oppenheimer & Co., Inc.,
subject to certain limited exceptions. See "Shares Eligible for Future Sale."

The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions,
penalty bids and "passive" market making in accordance with Regulation M under
the Securities Act of 1934, as amended (the "Exchange Act"). Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the Common Stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. In "passive" market making, market makers in the
Common Stock who are Underwriters or prospective underwriters may, subject to
certain limitations, make bids for or purchases of the Common Stock until the
time, if any, at which a stabilizing bid is made. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
Common Stock originally sold by such syndicate member is purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stablizing transactions, syndicate covering transactions, penalty bids and
passive market making may cause the price of the Common Stock to be higher than
it would otherwise be in the absence of such transactions. These transactions
may be effected on the Nasdaq National Market or otherwise and, if commenced,
may be discontinued at any time.

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for the
Company by Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New
York 10036. Certain legal matters will be passed upon for the Underwriters by
Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178.

EXPERTS

The Consolidated Financial Statements of the Company at December 31, 1995
and 1996 and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and the

56
<PAGE>
Registration Statement of which this Prospectus forms a part have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

The Waste Management, Inc. Evansville, Indiana Operations Statement of Net
Tangible Assets to be Sold at December 31, 1996 and the Statements of Revenue
and Direct Operating Expenses for each of the two years in the period ended
December 31, 1996, appearing in this Prospectus and the Registration Statement
of which this Prospectus forms a part have been audited by Arthur Andersen LLP,
independent public accountants, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

The financial statements of Liberty Disposal, Inc. at December 31, 1995 and
1996 and for each of the two years in the period ended December 31, 1996,
appearing in this Prospectus and the Registration Statement of which this
Prospectus forms a part have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Shares offered hereby.
This Prospectus, which forms a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Shares offered hereby, reference
is made to the Registration Statement. Statements contained in this Prospectus
as to the contents of any contract or other document that has been filed as an
exhibit to the Registration Statement are qualified in their entirety by
reference to such exhibits for a complete statement of their terms and
conditions. Each such statement is qualified in its entirety by such reference.
The Company also files periodic reports and other information required to be
filed pursuant to the Exchange Act. The Registration Statement and such periodic
reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth Street
N.W., Washington, D.C. 20549 or at certain of the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, upon payment
of the fees prescribed by the Commission. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450 Fifth Street
N.W., Washington, D.C. 20549, at prescribed rates.

The Common Stock is quoted on the Nasdaq National Market under the symbol
"ADSI." Reports and other information concerning the Company may be inspected at
the offices of the National Association of Securities Dealers, 1735 K Street
N.W., Washington, D.C. 20006.

57
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AMERICAN DISPOSAL SERVICES, INC. AND SUBSIDIARIES:
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors........................................................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995................................................ F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994............... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994..... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994............... F-6
Notes to Consolidated Financial Statements............................................................... F-7

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Consolidated Financial Statements.............................................................. F-19
Pro Forma Condensed Consolidated Balance Sheet at December 31, 1996...................................... F-20
Pro Forma Consolidated Income Statement for the year ended December 31, 1996............................. F-21
Notes to Pro Forma Consolidated Financial Statements..................................................... F-22

WASTE MANAGEMENT, INC. EVANSVILLE, INDIANA OPERATIONS:
Report of Independent Public Accountants................................................................. F-24
Statement of Net Tangible Assets to be Sold as of December 31, 1996...................................... F-25
Statements of Revenue and Direct Operating Expenses for the years ended December 31, 1996 and 1995....... F-26
Notes to Financial Statements............................................................................ F-27

LIBERTY DISPOSAL, INC.:
Report of Independent Auditors........................................................................... F-31
Balance Sheets at December 31, 1996 and 1995............................................................. F-32
Statements of Income for the years ended December 31, 1996 and 1995...................................... F-33
Statements of Stockholder's Equity for the years ended December 31, 1996 and 1995........................ F-34
Statements of Cash Flows for the years ended December 31, 1996 and 1995.................................. F-35
Notes to Financial Statements............................................................................ F-36
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
American Disposal Services, Inc.

We have audited the accompanying consolidated balance sheets of American
Disposal Services, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of American
Disposal Services, Inc. at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Chicago, Illinois
February 26, 1997, except as to

Note 5 for which the

date is March 21, 1997 and
except as to Note 10
for which the date is
March 25, 1997

F-2
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1996 1995
---------- ----------
Current assets:
Cash and cash equivalents............................................................... $ 2,301 $ 6,383
Cash held in escrow..................................................................... -- 156
Trade receivables--Net of allowance for doubtful accounts of $473 and $476.............. 9,741 6,331
Prepaid expenses........................................................................ 1,248 686
Inventory............................................................................... 354 312
---------- ----------
Total current assets...................................................................... 13,644 13,868

Property and equipment, net............................................................... 93,692 81,250

Other assets:
Cost over fair value of net assets of acquired businesses, net of accumulated
amortization of $1,374 and $823....................................................... 31,237 15,739
Other intangible assets, net of accumulated amortization of $439 and $305............... 1,610 1,081
Debt issuance costs, net of accumulated amortization of $204 and $71.................... 2,392 815
Other................................................................................... 2,411 1,940
---------- ----------
$ 144,986 $ 114,693
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 3,359 $ 3,185
Accrued liabilities..................................................................... 4,249 2,360
Deferred revenues....................................................................... 2,245 1,202
Current portion of long-term debt and capital lease obligations......................... 2,572 3,440
Note payable to stockholder............................................................. -- 12,500
---------- ----------
Total current liabilities................................................................. 12,425 22,687

Long-term debt and capital lease obligations, net of current portion...................... 65,445 48,789
Accrued environmental and landfill costs.................................................. 7,603 6,214
Deferred income taxes..................................................................... 1,416 1,240

Redeemable preferred stock................................................................ -- 1,908

Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares authorized; shares issued and
outstanding; 1996--8,872,381; 1995--5,662,865......................................... 89 57
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued and
outstanding in 1996 and 1995.......................................................... -- --
Warrants outstanding...................................................................... 107 107
Additional paid-in capital................................................................ 66,170 41,590
Accumulated deficit....................................................................... (8,269) (7,899)
---------- ----------
58,097 33,855
---------- ----------
$ 144,986 $ 114,693
---------- ----------
---------- ----------
</TABLE>

See accompanying notes.

F-3
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ----------
Revenues................................................................... $ 56,804 $ 30,004 $ 18,517
Cost of operations......................................................... 30,376 17,286 12,647
Selling, general, and administrative expenses.............................. 8,328 5,882 4,910
Depreciation and amortization.............................................. 12,334 6,308 3,226
---------- ---------- ----------
Operating income (loss).................................................... 5,766 528 (2,266)
Interest expense........................................................... (5,745) (3,030) (1,497)
Interest income............................................................ 260 189 2
Other income............................................................... 179 -- --
---------- ---------- ----------
Income (loss) before income taxes and extraordinary item................... 460 (2,313) (3,761)
Income tax benefit (expense)............................................... (245) (332) 1,372
---------- ---------- ----------
Income (loss) before extraordinary item.................................... 215 (2,645) (2,389)
Extraordinary item -- loss on early retirement of debt..................... (476) (908) --
---------- ---------- ----------
Net loss................................................................... (261) (3,553) (2,389)
Preferred stock dividend................................................... (109) (190) --
---------- ---------- ----------
Net loss applicable to common stockholders................................. $ (370) $ (3,743) $ (2,389)
---------- ---------- ----------
---------- ---------- ----------
Per common share:
Income (loss) before extraordinary item.................................. $ .02 $ (.80) $ (.99)
Extraordinary item....................................................... (.07) (.26) --
---------- ---------- ----------
Net loss................................................................. $ (.05) $ (1.06) $ (.99)
---------- ---------- ----------
---------- ---------- ----------
Weighted average common stock and common stock equivalent shares
outstanding.............................................................. 7,063,928 3,527,688 2,411,381
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See accompanying notes.

F-4
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- WARRANTS PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT OUTSTANDING CAPITAL DEFICIT EQUITY
---------- ----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance -- December 31, 1993......... 2,099,952 $ 21 $ 107 $ 14,170 $ (1,767) $ 12,531
Issuance of common stock, net of
issuance costs..................... 282,393 3 -- 1,987 -- 1,990
Net loss............................. -- -- -- -- (2,389) (2,389)
---------- --- ----- ----------- ------------ ------------
Balance -- December 31, 1994......... 2,382,345 24 107 16,157 (4,156) 12,132
Issuance of common stock, net of
issuance costs..................... 3,280,520 33 -- 25,433 -- 25,466
Net loss............................. -- -- -- -- (3,553) (3,553)
Dividends on preferred stock......... -- -- -- -- (190) (190)
---------- --- ----- ----------- ------------ ------------
Balance -- December 31, 1995......... 5,662,865 57 107 41,590 (7,899) 33,855
Issuance of common stock, net of
issuance costs..................... 3,162,500 32 -- 24,573 -- 24,605
Exercise of common stock warrants and
options............................ 47,016 -- -- 7 -- 7
Dividends on preferred stock......... -- -- -- -- (109) (109)
Net loss............................. -- -- -- -- (261) (261)
---------- --- ----- ----------- ------------ ------------
Balance at December 31, 1996......... 8,872,381 $ 89 $ 107 $ 66,170 $ (8,269) $ 58,097
---------- --- ----- ----------- ------------ ------------
---------- --- ----- ----------- ------------ ------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ---------
OPERATING ACTIVITIES
Net loss........................................................................ $ (261) $ (3,553) $ (2,389)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Extraordinary item, net....................................................... 476 908 --
Depreciation and amortization................................................. 12,334 6,308 3,226
Provision for environmental and landfill costs................................ 571 292 48
Deferred income taxes......................................................... 176 47 (1,372)
Gain on sale of fixed assets.................................................. (98) -- --
Changes in operating assets and liabilities, net of effects from acquisitions:
Trade receivables........................................................... (2,600) (340) (625)
Prepaid expenses, cash held in escrow and other assets...................... (1,029) (33) (361)
Inventory................................................................... (42) (128) (96)
Accounts payable, accrued liabilities and accrued environmental and landfill
costs..................................................................... 1,522 1,846 235
Deferred revenue............................................................ 656 254 210
---------- ---------- ---------
Net cash provided by (used in) operating activities............................. 11,705 5,601 (1,124)

INVESTING ACTIVITIES
Capital expenditures............................................................ (14,003) (6,173) (5,600)
Cost of acquisitions............................................................ (25,029) (62,201) (580)
---------- ---------- ---------
Net cash used in investing activities........................................... (39,032) (68,374) (6,180)

FINANCING ACTIVITIES
Net proceeds from issuances of common stock..................................... 24,605 25,466 1,990
Exercise of stock options and warrants.......................................... 7 -- --
Redemption of preferred stock................................................... (1,950) -- --
Net proceeds from issuance of preferred stock................................... -- 1,908 --
Preferred stock dividend........................................................ (109) (190) --
Proceeds from issuance of long-term debt........................................ 66,950 32,568 6,319
Repayments of indebtedness...................................................... (51,162) (2,698) (2,511)
Proceeds from (payment of) note payable to stockholder.......................... (12,500) 12,500 --
Debt issuance costs............................................................. (2,596) (946) (80)
---------- ---------- ---------
Net cash provided by financing activities....................................... 23,245 68,608 5,718
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents............................ (4,082) 5,835 (1,586)
Cash and cash equivalents, at beginning of year................................. 6,383 548 2,134
---------- ---------- ---------
Cash and cash equivalents, at end of year....................................... $ 2,301 $ 6,383 $ 548
---------- ---------- ---------
---------- ---------- ---------

Supplemental cash flow information:
Cash paid for interest.......................................................... $ 6,222 $ 2,515 $ 1,426
Cash (refunds) paid for income taxes............................................ (159) 478 --
</TABLE>

See accompanying notes.

