10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-14705

ALLIED WASTE INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	88-0228636
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

15880 North Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (480) 627-2700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of the issuer’s class of common stock, as of the latest practicable date.

Class	Outstanding as of July 27, 2006
Common Stock	367,583,054

ALLIED WASTE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2006

INDEX

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Cash Flows	3
Notes to Consolidated Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
Item 4. Controls and Procedures	46
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	47
Item 1A. Risk Factors	47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3. Defaults upon Senior Securities	48
Item 4. Submission of Matters to a Vote of Security Holders	48
Item 5. Other Information	48
Item 6. Exhibits	49
Signatures	50
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32

ALLIED WASTE INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)

	June 30,			December 31,
	2006			2005
	(unaudited)
ASSETS
Current Assets —
Cash and cash equivalents	$	47.6		$	56.1
Accounts receivable, net of allowance of $17.8 and $17.8		728.0			690.5
Prepaid and other current assets		90.7			80.5
Deferred income taxes		128.6			93.3
Total current assets		994.9			920.4
Property and equipment, net		4,393.7			4,273.5
Goodwill		8,179.8			8,184.2
Other assets, net		242.5			247.5
Total assets	$	13,810.9		$	13,625.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities —
Current portion of long-term debt	$	223.0		$	238.5
Accounts payable		481.1			564.8
Current portion of accrued capping, closure, post-closure and environmental costs		89.7			95.8
Accrued interest		117.7			116.5
Other accrued liabilities		343.7			330.5
Unearned revenue		241.1			229.4
Total current liabilities		1,496.3			1,575.5
Long-term debt, less current portion		6,959.1			6,853.2
Deferred income taxes		395.1			305.5
Accrued capping, closure, post-closure and environmental costs, less current portion		809.0			796.8
Other long-term obligations		643.1			655.2
Commitments and Contingencies
Stockholders’ Equity —
Series C senior mandatory convertible preferred stock, $0.10 par value, 6.9 million shares authorized, issued and outstanding, liquidation preference of $50.00 per share, net of $11.9 million of issuance costs		—			333.1
Series D senior mandatory convertible preferred stock, $0.10 par value, 2.4 million shares authorized, issued and outstanding, liquidation preference of $250.00 per share, net of $19.2 million of issuance costs		580.8			580.8
Common stock, $0.01 par value, 525 million authorized shares, 366.6 million and 331.2 million shares issued and outstanding		3.7			3.3
Additional paid-in capital		2,787.6			2,440.7
Accumulated other comprehensive loss		(70.3	)		(70.3	)
Retained earnings		206.5			151.8
Total stockholders’ equity		3,508.3			3,439.4
Total liabilities and stockholders’ equity	$	13,810.9		$	13,625.6

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

1

ALLIED WASTE INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts, unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Revenues	$	1,540.6		$	1,448.6		$	2,979.3		$	2,789.9
Cost of operations (exclusive of depreciation and amortization shown below)		991.9			942.7			1,935.2			1,817.6
Selling, general and administrative expenses		148.4			117.0			293.8			246.9
Depreciation and amortization		147.5			141.0			288.9			274.3
Operating income		252.8			247.9			461.4			451.1
Interest expense and other		173.8			126.6			306.5			330.2
Income before income taxes		79.0			121.3			154.9			120.9
Income tax expense		41.2			69.3			76.3			43.9
Minority interest		0.2			(1.0	)		(0.2	)		(0.7	)
Income from continuing operations		37.6			53.0			78.8			77.7
Income from discontinued operations, net of tax		—			1.0			—			1.0
Net income		37.6			54.0			78.8			78.7
Dividends on preferred stock		(9.4	)		(14.7	)		(24.1	)		(22.4	)
Net income available to common shareholders	$	28.2		$	39.3		$	54.7		$	56.3
Basic EPS:
Continuing operations	$	0.08		$	0.12		$	0.16		$	0.17
Discontinued operations		—			—			—			—
Net income available to common shareholders	$	0.08		$	0.12		$	0.16		$	0.17
Weighted average common shares		364.1			329.1			347.2			324.2
Diluted EPS:
Continuing operations	$	0.08		$	0.12		$	0.16		$	0.17
Discontinued operations		—			—			—			—
Net income available to common shareholders	$	0.08		$	0.12		$	0.16		$	0.17
Weighted average common and common equivalent shares		367.3			332.2			349.9			327.6

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

2

ALLIED WASTE INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)

	Six Months Ended June 30,
	2006			2005
Operating activities —
Net income	$	78.8		$	78.7
Discontinued operations, net of tax		—			(1.0	)
Adjustments to reconcile net income to cash provided by operating activities from continuing operations —
Provisions for:
Depreciation and amortization		288.9			274.3
Stock-based compensation expense		7.3			2.8
Doubtful accounts		7.5			6.3
Accretion of debt and amortization of debt issuance costs		10.9			11.9
Deferred income taxes		63.9			31.3
Gain on sale of fixed assets		(2.5	)		(1.6	)
Non-cash reduction in acquisition and environmental accruals		(13.5	)		(17.5	)
Write-off of deferred debt issuance costs		3.6			13.5
Change in operating assets and liabilities, excluding the effects of purchase acquisitions—
Accounts receivable, prepaid expenses, inventories and other assets		(52.5	)		(45.9	)
Accounts payable, accrued liabilities, unearned income and other		(26.0	)		(29.9	)
Capping, closure and post-closure accretion		25.2			25.3
Capping, closure, post-closure and environmental expenditures		(23.8	)		(30.7	)
Cash provided by operating activities from continuing operations		367.8			317.5
Investing activities —
Cost of acquisitions, net of cash acquired		(10.6	)		(1.9	)
Proceeds from divestitures, net of cash divested		13.4			3.5
Proceeds from sale of fixed assets		7.3			7.2
Capital expenditures, excluding acquisitions		(371.8	)		(283.5	)
Capitalized interest		(8.2	)		(7.1	)
Change in deferred acquisition costs, notes receivable and other		1.5			1.1
Cash used for investing activities from continuing operations		(368.4	)		(280.7	)
Financing activities —
Net proceeds from sale of Series D preferred stock		—			580.6
Proceeds from long-term debt, net of issuance costs		1,223.1			2,614.9
Payments of long-term debt		(1,147.0	)		(3,213.3	)
Payments of preferred stock dividends		(29.4	)		(19.3	)
Net change in disbursement account		(63.3	)		(94.4	)
Net proceeds from sale of common stock, exercise of stock options and other		8.7			96.0
Cash used for financing activities from continuing operations		(7.9	)		(35.5	)
Discontinued operations:
Provided by operating activities		—			0.7
Cash provided by discontinued operations		—			0.7
(Decrease) increase in cash and cash equivalents		(8.5	)		2.0
Cash and cash equivalents, beginning of period		56.1			68.0
Cash and cash equivalents, end of period	$	47.6		$	70.0

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

3

ALLIED WASTE INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Allied Waste Industries, Inc. (Allied, we, us, our or the Company), a Delaware corporation, is the second largest, non-hazardous solid waste management company in the United States, as measured by revenues. We provide non-hazardous waste collection, transfer, recycling and disposal services in 37 states and Puerto Rico, geographically identified as the Midwestern, Northeastern, Southeastern, Southwestern and Western regions.

The consolidated financial statements include the accounts of Allied and its subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. The December 31, 2005 balance sheet data included herein is derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles in the United States (GAAP). The consolidated balance sheet as of December 31, 2005 and the unaudited interim consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). As applicable under such regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. We believe that the presentations and disclosures herein are adequate when read in conjunction with our Annual Report on Form 10-K, for the year ended December 31, 2005. The consolidated financial statements as of June 30, 2006, and for the three and six months ended June 30, 2006 and 2005 reflect, in the opinion of management, all adjustments, consisting only of normal recurring adjustments (except as otherwise disclosed in the notes) necessary to fairly state the financial position and results of operations for such periods. Certain reclassifications have been made to the prior period financial statements to conform to the current presentation.

Operating results for interim periods are not necessarily indicative of the results for full years. These consolidated financial statements should be read in conjunction with our consolidated financial statements for the year ended December 31, 2005 and the related notes thereto included in our Annual Report on Form 10-K.

For the description of our significant accounting policies, see Note 1 of Notes to Consolidated Financial Statements for the year ended December 31, 2005 in our Annual Report on Form 10-K.

Assets held for sale –

Certain operations were classified as assets held for sale in 2005, which did not qualify as discontinued operations. In the first quarter of 2005, we recorded a $3.7 million pre-tax loss in cost of operations and a benefit of approximately $27.0 million in our provision for income taxes, of which $25.5 million related to the stock basis of these assets held for sale. Since certain of these operations were sold pursuant to a stock sale agreement, we were able to recognize as a deferred tax asset the tax basis in the stock of these operations in the first quarter of 2005, which previously could not be recognized under Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes (SFAS 109). The sale of these assets was completed in the first quarter of 2006.

Discontinued operations –

Discontinued operations for the three and six months ended June 30, 2005 include $1.7 million of income before tax ($1.0 million, net of tax), primarily the result of adjustments to our insurance liabilities related to Florida operations classified as discontinued operations and sold in 2004.

Interest expense capitalized –

We capitalize interest in connection with the construction of our landfill assets. Actual acquisition, permitting and construction costs incurred which relate to landfill assets under active development qualify for interest capitalization. Interest capitalization ceases when the construction of a landfill asset is complete and available for use.

4

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended June 30, 2006 and 2005, we incurred gross interest expense of $132.4 million and $126.5 million, respectively, of which $4.1 million and $3.7 million, respectively, was capitalized. We incurred gross interest expense of $264.4 million and $264.9 million for the six months ended June 30, 2006 and 2005, respectively, of which $8.2 million and $7.1 million, respectively, was capitalized.

Statements of cash flows –

The supplemental cash flow disclosures are as follows (in millions):

	Six Months Ended June 30,
	2006		2005
Supplemental Disclosures -
Interest paid (net of amounts capitalized)	$	254.5	$	278.8
Income taxes paid (net of refunds)		17.1		28.4
Non-Cash Transactions -
Liabilities incurred or assumed in acquisitions	$	1.7	$	0.1
Dividends accrued on preferred stock		3.1		8.5

Use of estimates –

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Although we believe that our estimates and assumptions are reasonable, they are based upon information presently available and assumptions about the future. Actual results may differ significantly from the estimates.

Recently issued accounting pronouncements –

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which revises SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123) and supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be measured at fair value and expensed in the consolidated statement of operations over the service period (generally the vesting period).

Effective January 1, 2006, we adopted SFAS 123(R) using the modified prospective transition method, whereby compensation expense is only recognized in the consolidated statements of operations in the period beginning in January 1, 2006. Accordingly, compensation cost amounts for prior periods are contained in the Company’s footnotes but the consolidated financial statements have not been restated to reflect, and do not include, the impact of SFAS 123(R). See Note 8, Stock Plans, for additional disclosures.

We have elected to adopt the alternative transition method for calculating the tax effects of stock-based compensation pursuant to SFAS 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that are outstanding upon the adoption of SFAS 123(R).

In October 2005, the FASB issued FASB Staff Position (FSP) No. 13-1 (FSP FAS 13-1), Accounting for Rental Costs Incurred during a Construction Period. This FSP requires rental costs associated with ground or building operating leases that are incurred during the construction period to be recognized as rental expense over the lease term, which includes the construction period. The adoption of FSP FAS 13-1 as of January 1, 2006 did not have a material impact on our financial position or results of operations.

5

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and provides guidance on the recognition, de-recognition and measurement of benefits related to an entity’s uncertain tax positions. FIN 48 is effective for us beginning January 1, 2007. We are currently evaluating the impact of its adoption on our financial position and results of operations.

2. Property and Equipment

Maintenance and repair expenses charged to cost of operations for the three and six months ended June 30, 2006 were $123.9 million and $249.2 million and $123.5 million and $239.3 million for the same periods in 2005, respectively. We recognized net pre-tax gains on the disposal of fixed assets for the three and six months ended June 30, 2006 of $1.7 million and $2.5 million, and $1.0 million and $1.6 million for same periods in 2005, respectively.

The following tables show the activity and balances related to property and equipment from December 31, 2005 through June 30, 2006 (in millions):

	Property and Equipment
	Balance at							Acquisitions,			Transfers			Balance at
	December 31,		Capital		Sales and			net of			and			June 30,
	2005		Additions		Retirements			Divestitures			Other(1)			2006
Land and improvements	$	472.0	$	8.6	$	(1.5	)	$	(0.1	)	$	3.5		$	482.5
Land held for permitting as landfills		114.0		2.6		—			(7.1	)		(12.6	)		96.9
Landfills		3,978.5		107.9		—			12.2			20.7			4,119.3
Buildings and improvements		506.6		13.8		(1.7	)		(3.3	)		27.9			543.3
Vehicles and equipment		2,039.6		200.7		(34.2	)		(1.2	)		0.5			2,205.4
Containers and compactors		920.7		37.4		(8.8	)		(1.2	)		0.1			948.2
Furniture and office equipment		52.7		0.8		(1.4	)		—			—			52.1
Total	$	8,084.1	$	371.8	$	(47.6	)	$	(0.7	)	$	40.1		$	8,447.7

	Accumulated Depreciation and Amortization
				Depreciation
	Balance at			and						Acquisitions,		Transfers			Balance at
	December 31,			Amortization			Sales and			net of		and			June 30,
	2005			Expense			Retirements			Divestitures		Other(1)			2006
Land and improvements	$	(31.7	)	$	(3.0	)	$	—		$	—	$	—		$	(34.7	)
Landfills		(1,839.9	)		(129.6	)		—			—		—			(1,969.5	)
Buildings and improvements		(150.2	)		(13.8	)		0.8			0.3		—			(162.9	)
Vehicles and equipment		(1,159.4	)		(98.5	)		32.4			1.7		(1.2	)		(1,225.0	)
Containers and compactors		(590.0	)		(41.1	)		8.2			1.3		—			(621.6	)
Furniture and office equipment		(39.4	)		(2.3	)		1.4			—		—			(40.3	)
Total	$	(3,810.6	)	$	(288.3	)	$	42.8		$	3.3	$	(1.2	)	$	(4,054.0	)
Property and equipment, net	$	4,273.5		$	83.5		$	(4.8	)	$	2.6	$	38.9		$	4,393.7

⁽¹⁾ Includes construction-in-process related to the lease of a new Operations Support Center, for which we are considered the owner during the construction period (for accounting purposes) under the provisions of EITF 97-10, The Effect of Lessee Involvement in Asset Construction. Also includes capitalized interest, reclass of landfill cover from land held for landfills and changes in our landfill retirement obligation asset for recognition of and adjustments to capping, closure and post-closure costs (see Note 6).

6

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Goodwill and Intangible Assets

At least annually, we perform an assessment of goodwill impairment by applying a fair value based test to each of our reporting units, which we define as each of our geographic operating segments. We completed our annual assessment of goodwill in the fourth quarter of 2005 and no impairment was recorded. The calculation of fair value is subject to judgments and estimates about future events. We estimated fair value based on projected net cash flows discounted using a weighted-average cost of capital of approximately 7.4% in 2005. In addition, consideration is also given to an earnings multiple approach as an indicator of the reasonableness of our discounted cash flows. The estimated fair value could change if there were future changes in our capital structure, cost of debt, interest rates, capital expenditure levels, ability to perform at levels that were forecasted or changes to the market capitalization of our company. As a result of evaluating goodwill for impairment, we may recognize an impairment in one or more reporting units even though our fair value test indicates no impairment in other reporting units or no impairment if a test were to be performed on the Company as a whole.

We may conduct an impairment test of goodwill more frequently than annually under certain conditions. For example, a significant adverse change in liquidity or the business environment, unanticipated competition, a significant adverse action by a regulator or a disposal of a significant portion of a reporting unit could prompt an impairment test between annual assessments.

Our reporting units are comprised of several vertically integrated businesses. A divestiture of any individual asset below the reporting unit level could result in a loss. At the time of a divestiture of an individual business within a reporting unit, goodwill is allocated to that business based on its relative fair value to its reporting unit and a gain or loss on disposal is derived. Subsequently, the remaining goodwill in the reporting unit from which the assets were divested would be re-evaluated for realizability. This could result in an additional recognized loss.

We have incurred non-cash losses on sales of assets when we believed that re-deployment of the proceeds from the sale of such assets could reduce debt or improve operations and was economically beneficial. If we decide to sell additional assets in the future, we could incur additional non-cash losses on asset sales.

The following table shows the activity and balances related to goodwill by reporting unit from December 31, 2005 through June 30, 2006 (in millions):

	Balance as of										Balance as of
	December 31, 2005		Acquisitions		Divestitures			Adjustments(1)			June 30, 2006
Midwestern	$	2,169.1	$	—	$	(0.5	)	$	(0.6	)	$	2,168.0
Northeastern		1,796.5		—		—			(3.0	)		1,793.5
Southeastern		1,584.0		—		—			(0.5	)		1,583.5
Southwestern		1,316.9		0.8		—			58.9			1,376.6
Western		1,317.7		—		—			(59.5	)		1,258.2
Total	$	8,184.2	$	0.8	$	(0.5	)	$	(4.7	)	$	8,179.8

⁽¹⁾ Primarily due to a reallocation related to refinements to the regional organization structure.

In addition, we have other amortizable intangible assets included in other assets that consist primarily of the following at June 30, 2006 (in millions):

	Gross Carrying		Accumulated
	Value		Amortization		Net Carrying Value
Non-compete agreements	$	6.8	$	5.8	$	1.0
Other		2.8		0.6		2.2
Total	$	9.6	$	6.4	$	3.2

Amortization expense for the three and six months ended June 30, 2006 was $0.2 million and $0.5 million and $0.3 million and $0.7 million for the same periods in 2005, respectively. Based upon the amortizable assets recorded in the balance sheet at June 30, 2006, amortization expense for each of the next five years is estimated to decline from $0.9 million to $0.4 million.

7

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Long-term Debt

Long-term debt at June 30, 2006 and December 31, 2005 consists of the amounts listed in the following table. The effective interest rate includes our interest cost incurred, amortization of deferred debt issuance cost and the amortization or accretion of discounts or premiums (in millions, except percentages).

	Debt Balance at				Effective Interest Rate
	June 30,		December 31,		June 30,			December 31,
	2006		2005		2006			2005
Revolving credit facility ABR borrowings*	$	1.8	$	3.7		10.00	%		9.00	%
Revolving credit facility Adjusted LIBOR borrowings*		115.0		—		8.16			7.29
2005 Term loan B		1,275.0		1,275.0		6.93			6.33
Receivables secured loan		215.1		230.0		6.17			4.90
6.375% senior notes due 2008		156.3		154.7		8.34			8.34
8.875% senior notes due 2008		—		600.0		—			9.15
8.50% senior notes due 2008		750.0		750.0		8.78			8.78
6.50% senior notes due 2010		350.0		350.0		6.76			6.76
5.75% senior notes due 2011		400.0		400.0		6.00			6.00
6.375% senior notes due 2011		275.0		275.0		6.63			6.63
9.25% senior notes due 2012		251.0		251.1		9.40			9.40
7.875% senior notes due 2013		450.0		450.0		8.09			8.09
6.125% senior notes due 2014		425.0		425.0		6.30			6.30
7.25% senior notes due 2015		600.0		600.0		7.43			7.43
7.125% senior notes due 2016		594.8		—		7.38			—
9.25% debentures due 2021		96.2		96.1		9.47			9.47
7.40% debentures due 2035		293.3		292.2		8.03			8.03
4.25% senior subordinated convertible debentures due 2034		230.0		230.0		4.34			4.34
7.375% senior unsecured notes due 2014		400.0		400.0		7.55			7.55
Solid waste revenue bond obligations, principal payable through 2031		280.4		283.9		6.92			6.81
Notes payable to banks, finance companies, and individuals, interest rates of 0.7% to 11.25%, and principal payable through 2014, secured by vehicles, equipment, real estate or accounts receivable **		4.6		5.1		4.18			4.32
Obligations under capital leases of vehicles and equipment **		12.7		13.2		9.03			9.08
Notes payable to individuals and a commercial company, interest rates of 5.99% to 9.50%, principal payable through 2010, unsecured **		5.9		6.7		8.07			7.93
Total debt **		7,182.1		7,091.7		7.31			7.29
Less: Current portion		223.0		238.5
Long-term portion	$	6,959.1	$	6,853.2

*	Excludes fees
**	Reflects weighted average interest rate

2005 Credit facility —

We have a senior secured credit facility (2005 Credit Facility) that includes at June 30, 2006: (i) a $1.575 billion Revolving Credit Facility due January 2010 (the 2005 Revolver), (ii) a $1.275 billion Term Loan due January 2012 (the 2005 Term Loan), and (iii) a $495.0 million Institutional Letter of Credit Facility due January 2012. The proceeds of the 2005 Term Loan were used to repay previously outstanding Term Loans B, C, and D under our 2003 Credit Facility. Of the $1.575 billion available under the 2005 Revolver, the entire amount may be used to support the issuance of letters of credit. At June 30, 2006, we had $116.8 million of borrowings outstanding and $411.1 million in letters of credit outstanding under the 2005 Revolver, leaving approximately $1.047 billion capacity available under the 2005 Revolver.

8

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2005 Credit Facility bears interest at (a) an Alternative Base Rate (ABR), or (b) an Adjusted LIBOR, both terms defined in the 2005 Credit Facility agreement, plus, in either case, an applicable margin based on our leverage ratio. Proceeds from the 2005 Credit Facility may be used for working capital and other general corporate purposes, including acquisitions.

We are required to make prepayments on the 2005 Credit Facility upon completion of certain transactions as defined in the 2005 Credit Facility, including asset sales and issuances of debt securities. Proceeds from these transactions are required to be applied to amounts due under the 2005 Credit Facility pursuant to the 2005 Credit Facility agreement. We are also required to make prepayments on the 2005 Credit Facility for 50% of any excess cash flows from operations, as defined in the 2005 Credit Facility agreement. There is also scheduled amortization on the 2005 Term Loan and Institutional Letter of Credit Facility, as required in the 2005 Credit Facility agreement.

Senior notes —

In May 2006, we issued $600 million of 7.125% senior notes due 2016 at a discounted price equal to 99.123% of the aggregate principal amount. The net proceeds were used to fund a portion of the tender offer for our 8.875% senior notes due 2008. Interest is payable semi-annually on May 15^th and November 15^th, beginning on November 15, 2006. These senior notes have a make-whole call provision that is exercisable any time prior to May 15, 2011 at the stated redemption price. These notes may also be redeemed on or after May 15, 2011 at the stated redemption price.

Receivables secured loan —

We have an accounts receivable securitization program with two financial institutions that allows us to borrow up to $230 million on a revolving basis under a loan agreement secured by receivables. The agreements include a 364-day liquidity facility and a three-year purchase commitment. If we are unable to renew the liquidity facility when it matures on May 29, 2007, we will refinance any amounts outstanding with a portion of our senior credit facility or with other long-term borrowings. Although we intend to renew the liquidity facility on May 29, 2007, and do not expect to repay the amounts within the next twelve months, the loan is classified as a current liability because it has a contractual maturity of less than one year.

Debt covenants —

Under the 2005 Credit Facility, we are subject to the following financial covenants:

Minimum Interest Coverage:

From the Quarter Ending	Through the Quarter Ending	EBITDA(1)/Interest
January 1, 2006	June 30, 2006		1.95x
July 1, 2006	December 31, 2006		2.00x
January 1, 2007	March 31, 2007		2.10x
April 1, 2007	June 30, 2007		2.15x
July 1, 2007	March 31, 2008		2.20x
April 1, 2008	September 30, 2008		2.25x
October 1, 2008	December 31, 2008		2.30x
January 1, 2009	June 30, 2009		2.40x
July 1, 2009	December 31, 2009		2.55x
January 1, 2010	Thereafter		2.75x

9

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maximum Leverage:

From the Quarter Ending	Through the Quarter Ending	Total Debt/EBITDA(1)
January 1, 2006	June 30, 2006		6.25x
July 1, 2006	December 31, 2006		6.00x
January 1, 2007	June 30, 2007		5.75x
July 1, 2007	December 31, 2008		5.50x
January 1, 2009	June 30, 2009		5.25x
July 1, 2009	December 31, 2009		5.00x
January 1, 2010	Thereafter		4.50x

At June 30, 2006, we were in compliance with all financial and other covenants under our 2005 Credit Facility. We are not subject to any minimum net worth covenants. At June 30, 2006, Total Debt/EBITDA⁽¹⁾ ratio, as defined by the 2005 Credit Facility, was 4.83:1 and our EBITDA⁽¹⁾/Interest ratio was 2.42:1.

⁽¹⁾ EBITDA, which is a non-GAAP measure used for covenants, is calculated in accordance with the definition in the 2005 Credit Facility agreement. In this context, EBITDA is used solely to provide information on the extent to which we are in compliance with debt covenants and is not comparable to EBITDA used by other companies.

In addition, the 2005 Credit Facility restricts us from making certain types of payments, including dividend payments on our common and preferred stock. However, we are able to pay cash dividends on our outstanding 6.25% Series D senior mandatory convertible preferred stock (Series D preferred).

All of our notes contain certain financial covenants and restrictions, which may, in certain circumstances, limit our ability to complete acquisitions, pay dividends, incur indebtedness, make investments and take certain other corporate actions. At June 30, 2006, we were in compliance with all applicable covenants.

2006 Refinancing –

On April 12, 2006, we completed the re-pricing of the 2005 Term Loan and Institutional Letter of Credit portions of our 2005 Credit Facility. The 2005 Term Loan and Institutional Letter of Credit Facility re-priced at LIBOR plus 175 basis points (or ABR plus 75 basis points), a reduction of 25 basis points. The pricing will further decrease to LIBOR plus 150 basis points (or ABR plus 50 basis points) when our leverage ratio is equal to or less than 4.25x. In May 2006, we issued $600 million of 7.125% senior notes due 2016 and used the net proceeds to fund a portion of our tender offer for our 8.875% senior notes due 2008. In connection with these transactions, during the second quarter of 2006, we expensed approximately $40.8 million of premiums paid, deferred financing and other costs.

2005 Refinancing –

During the first quarter of 2005, we executed a multifaceted refinancing plan for which the costs incurred to early extinguish debt during the six months ended June 30, 2005 were $62.4 million. These expenses were recorded in interest expense and other.

Collateral —

Our 2005 Credit Facility is secured by the stock of substantially all of our subsidiaries and a security interest in substantially all of our assets. A portion of the collateral that collateralizes the 2005 Credit Facility is shared as collateral with the holders of certain of our senior secured notes and debentures.

The senior secured notes and debentures are collateralized by the stock of substantially all of Browning-Ferris Industries, LLC (BFI) subsidiaries along with certain other Allied subsidiaries and a security interest in the assets of BFI, its domestic subsidiaries and certain other Allied subsidiaries. As of June 30, 2006, the book value of the assets of the subsidiaries that serve as collateral for these notes and debentures was approximately $8.8 billion, which represents approximately 64% of our consolidated total assets.

10

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative instruments and hedging activities —

Our risk management policy requires that no less than 70% of our total debt is fixed, either directly or effectively through interest rate swap contracts. From time to time, in order to adhere to the policy, we have entered into interest rate swap agreements for the purpose of hedging variability of interest expense and interest payments on our long-term variable rate bank debt and maintaining a mix of fixed and floating rate debt. Our strategy is to use interest rate swap contracts when such transactions will serve to reduce our aggregate exposure and meet the objectives of our risk management policy. These contracts are not entered into for trading purposes.

We believe it is important to have a mix of fixed and floating rate debt to provide financing flexibility. At June 30, 2006, approximately 77% of our debt was fixed and 23% had variable interest rates. We had no interest rate swap contracts outstanding at June 30, 2006 or 2005.

5. Stockholders’ Equity

Accumulated other comprehensive loss —

The components of the ending balances of accumulated other comprehensive loss, as reflected in stockholders’ equity are as follows (in millions):

	June 30,			December 31,
	2006			2005
Minimum pension liability adjustment, net of taxes of $46.8	$	(70.3	)	$	(70.3	)
Accumulated other comprehensive loss	$	(70.3	)	$	(70.3	)

Comprehensive income —

The components of total comprehensive income are shown as follows (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
Net income	$	37.6	$	54.0	$	78.8	$	78.7
Other comprehensive income:
Designated interest rate swap contracts gain, net of tax effect of $0.0, $0.0, $0.0 and $0.7		—		—		—		1.3
Total comprehensive income	$	37.6	$	54.0	$	78.8	$	80.0

Series C senior mandatory convertible preferred stock –

In April 2006, each of the outstanding shares of our 6.25% Series C senior mandatory convertible preferred stock (Series C preferred stock) automatically converted into 4.9358 shares of our common stock pursuant to the terms of the certificate of designations governing the Series C preferred stock. This increased our common shares outstanding by approximately 34.1 million shares and eliminated annual cash dividends of $21.6 million.

The conversion rate, pursuant to the terms set forth in the certificate of designations, is equal to $50.00 divided by $10.13 (the threshold appreciation price), as the average of the closing prices per share of our common stock on each of the 20 consecutive trading days ending on March 29, 2006 (the third trading day preceding the conversion date) was greater than the threshold appreciation price. Each holder of Series C preferred stock on the applicable record date received a cash payment equal to the amount of accrued and unpaid dividends. As a result of the automatic conversion, we will no longer pay any future quarterly dividends in cash or stock in respect of the Series C preferred stock. Each holder of Series C preferred stock on the conversion date received cash in lieu of any fractional shares of common stock issued upon conversion of the Series C preferred stock.

11

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Landfill Accounting

Landfill accounting —

We have a network of 169 owned or operated active landfills with a net book value of approximately $2.1 billion at June 30, 2006. In addition, we own or have responsibility for 107 closed landfills.

We use a life-cycle accounting method for landfills and the related capping, closure and post-closure liabilities. This method applies the costs to be capitalized associated with acquiring, developing, closing and monitoring the landfills over the associated consumption of landfill capacity.

Specifically, we record landfill retirement obligations at fair value as a liability with a corresponding increase to the landfill asset as waste is disposed. The amortizable landfill asset includes landfill development costs incurred, landfill development costs expected to be incurred over the life of the landfill, the recorded capping, closure and post-closure asset retirement obligation and the present value of cost estimates for future capping, closure and post-closure costs. We amortize the landfill asset over the remaining capacity of the landfill as volume is consumed during the life of the landfill with one exception. The exception applies to capping costs for which both the recognition of the liability and the amortization of these costs is based instead on the costs and capacity of the specific capping event.

On an annual basis, we update the development cost estimates (which include the costs to develop the site as well as the individual cell construction costs) and capping, closure and post-closure cost estimates for each landfill. Additionally, future capacity estimates (sometimes referred to as airspace) are updated annually using aerial surveys of each landfill to estimate utilized disposal capacity and remaining disposal capacity. The overall cost and capacity estimates are reviewed and approved by senior operations management annually.

Landfill assets —

The following is a rollforward of our investment in our landfill assets excluding land held for future permitting as landfills (in millions):

Net Book	Net Book Value		Capping,			Net Book
Value at	of Landfills	Landfill	Closure and			Value at
December 31,	Acquired, net of	Development	Post Closure	Landfill		June 30,
2005	Divestitures	Costs	Accruals	Amortization	Other	2006
$2,138.6	$12.2	$116.2	$11.2	($129.6)	$1.2	$2,149.8

We expensed approximately $67.9 million and $65.4 million, or an average of $3.28 and $3.14 per ton consumed, related to landfill amortization during the three months ended June 30, 2006 and 2005, respectively. During the six months ended June 30, 2006 and 2005, we expensed approximately $129.6 million and $122.7 million, respectively, or an average of $3.30 and $3.12 per ton consumed, respectively, related to landfill amortization.

Capping, closure and post-closure and environmental costs—

Accretion expense is necessary to increase the accrued capping, closure and post-closure accrual balance to its future undiscounted value. To accomplish this, we accrete our capping, closure and post-closure accrual balance using the applicable credit-adjusted, risk-free rate and charge this accretion as an operating expense in that period. Accretion expense on recorded landfill liabilities is recorded to cost of operations from the time the liability is recognized until the costs are paid.

12

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accretion expense for capping, closure and post-closure for the three months ended June 30, 2006 and 2005 was $12.4 million and $12.6 million, respectively, or an average of $0.60 and $0.60 per ton consumed, respectively. During the six months ended June 30, 2006 and 2005, we recorded accretion expense of $25.2 million and $25.3 million, respectively, or an average of $0.64 and $0.64 per ton consumed, respectively. Changes in estimates of costs or disposal capacity are treated on a prospective basis for operating landfills and are recorded immediately in results of operations for fully incurred capping events and closed landfills. There were no changes in estimates that had a material impact on our results of operations during the three and six months ended June 30, 2006.

Environmental liabilities arise from contamination at sites that we own or operate or third-party sites where we deliver or transport waste. These liabilities primarily include costs associated with remediating groundwater, surface water and soil contamination as well as controlling and containing methane gas migration. In connection with evaluating liabilities for environmental matters, we estimate a range of potential impacts and the most likely outcome. The recorded liabilities represent our estimate of the most likely outcome of the matters for which we have determined liability is probable. For these matters, we periodically evaluate the recorded liabilities and as additional information becomes available to ascertain whether the accrued liabilities are adequate. We do not expect near-term adjustments to estimates will have a material effect on our consolidated liquidity, financial position or results of operations.

These estimates, however, require assumptions about future events due to a number of uncertainties including the extent of the contamination, the appropriate remedy, the financial viability of other potentially responsible parties and the final apportionment of responsibility among the potentially responsible parties. As noted above, because of these uncertainties, we estimate a range of exposure for environmental liabilities. Using the high end of our estimate of the reasonably possible range, the outcome of these matters, which exclude capping, closure and post-closure costs, could result in approximately $22 million of additional liability.

The following table shows the activities and balances related to environmental accruals and for capping, closure and post-closure accruals related to open and closed landfills from December 31, 2005 through June 30, 2006 (in millions):

	Balance at										Balance at
	December 31,		Charges to								June 30,
	2005		Expense		Other(1) (2)			Payments			2006
Environmental accruals	$	272.8	$	—	$	(7.9	)	$	(7.0	)	$	257.9
Open landfills capping, closure, and post-closure accruals		419.8		17.4		12.7			(6.4	)		443.5
Closed landfills capping, closure, and post-closure accruals		200.0		7.8		(0.1	)		(10.4	)		197.3
Total	$	892.6	$	25.2	$	4.7		$	(23.8	)	$	898.7

(1)	Environmental adjustment recorded in the second quarter was due to the selection by a regulatory agency of a lower cost remediation plan related to a Superfund site.
(2)	Amounts for open and closed landfills consist primarily of amounts accrued for capping, closure and post-closure liability to landfill assets during the period.