F-6
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996, 1995 AND 1994

1. FORMATION AND BASIS OF PRESENTATION

ADS, Inc. (ADS) was organized January 15, 1991, to acquire, develop, and
operate non-hazardous municipal solid waste disposal, collection, and transfer
operations and provide non-hazardous solid waste disposal management services to
commercial, industrial, and residential customers. During 1993, an affiliate of
Charterhouse Equity Partners, L.P. (CEP) purchased a controlling interest in
ADS.

County Disposal, Inc. (County) was incorporated by Charterhouse Equity
Partners II, L.P. (CEPII) on April 27, 1995, for the purpose of acquiring
certain net assets of Envirite Corporation (Envirite). On April 28, 1995,
Envirite and County entered into an Asset Purchase Agreement whereby County
agreed to purchase from Envirite certain landfill facilities and waste
transportation and collection equipment located in Livingston County, Illinois,
and Wyandot County, Ohio; all of the issued and outstanding capital stock of
County Environmental Services, Inc., a wholly-owned subsidiary of Envirite,
which owned and operated a landfill facility and waste transportation and
collection equipment located in Clarion County, Pennsylvania; and certain
related assets and assumption of certain liabilities.

Effective January 1, 1996, the stockholders of ADS and County exchanged
their shares for shares of a newly created holding company by the name of
American Disposal Services, Inc. (the Company). This share exchange (the
Exchange) qualifies as a transfer of companies under common control as
affiliates of Charterhouse Group International, Inc. are the general partners
and in control of CEP and CEPII and, accordingly, the transaction has been
accounted for at historical cost in a manner similar to pooling of interests
accounting. The financial statements have been prepared as if this Exchange had
occurred as of December 31, 1993.

In July 1996, the Company issued 3,162,500 shares of common stock at $9.00
per share in its initial public offering. Proceeds from the offering, net of
underwriting commissions and related expenses, were $24.6 million. Immediately
following the offering, the Company had 8,825,365 common stock shares issued and
outstanding. The offering proceeds were used to finance acquisitions and paydown
a portion of the debt facility.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration
of credit risks consist primarily of trade receivables. Credit risk on trade
receivables is minimized as a result of the large and diverse nature of the
Company's customer base. No single group or customer represents greater than 10%
of total accounts receivable. The Company maintains an allowance for losses
based on the expected collectibility of accounts receivable. Credit losses have
been within management's expectations.

F-7
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS

Trade receivables, trade payables, and debt obligations are carried at cost
which approximates fair value.

USE OF ESTIMATES

CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent cash in banks and liquid investments
with original maturities of three months or less.

CASH HELD IN ESCROW

Cash held in escrow represents cash held in banks restricted to fund
obligations incurred in acquiring businesses.

INVENTORY

Inventory is stated at the lower of cost (first in, first out method) or
market and consists principally of equipment parts, materials, and supplies.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation of equipment is
computed using the straight-line method over the estimated useful lives of the
respective assets as follows:

<TABLE>
<S> <C>
Vehicles and equipment..................... 3 to 12 years

25 to 30
Buildings.................................. years
</TABLE>

Expenditures for major renewals are capitalized, and expenditures for
routine maintenance and repairs are charged to expense as incurred.

Capitalized landfill costs include expenditures for land and related
airspace, permitting costs and preparation costs. Landfill permitting and
preparation costs represent only direct costs related to these activities,
including legal, engineering, construction of landfill improvements, cell
development costs, and the direct costs of Company personnel dedicated for these
purposes. Preparation costs for individual secure land disposal cells are
recorded in property and equipment and amortized as the airspace is filled.

INTANGIBLE ASSETS

The cost over fair value of tangible net assets of acquired businesses
represents long-lived intangible assets including routes, tradenames and
goodwill and is amortized on a straight-line method over periods

F-8
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

not exceeding 40 years. Other intangible assets, substantially all of which are
covenants not to compete and customer lists, are amortized on the straight-line
method over their estimated lives, typically no more than 12 years. Amortization
expense for fiscal years 1996, 1995, and 1994 related to intangible assets was
approximately $1.0 million, $1.4 million, and $600,000, respectively. In 1995,
the Company determined not to enforce certain covenants not to compete which
arose from 1993 transactions with the net book value of such covenants of
$505,000, was fully written-off and included in 1995 amortization expense.

The Company continually evaluates the value and future benefits of its
intangibles. The Company assesses recoverability from future operations using
income from operations of the related acquired business as a measure. Under this
approach, the carrying value would be reduced if it becomes probable that the
Company's best estimate for expected future cash flows of the related business
would be less than the carrying amount of the intangible over the remaining
amortization period. For the three year period ended December 31, 1996, there
were no adjustments to the carrying amounts of intangibles resulting from these
evaluations.

DEFERRED ACQUISITION COSTS

The Company capitalizes engineering, legal, accounting, and other direct
costs paid to outside parties that are incurred in connection with potential
acquisitions. The Company, however, routinely evaluates such capitalized costs
and charges to expense those relating to abandoned acquisition candidates.
Indirect acquisition costs, such as executive salaries, general corporate
overhead, and other corporate services are expensed as incurred. Net deferred
acquisition costs, included in other intangible assets, were approximately
$545,000 and $370,000 at December 31, 1996 and 1995, respectively.

ACCRUED ENVIRONMENTAL AND LANDFILL COSTS

Accrued environmental and landfill costs represent landfill accruals which
are provided for environmental compliance costs and closure and post-closure
costs. These accruals are based on accounting estimates by management determined
primarily from the results of engineering studies and reviews and on
interpretation of the technical standards of the Environmental Protection
Agency's Subtitle D regulations, or the approved state counterpart, and recently
promulgated air emissions standards under the Clean Air Act, as they apply on a
state-by-state basis. The Company typically provides accruals for these costs as
permitted airspace of such facilities is consumed. Closure and post-closure
monitoring and maintenance costs represent the costs related to cash
expenditures yet to be incurred when a landfill facility ceases to accept waste
and closes. Certain of these accrued environmental and landfill costs,
principally capping, leachate collection and removal, and methane gas control
and recovery, are operating and maintenance costs to be incurred during the
30-year period after the facility closes, but are accrued during the operating
life of the site in accordance with the landfill operation requirements of
Subtitle D and the EPA's recently promulgated air emissions standards. An
environmental and landfill cost accrual is provided as a liability assumed for
purchased landfill operations based on permitted airspace consumed prior to the
acquisition date and is included in the purchase price allocation (see Note 3).
The Company has estimated that, as of December 31, 1996, post-closure expenses,
including cap maintenance, groundwater monitoring, methane gas control and
recovery and leachate treatment/disposal for up to 30 years after closure in
certain cases, will approximate $10.9 million. In addition, the Company has
estimated that, as of December 31, 1996, closure costs expected to occur during
the operating lives of these facilities' useful lives will approximate

F-9
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$35.2 million. These accruals are reviewed by management periodically and
revised prospectively for any significant changes in future cost estimates.

INCOME TAXES

Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

REVENUE RECOGNITION

Landfill revenues are recorded at the date of actual waste disposal.
Revenues billed prior to the performance of services are deferred and recorded
as income in the period in which the related services are rendered, generally
over a three-month period.

EARNINGS PER SHARE

Earnings per share is based on the weighted average number of common stock
and common stock equivalent shares outstanding during each year and incremental
shares from the assumed exercise of options and warrants granted and computed
using the treasury stock method.

STOCK-BASED COMPENSATION

The Company typically grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. The Company accounts for such stock option grants in accordance
with Accounting Principles Board Opinion No. 25 "Accounting for Stock Options
Issued to Employees" (APB 25), and, accordingly, typically recognizes no
compensation expense for these stock option grants.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of ("SFAS No. 121"), which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. SFAS No. 121 also
addressees the accounting for long-lived assets that are expected to be disposed
of. SFAS No. 121 is effective for the Company's fiscal year ended December 31,
1996. The adoption of this Statement did not have a material effect on the
Company's financial position or results of operations.

In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 96-1, "Environmental Remediation Liabilities." The SOP is effective for
fiscal years beginning after December 15, 1996, and provides that enviromental
remediation liabilities should be accrued when the criteria of FAS 5,
"Accounting for Contingencies," are met. Included in the SOP are benchmarks to
aid in the determination of when such criteria are met and environmental
liabilities should be recognized. It also provides that the accrual for such
liabilities should include future costs of those employees expected to devote a
significant amount of

F-10
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

time directly to the remediation effort. The Company does not believe that the
adoption of SOP 96-1 will have a material impact on its financial statements.

3. ACQUISITIONS

The acquisitions below have been accounted for using the purchase method of
accounting and, accordingly, the results of their operations have been included
in the Company's results of operations from their respective acquisition dates.
The purchase prices have been allocated to the assets acquired and liabilities
assumed based on their fair values at their respective acquisition dates with
the residual allocated to cost over fair value of net assets acquired.

During 1996 the Company acquired 16 non-hazardous solid waste businesses,
consisting of 16 collection operations and two transfer stations. As described
in Note 1, the Company acquired three non-hazardous solid waste landfills and a
solid waste collection operation (the Envirite Acquisition) during 1995.

The Company has not completed its valuation of certain of its 1996 purchases
and the purchase price allocations are subject to change when additional
information concerning asset and liability valuations is completed.

The purchase prices allocated to the net assets acquired are as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Property and equipment.................................................. $ 8,425 $ 62,288
Accounts receivable and inventory....................................... 810 3,363
Other assets............................................................ 785 1,664
Cost over fair value of net assets acquired............................. 15,642 3,060
Total liabilities assumed............................................... (633) (8,174)
--------- ---------
Total cash paid......................................................... $ 25,029 $ 62,201
--------- ---------
--------- ---------
</TABLE>

The pro forma unaudited results of operations for the years ended December
31, 1996 and 1995, assuming each acquisition above had occurred on January 1,
1995, are as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
<S> <C> <C>
1996 1995
---------- ----------
Revenues............................................................ $ 64,356 $ 56,371
Operating income (loss)............................................. 5,966 (1,106)
Net loss applicable to common stockholders.......................... (370) (8,500)
Pro forma loss per share of common stock............................ (.05) (2.41)
Weighted average common stock and common stock equivalent shares
outstanding....................................................... 7,063,928 3,527,688
</TABLE>

F-11
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

3. ACQUISITIONS (CONTINUED)
The pro forma results do not purport to be indicative of the results of
operations which actually would have resulted had the acquisitions occurred on
January 1, 1995 nor are they necessarily indicative of future operating results.

4. PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
<S> <C> <C>
1996 1995
---------- ---------
Land................................................................... $ 5,417 $ 5,038
Landfills.............................................................. 78,547 66,529
Buildings.............................................................. 3,285 2,695
Vehicles and equipment................................................. 23,977 14,335
---------- ---------
111,226 88,597
Less: Accumulated depreciation and amortization........................ (17,534) (7,347)
---------- ---------
$ 93,692 $ 81,250
---------- ---------
---------- ---------
</TABLE>

F-12
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

5. OBLIGATIONS

Obligations, which approximate fair value, are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Long-term debt:
Acquisition loan, ING Capital Corporation................................................. $ 41,506 $ --
Term loan, ING Capital Corporation........................................................ 24,750 --
Other borrowings, with interest rates ranging from 7.0% to 11.0%.......................... 1,101 1,285
Term loan, Bank of America................................................................ -- 20,000
Revolving loan, Bank of America........................................................... -- 10,847
Term loan A, ING Capital Corporation...................................................... -- 12,525
Term loan B, ING Capital Corporation...................................................... -- 4,000
Revolving loan, ING Capital Corporation................................................... -- 2,423
Capital lease obligations:
Capital lease obligations with interest and principal due monthly through 1999, at various
interest rates ranging from 6.0% to 9.5%, secured by equipment.......................... 660 1,149
--------- ---------
68,017 52,229
Less: Current portion....................................................................... 2,572 3,440
--------- ---------
Long-term obligations, net of current portion............................................... $ 65,445 $ 48,789
--------- ---------
--------- ---------
</TABLE>

In May 1996, the Company entered into a credit agreement with Internationale
Nederlanden (US) Capital Corporation (ING), as administrative agent, and Morgan
Guaranty Trust Company of New York, as document agent, that provided for
borrowings of up to $87 million to finance acquisitions and provide working
capital (Credit Facility), which was used to repay the existing credit
agreements with Bank of America and ING, as well as the note payable to
stockholder and the redeemable preferred stock. In August 1996, this Credit
Facility was amended to provide for borrowings up to $110 million. The Credit
Facility consists of a $25 million term loan, $10 million revolving loan, and
$75 million acquisition facility. The various loans and lines of credit under
the Credit Facility bear interest at rates per annum equal to, at the Company's
discretion either: (i) the higher of (a) the federal funds rate plus 0.5% and
(b) the prime rate, plus an applicable margin ranging from 0% to 1.5%; or (ii)
the London Interbank Offered Rate (LIBOR), plus an applicable margin ranging
from 1.50% to 3.25%, and have maturities ranging from 2001 to 2003. The term
loan had an interest rate of 8.88% at December 31, 1996 and the acquisition
facility had an interest rate of 8.68% at December 31, 1996. The Credit Facility
is secured by substantially all of the assets of the Company. Under terms of the
Credit Facility, the Company is subject to various debt covenants, including
maintenance of certain financial ratios and other restrictions. The Credit
Facility requires the Company to use 50% of the proceeds of any equity offering
to repay a portion of the term loans. Effective March 21, 1997, the Company
amended the Credit Facility (i) to expand the borrowing capacity to $125
million, (ii) to waive the term loan repayment requirement of any offering
proceeds and (iii) to permit the reborrowing of any amounts under the expansion
facility which may be repaid in connection with an equity offering consummated
in 1997. In connection with refinancings during 1996 and 1995, the Company
recognized an extraordinary loss, net of income tax benefit, of $476,000 and
$908,000, respectively, representing unamortized deferred debt issuance costs.

F-13
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

5. OBLIGATIONS (CONTINUED)
At December 31, 1996, maturities of obligations (excluding capital lease
obligations) are as follows (in thousands):

<TABLE>
<S> <C>
1997............................................................... $ 2,207
1998............................................................... 6,507
1999............................................................... 8,890
2000............................................................... 12,920
2001 and thereafter................................................ 36,833
---------
$ 67,357
---------
---------
</TABLE>

6. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the amount of assets and liabilities for financial reporting and income
tax purposes. Significant components of the Company's deferred tax assets and
liabilities were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Deferred tax assets arising from:
Net operating loss carryforwards........................................................... $ 2,938 $ 3,111
Closure and post-closure costs............................................................. 421 421
Amortization of intangibles................................................................ 881 550
Other...................................................................................... 26 41
--------- ---------
Total deferred tax assets.................................................................... 4,266 4,123

Valuation allowance.......................................................................... (2,280) (2,323)
--------- ---------
Net deferred tax assets...................................................................... 1,986 1,800

Deferred tax liabilities arising from:
Property and equipment..................................................................... 2,855 2,898
Amortization of intangibles and landfill................................................... 472 84
Capital leases............................................................................. 32 32
Other...................................................................................... 43 26
--------- ---------
Total deferred tax liabilities............................................................... 3,402 3,040
--------- ---------
Net deferred tax liability................................................................... $ 1,416 $ 1,240
--------- ---------
--------- ---------
</TABLE>

At December 31, 1996, the Company had net operating loss (NOL) carryforwards
of approximately $8.0 million for federal income tax purposes that expire in
years 2006 to 2010. The utilization of the NOL carryforwards is limited by
future taxable earnings generated at the subsidiary level. The Company recorded
a valuation allowance to reflect uncertainty as to the utilization of such NOL
carryforwards for financial reporting purposes. The maximum annual utilization
of such NOL carryforwards are limited under the Internal Revenue Code as a
result of changes in ownership that have occurred.

F-14
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

6. INCOME TAXES (CONTINUED)
Significant components of the income tax expense (benefits) were as follows
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Current:
Federal........................................................................... $ 99 $ 141 $ --
State............................................................................. (30) 144 --
--------- --------- ---------
69 285 --

Deferred:
Federal........................................................................... 146 38 (1,205)
State............................................................................. 30 9 (167)
--------- --------- ---------
176 47 (1,372)
--------- --------- ---------
Total provision..................................................................... $ 245 $ 332 $ (1,372)
--------- --------- ---------
--------- --------- ---------
</TABLE>

A reconciliation from the statutory income tax rate to the effective income
tax rate was as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Federal statutory income tax rate.................................................... 34.0% (34.0)% (34.0)%
Effect of:
State taxes, net of federal tax effect............................................. -- 3.1 (2.9)
Nondeductible goodwill............................................................. 15.5 -- --
Net operating loss with no benefit................................................. -- 39.6 0.1
Other, net......................................................................... 3.8 1.6 0.3
--- --------- ---------
Effective tax rate................................................................... 53.3% 10.3% (36.5)%
--- --------- ---------
--- --------- ---------
</TABLE>

7. RELATED PARTY TRANSACTIONS

The Company had entered into a management agreement with a stockholder for
certain services to be rendered to the Company in exchange for annual management
fees. The management agreement was terminated in connection with the initial
public offering during July 1996. Management fees of approximately $466,000,
$659,000, and $515,000 were incurred in 1996, 1995, and 1994, respectively.

At December 31, 1995, the Company had a $12,500,000 unsecured note payable
outstanding to a stockholder, which was issued on November 16, 1995 and was due
November 16, 1996, bearing an annual interest rate of prime plus 3%. The Company
repaid the note payable to the stockholder in May 1996. Interest expense
relating to this note payable was approximately $621,000 and $180,000 in 1996
and 1995, respectively.

F-15
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

8. COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL AND REGULATORY REQUIREMENTS

The business and activities of the Company are, and may become more,
extensively regulated by, among others, the federal Environmental Protection
Agency, the Department of Transportation, the Interstate Commerce Commission,
and various state and local environmental and transportation regulatory
authorities. The Company is subject to various statutes and regulations which
include, but are not limited to, the Resource Conservation and Recovery Act of
1976, the Federal Water Pollution Control Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Clean Air Act, and
numerous state and local laws and regulations. The full impact of these laws and
regulations and the possible adoption of new statutes and regulations with
respect to the Company's facilities and operations is uncertain and could have
material adverse effects on the Company's business, results of operations, and
financial condition in that the Company: (i) could be required to incur
additional expenses in compliance efforts, (ii) might be unable to comply,
forcing the Company to cease operations, and (iii) could incur additional
liability for past operation(s) of acquired assets. These regulations may also
impose restrictions on the Company's operations, such as limiting the expansion
of disposal facilities, limiting or banning the disposal of out-of-state waste
or certain other categories of waste, or mandating the disposal of local refuse.

Although the Company believes it is in substantial compliance with current
regulatory requirements, because of heightened political and public concern over
environmental issues, companies in the waste disposal industry, including the
Company, may become subject to judicial and administrative proceedings involving
federal, state, or local agencies in the normal course of business.

The Company has obtained some levels of pollution liability insurance
covering certain claims for sudden or gradual onset environmental damage at its
landfill sites. The Company carries a comprehensive general liability insurance
policy which management considers adequate to protect its assets and operations
from other risks.

The Company also may be subject to claims for personal injury or property
damage arising out of motor vehicle accidents involving its trucks. The Company
currently carries insurance with policy limits which management believes to be
sufficient to cover these risks. If the Company were to incur liabilities
outside of or in excess of its insurance limits, its financial condition could
be adversely affected.

In connection with the Company's existing landfills, the Company has
provided financial assurance bonds for approximately $15.2 million at December
31, 1996 from a financial institution to provide financial assurance that
closure and postclosure expenses will be met in the event that the Company is
not able to fulfill its closure and postclosure obligations.