13

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Employee Benefit Plans

Components of net periodic benefit cost —

The following tables provide the components of net periodic benefit cost for the BFI Pension Plan and the supplemental executive retirement plan (SERP) (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
BFI Pension Plan:	2006			2005			2006			2005
Service cost	$	—		$	0.2		$	0.1		$	0.3
Interest cost		5.3			5.2			10.6			10.4
Expected return on plan assets		(7.5	)		(7.1	)		(15.0	)		(14.1	)
Recognized net actuarial loss		1.8			1.7			3.5			3.4
Amortization of prior service cost		—			—			—			—
Curtailment		0.1			—			0.1			—
Net periodic benefit (income) cost	$	(0.3	)	$	—		$	(0.7	)	$	—

	Three Months Ended June 30,						Six Months Ended June 30,
SERP:	2006			2005			2006			2005
Service cost	$	0.2		$	0.6		$	0.4		$	0.8
Interest cost		0.1			—			0.3			0.2
Recognized net actuarial gain		—			—			(0.0	)		—
Curtailment		(0.0	)		(0.4	)		(0.0	)		(0.4	)
Amortization of prior service cost		0.2			0.4			0.4			0.8
Net periodic benefit cost	$	0.5		$	0.6		$	1.1		$	1.4

8. Stock Plans

Effective January 1, 2006, we adopted the provisions of SFAS 123(R), Share-Based Payment, which establishes the accounting for stock-based awards exchanged for employee services. SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be measured at fair value and expensed in the consolidated statement of operations over the service period (generally the vesting period). We previously accounted for share-based compensation plans under APB 25 and the related interpretations and provided the required SFAS 123 pro forma disclosures for employee stock options.

Periods prior to the adoption of SFAS 123(R) –

Prior to the adoption of SFAS 123(R), we provided the disclosures required under SFAS 123. We did not recognize stock option-based compensation cost in our statement of operations for the periods prior to the adoption of SFAS 123(R), as all options granted had an exercise price equal to the fair value of our common stock on the date of grant. The following table presents the effect on net income available to common shareholders and earnings per share as if we had applied the fair value recognition provisions of SFAS 123 (in millions, except per share data):

	Three Months			Six Months
	Ended June 30,			Ended June 30,
	2005			2005
Net income available to common shareholders, as reported	$	39.3		$	56.3
Add: Stock-based compensation expense included in reported net income available to common shareholders, net of tax		1.4			2.8
Less: Total stock-based employee compensation expense determined under fair value based method, net of tax		(2.5	)		(5.1	)
Net income available to common shareholders, pro forma	$	38.2		$	54.0
Basic earnings per share:   As reported	$	0.12		$	0.17
Pro forma		0.12			0.17
Diluted earnings per share: As reported	$	0.12		$	0.17
Pro forma		0.11			0.16

14

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In accordance with SFAS 123, the fair value of each option grant was estimated as of the date of grant using the Black-Scholes option valuation model with the following weighted average assumptions:

	Three Months			Six Months
	Ended June 30,			Ended June 30,
	2005			2005
Risk free interest rate		3.2	%		3.2	%
Expected life (in years)		6.0			6.0
Dividend rate		0.0	%		0.0	%
Expected volatility		53.3	%		53.6	%

Adoption of SFAS 123(R) –

We elected to adopt the modified prospective transition method as provided by SFAS 123(R). Under this method, we are required to recognize compensation expense for all awards granted after the date of adoption and for all the unvested portion of previously granted awards that remained outstanding at the date of adoption. Accordingly, financial statement amounts for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). The effect of recording stock-based compensation expense for the three and six months ended June 30, 2006 was as follows (in millions, except per share data):

	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2006		2006
Stock-based compensation expense by type of award(1):
Stock options	$	2.1	$	3.7
Restricted stock awards (2)		1.8		3.6
Total stock-based compensation expense	$	3.9	$	7.3
Tax effect on stock-based compensation expense		1.3		2.6
Net effect on net income available to common shareholders	$	2.6	$	4.7
Effect on earnings per share:
Basic	$	0.01	$	0.01
Diluted		0.01		0.01

(1)	Included in selling, general and administrative expenses.
(2)	Stock-based compensation expense related to restricted stock awards was recorded under the provisions of APB 25.

Employee stock options –

In February 2006, the Board amended and restated the 1991 Employee Stock Plan to create the 2006 Incentive Stock Plan (2006 Plan). Our stockholders approved the 2006 Plan in May 2006. The 2006 Plan, the Amended and Restated 1993 Incentive Stock Plan (1993 Plan) and the Amended and Restated 1994 Incentive Stock Plan (1994 Plan) (collectively the Employee Plans), provide for the grant of non-qualified stock options, incentive stock options, shares of restricted stock, shares of phantom stock and stock bonuses. The 2006 Plan also provides for the grant of restricted stock units, stock appreciation rights, performance awards, dividend equivalents, cash awards, or other stock-based awards. Options granted under the Employee Plans typically vest over three to five years and expire ten years from their grant date. No further awards may be granted under the 1993 Plan and 1994 Plan. At June 30, 2006, there were approximately 35.0 million shares of common stock available for award under the 2006 Plan.

During the six months ended June 30, 2006, Allied granted 0.6 million stock options, all in the first quarter, with an estimated total grant-date fair value of $2.5 million. Of this amount, we estimated that the stock-based compensation for the awards granted during the six months ended June 30, 2006 not expected to vest was $0.1 million. All options have no intrinsic value at date of grant. The weighted average fair value of options granted during the six months ended June 30, 2006 was $4.35 per share.

15

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the three and six months ended June 30, 2006, we recorded stock-based compensation related to stock options of $2.1 million and $3.7 million or $1.2 million and $2.2 million, net of tax, respectively, for all unvested options granted prior to and after the adoption of SFAS 123(R). At June 30, 2006, the deferred stock-based compensation balance, net of estimated forfeitures, related to stock options was $16.4 million and is expected to be recognized over an estimated weighted average amortization period of 3.6 years.

The total intrinsic value of stock options exercised during the three and six months ended June 30, 2006 was $1.5 million and $1.9 million, respectively. The weighted average grant date fair value of stock options vested during the three months and six months ended June 30, 2006 was $2.3 million and $4.4 million, respectively. Total cash received from employee stock option exercises during the three and six months ended June 30, 2006 was $7.7 million and $8.8 million, respectively. The income tax benefits from stock option exercises totaled approximately $0.6 million and $0.7 million, respectively, for the three and six months ended June 30, 2006.

Non-employee director stock awards –

We provide restricted stock awards (or, at the discretion of the Management Development/ Compensation Committee of the Board of Directors, restricted stock units or stock options) to non-employee members of the Board of Directors under our 2005 Non-Employee Director Equity Compensation Plan (the Director Plan). The maximum number of shares to be granted under the Director Plan is 2.75 million common shares, of which approximately 1.3 million was available for issuance at June 30, 2006. Stock awards granted under the Director Plan generally vest over a period of one to three years and expire ten years from the grant date. Restricted stock awards cannot be sold or transferred and are subject to forfeiture until they are fully vested.

During the three and six months ended June 30, 2006, Allied granted non-employee directors approximately 46,000 shares of restricted stock with an estimated total grant-date fair value of $0.6 million and weighted average fair value of $12.04 per share for both the three and six months ended June 30, 2006.

During the three and six months ended June 30, 2006, stock-based compensation related to non-employee directors’ awards was $0.1 million and $0.2 million, net of tax, respectively. During the six months ended June 30, 2006, approximately 14,000 shares were forfeited, all in the first quarter. Approximately 49,000 shares vested during the six months ended June 30, 2006, all in the second quarter. At June 30, 2006, the deferred stock-based compensation balance related to these awards was $0.5 million and is expected to be recognized over an estimated weighted average amortization period of one year.

A summary of our stock option awards, including those granted to non-employee directors, for the three months ended June 30, 2006, is as follows:

	Number			Weighted		Weighted Average		Aggregate
	of			Average		Remaining		Intrinsic
	Shares			Exercise		Contractual Term		Value
	(in millions)			Price		(years)		(in millions)(1)
Outstanding, March 31, 2006		19.8		$	11.50		5.8	$	23.7
Granted		—			—				—
Exercised		(0.8	)		9.63				(1.5	)
Forfeited or expired		(0.0	)		10.85				(0.1	)
Outstanding, June 30, 2006		19.0			11.59		5.7	$	22.1
Exercisable, June 30, 2006		14.1			12.46		4.6	$	10.2

⁽¹⁾ Based on our closing common stock price of $11.36 at June 30, 2006.

16

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of our non-vested options at June 30, 2006 and changes during the three months ended June 30, 2006 is as follows:

	Number
	of			Weighted
	Shares			Average Grant
	(in millions)			Date Fair Value
Non-vested balance at March 31, 2006		5.5		$	4.62
Granted		—			—
Vested		(0.5	)		4.51
Forfeited		(0.1	)		4.94
Non-vested balance at June 30, 2006		4.9			4.63

Valuation assumptions –

In connection with the adoption of SFAS 123(R), we assessed our valuation technique and related assumptions. Consistent with the provisions of SFAS 123(R), Staff Accounting Bulletin No. 107 (SAB 107) and our prior period pro forma disclosures, we estimated the fair value of stock options on the date of grant using a Black-Scholes option valuation model that uses the assumptions in the following table. The fair value of each option grant is recognized using the straight-line attribution approach.

	Three Months Ended			Six Months Ended
	June 30, 2006			June 30, 2006
Risk free interest rate		3.8	%		3.8	%
Expected life (in years)		6.7			6.7
Dividend rate		0.0	%		0.0	%
Expected volatility		45.7	%		45.9	%

The risk-free interest rate is based on a zero-coupon U.S. Treasury bill rate on the date of grant with the maturity date approximately equal to the expected life at the grant date. The expected life of the options is determined using the simplified method as provided by SAB 107 for “plain vanilla” options. Allied has not issued any dividends on common stock and is currently restricted from paying common stock dividends under our 2005 Credit Facility. Based on this, the dividend rate is assumed to be zero. The Company derives its expected volatility based on a combination of the implied volatility of its traded options and daily historical volatility of its stock price. Prior to the adoption of SFAS 123(R), the Company used historical volatility of its stock price for its pro forma disclosures.

Restricted stock awards –

During 2000, our Management Development/Compensation Committee approved grants of approximately 7.0 million shares of restricted stock, with a weighted average grant-date fair value of $6.05, to key members of management under the Performance Accelerated Restricted Stock Agreement (PARSAP). Under the terms of the PARSAP, an award becomes partially vested after 4 years (1/7^th at year 4 and 1/7^th each year thereafter until fully vested at year 10). Generally, if the individual’s employment is terminated prior to vesting, the unvested shares are forfeited.

During 2005 and 2004, the Management Development/Compensation Committee approved grants of approximately 1.1 million and 0.2 million restricted stock units with a weighted average grant-date fair value of $8.83 and $13.38, respectively. These restricted stock units cannot be sold or transferred and are subject to forfeiture until they are fully vested. The restricted stock units vest over a period of three to five years, after which time they are automatically converted into shares of Allied’s common stock unless a participant has elected to defer the settlement of shares. Also during 2005, Allied granted 100,000 shares of restricted stock to its Chief Executive Officer. On May 27, 2006, 10,000 of those shares vested. Beginning in June 2006, another 40,000 began vesting at a rate of 833 per month. The remaining 50,000 will vest solely based on achieving certain performance targets over a period of not more than seven years beginning on January 1, 2006.

During six months ended June 30, 2006, Allied granted approximately 0.2 million restricted stock units with an estimated total grant-date fair value of $1.5 million, all in the first quarter. Of these amounts,

17

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

we estimated the stock-based compensation for the awards granted during the six months ended June 30, 2006 not expected to vest was immaterial. The weighted average fair value of restricted stock units granted during the six months ended June 30, 2006 was $8.94 per share.

During the three and six months ended June 30, 2006, we recorded stock-based compensation related to restricted stock awards to employees of $1.7 million and $3.4 million, or $1.3 million and $2.3 million net of tax, respectively. During the three and six months ended June 30, 2006, approximately 0.2 million shares and 0.2 million shares, respectively, were forfeited and approximately 0.8 million shares and 1.0 million shares, respectively, vested. At June 30, 2006, the deferred stock-based compensation balance related to non-vested restricted stock awards was $14.7 million and is expected to be recognized over an estimated weighted average amortization period of 3.7 years.

The weighted average grant date fair value of restricted stock awards vested during the three and six months ended June 30, 2006 was $5.0 million and $6.7 million, respectively. The income tax benefits from restricted stock awards were approximately $1.5 million for both the three and six months ended June 30, 2006.

A summary of our restricted stock awards, including those granted to non-employee directors, for the three months ended June 30, 2006, is as follows:

	Number			Weighted		Weighted Average		Aggregate
	of			Average		Remaining		Intrinsic
	Shares			Grant Date		Contractual Term		Value
	(in millions)			Fair Value		(years)		(in millions) (1)
Outstanding, March 31, 2006		4.9		$	7.06		3.9	$	55.0
Granted		0.0			12.04				0.5
Vested		(0.8	)		6.02				(9.5	)
Forfeited		(0.2	)		6.63				(2.1	)
Outstanding, June 30, 2006		3.9			7.37		3.7	$	43.9

⁽¹⁾ Based on our closing common stock price of $11.36 at June 30, 2006.

9. Net Income Per Common Share

Net income per common share is calculated by dividing net income less dividend requirements on preferred stock, by the weighted average number of common shares and common share equivalents outstanding during each period. The computation of basic earnings per share and diluted earnings per share is as follows (in millions, except per share data):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Basic earnings per share computation:
Income from continuing operations	$	37.6		$	53.0		$	78.8		$	77.7
Less: Dividends on preferred stock		(9.4	)		(14.7	)		(24.1	)		(22.4	)
Income from continuing operations available to common shareholders	$	28.2		$	38.3		$	54.7		$	55.3
Weighted average common shares outstanding		364.1			329.1			347.2			324.2
Basic earnings per share from continuing operations	$	0.08		$	0.12		$	0.16		$	0.17
Diluted earnings per share computation:
Income from continuing operations	$	37.6		$	53.0		$	78.8		$	77.7
Less: Dividends on preferred stock		(9.4	)		(14.7	)		(24.1	)		(22.4	)
Income from continuing operations available to common shareholders	$	28.2		$	38.3		$	54.7		$	55.3
Weighted average common shares outstanding		364.1			329.1			347.2			324.2
Dilutive effect of stock, stock options and contingently issuable shares		3.2			3.1			2.7			3.4
Weighted average common and common equivalent shares outstanding		367.3			332.2			349.9			327.6
Diluted earnings per share from continuing operations	$	0.08		$	0.12		$	0.16		$	0.17

18

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In calculating earnings per share, we have not assumed conversion of the following securities into common shares since the effects of those conversions would not be dilutive to earnings per share (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
Stock options		7.0		17.6		8.7		17.6
Series C preferred stock		—		41.6		34.1		41.6
Series D preferred stock		60.8		74.5		60.8		46.5
Senior subordinated convertible debentures		11.3		11.3		11.3		11.3

10. Commitments and Contingencies

Litigation –

We are subject to extensive and evolving laws and regulations and have implemented our own environmental safeguards to respond to regulatory requirements. In the normal course of conducting our operations, we may become involved in certain legal and administrative proceedings. Some of these actions may result in fines, penalties or judgments against us, which may have an impact on earnings for a particular period. We accrue for legal matters and regulatory compliance contingencies when such costs are probable and can be reasonably estimated. Our selling, general and administrative expenses in the second quarter of 2005 included a reversal of $16.3 million related to accruals for legal matters, primarily established at the time of the BFI acquisition. We do not believe that matters in process at June 30, 2006 will have a material adverse effect on our consolidated liquidity, financial position or results of operations. See Tax contingencies below for a discussion of our outstanding tax dispute with the Internal Revenue Service (IRS).

A consolidated amended class action complaint was filed against us and five of our current and former officers on March 31, 2005 in the U.S. District Court for the District of Arizona, consolidating three lawsuits previously filed on August 9, 2004, August 27, 2004 and September 30, 2004. The amended complaint asserted claims against all defendants under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and claims against the officers under Section 20(a) of the Securities Exchange Act. The complaint alleged that from February 10, 2004 to September 13, 2004, the defendants caused false and misleading statements to be issued in our public filings and public statements regarding our anticipated results for fiscal year 2004. The lawsuit sought an unspecified amount of damages. We filed a motion to dismiss the complaint on May 2, 2005. On December 15, 2005, the U.S. District Court for the District of Arizona granted our motion and dismissed the lawsuit with prejudice. Plaintiffs have appealed the dismissal to the 9^th Circuit Court of Appeals. We do not believe the outcome of this matter will have a material adverse effect on our consolidated results of operations.

In the normal course of conducting our landfill operations, we are involved in legal and administrative proceedings relating to the process of obtaining and defending the permits that allow us to operate our landfills.

In September 1999, neighboring parties and the county drainage district filed a civil lawsuit seeking to prevent BFI from obtaining a vertical elevation expansion permit at our 131-acre landfill in Donna, Texas. They claimed BFI had agreed not to expand the landfill based on a pre-existing Settlement Agreement from an unrelated dispute years ago related to drainage discharge rights. In 2001, the Texas Commission on Environmental Quality (TCEQ) granted BFI an expansion permit (the administrative expansion permit proceeding), and, based on this expansion permit, the landfill has an estimated remaining capacity of approximately 2.3 million tons at June 30, 2006. Nonetheless, the parties opposing the expansion continued to litigate the civil lawsuit and pursue their efforts in preventing the expansion. In November 2003, a judgment issued by a Texas state trial court in the civil

19

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

lawsuit effectively revoked the expansion permit that was granted by the TCEQ in 2001, which would require us to operate the landfill according to a prior permit granted in 1988. On appeal, the Texas Court of Appeals stayed the trial court’s order, allowing us to continue to place waste in the landfill in accordance with the expansion permit granted in 2001. In the administrative expansion proceeding on October 28, 2005, the Texas Supreme Court denied review of the neighboring parties’ appeal of the expansion permit, thereby confirming that the TCEQ properly granted our expansion permit.

In April 2006, the Texas Court of Appeals ruled on the civil litigation. The court dissolved the permanent injunction which would have effectively prevented us from operating the landfill under the expansion permit, but also required us to pay a damage award of approximately $2 million plus attorney fees and interest. On April 27, 2006, all parties filed motions for rehearing, which were denied by the Texas Court of Appeals. We are evaluating our options regarding the April 2006 opinion, including whether to file an appeal to the Texas Supreme Court.

Employment agreements –

We have entered into employment agreements with certain of our executive officers for periods up to two years. Under these agreements, in some circumstances, including a change in control as defined in the employment agreements, we may be obligated to pay an amount up to three times the sum of the executive’s base salary and targeted bonus. Also, in the event of a change in control, our executive officers may be entitled to a gross-up of certain excise taxes incurred, provided that the fair market value of our shares is at or greater than a specified price as of the date of the change in control. If an executive officer’s employment is terminated under certain circumstances, the executive may be entitled to continued medical, dental and/or vision coverage, continued vesting in outstanding awards of restricted stock and restricted stock units, continued vesting and exercisability of the executive’s stock options, and continued coverage under our directors’ and officers’ liability insurance, among other matters. In addition, our executive officers may be entitled to retirement payments equal to up to 60% of their base salary, paid over a period of 10 years under our supplemental executive retirement plan.

We expect that certain modifications may be required to be made to the employment agreements, as well as to related compensation plans, programs, and arrangements, to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended. The IRS has not released final guidance on Section 409A, and it is not certain when such guidance will be released or what modifications will be required. Under proposed regulations released by the IRS in September 2005, however, our company is required to operate its employment and compensation agreements, plans, programs and arrangements in reasonable good faith compliance with Section 409A and the guidance issued thereunder during 2005 and 2006. Under the proposed regulations, we generally will have until December 31, 2006 to amend documents to comply with Section 409A.

Financial assurances —

We are required to provide financial assurances to governmental agencies and a variety of other entities under applicable environmental regulations relating to our landfill operations for capping, closure and post-closure costs and/or related to performance under certain collection, landfill and transfer station contracts. We satisfy the financial assurance requirements by providing performance bonds, letters of credit, insurance policies or trust deposits. Additionally, we are required to provide financial assurances for our insurance program and collateral required for certain performance obligations.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At June 30, 2006, we had the following financial assurance instruments and collateral in place (in millions):

	Landfill
	Closure/		Contract		Risk/Casualty		Collateral for
	Post-Closure		Performance		Insurance		Obligations		Total
Insurance policies	$	646.0	$	—	$	—	$	—	$	646.0
Surety bonds		557.6		503.7		—		—		1,061.3
Trust deposits		81.9		—		—		—		81.9
Letters of credit (1)		469.4		46.2		282.0		108.5		906.1
Total	$	1,754.9	$	549.9	$	282.0	$	108.5	$	2,695.3

⁽¹⁾ At June 30, 2006, these amounts were issued under the 2005 Revolver and the Institutional Letter of Credit Facility under our 2005 Credit Facility.

These financial instruments are issued in the normal course of business and are not debt of the Company. Since we currently have no liability for these financial assurance instruments, they are not reflected in the accompanying consolidated balance sheets. However, we have recorded capping, closure and post-closure liabilities and self-insurance as the liabilities are incurred under GAAP. The underlying obligations of the financial assurance instruments would be valued and recorded in the consolidated balance sheets if it is probable that we would be unable to perform our obligations under the financial assurance contracts. We do not expect this to occur.

Off-balance sheet arrangements —

We have no off-balance sheet debt or similar obligations, other than operating leases and financial assurance instruments discussed above, which are not classified as debt. We have no transactions or obligations with related parties that are not disclosed, consolidated into or reflected in our reported results of operations or financial position. We do not guarantee any third party debt.

Guarantees —

We enter into contracts in the normal course of business that include indemnification clauses. Indemnifications relating to known liabilities are recorded in the consolidated financial statements based on our best estimate of required future payments. Certain of these indemnifications relate to contingent events or occurrences, such as the imposition of additional taxes due to a change in the tax law or adverse interpretation of the tax law, and indemnifications made in divestiture agreements where we indemnify the buyer for liabilities that relate to our activities prior to the divestiture and that may become known in the future. As of June 30, 2006, we estimated the contingent obligations associated with these indemnifications to be insignificant.

We have entered into agreements to guarantee property owners the value of certain property that is adjacent to certain landfills. These agreements have varying terms over varying periods. Prior to December 31, 2002, liabilities associated with these guarantees have been accounted for in accordance with SFAS No. 5, Accounting for Contingencies, in the consolidated financial statements. Agreements modified or entered into subsequent to December 31, 2002 are accounted for in accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others and were not significant as of June 30, 2006 and 2005.

Tax contingencies –

We are subject to various federal, state and local tax rules and regulations. Although these rules are extensive and often complex, we are required to interpret and apply them to our transactions. Positions taken in tax filings are subject to challenge by taxing authorities. Accordingly, we may have exposure for additional tax liabilities if, upon audit, any positions taken are disallowed by the taxing authorities.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We are currently under examination or administrative review by various state and federal taxing authorities for certain tax years, including federal income tax audits for calendar years 1998 through 2003. A federal income tax audit for BFI’s tax years ended September 30, 1996 through July 30, 1999 is complete with the exception of the matter discussed below.

Prior to our acquisition of BFI on July 30, 1999, BFI operating companies, as part of a risk management initiative to effectively manage and reduce costs associated with certain liabilities, contributed assets and existing environmental and self-insurance liabilities to six fully consolidated BFI risk management companies (RMCs) in exchange for stock representing a minority ownership interest in the RMCs. Subsequently, the BFI operating companies sold that stock in the RMCs to third parties at fair market value which resulted in a capital loss of approximately $900 million for tax purposes, calculated as the excess of the tax basis of the stock over the cash proceeds received.

On January 18, 2001, the IRS designated this type of transaction and other similar transactions as a “potentially abusive tax shelter” under IRS regulations. During 2002, the IRS proposed the disallowance of all of this capital loss. The primary argument advanced by the IRS for disallowing the capital loss was that the tax basis of the stock of the RMCs received by the BFI operating companies was required to be reduced by the amount of liabilities assumed by the RMCs even though such liabilities were contingent and, therefore, not liabilities recognized for tax purposes. Under the IRS view, there was no capital loss on the sale of the stock since the tax basis of the stock should have approximately equaled the proceeds received. We protested the disallowance to the Appeals Office of the IRS in August 2002.

In April 2005, the Appeals Office of the IRS upheld the disallowance of the capital loss deduction. As a result, in late April 2005 we paid a deficiency to the IRS of $23 million for BFI tax years prior to the acquisition. In July 2005, we filed a suit for refund in the United States Court of Federal Claims. Based on the complexity of the case, we estimate it will likely take a number of years to fully try the case and obtain a decision. Furthermore, depending on the circumstances at that time, the losing party may appeal the decision to the Court of Appeals for the Federal Circuit. A settlement, however, could occur at any time during the litigation process.

We also received a notification from the IRS assessing a penalty of $5.4 million and interest of $12.8 million relating to the asserted $23 million deficiency. In December 2005, the IRS agreed to suspend the collection of this penalty and interest until a decision is rendered on our suit for refund.

The remaining tax years affected by the capital loss issue are currently being audited or reviewed by the IRS. A decision by the United States Court of Federal Claims on the litigation should resolve the issue in these years as well. If we were to win the case, the initial payments would be refunded to us, subject to an appeal. If we were to lose the case, the deficiency associated with the remaining tax years would be due, subject to an appeal. If we were to settle the case, the settlement would likely cover all affected tax years and any resulting deficiency would become due in the ordinary course of the audits. A deficiency payment would adversely impact our cash flow in the period the payment was made.

On July 12, 2006, the United States Court of Appeals for the Federal Circuit reversed a decision by the United States Court of Federal Claims favorable to the taxpayer in Coltec v. United States, — F.3d — (Fed. Cir. 2006), in a case involving a similar transaction. The Federal Circuit affirmed the taxpayer’s position regarding the technical interpretation of the relevant tax code provisions. However, although we continue to believe that our suit for refund in the Court of Federal Claims is factually distinguishable from Coltec, the legal bases upon which the decision was reached by the Federal Circuit may impact our litigation.

If capital loss deduction is fully disallowed, we estimate it could have a potential federal and state cash tax impact (excluding penalties) of up to $310 million, of which approximately $33 million has been paid, plus accrued interest through June 30, 2006 of approximately $117 million ($70 million net of tax benefit). We are evaluating any potential impact of the Coltec decision on the possibility of penalties ultimately being paid. If the capital loss deduction is disallowed, the IRS could ultimately impose penalties and interest on those penalties for any amount up to approximately $130 million, after tax.

22

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The potential tax and interest (but not penalties or penalty-related interest) impact of a full disallowance has been fully reserved on our consolidated balance sheet. With regard to tax and accrued interest through June 30, 2006, a disallowance would not materially adversely affect our consolidated results of operations. The periodic accrual of additional interest charged through the time at which this matter is resolved will continue to affect our consolidated results of operations. In addition, the successful assertion by the IRS of penalties could have a material adverse impact on our consolidated liquidity, financial position and results of operations.

11. Segment Reporting

Our revenues are derived from one industry segment, which includes the collection, transfer, recycling and disposal of non-hazardous solid waste. We evaluate performance based on several factors, of which the primary financial measure is operating income before depreciation and amortization. Operating income before depreciation and amortization is not a measure of operating income, operating performance or liquidity under GAAP and may not be comparable to similarly titled measures reported by other companies. Our management uses operating income before depreciation and amortization in the evaluation of field operating performance as it represents operational cash flows and is a profit measure of components that are within the control of the operating units. The accounting policies of the business segments are the same as those described in the Organization and Summary of Significant Accounting Policies (See Note 1).

We manage our operations through five geographic operating segments: Midwestern, Northeastern, Southeastern, Southwestern and Western. Each region is responsible for managing several vertically integrated operations, which are comprised of districts. Results by segment have been restated for previous periods to reflect the changes in organizational structure in the fourth quarter of 2005 and refinements to that organizational structure completed during the second quarter ended June 30, 2006.

The tables below reflect information relating to our geographic operating segments (in millions):

Revenues:

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
Midwestern	$	319.6	$	308.9	$	608.7	$	586.1
Northeastern		322.3		324.4		618.6		613.2
Southeastern		270.0		248.5		528.2		484.7
Southwestern		252.6		233.8		493.6		452.5
Western		338.0		313.1		660.8		617.3
Total reportable segments		1,502.5		1,428.7		2,909.9		2,753.8
Other (1)		38.1		19.9		69.4		36.1
Total per financial statements	$	1,540.6	$	1,448.6	$	2,979.3	$	2,789.9

⁽¹⁾ Amounts relate primarily to our subsidiaries that provide services throughout the organization and not on a regional basis.

Operating income before depreciation and amortization: ⁽¹⁾

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
Midwestern	$	96.2	$	89.1	$	174.3	$	169.2
Northeastern		84.3		85.9		156.6		157.1
Southeastern		80.5		70.0		153.2		139.9
Southwestern		73.5		65.7		143.8		129.9
Western		109.7		103.4		209.0		201.4

⁽¹⁾ See the following table for the reconciliation to income before income taxes and minority interest per the consolidated statements of operations.

23

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The reconciliation of reportable segment primary measure of profitability to income before income taxes and minority interest is as follows (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Total operating income before depreciation and amortization for reportable segments	$	444.2		$	414.1		$	836.9		$	797.5
Other(1)		(43.9	)		(25.2	)		(86.6	)		(72.1	)
Depreciation and amortization		(147.5	)		(141.0	)		(288.9	)		(274.3	)
Interest expense and other		(173.8	)		(126.6	)		(306.5	)		(330.2	)
Income before taxes and minority interest	$	79.0		$	121.3		$	154.9		$	120.9

⁽¹⁾ Amounts relate primarily to our subsidiaries that provide services throughout the organization and not on a regional basis, including national accounts where work has been subcontracted.

Amounts of our total revenue attributable to services provided are as follows (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2006		2005(1)		2006		2005(1)
Collection
Residential	$	301.8	$	300.2	$	597.7	$	589.4
Commercial		373.4		345.6		737.6		682.2
Roll-off(2)		345.9		317.8		662.8		601.2
Recycling		52.9		50.8		99.8		99.6
Total Collection		1,074.0		1,014.4		2,097.9		1,972.4
Disposal
Landfill		223.2		209.1		421.6		389.3
Transfer		111.3		109.7		207.8		206.7
Total Disposal		334.5		318.8		629.4		596.0
Recycling — Commodity		55.4		59.5		105.8		116.2
Other(3)		76.7		55.9		146.2		105.3
Total Revenues	$	1,540.6	$	1,448.6	$	2,979.3	$	2,789.9

(1)	The revenue mix for 2005 reflects the reclassification of transportation revenue out of collection, disposal and recycling-commodity revenue to other revenue.
(2)	Consists of revenue generated from commercial, industrial and residential customers from waste collected in roll-off containers that are loaded onto collection vehicles.
(3)	Consists primarily of revenue from national accounts where the work has been subcontracted, revenue generated from waste transported via railway and revenue from liquid waste.

There were no revenues or operating income before depreciation and amortization reported for discontinued operations for the three and six months ended June 30, 2006. For the three and six months ended June 30, 2005, there were no revenues reported for discontinued operations and the operating income before depreciation and amortization reported as discontinued operations by geographic region was as follows (in millions):

Operating income before depreciation and amortization:

	Three Months			Six Months
	Ended			Ended
	June 30, 2005			June 30, 2005
Northeastern	$	(0.1	)	$	(0.1	)
Southeastern		(1.6	)		(1.6	)
Total reportable segments	$	(1.7	)	$	(1.7	)

24

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Condensed Consolidating Financial Statements

Most of our outstanding debt is issued by Allied NA, our wholly-owned subsidiary, or BFI. The 8.50% senior notes due 2008, the 8.875% senior notes due 2008, the 6.50% senior notes due 2010, the 5.75% senior notes due 2011, the 6.375% senior notes due 2011, the 9.25% senior notes due 2012, the 7.875% senior notes due 2013, the 6.125% senior notes due 2014, the 7.25% senior notes due 2015, the 7.125% senior notes due 2016 and the 7.375% senior unsecured notes due 2014 issued by Allied NA, and certain other debt issued by BFI and the 2005 Credit Facility are guaranteed by us. The 6.375% senior notes due 2008, the 9.25% debentures due 2021 and the 7.40% debentures due 2035 issued by BFI are guaranteed by Allied NA and Allied. All guarantees (including those of the guarantor subsidiaries) are full, unconditional and joint and several of Allied NA’s and BFI’s debt. Presented below are Condensed Consolidating Balance Sheets as of June 30, 2006 and December 31, 2005 and the related Condensed Consolidating Statements of Operations and Cash Flows for the three and six months ended June 30, 2006 and 2005 of Allied Waste Industries, Inc. (Parent), Allied NA (Issuer), the guarantor subsidiaries (Guarantors) and the subsidiaries that are not guarantors (Non-Guarantors).