F-16
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
At December 31, 1996, future minimum lease payments under noncancelable
lease obligations are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
1997......................................................................................... $ 431 $ 1,151
1998......................................................................................... 192 930
1999......................................................................................... 104 667
2000......................................................................................... -- 298
2001 and thereafter.......................................................................... -- 437
----- -----------
Total minimum lease payments................................................................. 727 $ 3,483
-----------
-----------
Less: Amount representing interest........................................................... 67
-----
Present value of net minimum lease payments.................................................. $ 660
-----
-----
</TABLE>

Rental expense in 1996, 1995, and 1994 was approximately $1.3 million,
$793,000, $132,000, respectively.

REDEEMABLE PREFERRED STOCK

On March 28, 1995, ADS issued 1,950 shares of its Series A Preferred Stock
and 46,550 warrants to purchase shares of common stock of the Company, for
$1,950,000. The holder of the warrants can purchase one common share for each
warrant held at the exercise price of $.10 per share on or before December 31,
2002. The Company redeemed the outstanding preferred stock in May 1996, and paid
any accrued dividends related to the preferred stock. The warrants were redeemed
for shares of common stock in 1996.

9. STOCKHOLDERS' EQUITY

STOCK OPTIONS

The Company's Board of Directors adopted the American Disposal Services,
Inc. 1996 Stock Option Plan effective January 1, 1996. As of December 31, 1996,
the plan permits grants of options up to an aggregate of 1,100,000 shares of
common stock to employees and certain consultants of the Company, on such terms
as the Company's compensation committee (or a stock option subcommittee thereof)
determines. Options granted under the plan as of January 1, 1996 replaced
existing stock options granted by ADS and County in connection with the
Exchange. The stock options vest over three and five year periods and are
exercisable over a ten year period from the original grant dates. All vesting is
subject to acceleration under specified circumstances.

Options to purchase an aggregate of 63,601 shares were granted outside the
plan to a former employee and were fully vested as of January 1, 1996. Such
shares have an exercise price of $7.17 per share, increasing at 25% per annum
from the date of original grant of the ADS stock options they replace.

F-17
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

9. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of stock option information follows:

<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year................ 869,617 $ 7.36 186,444 $ 7.17 144,900 $ 7.17
Granted....................................... 68,270 9.00 683,173 7.41 41,544 7.17
Exercised..................................... 467 7.17 0 -- 0 --
Forfeited..................................... (2,506) 7.64 0 -- 0 --
--------- ----- --------- ----- --------- -----
Outstanding at end of year...................... 934,914 $ 7.47 869,617 $ 7.36 186,444 $ 7.17
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
Exercisable at end of year...................... 434,553 105,223 0
Available for future grant...................... 228,220 293,984 977,157
Weighted average value of options granted during
the year....................................... $ 4.33 $ 1.88
</TABLE>

As of December 31, 1996, the Company had outstanding 934,914 options with
exercise prices between $7.17 and $9.00 per share and weighted average remaining
lives of 8.2 years.

The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123), requires
use of option valuation models that were not developed for use in valuing stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

Disclosure of pro forma information regarding net loss and net loss per
share is required by FAS 123, and has been determined as if the Company had
accounted for its stock options granted in 1996 and 1995 under the fair value
method. The options granted in 1996 were valued using the Black-Scholes option
pricing model. The options granted in 1995, as a non-public company, were valued
using the minimum value method. The Black-Scholes option valuation model
requires the input of highly subjective assumptions and, because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the model cannot necessarily provide a single measure of
the fair value of its stock options. The following assumptions were utilized in
the valuation:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C> <C> <C>
1996 1995
--------- ---------

Risk-free interest rate................................................. 6.65% 5.85%
Expected dividend yield................................................. 0% 0%
Expected stock price volatility......................................... 44.4% n/a
Expected life of options................................................ 5 years 5 years
</TABLE>

F-18
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996, 1995 AND 1994

9. STOCKHOLDERS' EQUITY (CONTINUED)

Had compensation cost for the Company's stock options granted in 1996 and
1995 been determined based on the fair value at the dates of grants, the
Company's net loss and net loss per share would have been increased to the pro
forma amounts indicated:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C> <C> <C>
1996 1995
--------- ---------
Pro forma net loss (in thousands of dollars)............................. ($ 687) ($ 3,807)
Pro forma net loss per share applicable to common shareholders........... ($ 0.10) ($ 1.08)
</TABLE>

The pro forma effect for 1996 and 1995 is not representative of the pro
forma effect in future years as the pro forma disclosures reflect only the fair
value of stock options granted in 1996 and 1995 and do not reflect the fair
value of outstanding options granted prior to 1995.

STOCK WARRANTS

In connection with obtaining various credit agreements, the Company issued
warrants to purchase 168,905 shares of common stock with exercise prices ranging
from $4.72 to $7.41 per share. The Company recorded the fair value of the
warrants as a component of equity and recognized debt issuance cost of $106,666.
The warrants expire 10 years from date of issuance.

In connection with the Exchange, 5,000,000 shares of new preferred stock of
the Company were authorized with none issued at December 31, 1996 and 1995.

10. SUBSEQUENT EVENTS

Subsequent to December 31, 1996, the Company acquired substantially all the
assets of Sparky's Waste Control and A-1 Container, and acquired the stock of
Allied Waste Systems, Inc. In addition, the Company entered into definitive
asset purchase agreements on March 24, 1997 and March 25, 1997 to acquire
substantially all the assets of Liberty Disposal, Inc. and the Evansville,
Indiana operations of Waste Management of Indiana, LLC, respectively.

F-19
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following unaudited Pro Forma Consolidated Financial Statements (Pro
Forma Financial Data) is based on the historical Consolidated Financial
Statements of the Company, Liberty Disposal, Inc. and Waste Management, Inc.
Evansville, Indiana Operations included elsewhere herein, adjusted to give
effect to the Acquisitions and this offering.

The Pro Forma Condensed Consolidated Balance Sheet gives effect to the
Acquisitions and this offering as if they had occurred as of December 31, 1996.
The Pro Forma Consolidated Income Statement for the year ended December 31, 1996
gives effect to the Acquisitions and this offering as if they had occurred on
January 1, 1996. The Pro Forma Financial Data does not purport to represent what
the Company's results would actually have been had the Acquisitions in fact
occurred on such date or to project the Company's results of operations and
financial position for any future period or date. The Pro Forma Financial Data
does not give effect to any transactions other than the Acquisitions and this
offering, as discussed in the notes to the Pro Forma Financial Data set forth
below.

The Acquisitions were accounted for using the purchase method of accounting.
Under purchase accounting, tangible and indentifiable intangible assets acquired
and liabilities assumed are recorded at their respective fair values.

The pro forma adjustments are based on available information and upon
certain assumptions that management of the Company believes are reasonable under
the circumstances. The Pro Forma Financial Data and accompanying notes should be
read in conjunction with the historical Consolidated Financial Statements of the
Company, Liberty Disposal, Inc. and Waste Management, Inc. Evansville, Indiana
Operations, including the notes thereto, and other financial information
pertaining to the Company included elsewhere herein.

F-20
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
LIBERTY DISPOSAL ACQUISITION WMX-EVANSVILLE ACQUISITION
ADJUSTED
COMPANY ------------------------------ LIBERTY DISPOSAL -----------------------------
HISTORICAL HISTORICAL ADJUSTMENTS ACQUISITION (A) HISTORICAL ADJUSTMENTS
----------- ----------- ----------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............. $ 2,301 $ 116 $ (116) $ -- $ -- $ --
Trade receivables......... 9,741 890 (890) -- 1,524 --
Prepaids and other current
assets.................. 1,602 74 (74) -- 91 --
----------- ----------- -------- -------- ----------- ----------------
Total current assets...... 13,644 1,080 (1,080) -- 1,615 --
Property and equipment,
net....................... 93,692 2,029 571 2,600 17,113 3,712
Cost over fair value of net
assets acquired, net...... 31,237 26 11,774 11,800 -- 7,643
Other intangibles and
deferred assets, net...... 4,002 81 19 100 -- 100
Other assets................ 2,411 45 (45) -- -- --
----------- ----------- -------- -------- ----------- ----------------
Total assets........ $ 144,986 $ 3,261 $ 11,239 $ 14,500 $ 18,728 $ 11,455
----------- ----------- -------- -------- ----------- ----------------
----------- ----------- -------- -------- ----------- ----------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......... $ 3,359 $ 556 $ (556) $ -- $ -- $ --
Accrued expenses.......... 4,249 118 (118) -- 276 --
Deferred revenues......... 2,245 -- -- -- 404 --
Current portion of long
term debt and capital
lease obligations....... 2,572 356 (356) -- -- --
----------- ----------- -------- -------- ----------- ----------------
Total current
liabilities......... 12,425 1,030 (1,030) -- 680 --
Long-term debt and capital
lease obligations, net
of current portion...... 65,445 469 14,031 14,500 39 29,000
Accrued environmental and
landfill costs.......... 7,603 -- -- -- 464 --
Deferred income taxes..... 1,416 -- -- -- -- --
Total stockholders'
equity.................. 58,097 1,762 (1,762) -- 17,545 (17,545)
----------- ----------- -------- -------- ----------- ----------------
Total liabilities and
stockholders' equity.... $ 144,986 $ 3,261 $ 11,239 $ 14,500 $ 18,728 $ 11,455
----------- ----------- -------- -------- ----------- ----------------
----------- ----------- -------- -------- ----------- ----------------

ADJUSTED
WMX- EVANSVILLE COMPANY
ACQUISITION (B) OFFERING (C) PRO FORMA
--------------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents............. $ -- $ -- $ 2,301
Trade receivables......... 1,524 -- 11,265
Prepaids and other current
assets.................. 91 -- 1,693
--------------- ------------ -----------
Total current assets...... 1,615 -- 15,259
Property and equipment,
net....................... 20,825 -- 117,117
Cost over fair value of net
assets acquired, net...... 7,643 -- 50,680
Other intangibles and
deferred assets, net...... 100 -- 4,202
Other assets................ -- -- 2,411
--------------- ------------ -----------
Total assets........ $ 30,183 $ -- $ 189,669
--------------- ------------ -----------
--------------- ------------ -----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......... $ -- $ -- $ 3,359
Accrued expenses.......... 276 -- 4,525
Deferred revenues......... 404 -- 2,649
Current portion of long
term debt and capital
lease obligations....... -- -- 2,572
--------------- ------------ -----------
Total current
liabilities......... 680 -- 13,105
Long-term debt and capital
lease obligations, net
of current portion...... 29,039 (54,430) 54,554
Accrued environmental and
landfill costs.......... 464 -- 8,067
Deferred income taxes..... -- -- 1,416
Total stockholders'
equity.................. -- 54,430 112,527
--------------- ------------ -----------
Total liabilities and
stockholders' equity.... $ 30,183 $ -- $ 189,669
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>

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

(a) Reflects the pending acquisition of Liberty Disposal, Inc. accounted for
using the purchase method. Pursuant to the Purchase Agreement, only property
and equipment and intangible assets were acquired. The Company has not yet
determined the final allocation of the purchase price as current information
regarding the fair value of assets to be acquired is not available and,
accordingly, the amounts shown below may differ from the amounts ultimately
determined.

Allocation of purchase price based on preliminary estimated values:

<TABLE>
<S> <C>
Property and equipment................................................................................................. $ 2,600
Cost over fair value of net assets acquired............................................................................ 11,800
Identifiable intangible assets......................................................................................... 100
---------
$ 14,500
---------
---------
</TABLE>

(b) Reflects the pending acquisition of Waste Management, Inc. Evansville,
Indiana Operations accounted for using the purchase method. The Company has
not yet determined the final allocation of the purchase price as current
information regarding the fair value of assets to be acquired is not
available and, accordingly, the amounts shown below may differ from the
amounts ultimately determined.

Allocation of purchase price based on preliminary estimated values:

<TABLE>
<S> <C>
Property and equipment.................................................................................................. $ 3,825
Landfill................................................................................................................ 17,000
Other assets acquired................................................................................................... 1,615
Net liabilities acquired................................................................................................ (1,183)
Cost over fair value of net assets acquired............................................................................. 7,643
Identifiable intangible assets.......................................................................................... 100
---------
$ 29,000
---------
---------
</TABLE>

(c) Reflects proceeds of this offering less underwriting discounts and estimated
expenses and the application of net proceeds therefrom.

F-21
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

PRO FORMA CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)

<TABLE>
<CAPTION>
LIBERTY DISPOSAL ACQUISITION WMX-EVANSVILLE ACQUISITION
---------------------------------- ------------------------------
COMPANY HISTORICAL HISTORICAL
HISTORICAL (1) ADJUSTMENTS (2) (3) ADJUSTMENTS (4) OFFERING (5)
----------- ------------- ------------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............... $ 56,804 $ 7,003 $ -- $ 12,985 $ -- $ --
Cost of operations..... 30,376 4,607 (4) 6,830 (291) --
Selling, general and
administrative
expenses............. 8,328 1,534 (695) 1,517 (246) --
Depreciation and
amortization......... 12,334 559 331 2,467 (430) --
----------- ------------- ----- ------------- ------- -----
Operating income....... 5,766 303 368 2,171 967 --
Interest expense....... (5,745) (84) 84 -- -- 924
Interest income........ 260 -- -- -- -- --
Other income........... 179 -- -- -- -- --
----------- ------------- ----- ------------- ------- -----
Income before income
taxes and
extraordinary item... 460 219 452 2,171 967 924
Income tax expense
(6).................. (245) -- (200) -- (947) (277)
----------- ------------- ----- ------------- ------- -----
Net income before
extraordinary item... $ 215 $ 219 $ 252 $ 2,171 $ 20 $ 647
----------- ------------- ----- ------------- ------- -----
----------- ------------- ----- ------------- ------- -----
Pro forma net income
per share of common
stock................
Pro forma weighted
average common stock
and common stock
equivalent shares
outstanding (7)......

COMPANY
PRO FORMA
-----------
<S> <C>
Revenues............... $ 76,792
Cost of operations..... 41,518
Selling, general and
administrative
expenses............. 10,438
Depreciation and
amortization......... 15,261
-----------
Operating income....... 9,575
Interest expense....... (4,821)
Interest income........ 260
Other income........... 179
-----------
Income before income
taxes and
extraordinary item... 5,193
Income tax expense
(6).................. (1,669)
-----------
Net income before
extraordinary item... $ 3,524
-----------
-----------
Pro forma net income
per share of common
stock................ $ 0.32
-----------
-----------
Pro forma weighted
average common stock
and common stock
equivalent shares
outstanding (7)...... 11,118,854
-----------
-----------
</TABLE>

See accompanying notes.

F-22
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)

(1) Reflects the historical income statement for Liberty Disposal, Inc. for the
year ended December 31, 1996, included herein.

(2) Adjustments to reflect the historical amounts for the Liberty Disposal, Inc.
acquisition noted in footnote (1) as follows:

<TABLE>
<S> <C>
Reduction in cost of operations due to:
Incremental rental expense as set forth in the Purchase
Agreement........................................................ $ 88
Reduction in wage expense per employment agreements................ (92)
---------
Net reduction in cost of operations.................................. $ (4)
---------
---------

Reduction in selling, general and administrative expenses due to:
Reduction in officer's salary per employment agreement............. $ (417)
Reduction in office employee wages per employment agreements....... (278)
---------
Net reduction in selling, general and administrative expenses........ $ (695)
---------
---------

Incremental depreciation and amortization due to:
Incremental depreciation of assets acquired assuming a composite
life of 4.6 years.................................................. $ 16
Amortization of excess purchase price over forty years............. 295
Amortization of identifiable intangible assets over five years..... 20
---------
Net incremental depreciation and amortization........................ $ 331
---------
---------

Reduction in interest expense to reflect the debt not acquired....... $ (84)
---------
---------
</TABLE>

(3) Reflects the historical statement of revenues and direct operating expenses
for Waste Management, Inc. Evansville, Indiana Operations for the year ended
December 31, 1996, included herein.

F-23
<PAGE>
AMERICAN DISPOSAL SERVICES, INC.

NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)

(4) Adjustments to reflect the historical amounts for the Waste Management, Inc.
Evansville, Indiana Operations acquisition noted in footnote (3) as follows:

<TABLE>
<S> <C>
Reduction in cost of operations due to reclassification to conform to
the Company's financial presentation............................... $ 291
---------
---------
Reduction in selling, general and administrative salaries of
employees terminated prior to the Acquisition...................... $ (246)
---------
---------

Reduction in depreciation and amortization due to:
Reduction in depreciation and amortization of assets acquired as a
result of preliminary purchase price allocation assuming a
composite life of 8 years for property and equipment and 45 years
for the landfill................................................. $ (932)
Incremental amortization of excess purchase price over forty
years............................................................ 191
Incremental amortization of identifiable intangible assets over
five years....................................................... 20
Reclassification to conform to the Company's financial
presentation..................................................... (291)
---------

Net reduction in depreciation and amortization....................... $ (430)
---------
---------
</TABLE>

(5) Reduction in interest expense to reflect the use of the proceeds of this
Offering as follows:

<TABLE>
<S> <C>
Net offering proceeds.............................................. $ 54,430
Funding of Liberty Disposal Acquisition............................ (14,500)
Funding of WMX Evansville Acquisition.............................. (29,000)
---------
Net proceeds available to pay down acquisition facility............ 10,930
Average 1996 interest rate on acquisition facility................. 8.45%
---------
Reduction in interest expense...................................... $ 924
---------
---------
</TABLE>

(6) Adjusted to reflect the income tax effect of the pro forma adjustments based
on an estimated marginal tax rate of 38% limited by the utilization of the
net operating loss (NOL) carryforwards. The maximum annual utilization of
such NOL carryforwards are limited under the Internal Revenue Code as a
result of changes in ownership that have occurred.

(7) Weighted average common stock and common stock equivalent shares outstanding
at December 31, 1996 gives effect to the issuance of 3.5 million shares in
this Offering as if such transaction had occurred as of January 1, 1996.

F-24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Waste Management, Inc.:

We have audited the accompanying statement of net tangible assets to be sold
of the EVANSVILLE, INDIANA OPERATIONS OF WASTE MANAGEMENT, INC. (the "Business")
as of December 31, 1996, and the related statements of revenue and direct
operating expenses for each of the two years in the period ended December 31,
1996. These financial statements are the responsibility of the Business'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

As described in Note 1, the accompanying financial statements were prepared
for the purpose of complying with Rule 3-05 of Regulation S-X of the Securities
and Exchange Commission, and are not intended to be a complete presentation of
assets and liabilities and results of operations on a stand-alone basis of the
Evansville, Indiana Operations of Waste Management, Inc.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the net tangible assets to be sold of the Evansville,
Indiana Operations of Waste Management, Inc. at December 31, 1996, and the
revenue and direct operating expenses for each of the two years in the period
ended December 31, 1996, as described in Note 1, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois

March 28, 1997

F-25
<PAGE>
WASTE MANAGEMENT, INC.

EVANSVILLE, INDIANA OPERATIONS

STATEMENT OF NET TANGIBLE ASSETS TO BE SOLD

AS OF DECEMBER 31, 1996

ASSETS

<TABLE>
<S> <C>
CURRENT ASSETS:
Customer accounts receivable, net of allowance of $79,000.................... $1,524,000
Parts and supplies inventory................................................. 91,000
----------
Total current assets................................................... 1,615,000
PROPERTY AND EQUIPMENT, at cost:
Land, primarily disposal site................................................ 10,453,000
Buildings.................................................................... 1,684,000
Vehicles and equipment....................................................... 10,431,000
----------
22,568,000
Less--Accumulated depreciation and amortization.............................. 5,455,000
----------
Total property and equipment, net...................................... 17,113,000
----------
Total tangible assets to be sold....................................... $18,728,000
----------
----------
</TABLE>

LIABILITIES AND NET TANGIBLE ASSETS TO BE SOLD

<TABLE>
<S> <C>
CURRENT LIABILITIES:
Portion of closure and post-closure liabilities payable within one year...... $ 276,000
Unearned revenue............................................................. 404,000
----------
Total current liabilities.............................................. 680,000
CLOSURE AND POST-CLOSURE LIABILITIES, less portion payable within one year..... 464,000
NOTE PAYABLE................................................................... 39,000
CUSTOMER CONTRACT COMMITMENTS..................................................
----------
Total liabilities...................................................... 1,183,000
----------
Net tangible assets to be sold......................................... $17,545,000
----------
----------
</TABLE>

The accompanying notes are an integral part of this statement.

F-26
<PAGE>
WASTE MANAGEMENT, INC.
EVANSVILLE, INDIANA OPERATIONS
STATEMENTS OF REVENUE AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Revenue.............................................................................. $ 12,985,000 $ 9,834,000
Direct operating expenses:
Cost of sales...................................................................... 6,830,000 5,864,000
Selling, general, and administrative expenses...................................... 1,517,000 1,005,000
Depreciation and amortization...................................................... 2,467,000 1,525,000
------------- ------------
Operating profit................................................................... $ 2,171,000 $ 1,440,000
------------- ------------
------------- ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-27
<PAGE>
WASTE MANAGEMENT, INC.
EVANSVILLE, INDIANA OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

1. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

On February 13, 1997, American Disposal Service, Inc. ("American") and Waste
Management, Inc. ("WMI") entered into a Letter of Intent whereby American agreed
in principle to purchase from WMI certain assets and assume certain liabilities
of WMI's Evansville, Indiana Operations (the "Business"). An Asset Purchase
Agreement (the "Agreement") was signed on March 25, 1997 and the transaction is
expected to close on March 31, 1997.