CONDENSED CONSOLIDATING BALANCE SHEETS
(in millions)

	June 30, 2006
									Non-
	Parent			Issuer		Guarantors			Guarantors			Eliminations			Consolidated
ASSETS
Current Assets —
Cash and cash equivalents	$	—		$	—	$	44.1		$	3.5		$	—		$	47.6
Accounts receivable, net		—			—		361.0			367.0			—			728.0
Prepaid and other current assets		—			0.4		41.2			126.0			(76.9	)		90.7
Deferred income taxes		—			—		119.1			9.5			—			128.6
Total current assets		—			0.4		565.4			506.0			(76.9	)		994.9
Property and equipment, net		—			0.1		4,367.5			26.1			—			4,393.7
Goodwill		—			—		8,107.4			72.4			—			8,179.8
Investment in subsidiaries		2,294.2			14,684.2		420.1			—			(17,398.5	)		—
Other assets, net		5.7			88.8		7.8			1,186.2			(1,046.0	)		242.5
Total assets	$	2,299.9		$	14,773.5	$	13,468.2		$	1,790.7		$	(18,521.4	)	$	13,810.9
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities —
Current portion of long-term debt	$	—		$	—	$	7.9		$	215.1		$	—		$	223.0
Accounts payable		—			—		476.7			4.4			—			481.1
Accrued closure, post-closure and environmental costs		—			—		14.6			75.1			—			89.7
Accrued interest		2.1			94.8		96.4			1.3			(76.9	)		117.7
Other accrued liabilities		63.2			0.8		62.7			217.0			—			343.7
Unearned revenue		—			—		234.4			6.7			—			241.1
Total current liabilities		65.3			95.6		892.7			519.6			(76.9	)		1,496.3
Long-term debt, less current portion		230.0			5,887.6		841.5			—			—			6,959.1
Deferred income taxes		—			—		404.8			(9.7	)		—			395.1
Accrued closure, post-closure and environmental costs		—			—		366.7			442.3			—			809.0
Due to (from) parent		(1,522.8	)		6,531.6		(5,004.4	)		(4.4	)		—			—
Other long-term obligations		19.1			—		1,608.1			62.9			(1,047.0	)		643.1
Stockholders’ equity		3,508.3			2,258.7		14,358.8			780.0			(17,397.5	)		3,508.3
Total liabilities and stockholders’ equity	$	2,299.9		$	14,773.5	$	13,468.2		$	1,790.7		$	(18,521.4	)	$	13,810.9

25

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEETS
(in millions)

	December 31, 2005
									Non-
	Parent			Issuer		Guarantors			Guarantors			Eliminations			Consolidated
ASSETS
Current Assets —
Cash and cash equivalents	$	—		$	—	$	53.1		$	3.0		$	—		$	56.1
Accounts receivable, net		—			—		302.6			387.9			—			690.5
Prepaid and other current assets		—			0.1		52.2			67.4			(39.2	)		80.5
Deferred income taxes		—			—		87.4			5.9			—			93.3
Total current assets		—			0.1		495.3			464.2			(39.2	)		920.4
Property and equipment, net		—			1.4		4,244.8			27.3			—			4,273.5
Goodwill		—			—		8,111.8			72.4			—			8,184.2
Investment in subsidiaries		2,242.9			14,469.2		396.5			—			(17,108.6	)		—
Other assets, net		5.8			89.0		9.5			1,202.0			(1,058.8	)		247.5
Total assets	$	2,248.7		$	14,559.7	$	13,257.9		$	1,765.9		$	(18,206.6	)	$	13,625.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities —
Current portion of long-term debt	$	—		$	—	$	8.5		$	230.0		$	—		$	238.5
Accounts payable		—			0.1		559.3			5.4			—			564.8
Accrued closure, post-closure and environmental costs		—			—		20.7			75.1			—			95.8
Accrued interest		2.1			93.6		58.8			1.2			(39.2	)		116.5
Other accrued liabilities		90.2			9.3		7.6			223.4			—			330.5
Unearned revenue		—			—		222.9			6.5			—			229.4
Total current liabilities		92.3			103.0		877.8			541.6			(39.2	)		1,575.5
Long-term debt, less current portion		230.0			5,779.8		843.4			—			—			6,853.2
Deferred income taxes		—			—		315.5			(10.0	)		—			305.5
Accrued closure, post-closure and environmental costs		—			—		348.1			448.7			—			796.8
Due to (from) parent		(1,531.6	)		6,457.5		(4,893.6	)		(32.3	)		—			—
Other long-term obligations		18.6			—		1,624.1			72.3			(1,059.8	)		655.2
Stockholders’ equity		3,439.4			2,219.4		14,142.6			745.6			(17,107.6	)		3,439.4
Total liabilities and stockholders’ equity	$	2,248.7		$	14,559.7	$	13,257.9		$	1,765.9		$	(18,206.6	)	$	13,625.6

26

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in millions)

	Three Months Ended June 30, 2006
										Non-
	Parent			Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Revenues	$	—		$	—		$	1,482.8		$	57.8		$	—		$	1,540.6
Cost of operations		—			0.2			957.2			34.5			—			991.9
Selling, general and administrative expenses		6.9			—			138.8			2.7			—			148.4
Depreciation and amortization		—			0.2			145.0			2.3			—			147.5
Operating (loss) income		(6.9	)		(0.4	)		241.8			18.3			—			252.8
Equity in earnings of subsidiaries		(21.3	)		(119.4	)		(10.9	)		—			151.6			—
Interest expense (income) and other		2.7			150.6			21.0			(0.5	)		—			173.8
Intercompany interest (income) expense		(35.1	)		21.7			32.6			(19.2	)		—			—
Management fees		(2.0	)		—			1.6			0.4			—			—
Income (loss) before income taxes		48.8			(53.3	)		197.5			37.6			(151.6	)		79.0
Income tax expense (benefit)		11.2			(69.0	)		84.3			14.7			—			41.2
Minority interest		—			—			—			0.2			—			0.2
Net income		37.6			15.7			113.2			22.7			(151.6	)		37.6
Dividends on preferred stock		(9.4	)		—			—			—			—			(9.4	)
Net income available to common shareholders	$	28.2		$	15.7		$	113.2		$	22.7		$	(151.6	)	$	28.2

	Six Months Ended June 30, 2006
										Non-
	Parent			Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Revenues	$	—		$	—		$	2,866.5		$	112.8		$	—		$	2,979.3
Cost of operations		—			—			1,850.7			84.5			—			1,935.2
Selling, general and administrative expenses		12.9			—			273.9			7.0			—			293.8
Depreciation and amortization		—			0.7			283.8			4.4			—			288.9
Operating (loss) income		(12.9	)		(0.7	)		458.1			16.9			—			461.4
Equity in earnings of subsidiaries		(46.3	)		(226.3	)		(17.2	)		—			289.8			—
Interest expense (income) and other		5.5			259.6			43.0			(1.6	)		—			306.5
Intercompany interest (income) expense		(69.3	)		51.3			56.6			(38.6	)		—			—
Management fees		(4.1	)		—			3.3			0.8			—			—
Income (loss) before income taxes		101.3			(85.3	)		372.4			56.3			(289.8	)		154.9
Income tax expense (benefit)		22.5			(124.6	)		156.3			22.1			—			76.3
Minority interest		—			—			—			(0.2	)		—			(0.2	)
Net income		78.8			39.3			216.1			34.4			(289.8	)		78.8
Dividends on preferred stock		(24.1	)		—			—			—			—			(24.1	)
Net income available to common shareholders	$	54.7		$	39.3		$	216.1		$	34.4		$	(289.8	)	$	54.7

27

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(in millions)

	Three Months Ended June 30, 2005
										Non-
	Parent			Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Revenues	$	—		$	—		$	1,409.6		$	39.0		$	—		$	1,448.6
Cost of operations		—			—			886.9			55.8			—			942.7
Selling, general and administrative expenses		5.2			—			108.1			3.7			—			117.0
Depreciation and amortization		—			—			139.2			1.8			—			141.0
Operating (loss) income		(5.2	)		—			275.4			(22.3	)		—			247.9
Equity in earnings of subsidiaries		(38.2	)		(127.2	)		(6.1	)		—			171.5			—
Interest expense (income) and other		2.7			104.4			20.9			(1.4	)		—			126.6
Intercompany interest (income) expense		(32.9	)		27.4			23.4			(17.9	)		—			—
Management fees		(1.3	)		—			0.9			0.4			—			—
Income (loss) before income taxes		64.5			(4.6	)		236.3			(3.4	)		(171.5	)		121.3
Income tax expense (benefit)		10.5			(52.7	)		112.3			(0.8	)		—			69.3
Minority interest		—			—			—			(1.0	)		—			(1.0	)
Net income (loss) from continuing operations		54.0			48.1			124.0			(1.6	)		(171.5	)		53.0
Discontinued operations, net of tax		—			—			1.0			—			—			1.0
Net income (loss)		54.0			48.1			125.0			(1.6	)		(171.5	)		54.0
Dividends on preferred stock		(14.7	)		—			—			—			—			(14.7	)
Net income (loss) available to common shareholders	$	39.3		$	48.1		$	125.0		$	(1.6	)	$	(171.5	)	$	39.3

	Six Months Ended June 30, 2005
										Non-
	Parent			Issuer			Guarantors			Guarantors			Eliminations			Consolidated
Revenues	$	—		$	—		$	2,694.4		$	95.5		$	—		$	2,789.9
Cost of operations		—			(0.4	)		1,714.6			103.4			—			1,817.6
Selling, general and administrative expenses		10.6			—			229.6			6.7			—			246.9
Depreciation and amortization		—			—			271.0			3.3			—			274.3
Operating (loss) income		(10.6	)		0.4			479.2			(17.9	)		—			451.1
Equity in earnings of subsidiaries		(54.1	)		(268.2	)		(12.4	)		—			334.7			—
Interest expense (income) and other		5.5			284.1			43.6			(3.0	)		—			330.2
Intercompany interest (income) expense		(55.6	)		47.6			45.0			(37.0	)		—			—
Management fees		(2.5	)		—			1.7			0.8			—			—
Income (loss) before income taxes		96.1			(63.1	)		401.3			21.3			(334.7	)		120.9
Income tax expense (benefit)		17.4			(132.5	)		150.1			8.9			—			43.9
Minority interest		—			—			—			(0.7	)		—			(0.7	)
Net income from continuing operations		78.7			69.4			251.2			13.1			(334.7	)		77.7
Discontinued operations, net of tax		—			—			1.0			—			—			1.0
Net income		78.7			69.4			252.2			13.1			(334.7	)		78.7
Dividends on preferred stock		(22.4	)		—			—			—			—			(22.4	)
Net income available to common shareholders	$	56.3		$	69.4		$	252.2		$	13.1		$	(334.7	)	$	56.3

28

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in millions)

	Six Months Ended June 30, 2006
										Non-
	Parent			Issuer			Guarantors			Guarantors			Eliminations		Consolidated
Cash (used for) provided by operating activities	$	(8.7	)	$	(258.6	)	$	610.2		$	24.9		$	—	$	367.8
Investing activities —
Proceeds from divestitures (cost of acquisitions), net of cash divested/acquired		—			—			2.8			—			—		2.8
Proceeds from sale of fixed assets		—			—			7.3			—			—		7.3
Capital expenditures, excluding acquisitions		—			—			(368.1	)		(3.7	)		—		(371.8	)
Capitalized interest		—			—			(8.2	)		—			—		(8.2	)
Change in deferred acquisition costs, notes receivable and other		—			—			1.5			—			—		1.5
Cash used for investing activities		—			—			(364.7	)		(3.7	)		—		(368.4	)
Financing activities —
Proceeds from long-term debt, net of issuance costs		—			1,200.7			—			22.4			—		1,223.1
Payments of long-term debt		—			(1,104.1	)		(5.7	)		(37.2	)		—		(1,147.0	)
Payments of preferred stock dividend		(29.4	)		—			—			—			—		(29.4	)
Net change in disbursement account		—			—			(63.3	)		—			—		(63.3	)
Net proceeds from sale of common stock, exercise of stock options and other		8.7			—			—			—			—		8.7
Intercompany between issuer and subsidiary		29.4			162.0			(185.5	)		(5.9	)		—		—
Cash provided by (used for) financing activities		8.7			258.6			(254.5	)		(20.7	)		—		(7.9	)
(Decrease) increase in cash and cash equivalents		—			—			(9.0	)		0.5			—		(8.5	)
Cash and cash equivalents, beginning of period		—			—			53.1			3.0			—		56.1
Cash and cash equivalents, end of period	$	—		$	—		$	44.1		$	3.5		$	—	$	47.6

29

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in millions)

	Six Months Ended June 30, 2005
										Non-
	Parent			Issuer			Guarantors			Guarantors			Eliminations		Consolidated
Cash (used for) provided by operating activities from continuing operations	$	(100.9	)	$	(180.0	)	$	564.3		$	34.1		$	—	$	317.5
Investing activities —
Proceeds from divestitures (cost of acquisitions), net of cash divested/acquired		—			—			1.6			—			—		1.6
Proceeds from sale of fixed assets		—			—			7.2			—			—		7.2
Capital expenditures, excluding acquisitions		—			—			(277.1	)		(6.4	)		—		(283.5	)
Capitalized interest		—			—			(7.1	)		—			—		(7.1	)
Change in deferred acquisitions costs, notes receivable and other		—			—			1.1			—			—		1.1
Cash used for investing activities from continuing operations		—			—			(274.3	)		(6.4	)		—		(280.7	)
Financing activities —
Net proceeds from sale of Series D preferred stock		580.6			—			—			—			—		580.6
Proceeds from long-term debt, net of issuance costs		—			2,560.6			—			54.3			—		2,614.9
Payments of long-term debt		—			(3,074.8	)		(84.5	)		(54.0	)		—		(3,213.3	)
Payments of preferred stock dividend		(19.3	)		—			—			—			—		(19.3	)
Net change in disbursement account		—			—			(94.4	)		—			—		(94.4	)
Net proceeds from sale of common stock, exercise of stock options and other, net		96.0			—			—			—			—		96.0
Intercompany between issuer and subsidiary		(556.3	)		698.9			(119.5	)		(23.1	)		—		—
Cash provided by (used for) financing activities from continuing operations		101.0			184.7			(298.4	)		(22.8	)		—		(35.5	)
Cash provided by discontinued operations		—			—			0.7			—			—		0.7
Increase (decrease) in cash and cash equivalents		0.1			4.7			(7.7	)		4.9			—		2.0
Cash and cash equivalents, beginning of period		—			(0.3	)		66.7			1.6			—		68.0
Cash and cash equivalents, end of period	$	0.1		$	4.4		$	59.0		$	6.5		$	—	$	70.0

30

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Consolidated Financial Statements and the notes thereto, included elsewhere herein. Please note that unless otherwise specifically indicated, discussion of our results relate to our continuing operations. This discussion may contain forward-looking statements that anticipate results based upon assumptions as to future events that may not prove to be accurate.

Executive Summary

We are the second largest non-hazardous solid waste management company in the United States, as measured by revenues. We provide non-hazardous solid waste collection, transfer, recycling and disposal services in 37 states and Puerto Rico, geographically identified as the Midwestern, Northeastern, Southeastern, Southwestern and Western regions.

Our business is characterized by a relatively stable customer base. Competition is driven by domestic economic and local demographic factors, as well as fluctuations in capacity utilization, in both the collection and landfill business. Customer service satisfaction levels industry-wide are very high since the collection customer has a very low tolerance for poor service.

Our revenues result primarily from fees charged to customers for waste collection, transfer, recycling and disposal services. We generally provide collection services under direct agreements with our customers or pursuant to contracts with municipalities. Commercial and municipal contract terms generally range from one to five years and commonly have renewal options. Our landfill operations include both company-owned landfills and landfills that we operate on behalf of municipalities and others.

We invest a significant amount of capital to support the ongoing operations of our landfill and collection business. Landfills are highly engineered, sophisticated facilities similar to civil works. Each year we invest capital at our 169 active landfills to ensure sufficient capacity to receive the waste volume we handle. In addition, we have approximately 13,200 collection vehicles and over 1.5 million containers to serve our collection customers. They endure rough conditions each day and must be routinely maintained and replaced. During the six months ended June 30, 2006, we invested $371.8 million of capital into the business (see Note 2, Property and Equipment, for detail by fixed asset category). In 2006, total capital expenditures are expected to be approximately $700 million.

Cash flows in our business are for the most part fairly predictable as a result of the nature of our customer base. This predictability helps us to determine our ability to service debt. Knowing this, we have incurred debt to acquire the assets we own and we have paid cash to acquire existing cash flow streams. This financial model should allow us over time to transfer the enterprise value of the company from debt holders to shareholders as we use our cash flow to repay debt. We continue to use cash flow from operations after capital expenditures to reduce our debt balance.

Results of Operations.

Net income for the three months ended June 30, 2006 decreased to $37.6 million from $54.0 million for the three months ended June 30, 2005. This decrease was the result of increased revenues, offset by higher operating costs and higher interest expenses. Net income for the six months ended June 30, 2006 remained flat compared to the same period in the prior year, driven by increased revenues, higher operating costs and higher income tax expenses. Income tax expenses for the six months ended June 30, 2005 included a tax benefit of approximately $25.5 million, recorded in the first quarter of 2005, related to additional stock basis associated with a pending divestiture.

Our organic revenue growth was 7.8% for both the three and six months ended June 30, 2006. Revenues increased across all service lines except for a slight decrease in our recycling business.

31

Operating income for the three and six months ended June 30, 2006 increased by $4.9 million and $10.3 million, respectively, over the same periods in the prior year. However, increases in subcontractor and fuel recovery fee revenues were offset by increases in their related costs. In addition, operating costs increased from volume increases, normal inflation and investments in supply chain, sales, pricing and customer service programs. The increase in interest expense for the three months ended June 30, 2006 was driven by costs incurred in connection with the refinancing transactions during the second quarter of 2006 while the decrease in interest expense for the six months ended June 30, 2006 related to higher costs incurred to early extinguish and refinance debt during the first quarter of 2005.

Beginning in 2004 and continuing through the first six months of 2006, we implemented a best practices program to focus on improving sales productivity and pricing effectiveness, driver productivity through improved routing and maintenance efficiency through standardized operating practices, as well as reducing our procurement costs through more effective purchasing. In addition, we are focused on improving the effectiveness of our safety and our health and welfare programs.

Beginning in 2005, we increased the level of annual capital expenditures to approximately $700 million primarily to accelerate replacement of vehicles; we plan to maintain this level of annual spending for the next few years. We expect this investment, along with improved maintenance practices, to have a favorable impact on maintenance costs.