The accompanying statement of net tangible assets to be sold presents, as of
December 31, 1996, the tangible assets of the Business to be sold to American
and certain liabilities of the Business to be assumed by American pursuant to
the Agreement. The tangible assets to be sold consist primarily of customer
accounts receivable, parts and supplies inventory, a landfill facility and waste
transportation and collection facilities and equipment located in and around
Evansville, Indiana. The liabilities to be assumed consist primarily of closure
and postclosure liabilities related to the landfill, a note payable to the
former owner of the land on which the landfill was constructed and unearned
revenue. The Business' customer accounts and customer account contracts will
also be acquired by American. The accounts receivable and unearned revenue
related to these customer accounts and customer account contracts are included
in the accompanying statement of net tangible assets to be sold. However, cash,
certain prepaid assets, certain property and equipment, goodwill, income tax
benefits and liabilities, certain accrued expenses and certain other assets and
liabilities related to the Business will be retained by WMI and are not included
herein. Pursuant to the Agreement, American will assume certain contractual
obligations that are not required by generally accepted accounting principles to
be recorded in these financial statements. The statements of revenue and direct
operating expenses represent those revenues and expenses that are specifically
identifiable to the Business and do not include certain expenses as described in
Note 3.

As a result, the accompanying financial statements are not intended to be a
complete presentation of the Business' assets and liabilities and results of
operations had it been operated as a stand-alone entity (see Note 3). Rather,
these financial statements were prepared for the purpose of complying with Rule
3-05 of Regulation S-X of the Securities and Exchange Commission.

REVENUE RECOGNITION

Revenues are recognized when the services are performed. Billings to
customers and cash receipts from customers in advance of the providing of
services are recorded as unearned revenue. No single customer accounted for more
than 7% of revenue in 1996 or 1995.

PROPERTY AND EQUIPMENT

Property and equipment (including major repairs and improvements) are
capitalized and stated at cost. Items of an ordinary maintenance or repair
nature are charged directly to operations. Disposal sites are carried at cost
and to the extent this exceeds end use realizable value, such excess is
amortized over the estimated life of the disposal site, which is 45 years based
upon the current site plans, permitted air space and annual volumes of waste.
Disposal site improvement costs are capitalized and charged to operations

F-28
<PAGE>
WASTE MANAGEMENT, INC.
EVANSVILLE, INDIANA OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
over the shorter of the estimated usable life of the site or the improvements.
These capitalized site improvement costs are included as land on the
accompanying statement of net tangible assets to be sold.

Preparation costs for individual secure land disposal cells are recorded as
prepaid expenses which are included as land on the accompanying statement of net
assets to be sold. These costs are amortized as the airspace is filled.
Significant costs capitalized for such cells include excavation and grading
costs, costs relating to the design and construction of liner systems, and gas
collection and leachate collection systems. Unamortized site improvement and
cell construction costs at December 31, 1996 were $7,974,000. Site improvement
and cell construction amortization expense of $823,000 and $332,000 is included
in direct operating expenses in the accompanying statements of revenues and
direct operating expenses for the years ended December 31, 1996 and 1995,
respectively.

DEPRECIATION

The cost, less estimated salvage value, of property and equipment is
depreciated over the estimated useful lives on the straight-line method as
follows: buildings--10 to 40 years; vehicles and equipment--3 to 20 years;
containers--5 to 10 years. Depreciation expense of $1,644,000 and $1,193,000 is
included in direct operating expenses in the accompanying statements of revenues
and direct operating expenses for the years ended December 31, 1996 and 1995,
respectively.

The property and equipment included in the accompanying statement of net
tangible assets to be sold includes the majority of property and equipment used
by WMI to operate the Business. Certain of this property and equipment may not
ultimately be acquired by American as the final list of assets to be sold is
still being negotiated.

ENVIRONMENTAL LIABILITIES

The Business provides for estimated closure and postclosure monitoring costs
over the operating life of its disposal sites as airspace is consumed. WMI has
also established procedures to evaluate potential remedial liabilities at closed
sites which it owns or operated, or to which it (or a company which it acquired)
transported waste, including sites listed on the Superfund National Priority
List ("NPL"). Where WMI concludes that it is probable that a liability has been
incurred, provision is made in the financial statements, based upon management's
judgment and prior experience, for WMI's best estimate of the liability. Such
estimates are subsequently revised as deemed necessary as additional information
becomes available. Based upon the advice of its environmental legal counsel, WMI
does not believe any specific remedial liabilities exist related to the
Business. Therefore, no specific remedial liabilities have been allocated by WMI
to the Business as of December 31, 1996.

USE OF ESTIMATES

F-29
<PAGE>
WASTE MANAGEMENT, INC.
EVANSVILLE, INDIANA OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995

2. ACQUISITION OF ROSE DISPOSAL SERVICES, INC.

WMI acquired 100% of the outstanding shares of stock of Rose Disposal
Services, Inc. ("Rose"), which operates waste hauling and landfill disposal
operations in the Evansville, Indiana area, on April 28, 1995, for $7,000,000 in
cash. This acquisition was accounted for using the purchase method of
accounting. The revenues and direct operating expenses of Rose are included in
the accompanying statements of revenue and direct operating expenses from the
date of the acquisition.

In conjunction with the acquisition of Rose, WMI entered into a royalty
agreement whereby WMI is required to pay royalties to the former owner of the
land on which the landfill facility was constructed based on volume and type of
waste received by the landfill. Royalty expense of $215,000 and $131,000 is
included in direct operating expenses in the accompanying statements of revenues
and direct operating expenses for the years ended December 31, 1996 and 1995,
respectively.

3. DIRECT OPERATING EXPENSES

The direct operating expenses of the Business include costs associated with
direct customer support to produce revenues. Such expenses (including certain
allocations) include costs of vehicle drivers, vehicle operating expenses,
disposal costs, landfill maintenance and operation costs, depreciation and
amortization, supplies and certain occupancy costs. The direct operating
expenses also include the royalty expenses described above in Note 2. Also
included in direct operating expenses are certain selling, general and
administrative expenses (including certain allocations), directly related to the
operations in Evansville, Indiana. Certain other selling, general, and
administrative expenses, interest expense, goodwill amortization, provision for
income taxes and certain other costs incurred by WMI on behalf of and to support
the Business have not been included in these financial statements since these
costs have historically been included in WMI's consolidated statement of
operations and have not been allocated to the various WMI businesses.
Accordingly, as also indicated in Note 1, the accompanying financial statements
are not intended to be a complete presentation of the Business' assets and
liabilities and results of operations had it been operated as a stand-alone
entity.

4. ENVIRONMENTAL COSTS AND LIABILITIES

The operations of the Business are intrinsically connected with the
protection of the environment. As such, a significant portion of the Business'
operating costs and capital expenditures could be characterized as costs of
environmental protection. While the Business is faced, in the normal course of
business, with the need to expend funds for environmental protection, it does
not expect such expenditures to have a material adverse effect on its financial
condition or results of operations because its business is based upon compliance
with environmental laws and regulations and its services are priced accordingly.

The Business provides for estimated closure and post-closure monitoring
costs over the operating life of disposal sites as airspace is consumed. Such
costs are estimated based on the technical requirements of the Subtitle C and D
Regulations of the U.S. Environmental Protection Agency or the applicable state
requirements, whichever are stricter, and include such items as final cap and
cover on the site, methane gas and leachate management, and groundwater
monitoring. Landfill closure and post-closure costs of $374,000 and $216,000 are
included in direct operating expenses in the accompanying statements of revenues
and direct operating expenses for the years ended December 31, 1996 and 1995,
respectively.

F-30
<PAGE>
WASTE MANAGEMENT, INC.
EVANSVILLE, INDIANA OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995

4. ENVIRONMENTAL COSTS AND LIABILITIES (CONTINUED)
WMI has also established procedures to evaluate potential remedial
laibilities at closed sites which it owns or operated, or to which it (or a
company which it acquired) transported waste, including sites on the NPL. Based
upon the advice of its environmental legal counsel, WMI does not believe any
specific remedial liabilities exist related to the Business. Therefore, no
specific remedial liabilities have been allocated by WMI to the Business as of
December 31, 1996. The environmental liabilities included in the statement of
net tangible assets to be sold consist only of closure and post-closure
liabilities.

5. NOTE PAYABLE

The note payable on the accompanying statement of net tangible assets to be
sold represents the remaining principal due on a note payable to the former
owner of the land on which the landfill was constructed. The note carries an
interest rate of 9% per annum and is due on January 20, 2008.

F-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Stockholder of
Liberty Disposal, Inc.

We have audited the accompanying balance sheets of Liberty Disposal, Inc. as
of December 31, 1996 and 1995, and the related statements of income,
stockholder's equity, and cash flows for the years then ended. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Liberty Disposal, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Chicago, Illinois
March 17, 1997

F-32
<PAGE>
LIBERTY DISPOSAL, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------------------
CURRENT ASSETS
Cash........................................................................................... $ 116 $ 411
Trade receivables -- Net of allowance for doubtful accounts of $200 and $240 in 1996 and 890 833
1995.........................................................................................
Other receivables.............................................................................. -- 67
Prepaid expenses and other assets.............................................................. 74 71
--------- ---------
Total current assets........................................................................... 1,080 1,382
Equipment, net................................................................................. 2,029 2,335
Cost in excess of fair value of net assets of acquired businesses, net of accumulated 26 28
amortization of $4 and $2....................................................................
Other intangible assets, net of accumulated amortization of $227 and $219...................... 81 89
Other assets................................................................................... 45 11
--------- ---------
$ 3,261 $ 3,845
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................................................. $ 556 $ 380
Accrued liabilities.......................................................................... 118 116
Current portion of debt obligations.......................................................... 356 324
--------- ---------
Total current liabilities...................................................................... 1,030 820
Debt obligations, net of current portion....................................................... 469 833
Stockholder's equity:
Common stock, no par value, 1,000 shares authorized -- 100 shares issued and outstanding..... -- --
Additional paid-in capital................................................................... 50 50
Retained earnings............................................................................ 1,712 2,142
--------- ---------
1,762 2,192
--------- ---------
$ 3,261 $ 3,845
--------- ---------
--------- ---------
</TABLE>

See accompanying notes.