Financing activities. We remain committed to our long-term strategy of reducing our debt balance. As this occurs, we believe the relative cost of debt and interest expense should decline. Upon achieving optimal credit ratios, we should have the opportunity to choose the best use of any excess cash flow: further repay debt, pay a dividend to the extent permitted by our debt agreements, repurchase stock or reinvest in our company. We may take advantage of opportunities that arise to accelerate the de-leveraging process as long as the opportunities meet our need to maintain our competitive strength.

On April 12, 2006, we completed the re-pricing of the 2005 Term Loan and Institutional Letter of Credit portions of our 2005 Credit Facility. The 2005 Term Loan and Institutional Letter of Credit Facility re-priced at LIBOR plus 175 basis points (or ABR plus 75 basis points), a reduction of 25 basis points. The pricing will further decrease to LIBOR plus 150 basis points (or ABR plus 50 basis points) when our leverage ratio is equal to or less than 4.25x. This re-pricing is expected to generate more than $4 million in annual interest savings.

In May 2006, we issued $600 million of 7.125% senior notes due 2016 at a discounted price equal to 99.123% of the aggregate principal amount. The net proceeds were used to fund a portion of the tender offer for our 8.875% senior notes due 2008. The refinancing of the senior notes is expected to generate approximately $6 million in annual interests savings. In conjunction with the re-pricing and refinancing transactions during the second quarter of 2006, we expensed approximately $40.8 million of costs related to premiums paid, deferred financing and other costs.

We continue to focus on maximizing cash flow to repay debt and to seek opportunities to create additional cash flow through reductions in interest cost. During the six months ended June 30, 2006, our debt balance increased by approximately $90 million to $7.2 billion primarily due to a higher level of capital reinvestment in the fourth quarter of 2005 and throughout 2006. We continue to improve our debt to total capitalization ratio, which decreased to 67.2% at June 30, 2006 from 67.3% at December 31, 2005.

Results of Operations

Three and Six Months Ended June 30, 2006 and 2005

The following table sets forth our results of operations and percentage relationship that the various items bear to revenues for the periods indicated (in millions, except percentages).

32

Statement of Operations Data:

	Three Months Ended June 30,
	2006					2005
Revenues	$	1,540.6		100.0	%	$	1,448.6		100.0	%
Cost of operations		991.9		64.4			942.7		65.1
Selling, general and administrative expenses		148.4		9.6			117.0		8.1
Depreciation and amortization		147.5		9.6			141.0		9.7
Operating income		252.8		16.4			247.9		17.1
Interest expense and other		173.8		11.3			126.6		8.7
Income before income taxes		79.0		5.1			121.3		8.4
Income tax expense		41.2		2.7			69.3		4.8
Minority interest		0.2		0.0			(1.0	)	(0.1	)
Income from continuing operations		37.6		2.4			53.0		3.7
Discontinued operations, net of tax		—		—			1.0		0.0
Net income		37.6		2.4			54.0		3.7
Dividends on preferred stock		(9.4	)	(0.6	)		(14.7	)	(1.0	)
Net income available to common shareholders	$	28.2		1.8	%	$	39.3		2.7	%

	Six Months Ended June 30,
	2006					2005
Revenues	$	2,979.3		100.0	%	$	2,789.9		100.0	%
Cost of operations		1,935.2		64.9			1,817.6		65.1
Selling, general and administrative expenses		293.8		9.9			246.9		8.9
Depreciation and amortization		288.9		9.7			274.3		9.8
Operating income		461.4		15.5			451.1		16.2
Interest expense and other		306.5		10.3			330.2		11.8
Income before income taxes		154.9		5.2			120.9		4.4
Income tax expense		76.3		2.6			43.9		1.6
Minority interest		(0.2	)	(0.0	)		(0.7	)	(0.0	)
Income from continuing operations		78.8		2.6			77.7		2.8
Discontinued operations, net of tax		—		—			1.0		0.0
Net income		78.8		2.6			78.7		2.8
Dividends on preferred stock		(24.1	)	(0.8	)		(22.4	)	(0.8	)
Net income available to common shareholders	$	54.7		1.8	%	$	56.3		2.0	%

Revenues. We generate revenues primarily from fees charged to customers for waste collection, transfer, recycling and disposal services. We consider our core business to be our collection and disposal operations. We also generate revenue from the sale of recycled commodities. We record revenue as the services are provided, with revenue deferred in instances where services are billed in advance of the service being provided.

The following table shows our total reported revenues by service line. Inter-company revenues have been eliminated.

Revenues by service line (in millions, except percentages):

	Three Months Ended June 30,								Six Months Ended June 30,
	2006				2005(1)				2006				2005(1)
Collection
Residential	$	301.8	19.6	%	$	300.2	20.7	%	$	597.7	20.1	%	$	589.4	21.1	%
Commercial		373.4	24.2			345.6	23.9			737.6	24.8			682.2	24.4
Roll-off (2)		345.9	22.5			317.8	21.9			662.8	22.2			601.2	21.6
Recycling		52.9	3.4			50.8	3.5			99.8	3.3			99.6	3.6
Total Collection		1,074.0	69.7			1,014.4	70.0			2,097.9	70.4			1,972.4	70.7
Disposal
Landfill		223.2	14.5			209.1	14.4			421.6	14.1			389.3	14.0
Transfer		111.3	7.2			109.7	7.6			207.8	7.0			206.7	7.4
Total Disposal		334.5	21.7			318.8	22.0			629.4	21.1			596.0	21.4
Recycling – Commodity		55.4	3.6			59.5	4.1			105.8	3.6			116.2	4.2
Other(3)		76.7	5.0			55.9	3.9			146.2	4.9			105.3	3.7
Total Revenues	$	1,540.6	100.0	%	$	1,448.6	100.0	%	$	2,979.3	100.0	%	$	2,789.9	100.0	%

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(1)	The revenue mix for 2005 reflects the reclassification of transportation revenue out of collection, disposal and recycling-commodity revenue to other revenue.
(2)	Consists of revenue generated from commercial, industrial and residential customers from waste collected in roll-off containers that are loaded onto collection vehicles.
(3)	Consists primarily of revenue from national accounts where the work has been subcontracted, revenue generated from waste transported via railway and revenue from liquid waste.

Revenues increased 6.3% and 6.8%, respectively, during the three and six months ended June 30, 2006 over the comparative periods in 2005. All lines of business increased with the exception of recycling — commodity. The revenue increase within the collection business was attributable to increases in each of the residential, commercial, roll-off and recycling lines of business. The revenue increase within the disposal business is driven primarily by landfill revenue increases while transfer revenue increased slightly year over year. Recycling revenue decreased primarily due to cardboard and newspaper commodity price declines while other revenue increased as a result of waste volume increases associated with our national accounts. National account-related revenue included in other revenue represents the portion of revenue generated from nationwide contracts in markets outside our standard operating areas, and as such, the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset by the corresponding subcontract costs.

Following is a summary of the change in revenues (in millions):

	Three Months			Six Months
	Ended June 30,			Ended June 30,
Reported revenues in 2005	$	1,448.6		$	2,789.9
Core business organic growth
Increase from average base per unit price change		51.6			92.6
Increase from fuel recovery fees		30.1			61.1
Increase from net volume change		24.1			48.0
Net divested revenues and adjustments		(10.2	)		(7.0	)
Decrease in recycling and other		(3.6	)		(5.3	)
Reported revenues in 2006	$	1,540.6		$	2,979.3

During the three and six months ended June 30, 2006, we generated organic revenue growth of 7.8% and 7.8%, of which $81.7 million or 6.0% and $153.7 million or 5.9% were attributable to revenue growth relating to our average price per unit on core business. Our continued price growth reflected the results of pricing increases implemented throughout the year. Within the collection business, average per unit pricing increased 7.0%, 8.3%, 3.4% and 10.4%, respectively, in the commercial, roll-off, residential and recycling collection lines of business for the quarter ended June 30, 2006. For the six months ended June 30, 2006, average per unit pricing increased by 6.6%, 7.6%, 4.1% and 11.2% in the commercial, roll-off, residential and recycling collection lines of business. Within the disposal line of business, landfill average per unit pricing increased 5.1% and 4.9%, respectively, and transfer average per unit pricing increased 5.2% and 5.0%, respectively, for the three and six months ended June 30, 2006. The fuel recovery fee program, implemented in 2005 to mitigate our exposure to increases in fuel price, generated $30.1 million or 36.8% and $61.1 million or 39.8%, respectively, of the total price growth in the three and six months ended June 30, 2006. This fee fluctuates with the price of fuel.

Core business volume growth was 1.8% and 1.9% for the three and six months ended June 30, 2006 compared to the same periods in the prior year. Approximately 1.6% and 1.4% of the total volume increases during the three and six months ended June 30, 2006 related to subcontracted and transportation revenues which generally generate low margin. Within the collection business, the commercial and roll-off lines of business experienced volume increases of 1.1% and 1.7%, respectively, and 1.6% and 3.1%, respectively, for the three and six months ended June 30, 2006. The residential line of business experienced slight volume decreases during both the three and six month periods ended June 30, 2006 and recycling collection volume declined by 9.0% and 10.5%,

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respectively. Within the disposal business, landfill and transfer volume decreased slightly during the quarter ended June 30, 2006. For the six months ended June 30, 2006, landfill volume increased slightly while transfer volume declined by 2.5%.

Our operations are not concentrated in any one geographic region. At June 30, 2006, we operated in 129 major markets in 37 states and Puerto Rico. Our regional teams focus on developing local markets in which we can operate a vertically integrated operation and maximize operating efficiency. As a result, we may choose to not operate in a market where our business objective cannot be met.

The following table shows our revenues by geographic region in total and as a percentage of total revenues.

Revenues by region⁽¹⁾ (in millions, except percentages):

	Three Months Ended June 30,								Six Months Ended June 30,
	2006				2005				2006				2005
Midwestern	$	319.6	20.8	%	$	308.9	21.3	%	$	608.7	20.4	%	$	586.1	21.0	%
Northeastern		322.3	20.9			324.4	22.4			618.6	20.8			613.2	22.0
Southeastern		270.0	17.5			248.5	17.1			528.2	17.7			484.7	17.4
Southwestern		252.6	16.4			233.8	16.2			493.6	16.6			452.5	16.2
Western		338.0	21.9			313.1	21.6			660.8	22.2			617.3	22.1
Other(2)		38.1	2.5			19.9	1.4			69.4	2.3			36.1	1.3
Total Revenues	$	1,540.6	100.0	%	$	1,448.6	100.0	%	$	2,979.3	100.0	%	$	2,789.9	100.0	%

(1)	See discussion in Note 11 to our Consolidated Financial Statements.
(2)	Amounts relate primarily to our subsidiaries that provide services throughout the organization and not on a regional basis, including national accounts where the work has been subcontracted.

Cost of operations. Cost of operations includes labor and related benefits, which consists of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes. It also includes transfer and disposal costs representing tipping fees paid to third-party disposal facilities and transfer stations; maintenance and repairs relating to our vehicles, equipment, and containers, including related labor and benefit costs; transportation and subcontractor costs which include costs for independent haulers who transport our waste to disposal facilities and costs for local operators who provide waste handling services associated with our national accounts in markets outside our standard operating areas; fuel which includes the direct cost of fuel used by our vehicles, net of fuel credits; disposal and franchise fees and taxes consisting of landfill taxes, municipal franchise fees, host community fees and royalties; landfill operating costs which includes landfill accretion, financial assurance, leachate disposal and other landfill maintenance costs; risk management which includes casualty insurance premiums and claims; cost of goods sold which includes material costs paid to suppliers associated with recycling commodities; and other which includes expenses such as facility operating costs, equipment rent, and gains or losses on sale of assets used in our operations.

The following tables provide the components of our operating costs and as a percentage of revenues (in millions, except percentages):

	Three Months Ended June 30,								Six Months Ended June 30,
	2006				2005				2006				2005
Labor and related benefits	$	284.5	18.5	%	$	279.2	19.3	%	$	566.9	19.0	%	$	549.2	19.7	%
Transfer and disposal costs		132.4	8.6			131.0	9.0			248.7	8.3			243.4	8.7
Maintenance and repairs		123.9	8.0			123.5	8.5			249.2	8.4			239.3	8.6
Transportation and subcontractor costs		138.5	9.0			111.8	7.7			258.3	8.7			211.1	7.6
Fuel		82.6	5.4			59.8	4.1			147.5	4.9			106.9	3.8
Disposal and franchise fees and taxes		92.3	6.0			90.3	6.2			181.8	6.1			171.6	6.1
Landfill operating costs		38.4	2.5			37.6	2.6			76.4	2.6			75.0	2.7
Risk management		37.7	2.5			49.0	3.4			79.9	2.7			88.9	3.2
Costs of good sold		16.2	1.0			11.7	0.8			25.9	0.9			23.6	0.8
Other		45.4	2.9			48.8	3.5			100.6	3.3			108.6	3.9
Total operating expenses	$	991.9	64.4	%	$	942.7	65.1	%	$	1,935.2	64.9	%	$	1,817.6	65.1	%

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Cost of operations increased 5.2% and 6.5% in the three and six months ended June 30, 2006 compared to the same periods in the prior year primarily due to increases in labor, fuel, and transportation and subcontract costs, partially offset by decreases in risk management and other expenses. Labor costs increased for the six months ended June 30, 2006, primarily as a function of inflation and volume increases. The increase in transportation and subcontractor costs reflected our year-to-date price and volume growth, particularly volume growth in our national accounts, and pass-through fuel cost increases. Risk management costs were reduced by $7  million in the second quarter of 2006 as a result of changes in estimates due to claims experience. Other expense decreased approximately $8 million as a result of a favorable adjustment to our environmental reserves in the second quarter of 2006, primarily due to the selection by the U.S. Environmental Protection Agency of a lower cost remediation plan related to a Superfund site at which the Company is a potentially responsible party.

Fuel costs increased because of higher fuel prices and the expiration of certain fixed price purchase contracts. A significant portion of these contracts expired in early 2005. All fixed price purchase contracts expired as of March 31, 2006, and, unless new contracts are executed, all future fuel purchases will be at market rates. In the three and six months ended June 30, 2006, the contracts in place reduced fuel costs by $5.9 million when compared to then current market prices. We expect that our fuel recovery fee will offset a portion of the volatility in fuel costs arising from future market price fluctuations. At June 30, 2006, approximately 56% of our customers participated in the fuel recovery fee program.

Selling, general and administrative expenses include salaries, health and welfare benefits and incentive compensation for corporate and field general management, field support functions, sales force, accounting and finance, legal, management information systems and clerical and administrative departments. It also includes rent and office costs, fees for professional services provided by third parties, such as accountants, lawyers and consultants, provisions for estimated uncollectible accounts receivable and other expenses such as marketing, investor and community relations, directors’ and officers’ insurance, employee relocation, travel, entertainment and bank charges.

The following tables provide the components of our selling, general and administrative costs and as a percentage of revenues (in millions, except percentages):

	Three Months Ended June 30,								Six Months Ended June 30,
	2006				2005				2006				2005
Salaries	$	89.7	5.8	%	$	78.9	5.5	%	$	176.6	5.9	%	$	161.4	5.8	%
Rent and office costs		10.8	0.7			9.8	0.7			21.3	0.7			20.0	0.7
Professional fees		15.2	1.0			12.6	0.9			29.8	1.0			25.0	0.9
Provision for doubtful accounts		2.8	0.2			5.5	0.4			7.5	0.3			6.3	0.2
Other		29.9	1.9			10.2	0.6			58.6	2.0			34.2	1.3
Total selling, general and administrative expenses	$	148.4	9.6	%	$	117.0	8.1	%	$	293.8	9.9	%	$	246.9	8.9	%

Selling, general and administrative expenses increased 26.8% and 19.0% for the three and six months ended June 30, 2006 compared to the same periods in 2005 primarily relating to salaries, professional fees and other expenses. The increase in salaries reflected the impact of inflation and benefits costs as well as stock option expense recognized due to the adoption of SFAS 123(R) as of January 1, 2006. The professional fees increase was driven by consulting fees related to initiatives to standardize sales programs and implement procurement programs. The increase in other expense was primarily attributable to a $16.3 million non-cash reversal of litigation reserves during the quarter ended June 30, 2005 and accruals and settlements for certain legal matters in the second quarter of 2006.

Depreciation and amortization includes depreciation of fixed assets and amortization costs associated with the acquisition, development and retirement of landfill airspace and intangible assets. Depreciation is provided on the straight-line method over the estimated useful lives of buildings and improvements (30-40 years), vehicles and equipment (3-15 years), containers and compactors (5-10

36

years) and furniture and office equipment (4-8 years). Landfill assets are amortized at a rate per ton of waste disposed. (See Note 6, Landfill Accounting for a discussion of landfill accounting.) Depreciation of vehicles increases as fully-depreciated trucks are replaced by new vehicles. Amortization of landfill assets is impacted by several factors including rates of inflation, granted landfill expansions and compaction rates.