F-33
<PAGE>
LIBERTY DISPOSAL, INC.
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Revenues....................................................................................... $ 7,003 $ 7,266
Cost of operations............................................................................. 4,607 4,417
Selling, general, and administrative expenses.................................................. 1,534 1,383
Depreciation and amortization.................................................................. 559 566
--------- ---------
Operating income............................................................................... 303 900
Interest expense, net.......................................................................... 84 113
--------- ---------
Net income..................................................................................... $ 219 $ 787
--------- ---------
--------- ---------
</TABLE>

See accompanying notes.

F-34
<PAGE>
LIBERTY DISPOSAL, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1995.......................................... $ -- $ 50 $ 1,608 $ 1,658
Stockholder distributions......................................... -- -- (253) (253)
Net income........................................................ -- -- 787 787
----------- --- ----------- ------
Balance, December 31, 1995........................................ -- 50 2,142 2,192
Stockholder distributions......................................... -- -- (649) (649)
Net income........................................................ -- -- 219 219
----------- --- ----------- ------
Balance, December 31, 1996........................................ $ -- $ 50 $ 1,712 $ 1,762
----------- --- ----------- ------
----------- --- ----------- ------
</TABLE>

See accompanying notes.

F-35
<PAGE>
LIBERTY DISPOSAL, INC.

STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income....................................................................................... $ 219 $ 787
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................................. 559 566
Provision for bad debts........................................................................ 133 310
Changes in operating assets and liabilities:
Trade receivables............................................................................ (190) (132)
Other receivables............................................................................ 67 (67)
Prepaid expenses and other current assets.................................................... (3) (61)
Other assets................................................................................. (34) 6
Accounts payable............................................................................. 176 1
Accrued liabilities.......................................................................... 2 (8)
--------- ---------
Net cash provided by operating activities........................................................ 929 1,402

INVESTING ACTIVITIES
Capital expenditures............................................................................. (243) (1,024)
Proceeds from sale of equipment.................................................................. -- 169
Cost of acquisitions............................................................................. -- (410)
--------- ---------
Net cash used in investing activities............................................................ (243) (1,265)

FINANCING ACTIVITIES
Proceeds from debt obligations................................................................... 331 2,428
Repayments of indebtedness....................................................................... (663) (1,903)
Stockholder distributions........................................................................ (649) (253)
--------- ---------
Net cash provided by (used in) financing activities.............................................. (981) 272
--------- ---------
Net increase (decrease) in cash.................................................................. (295) 409
Cash at beginning of year........................................................................ 411 2
--------- ---------
Cash at end of year.............................................................................. $ 116 $ 411
--------- ---------
--------- ---------
Supplemental cash flow information:
Interest paid.................................................................................. $ 87 $ 94
</TABLE>

See accompanying notes.

F-36
<PAGE>
LIBERTY DISPOSAL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1996 AND 1995

1. FORMATION AND BASIS OF PRESENTATION

Liberty Disposal, Inc. (Company), a Rhode Island corporation, provides
non-hazardous solid waste collection and transportation services throughout
Rhode Island and eastern Massachusetts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration
of credit risks consist primarily of trade receivables. Credit risk on trade
receivables is minimized as a result of the large and diverse nature of the
Company's customer base. The Company maintains an allowance for losses based on
the expected collectibility of accounts receivable. Credit losses have been
within management's expectations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Trade receivables, trade payables, and borrowings under the revolving credit
loan and other notes payable are carried at cost, which approximates fair value.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. The Company will, when determined necessary, accrue for
estimated liabilities when the financial effect is probable and can be estimated
by management. Actual results could differ from those estimates.

REVENUE RECOGNITION

Revenue is recognized in the period in which the related services are
provided.

EQUIPMENT

Equipment is recorded at cost. Depreciation of equipment is computed using
the accelerated methods over the estimated useful lives of the respective assets
as follows:

<TABLE>
<S> <C>
4 to 7
Vehicles....................................................... years
Containers and equipment....................................... 10 years
</TABLE>

Expenditures for major renewals are capitalized and expenditures for routine
maintenance and repairs are charged to expense as incurred.

INTANGIBLE ASSETS

The cost in excess of fair value of net assets of acquired businesses is
amortized using the straight-line method over periods not exceeding 15 years.
Other intangible assets, substantially all of which are covenants not to compete
and customer lists, are amortized using the straight-line method over their

F-37
<PAGE>
LIBERTY DISPOSAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
estimated lives, typically no more than 15 years. Amortization expense for
fiscal years 1996 and 1995 related to intangible assets was $10,500 and $8,200,
respectively.

ADVERTISING COSTS

Advertising costs are expensed as incurred and amounted to $121,000 and
$29,000 in 1996 and 1995, respectively.

INCOME TAXES

No provision for federal income taxes was required for the fiscal years 1996
and 1995, as a result of the Company's election to be treated as an
S-Corporation. Accordingly, the income of the Company is reported in the
individual tax returns of its stockholder.

3. ACQUISITIONS

The Company acquired certain assets of two waste collection operations
during February and March 1995 which were accounted for using the purchase
method of accounting. Accordingly, operating results of these businesses since
the dates of acquisition are included in the Company's statements of income. The
purchase prices have been allocated to the net assets acquired based upon fair
values at the dates of acquisition with the residual amounts allocated to cost
in excess of fair value of net assets acquired. The purchase prices allocated to
the net assets acquired in 1995 were as follows (in thousands):

<TABLE>
<S> <C>
Equipment............................................................ $ 320
Cost in excess of fair value of net assets acquired.................. 21
Other intangible assets.............................................. 69
---------
Total cash paid...................................................... $ 410
---------
---------
</TABLE>

4. EQUIPMENT

Equipment is summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Containers................................................................. $ 1,505 $ 1,462
Equipment.................................................................. 1,331 1,323
Vehicles................................................................... 3,638 3,447
--------- ---------
6,474 6,232
Less: Accumulated depreciation............................................. (4,445) (3,897)
--------- ---------
$ 2,029 $ 2,335
--------- ---------
--------- ---------
</TABLE>

F-38
<PAGE>
LIBERTY DISPOSAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

5. DEBT OBLIGATIONS

Debt obligations, which approximate fair value, are summarized as follows
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
Revolving credit loan, Fleet National Bank................................... $ 124 $ --
Term loan, Fleet National Bank............................................... 620 1,100
Note payable, AIG Credit Corporation......................................... 73 44
Other........................................................................ 8 13
--------- ---------
825 1,157
Less: Current portion........................................................ 356 324
--------- ---------
Debt obligations, net of current portion..................................... $ 469 $ 833
--------- ---------
--------- ---------
</TABLE>

On December 22, 1995, the Company entered into a credit agreement with Fleet
National Bank for a $1.1 million term loan and a $1.0 million revolving credit
loan. The term loan is payable in 48 monthly installments of principal plus
interest that began in January 1996 and will continue through December 1999. The
Company may borrow up to $1.0 million under the revolving credit loan with the
outstanding balance as of January 1, 1998 payable in 48 monthly installments of
principal plus interest beginning January 1998 through December 2001. The term
loan and revolving credit loan bear interest at a rate of prime plus 0.25%
(8.50% and 8.75% at December 1, 1996 and 1995). The term loan and revolving
credit loan are secured by substantially all of the Company's assets and are
personally guaranteed by the Company's sole stockholder. The credit agreement
contains covenants requiring compliance with certain financial ratios and
restrictions as to the use of assets.

In July of 1996 and 1995, the Company entered into an agreement with AIG
Credit Corporation to finance a significant portion of the Company's annual
insurance premiums. The 1995 note was payable in 9 monthly installments of
principal plus interest at a rate of 8.2% that began in August 1995 and
continued through April 1996. The 1996 note is payable in 11 monthly
installments of principal plus interest at a rate of 7.63% that began in August
1996 and will continue through June 1997.

Maturities of debt obligations are as follows (in thousands):

<TABLE>
<S> <C>
1997................................................................. $ 356
1998................................................................. 325
1999................................................................. 120
2000................................................................. 24
2001 and thereafter.................................................. --.......
---------
$ 825
---------
---------
</TABLE>

6. RELATED PARTY TRANSACTIONS

The Company rents its operational facilities and offices from the sole
stockholder. Rent expense was approximately $62,150 and $62,550 in 1996 and
1995, respectively.

F-39
<PAGE>
LIBERTY DISPOSAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

7. COMMITMENTS AND CONTINGENCIES

The Company also may be subject to claims for personal injury or property
damage arising out of motor vehicle accidents involving its trucks. The Company
currently carries insurance with policy limits which management believes to be
sufficient to cover these risks. If the Company were to incur liabilities in
excess of its insurance limits, its financial condition may be adversely
affected.

8. PROFIT SHARING RETIREMENT PLAN

The Company makes discretionary contributions to the Liberty Disposal, Inc.
Profit Sharing Retirement Plan, which covers all qualified employees. The
Company contributed $75,000 in both 1996 and 1995.

F-40
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS 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 AN OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................................. 3
Risk Factors................................................... 6
The Company.................................................... 14
Use of Proceeds................................................ 14
Price Range of Common Stock.................................... 15
Dividend Policy................................................ 15
Capitalization................................................. 16
Selected Consolidated Financial Data........................... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................................ 19
Business....................................................... 26
Management..................................................... 42
Certain Transactions........................................... 49
Principal Stockholders......................................... 50
Description of Capital Stock................................... 52
Shares Eligible for Future Sale................................ 54
Underwriting................................................... 55
Legal Matters.................................................. 56
Experts........................................................ 57
Additional Information......................................... 57
Index to Financial Statements.................................. F-1
</TABLE>

3,500,000 SHARES

[LOGO]

COMMON STOCK

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

PROSPECTUS

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

OPPENHEIMER & CO., INC.
CREDIT SUISSE FIRST BOSTON
, 1997

- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table shows the expenses, other than underwriting discounts,
which the Company expects to incur in connection with the issuance and
distribution of the securities being registered under this registration
statement. All expenses are estimated except for the Securities and Exchange
Commission registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
Securities and Exchange Commission registration fee............... $ 20,125
<S> <C>
Nasdaq fee........................................................ 17,500
NASD filing fee................................................... 7,141
Blue Sky fees and expenses........................................ 5,000
Legal fees and expenses........................................... 350,000
Accounting fees and expenses...................................... 250,000
Printing and engraving expenses................................... 100,000
Miscellaneous..................................................... 50,234
---------
Total..................................................... $ 800,000
---------
---------
</TABLE>

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

* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a Delaware corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.