The following tables provide the components of our depreciation and amortization and as a percentage of revenues (in millions, except percentages):

	Three Months Ended June 30,								Six Months Ended June 30,
	2006				2005				2006				2005
Depreciation of fixed assets	$	79.4	5.2	%	$	75.3	5.2	%	$	158.7	5.3	%	$	150.8	5.4	%
Landfill and other amortization		68.1	4.4			65.7	4.5			130.2	4.4			123.5	4.4
Total depreciation and amortization	$	147.5	9.6	%	$	141.0	9.7	%	$	288.9	9.7	%	$	274.3	9.8	%

Depreciation and amortization increased 4.6% in the second quarter of 2006 and 5.3% for the six months ended June 30, 2006 compared to the same periods in 2005. The increase in amortization expense is primarily related to an increase in the landfill amortization rate. Depreciation expense related to vehicles and equipment increased primarily due to increases in capital expenditures in recent periods.

Interest expense and other. Interest expense and other increased by 37.2% in the quarter ended June 30, 2006 and decreased by 7.2% in the six months ended June 30, 2006 compared to the same periods in 2005. Following are the components of interest expense and other (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
Interest expense, gross	$	132.4		$	126.5		$	264.4		$	264.9
Interest income		(0.7	)		(1.5	)		(1.4	)		(1.9	)
Interest capitalized for development projects		(4.1	)		(3.7	)		(8.2	)		(7.1	)
Accretion of debt and amortization of debt issuance costs		5.4			5.7			10.9			11.9
Costs incurred to early extinguish debt		40.8			(0.4	)		40.8			62.4
Total Interest expense and other	$	173.8		$	126.6		$	306.5		$	330.2

The increase in interest expense and other for the three months ended June 30, 2006 was attributable primarily to the premiums paid and the write-off of deferred financing and other costs in connection with the refinancing transactions in the second quarter of 2006. In connection with these refinancing transactions, we incurred costs to early extinguish and refinance debt of $40.8 million during the three and six months ended June 30, 2006. Gross interest expense increased during the three months ended June 30, 2006 due to the impact of rising interest rates on the variable rate portion of our debt. Gross interest expense for the six months ended June 30, 2006 decreased due to the repayment of debt in prior quarters from our continued de-leveraging strategy and the refinancing of debt at lower interest rates in the first quarter of 2005 (2005 Refinancing plan). In connection with the 2005 refinancing transactions, costs incurred to early extinguish and refinance debt were $62.4 million for six months ended June 30, 2005.

Income tax expense. The effective tax rate for the three and six months ended June 30, 2006 was 52.3% and 49.2%, respectively, compared to 56.7% and 36.1% for the same periods in the prior year. The increase in the effective tax rate for the six months ended June 30, 2006 is primarily attributable to a $25.5 million tax benefit, recorded in the first quarter of 2005, related to the stock basis associated with a pending divestiture.

Dividends on preferred stock. Dividends on preferred stock were $9.4 million and $14.7 million for the three months ended June 30, 2006 and 2005, respectively, and $24.1 million and $22.4 million for the six months ended June 30, 2006 and 2005, respectively. The decrease of $5.3 million for the three months ended June 30, 2006 was a result of the conversion of the Series C mandatory convertible preferred stock (Series C preferred stock) issued in April 2003. The Series C preferred stock was converted into approximately 34.1 million shares of common stock on April 1, 2006, eliminating

37

approximately $21.6 million of annual cash dividends. The increase of $1.7 million for the six months ended June 30, 2006 was a result of an increase of $7.1 million of 6.25% dividends payable in cash for the Series D mandatory convertible preferred stock (Series D preferred stock) issued in March 2005 offset by the decrease of $5.4 million due to the conversion of the Series C preferred stock.

Liquidity and Capital Resources

We are a highly leveraged company with $7.2 billion of outstanding debt at June 30, 2006. The majority of our debt was incurred to acquire solid waste companies between 1990 and 2000. We incurred and assumed over $11 billion of debt to acquire BFI in 1999. Since the acquisition of BFI, we have repaid debt with cash flow from operations, asset sales and the issuances of equity. We intend to continue to reduce our debt balance until we reach credit ratios that we believe will allow us to benefit from an investment grade-like cost of capital. We believe that as we move towards these ratios, when compared to today, we will have additional opportunities to reduce our cost of debt below our current level on a basis relative to interest rates at the time. We expect these opportunities will increase liquidity, and provide more flexibility in deciding the most appropriate use of our cash flow. Additionally, we believe that as we reduce our financial leverage, shareholder value should be created through cash flow due to reduced interest payments.

Until then, we will continue to manage operating cash flows after capital expenditures to ensure repayment of our scheduled debt maturities and opportunistically reduce interest costs through refinancing transactions to the extent economically beneficial. In both 2004 and 2005, we completed multifaceted refinancing transactions that reduced our overall debt, refinanced our credit facility and reduced our higher cost debt. In addition, we expect to continue to evaluate the performance of and opportunities to divest operations that do not maximize operating efficiencies or provide an adequate return on invested capital.

We may refinance or repay portions of our debt to ensure a capital structure that supports our operating plan, as well as continue to seek opportunities to extend our maturities in the future with actions that are economically beneficial. The potential alternatives include continued application of cash flow from operations, asset sales and capital markets transactions. Capital markets transactions could include issuance of debt with longer-term maturities, issuance of equity, or a combination of both. There is no assurance that in the future we will be able to generate annual cash flows to repay debt, consummate transactions in the capital markets on commercially reasonable terms, or at all, or sell assets on terms that decrease leverage.

We generally meet operational liquidity needs with operating cash flows. Our liquidity needs are primarily for working capital, capital expenditures for vehicles, containers and landfill development, capping, closure, post-closure and environmental expenditures, debt service costs and scheduled debt maturities.

When we cannot meet our liquidity needs with operating cash flow, we meet those needs with borrowings under our 2005 Credit Facility. We have a $1.575 billion commitment until 2010 under our 2005 Credit Facility, which we believe is adequate to meet our liquidity needs based on current conditions. At June 30, 2006, we had $116.8 million of loans outstanding and $411.1 million in letters of credit drawn on the 2005 Revolver, leaving approximately $1.047 billion of availability for borrowings and letters under our Institutional Letter of Credit Facility, all of which was used at June 30, 2006. During the second half of 2006, we expect to repay the $116.8 million outstanding on our revolving credit facility with cash flow from operations after capital expenditures plus the proceeds from the sale of assets and surplus properties.

Cash provided by operations increased 16% in the first six months of 2006 when compared to the same period in 2005, primarily due to an increase in net income after adjusting for non-cash items related to deferred taxes of approximately $33 million and depreciation and amortization of approximately $15 million. Consistent with our 2006 capital plan, we reinvested $371.8 million of capital into the business during the first six months of 2006, an increase of more than $88 million over

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the first six months of 2005. The year over year reduction in cash used for financing activities is primarily reflective of the change in disbursement account. The disbursement account represents outstanding checks that were issued but are in transit at the end of a reporting period.

Following is a summary of the primary sources and uses of cash during the six months ended June 30, (in millions):

Sources of cash

	2006		2005
Cash provided by operations	$	367.8	$	317.5
Net proceeds from issuance of common and preferred stock		8.7		676.6
Decrease in cash balance		8.5		—
Net proceeds from divestitures, net of acquisitions		2.8		1.6
Debt proceeds, net of debt repayments		87.4		—
Proceeds from the sale of fixed assets		7.3		7.2
Total	$	482.5	$	1,002.9

Uses of cash

	2006		2005
Capital expenditures	$	371.8	$	283.5
Debt repayments, net of debt proceeds		—		569.9
Debt issuance costs		11.3		28.5
Increase in cash balance		—		2.0
Payment of preferred stock cash dividends		29.4		19.3
Decrease in disbursement account		63.3		94.4
Other non-operating net cash outflows		6.7		5.3
Total	$	482.5	$	1,002.9

We continuously seek opportunities to increase our cash flow through improvements in operations and reduction of our interest cost. Historically, we have used bank financings and capital markets transactions to meet our refinancing and liquidity requirements. Under our 2005 Credit Facility, we are required to meet certain financial covenants. Our objective is to maintain sufficient surplus between the required covenant ratios and the actual ratios calculated according to the 2005 Credit Agreement. We monitor the surplus carefully and will seek to take action if the surplus becomes too small. We have not historically experienced difficulty in obtaining financing or refinancing existing debt. We expect to continue to seek such opportunities in the future to the extent such opportunities are available to us. (See also Debt covenants in Contractual Obligations and Commitments.)

Significant financing events in 2006. On April 1, 2006, each of the outstanding shares of the 6.25% Series C preferred stock automatically converted into 4.9358 shares of our common stock pursuant to the terms of the certificate of designations governing the Series C preferred stock. This increased our common shares outstanding by approximately 34.1 million shares as of April 1, 2006 and eliminated annual cash dividends of $21.6 million.

The conversion rate, pursuant to the terms set forth in the certificate of designations, is equal to $50.00 divided by $10.13 (the threshold appreciation price), as the average of the closing prices per share of our common stock on each of the 20 consecutive trading days ending on March 29, 2006 (the third trading day preceding the conversion date) was greater than the threshold appreciation price. Each holder of Series C preferred stock on the applicable record date received a cash payment equal to the amount of accrued and unpaid dividends. As a result of the automatic conversion, we will no longer pay any future quarterly dividends in cash or stock in respect of the Series C preferred stock. Each holder of Series C preferred stock on the conversion date received cash in lieu of any fractional shares of common stock issued upon conversion of the Series C preferred stock.

On April 12, 2006, we completed the re-pricing of the 2005 Term Loan and Institutional Letter of Credit portions of our 2005 Credit Facility. The 2005 Term Loan and Institutional Letter of Credit Facility re-priced at LIBOR plus 175 basis points (or ABR plus 75 basis points), a reduction of 25 basis points. The pricing will further decrease to LIBOR plus 150 basis points (or ABR plus 50 basis points) when our leverage ratio is equal to or less than 4.25x. This re-pricing is expected to generate more than $4 million in annual interest savings.

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In May 2006, we issued $600 million of 7.125% senior notes due 2016 at a discounted price equal to 99.123% of the aggregate principal amount. The net proceeds were used to fund a portion of the tender offer for our 8.875% senior notes due 2008. The refinancing of the senior notes is expected to generate approximately $6 million in annual interest savings. In conjunction with the re-pricing and refinancing transactions during the second quarter of 2006, we expensed approximately $40.8 million of costs related to premiums paid, deferred financing and other costs.

In June 2006, we filed an automatic shelf registration statement with the SEC. It allows us to issue, from time to time, an unrestricted amount of debt securities, preferred stock, common stock, debt and equity warrants, depositary shares (including an indeterminate amount of debt securities, preferred stock and common stock as may be issued upon conversion or exchange for any of our other securities). The registration statement was effective immediately upon filing.

Contractual Obligations and Commitments

The following table provides additional maturity detail of our long-term debt at June 30, 2006 (in millions):

Debt	2006		2007		2008		2009		2010		Thereafter		Total
Revolving 2005 Credit Facility(1)	$	—	$	—	$	—	$	—	$	116.8	$	—	$	116.8
Term loan B		—		—		—		—		6.0		1,269.0		1,275.0
Receivables secured loan(2)		—		215.1		—		—		—		—		215.1
6.375% BFI Senior notes		—		—		161.2		—		—		—		161.2
8.50% Senior notes		—		—		750.0		—		—		—		750.0
6.50% Senior notes		—		—		—		—		350.0		—		350.0
5.75% Senior notes due 2011		—		—		—		—		—		400.0		400.0
6.375% Senior notes due 2011		—		—		—		—		—		275.0		275.0
9.25% Senior notes due 2012		—		—		—		—		—		250.0		250.0
7.875% Senior notes due 2013		—		—		—		—		—		450.0		450.0
6.125% Senior notes due 2014		—		—		—		—		—		425.0		425.0
7.25% Senior notes due 2015		—		—		—		—		—		600.0		600.0
7.125% Senior notes due 2016		—		—		—		—		—		600.0		600.0
9.25% BFI debentures due 2021		—		—		—		—		—		99.5		99.5
7.40% BFI debentures due 2035		—		—		—		—		—		360.0		360.0
4.25% Senior subordinated convertible debentures due 2034		—		—		—		—		—		230.0		230.0
7.375% Senior unsecured notes due 2014		—		—		—		—		—		400.0		400.0
Other debt		2.9		6.5		1.8		2.0		25.4		268.0		306.6
Total principal due	$	2.9	$	221.6	$	913.0	$	2.0	$	498.2	$	5,626.5	$	7,264.2
Discount, net														(82.1	)
Total debt balance													$	7,182.1

(1)

At June 30, 2006, under our 2005 Credit Facility, we had revolving commitments totaling $1.575 billion with $116.8 million in loans outstanding and $411.1 million of letters of credit outstanding, providing us remaining availability of approximately $1.047 billion. In addition, we had an Institutional Letter of Credit Facility of $495.0 million available under the 2005 Credit Facility, all of which was used for letters of credit outstanding.

(2)

The receivables secured loan is a 364-day liquidity facility with a maturity date on May 29, 2007. At that time, we intend to renew the liquidity facility. If we are unable to renew the liquidity facility, we will refinance any amounts outstanding with our 2005 Credit Facility, which matures in 2010, or with other long-term borrowings. Although we intend to renew the liquidity facility on May 29, 2007 and do not expect to repay the amounts within the next twelve months, the loan is classified as a current liability because it has a contractual maturity of less than one year.

Debt covenants. Our 2005 Credit Facility and the indentures relating to our senior subordinated notes and our senior notes contain financial covenants and restrictions on our ability to complete acquisitions, pay dividends, incur indebtedness, make investments and take certain other corporate actions. See Note 4 to our Consolidated Financial Statements for additional information regarding our primary financial covenants.

At June 30, 2006, we were in compliance with all financial and other covenants under our 2005 Credit Facility. We are not subject to any minimum net worth covenants.

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Failure to comply with the financial and other covenants under our 2005 Credit Facility, as well as the occurrence of certain material adverse events, would constitute default under the credit agreement and would allow the lenders under the 2005 Credit Facility to accelerate the maturity of all indebtedness under the credit agreement. This could also have an adverse impact on availability of financial assurances. In addition, maturity acceleration on the 2005 Credit Facility constitutes an event of default under our other debt instruments, including our senior notes and our senior subordinated notes and, therefore, these would also be subject to acceleration of maturity. If such acceleration of maturities of indebtedness were to occur, we would not have sufficient liquidity available to repay the indebtedness. We would likely have to seek an amendment under the 2005 Credit Facility for relief from the financial covenants or repay the debt with proceeds from the issuance of new debt or equity, and/or assets sales, if necessary. We may be unable to amend the 2005 Credit Facility or raise sufficient capital to repay such obligations in the event the maturities are accelerated.

Prepayments. Under our 2005 Credit Facility, if we generate cash flow in excess of specified levels, we must prepay a portion of our Term Loan borrowings annually (prior to the stated maturity). To make these payments, if required, we may have to use the 2005 Revolver to accommodate cash timing differences. Factors primarily increasing Excess Cash Flow, as defined in the 2005 Credit Agreement, could include increases in operating cash flow, lower capital expenditures and working capital requirements, net divestitures or other favorable cash generating activities. In addition, we are required to make prepayments on the 2005 Credit Facility upon completion of certain transactions as defined in the 2005 Credit Agreement, including asset sales and issuances of debt or equity securities.

Financial Assurances. We are required to provide financial assurances to governmental agencies and a variety of other entities under applicable environmental regulations relating to our landfill operations for capping, closure and post-closure costs, and/or related to our performance under certain collection, landfill and transfer station contracts. We satisfy the financial assurance requirements by providing performance bonds, letters of credit, insurance policies or trust deposits. The amount of the financial assurance requirements for capping, closure and post-closure costs are determined by the applicable state environmental regulations, which vary by state. The financial assurance requirements for capping, closure and post-closure costs can either be for costs associated with a portion of the landfill or the entire landfill. Generally, states will require a third-party engineering specialist to determine the estimated capping, closure and post-closure costs that are used to determine the required amount of financial assurance for a landfill. The amount of financial assurances required can, and generally will, differ from the obligation determined and recorded under generally accepted accounting principles in the United States (GAAP). The amount of the financial assurance requirements related to contract performance varies by contract.

Additionally, we are required to provide financial assurance for our insurance program and collateral required for certain performance obligations. We do not expect a material increase in financial assurances during 2006, although the mix of financial assurance instruments may change.

At June 30, 2006, we had the following financial assurance instruments and collateral in place (in millions):

	Landfill
	Closure/		Contract		Risk/Casualty		Collateral for
	Post-Closure		Performance		Insurance		Obligations		Total
Insurance policies	$	646.0	$	—	$	—	$	—	$	646.0
Surety bonds		557.6		503.7		—		—		1,061.3
Trust deposits		81.9		—		—		—		81.9
Letters of credit (1)		469.4		46.2		282.0		108.5		906.1
Total	$	1,754.9	$	549.9	$	282.0	$	108.5	$	2,695.3

⁽¹⁾ These amounts are issued under the 2005 Revolver and the Institutional Letter of Credit Facility under our 2005 Credit Facility.

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These financial instruments are issued in the normal course of business and are not debt of the company. Since we currently have no liability for these financial assurance instruments, they are not reflected in the accompanying consolidated balance sheets. However, we have recorded capping, closure and post-closure liabilities and self-insurance as the liabilities are incurred under GAAP. The underlying obligations of the financial assurance instruments would be valued and recorded in the consolidated balance sheets if it is probable that we would be unable to perform our obligations under the financial assurance contracts. We do not expect this to occur.