In the case of an action by or in the right of the corporation, Section 145
permits the corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. No indemnification may be made in respect of any claim, issue, or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

II-1
<PAGE>
To the extent that a director, officer, employee, or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in the preceding two paragraphs, Section 145 requires
that he be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

Section 145 provides that expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative, or
investigative action, suit, or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit, or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in Section 145.

Article Fifth of the Company's Certificate of Incorporation eliminates the
personal liability of the directors of the Company to the Company or its
stockholders for monetary damages for breach of fiduciary duty as directors,
with certain exceptions, and Article Sixth requires indemnification of directors
and officers of the Company, and for advancement of litigation expenses to the
fullest extent permitted by Section 145. Article Sixth of the Company's By-laws
provides for indemnification of the Company's officers and directors to the
fullest extent permitted by Section 145 and other applicable laws as currently
in effect and as they may be amended in the future.

The Underwriting Agreement filed herewith as Exhibit 1.1 provides for
indemnification of the directors, certain officers, and controlling persons of
the Company by the Underwriters against certain civil liabilities, including
liabilities under the Securities Act. The Company has also entered into
agreements with its directors and executive officers providing for
indemnification in certain circumstances.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

As part of the Exchange, the Company issued an aggregate of 5,676,901 shares
of its Common Stock, options to purchase 869,615 shares of Common Stock and
Warrants to purchase 215,455 shares of Common Stock (after giving effect to the
Stock Split) to the then stockholders, option holders and warrant holders,
respectively, of ADS and CDI, effective as of January 1, 1996. No underwriters
were engaged in connection with the foregoing sales of securities. Such sales
were made in reliance on the exemption set forth in Section 4(2) of the
Securities Act of 1933, as amended ("Securities Act"), relating to sales by an
issuer not involving a public offering. All of the foregoing shares are deemed
to be restricted securities for the purposes of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>

1.1........ Form of Underwriting Agreement (1)

3.1........ Restated Certificate of Incorporation of the Company (2)

3.2........ Amendment to Restated Certificate of Incorporation (2)

3.3........ By-laws of the Company (2)

4.1........ Specimen Common Stock Certificate (2)

5.1........ Opinion of Proskauer Rose Goetz & Mendelsohn LLP

10.1....... Asset Purchase Agreement dated as of March 24, 1997 by and among Liberty Disposal, Inc., John M.
Harpootian, Trustee, The Liberty Disposal, Inc. Charitable Remainder Annual Trust--1997 and the
Company (3)

10.2....... Asset Purchase Agreement dated as of March 25, 1997 by and between American Disposal Services of
Missouri, Inc. and Waste Management of Indiana, LLC (3)
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.3....... Credit Agreement dated as of August 30, 1996 among the Company, Internationale Nederlanden (U.S.)
Capital Corporation, as administrative agent, and Morgan Guaranty Trust Company of New York, as
documentation agent, and the other financial institutions party thereto (4)

10.4....... Amendment No. 2 to the Amended and Restated Credit Agreement dated as of March 21, 1997 among the
Company, ING (U.S.) Capital Corporation, as administrative agent, and Morgan Guaranty Trust Company
of New York, as documentation agent, and the other financial institutions party thereto (5)

10.5....... Registration Rights Agreement dated as of January 1, 1997 among the Company and certain of its
stockholders (2)

10.6....... Employment Agreement dated as of May 31, 1996 between the Company and Richard De Young (2)

10.7....... Employment Agreement dated January 26, 1993 between the Company and John J. McDonnell, as amended (2)

10.8....... Employment Agreement dated May 16, 1995 between the Company and Richard T. Kogler (2)

10.9....... Employment Agreement dated June 2, 1995 between the Company and Ann L. Straw (2)

10.10...... Employment Agreement dated May 3, 1994 between the Company and Lawrence R. Conrath, Sr. (2)

10.11...... Employment Agreement dated as of May 31, 1996 between the Company and David C. Stoller (2)

10.12...... Employment Agreement dated as of February 21, 1997 between the Company and Stephen P. Lavey (5)

10.13...... American Disposal Services, Inc. 1996 Stock Option Plan (2)

10.14...... Form of Indemnification Agreement between the Company and its directors (2)

10.15...... Form of Indemnification Agreement between the Company and its executive officers (2)

10.16...... Form of Indemnification Agreement between the Company and its directors and executive officers (2)

10.17...... Form of Tax-Sharing Agreement between the Company and its executive officers (2)

21.1....... Subsidiaries of the Company

23.1....... Consent of the Independent Auditors

23.2....... Consent of Arthur Andersen LLP

23.5....... Consent of Proskauer Rose Goetz & Mendelsohn LLP (included in exhibit 5.1)

24.1....... Powers of Attorney are set forth on the signature pages hereof
</TABLE>

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

(*) To be filed by amendment.

(1) Previously filed.

(2) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (333-4889).

(3) Previously filed as an exhibit to the Company's Current Report on Form 8-K,
dated April 15, 1997.

(4) Previously filed as an exhibit to the Company's Current Report on Form 8-K,
dated August 26, 1996.

(5) Filed as an exhibit to the Company's annual report on Form 10-K for the year
ended December 31, 1996.

II-3
<PAGE>
(b) Financial Statement Schedules

None

ITEM 17. UNDERTAKINGS.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement (filed herewith as Exhibit 1.1)
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

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 provisions described above in Item 14 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 Securities Act of 1933 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 against the Registrant 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Burr Ridge, State of Illinois, on May 1, 1997.

AMERICAN DISPOSAL SERVICES, INC.

BY: /S/ RICHARD DE YOUNG
-----------------------------------------
Richard De Young
PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registrant's registration statement has been signed by the following
persons in the capacities and on the dates indicated.

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

* Chairman and Director May 1, 1997
- ------------------------------ (principal executive
David C. Stoller officer)

/s/ RICHARD DE YOUNG President and Director May 1, 1997
- ------------------------------
Richard De Young

* Chief Financial Officer May 1, 1997
- ------------------------------ (principal financial
Stephen P. Lavey officer)

* Vice President and May 1, 1997
- ------------------------------ Controller (principal
Lawrence R. Conrath, Sr. accounting officer)

II-5
<PAGE>

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

* Director May 1, 1997
- ------------------------------
Merril M. Halpern

* Director May 1, 1997
- ------------------------------
A. Lawrence Fagan

* Director May 1, 1997
- ------------------------------
Richard T. Henshaw, III

* Director May 1, 1997
- ------------------------------
G. T. Blankenship

* Director May 1, 1997
- ------------------------------
Norman Steisel

/s/ RICHARD DE YOUNG
----------------------------------------
Richard De Young
*By: ATTORNEY-IN-FACT

II-6

<PAGE>

EXHIBIT 5.1

PROSKAUER ROSE GOETZ & MENDELSOHN LLP
1585 BROADWAY
NEW YORK, NEW YORK 10036-8299

May 1, 1997

American Disposal Services, Inc.
745 McClintock Drive
Suite 305
Burr Ridge, IL 60521

Re: Registration Statement on Form S-1
FILE NO. 333-24103

Gentlemen:

You have requested our opinion in connection with the above-referenced
registration statement, as amended (the "Registration Statement"), filed by
American Disposal Services, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to 3,500,000 shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), to be sold to the underwriters by the
Company (the "Firm Shares"), and up to 525,000 additional shares of Common Stock
to cover over-allotment options granted to the underwriters (together with the
Firm Shares, the "Shares"), for sale to the public pursuant to an underwritten
public offering.

As counsel to the Company, we have examined such corporate records,
other documents and questions of law as we have considered necessary or
appropriate for the purpose of this opinion, including the Certificate of
Incorporation, as amended, and the By-laws of the Company, the Registration
Statement and the exhibits thereto, including the form of underwriting agreement
relating to the Shares filed as Exhibit 1.1 to the Registration Statement (the
"Underwriting Agreement"), and we have made such investigations of law as we
have deemed necessary in order to render the opinion hereinafter set forth. In
such examinations, we have assumed the genuineness of signatures and the
conformity to original documents of the documents supplied to us as copies. As
to relevant questions of fact material to our opinion, we have relied upon
statements and certificates of officers and representatives of the Company.

In giving this opinion, we have assumed that the certificates for the
Shares, when issued, will have been duly executed on behalf of the Company by
the Company's transfer agent and registered by the Company's registrar and will
conform, except as to denominations, to specimens we have examined.

Based upon and subject to the foregoing, we are of the opinion that:

<PAGE>

May 1, 1997
Page 2

1. The Shares have been authorized; and

2. The Shares to be sold by the Company, when issued in accordance
with the Underwriting Agreement, will be validly issued, fully paid and non-
assessable.

We hereby consent to the references to our firm under the caption
"Legal Matters" in the Registration Statement and to the use of this opinion as
an exhibit to the Registration Statement. In giving this consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.

Very truly yours,

PROSKAUER ROSE GOETZ & MENDELSOHN LLP

<PAGE>

EHIBIT 21.1

SUBSIDIARIES OF THE COMPANY

Name State of Incorporation
- ---- ----------------------

ADS, Inc. Oklahoma
County Disposal, Inc. Delaware
American Disposal Services of Kansas, Inc. Kansas*
American Disposal Services of Missouri, Inc. Missouri*
Tata's Transfer Systems, Inc. Oklahoma*
Pittsburg County Landfill, Inc. Delaware*
County Disposal (Illinois), Inc. Delaware*
County Disposal (Ohio), Inc. Delaware**
County Landfill, Inc. Delaware**
Southwest Waste, Inc. Missouri*
Bowers Phase II, Inc. Ohio**
Allied Waste Systems, Inc. Ohio**
Ross Bros. Waste and Recycling Co., Inc. Ohio**

* Indirect Ownership through ADS, Inc.
** Indirect Ownership through County Disposal, Inc.

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the caption "Experts" and to the
use of our reports dated February 26, 1997, except as to Note 5 for which the
date is March 21, 1997 and as to Note 10 for which the date is March 25, 1997
and March 17, 1997 in Amendment No. 3 to the Registration Statement (Form S-1
No. 333-24103) and related Prospectus of American Disposal Services, Inc. for
the registration of up to 4,025,000 shares of its common stock.

ERNST & YOUNG LLP

Chicago, Illinois

May 1, 1997

<PAGE>
EXHIBIT 23.2

CONSENT OF ARTHUR ANDERSEN LLP

As independent public accountants, we hereby consent to the reference to our
firm under the caption "Experts" and to the use of our report dated March 28,
1997 included in this Registration Statement on Form S-1.

ARTHUR ANDERSEN LLP

Chicago, Illinois
May 1, 1997