Off-Balance Sheet Financing

We have no off-balance sheet debt or similar obligations, other than financial assurance instruments and operating leases, which are not classified as debt. We have no transactions or obligations with related parties that are not disclosed, consolidated into or reflected in our reported results of operations or financial position. We do not guarantee any third party debt.

Interest Rate Risk Management

We believe it is important to have a mix of fixed and floating rate debt to provide financing flexibility. Our policy and procedures require that no less than 70% of our total debt is fixed, either directly or effectively through interest rate swap agreements. At June 30, 2006, approximately 77% of our debt was fixed, all directly.

From time to time, we have entered into interest rate swap agreements for the purpose of hedging variability of interest expense and interest payments on our long-term variable rate bank debt and maintaining a mix of fixed and floating rate debt. Our strategy is to use interest rate swap contracts when such transactions will serve to reduce our aggregate exposure and meet the objectives of our interest rate policy. These contracts are not entered into for trading purposes. At June 30, 2006, we had no interest rate swap agreements outstanding.

Contingencies

For a description of our commitments and contingencies, see Note 10 to our consolidated financial statements included under Item 1 of this Form 10-Q.

Accounting for Stock Options Granted to Employees

Our stock-based compensation program is a long-term retention program that is intended to attract and retain employees and align stockholder and employee interests. We offer our employees a variety of stock-based awards including stock options, restricted stock and restricted stock units. Stock options are granted with an exercise price equal to the fair value of our common stock on the date of grant. All stock-based awards generally vest over a period of three to five years and expire ten years from the date of grant.

Effective January 1, 2006, we adopted the provisions of SFAS 123(R), Share-Based Payment, which establishes the accounting for stock-based awards exchanged for employee services. SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be measured at fair value and expensed in the consolidated statement of operations over the service period (generally the vesting period). We previously accounted for share-based compensation plans under APB 25, Accounting for Stock Issued to Employees, and the related interpretations and provided the required pro forma disclosures of SFAS 123, Accounting for Stock-Based Compensation.

We elected to adopt the modified prospective transition method as provided by SFAS 123(R). Under this method, we are required to recognize compensation expense for all awards granted after the date of adoption and for all the unvested portion of previously granted awards that remained outstanding at the date of adoption. Accordingly, financial statement amounts for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R).

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During the three and six months ended June 30, 2006, we recorded stock-based compensation related to stock options of $2.1 million and $3.7 million or $1.2 million and $2.2 million net of tax, respectively, for all unvested options granted prior to and after the adoption of SFAS 123(R). At June 30, 2006, the deferred stock-based compensation balance, net of estimated forfeitures, related to stock options was $16.4 million and is expected to be recognized over an estimated weighted average amortization period of 3.6 years.

During the three and six months ended June 30, 2006, stock-based compensation related to non-employee directors’ awards was $0.1 million and $0.2 million, net of tax, respectively. During the six months ended June 30, 2006, approximately 14,000 shares were forfeited, all in the first quarter. Approximately 49,000 shares vested during the six months ended June 30, 2006, all in the second quarter. At June 30, 2006, the deferred stock-based compensation balance related to these awards was $0.5 million and is expected to be recognized over an estimated weighted average amortization period of one year.

During the three and six months ended June 30, 2006, we recorded stock-based compensation related to restricted stock awards to employees of $1.7 million and $3.4 million, or $1.3 million and $2.3 million net of tax, respectively. During the three and six months ended June 30, 2006, approximately 0.2 million shares and 0.2 million shares, respectively, were forfeited and approximately 0.8 million shares and 1.0 million shares, respectively, vested. At June 30, 2006, the deferred stock-based compensation balance related to non-vested restricted stock awards was $14.7 million and is expected to be recognized over an estimated weighted average amortization period of 3.7 years.

In connection with the adoption of SFAS 123(R), we assessed our valuation technique and related assumptions. Consistent with the provisions of SFAS 123(R), Staff Accounting Bulletin No. 107 (SAB 107) and our prior period pro forma disclosures, we estimated the fair value of stock options on the date of grant using a Black-Scholes option valuation model that uses the assumptions in the following table. The fair value of each option grant is recognized using the straight-line attribution approach.

	Three Months			Six Months
	Ended June 30,			Ended June 30,
	2006			2006
Risk free interest rate		3.8	%		3.8	%
Expected life (in years)		6.7			6.7
Dividend rate		0.0	%		0.0	%
Expected volatility		45.7	%		45.9	%

The risk-free interest rate is based on a zero-coupon U.S. Treasury bill rate on the date of grant with the maturity date approximately equal to the expected life at the grant date. The expected life of the options is determined using the simplified method as provided by SAB 107 for “plain vanilla” options. We have not issued any dividends on common stock and are currently restricted from paying common stock dividends under our 2005 Credit Facility. Based on this, the dividend rate is assumed to be zero. The Company derives its expected volatility based on a combination of the implied volatility of its traded options and daily historical volatility of its stock price. Prior to the adoption of SFAS 123(R), the Company utilized historical volatility of its stock price for its pro forma disclosures.

As stock-based compensation expense recognized in our consolidated statement of operations for the three and six months ended June 30, 2006 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience. In our pro forma disclosures prior to the adoption of SFAS 123(R), we accounted for forfeitures upon occurrence.

If factors change and we employ different assumptions in the application of SFAS 123(R) in future periods, the stock-based compensation expense that we record under SFAS 123(R) may differ from what we have recorded in the current period.

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Critical Accounting Judgments and Estimates

We identified and discussed our critical accounting judgments and estimates in our Annual Report on Form 10-K for the year ended December 31, 2005. Although we believe that our estimates and assumptions are reasonable, they are based upon information available at the time the judgment or estimate is made. Actual results may differ significantly from estimates under different assumptions or conditions.

New Accounting Standards

For a description of the new accounting standards that affect us, see Note 1 to our consolidated financial statements included under Item 1 of this Form 10-Q.

Disclosure Regarding Forward Looking Statements

This Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Forward Looking Statements). All statements, other than statements of historical fact included in this report, are Forward Looking Statements. Although we believe that the expectations reflected in such Forward Looking Statements are reasonable, we can give no assurance that such expectations will prove to be correct. Examples of these Forward Looking Statements include, among others, statements regarding:

• our business plans or strategies, projected or anticipated benefits or other consequences of such plans or strategies;

• our ability to obtain financing, refinance existing debt, increase liquidity, reduce interest cost, extend debt maturities and provide adequate financial liquidity;

• the adequacy of our operating cash flow and revolving credit facility to make payments on our indebtedness, support our capital reinvestment needs and fund other liquidity needs;

• our ability to repay during 2006 the outstanding balance on our revolving credit facility with cash flow from operations after capital expenditures plus the proceeds from the sale of assets and surplus properties;

• our expected interest savings in connection with the refinancing of portions of our 2005 Credit Facility and the tender offer of a portion of our 8.875% senior notes;

• our ability to generate cash flows from operations after funding capital expenditures;

• our ability to achieve credit ratios that would allow us to receive benefits of a cross-over investment grade company and/or investment grade-like cost of capital;

• our ability to achieve price and volume increases and cost reductions in the future;

• our estimates of future annual interest costs reductions;

• our ability to perform our obligations under financial assurance contracts and our expectation that our need for financial assurance contracts will not materially increase;

• underlying assumptions related to general economic and financial market condition;

• our expectation that our casualty, property or environmental claims or other contingencies will not have a material effect on our operations;

• our belief that the costs of settlements or judgments arising from litigation and the effects of settlements or judgments on our consolidated liquidity, financial position or results of operation will not be material;

• our ability to implement environmental safeguards to comply with governmental requirements;

• the impact of fuel costs and fuel recovery fees on our operations;

• our ability to meet our projected capital expenditures spending;

• our ability to achieve benefits, including the timing and amount of any benefits, resulting from the implementation of standards and best practices program;

• our ability to renew our receivables liquidity facility;

• the expected benefits of our refinancing plan;

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• our ability to maintain sufficient surplus between our covenant ratios;

• our expectations of lower vehicle and equipment ownership costs in the future;

• the amount, timing and sources of additional cash payments to the IRS and other taxing authorities;

• our ability to avoid a penalty by the IRS; and

• the ability to anticipate the impact of changes in federal, state, or local laws or regulations.

Other factors that could materially affect the Forward Looking Statements in this Form 10-Q can be found in our periodic reports filed with the SEC, including risk factors detailed in Item 1A, “Risk Factors” in our Form 10-K for the year ended December 31, 2005 and in our Form 10-Q dated March 31, 2006. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the Forward Looking Statements and are cautioned not to place undue reliance on such Forward Looking Statements. The Forward Looking Statements made herein are only made as of the date of this quarterly report on Form 10-Q, and we undertake no obligation to publicly update such Forward Looking Statements to reflect subsequent events or circumstances.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk. We are subject to interest rate risk on our variable rate long-term debt. From time to time, to reduce the risk from interest rate fluctuations, we have entered into hedging transactions that have been authorized pursuant to our policies and procedures. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. We currently have no outstanding interest rate swap arrangements at June 30, 2006.

At June 30, 2006, with 77% of our debt fixed, we have $1.692 billion of floating rate debt. If interest rates increased by 100 basis points, annualized interest expense and cash payments for interest would increase by approximately $16.9 million ($10.2 million after tax). This analysis does not reflect the effect that interest rates would have on other items, such as new borrowings nor the favorable impact declining rates would have on interest expense and cash payments for interest.

Fuel prices. Fuel costs represent a significant operating expense. Historically, we have mitigated fuel cost exposure with fixed price purchase contracts. A significant portion of these contracts expired in the first quarter of 2005 and the remainder in the first quarter of 2006.

When economically practical, we may enter into new or renewed contracts, or engage in other strategies to mitigate market risk. Where appropriate, we have implemented a fuel recovery fee that is designed to recover our fuel costs.

At our current consumption levels, a one-cent change in the price of diesel would affect annual net income by approximately $0.7 million, before considering the impact of fuel recovery fees. Accordingly, a substantial rise or drop in fuel costs could result in a material impact to our revenues and cost of operations.

Commodities prices. We market recycled products such as cardboard and newspaper from our material recycling facilities. As a result, changes in the market prices of these items will impact our results of operations. Revenues from sales of recycled cardboard and newspaper in the second quarter of 2006 were approximately $22.9 million compared to $28.5 million in the second quarter of 2005.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported accurately within the time periods specified in the SEC’s rules and forms. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (pursuant to Exchange Act Rule 13a-15). Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures are effective. The conclusions of the CEO and CFO from this evaluation were communicated to the Audit Committee.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

On June 27, 2006, our wholly-owned subsidiary, American Disposal Services of West Virginia, Inc., received a proposed Settlement Agreement and Consent Order from the West Virginia Department of Environmental Protection seeking to assess a civil penalty of $150,000 and seeking to require the facility to perform a Supplemental Environmental Project with a value of not less than $100,000 to resolve several alleged environmental violations under the West Virginia Solid Waste Management Act that occurred over the past three (3) years at its Short Creek Landfill in Ohio County, West Virginia.

In September 1999, neighboring parties and the county drainage district filed a civil lawsuit seeking to prevent BFI from obtaining a vertical elevation expansion permit at our 131-acre landfill in Donna, Texas. They claimed BFI had agreed not to expand the landfill based on a pre-existing Settlement Agreement from an unrelated dispute years ago related to drainage discharge rights. In 2001, the Texas Commission on Environmental Quality (TCEQ) granted BFI an expansion permit (the administrative expansion permit proceeding), and, based on this expansion permit, the landfill has an estimated remaining capacity of approximately 2.3 million tons at June 30, 2006. Nonetheless, the parties opposing the expansion continued to litigate the civil lawsuit and pursue their efforts in preventing the expansion. In November 2003, a judgment issued by a Texas state trial court in the civil lawsuit effectively revoked the expansion permit that was granted by the TCEQ in 2001, which would require us to operate the landfill according to a prior permit granted in 1988. On appeal, the Texas Court of Appeals stayed the trial court’s order, allowing us to continue to place waste in the landfill in accordance with the expansion permit granted in 2001. In the administrative expansion proceeding on October 28, 2005, the Texas Supreme Court denied review of the neighboring parties’ appeal of the expansion permit, thereby confirming that the TCEQ properly granted our expansion permit.

In April 2006, the Texas Court of Appeals ruled on the civil litigation. The court dissolved the permanent injunction which would have effectively prevented us from operating the landfill under the expansion permit, but also required us to pay a damage award of approximately $2 million, plus attorney fees and interest. On April 27, 2006, all parties filed a motion for rehearing, which was denied by the Texas Court of Appeals. We are evaluating our options regarding the April 2006 opinion, including whether to file an appeal to the Texas Supreme Court.

We are currently under examination or administrative review by various state and federal taxing authorities for certain tax years, including federal income tax audits for calendar years 1998 through 2003. A federal income tax audit for BFI’s tax years ended September 30, 1996 through July 30, 1999 is complete with the exception of an outstanding tax dispute with the IRS. See Note 10 to our Consolidated Financial Statements in Item 1 of this Form 10-Q for a detailed discussion of this matter.

Item 1A. Risk Factors

For a listing of our risk factors, see Item 1A, “Risk Factors”, in our Form 10-K for the year ended December 31, 2005.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

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Item 4. Submission of Matters to a Vote of Security Holders

On May 25, 2006, our annual meeting of stockholders was held at which we submitted to a vote of our stockholders the following proposals:

(1) Election of directors as follows :

	Number of Votes		Number of Votes
Nominee	For		Withheld
John J. Zillmer		311,688,950		16,416,051
Robert M. Agate		316,587,132		11,517,869
Charles H. Cotros		315,600,282		12,504,719
James W. Crownover		316,624,140		11,480,861
David I. Foley		317,164,162		10,940,839
Joshua J. Harris		316,865,236		11,239,765
Dennis R. Hendrix		316,464,246		11,640,755
Nolan Lehmann		311,680,819		16,424,182
Steven Martinez		317,104,667		11,000,334
James A. Quella		316,864,687		11,240,314
Antony P. Ressler		316,898,871		11,206,130

		Results of the Vote
								Broker
		Affirmative		Against		Abstentions		Non-Votes
(2)	To ratify the appointment of Pricewaterhouse Coopers LLP as our independent registered public accounting firm (“independent auditor”) for fiscal year 2006		326,255,906		736,453		1,098,172		14,470
(3)	To approve the amendment and restatement of the 1991 Incentive Stock Plan into the 2006 Incentive Stock Plan		258,101,399		25,171,441		1,137,058		43,695,103
(4)	To approve the 2006 Executive Incentive Compensation Plan		315,346,682		10,248,640		1,222,976		1,286,703
(5)	Stockholder proposal on majority voting for director nominees		100,882,871		181,305,880		2,221,327		43,694,923
(6)	Stockholder proposal on approval of severance agreements by stockholders		106,845,876		175,602,499		1,961,703		43,694,923

Item 5. Other Information

On July 28, 2006, Anthony P. Ressler informed the Company of his resignation as a Director of the Company and member of the Management Development/Compensation Committee.

Mr. Ressler served as a Shareholder Designee on the Company’s Board of Directors pursuant to the Third Amended and Restated Shareholders Agreement, dated December 18, 2003, between the Company and Apollo II, L.P. and Blackstone Capital Partners II Merchant Bank Fund L.P. (collectively, the “Apollo/Blackstone Investors”). The Apollo/Blackstone Investors are expected to nominate a replacement for this vacancy in the near future pursuant to their rights under the Shareholders Agreement.

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Item 6. Exhibits

4.1	Seventeenth Supplemental Indenture governing the 7-1/8% Senior Notes due 2016, dated May 17, 2006, among Allied Waste North America, Inc., Allied Waste Industries, Inc., the guarantors party thereto and U.S. Bank National Association, as trustee. Exhibit 1.01 to Allied’s Current Report on Form 8-K dated May 17, 2006 is incorporated herein by reference.
4.2	Second supplemental indenture to the sixth supplemental indenture governing the 7-7/8% Senior Notes due 2008, dated May 17, 2006, by and among Allied Waste North America, Inc., the guarantors signatory thereto and U.S. Bank National Association, as trustee. Exhibit 1.03 to Allied’s Current Report on Form 8-K dated May 17, 2006 is incorporated herein by reference.

10.1*	Second amendment dated as of March 30, 2006, to the Credit Agreement dated as of July 21, 1999, as amended and restated as of March 21, 2005, among Allied Waste Industries, Inc., Allied Waste North America, Inc., the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for the Lenders and as collateral trustee for the Shared Collateral Secured Parties.
10.2*	2006 Incentive Stock Plan.
10.3*	2006 Executive Incentive Compensation Plan.
10.4*	Participation Agreement between the Company and CoreTrust Purchasing Group LLC, the exclusive agent, for the purchase by the Company of certain goods and services effective July 1, 2006.
10.5	Registration Rights Agreement, dated as of May 17, 2006, by and among the Allied Waste North America, Inc., Allied Waste Industries, Inc., the guarantors party thereto, and the initial purchasers of the 7-1/8% Senior Notes due 2016. Exhibit 1.02 to Allied’s Current Report on Form 8-K dated May 17, 2006 is incorporated herein by reference.
31.1*	Section 302 Certification of John J. Zillmer, Chairman of the Board of Directors and Chief Executive Officer.
31.2*	Section 302 Certification of Peter S. Hathaway, Executive Vice President and Chief Financial Officer.
32*	Certification Pursuant to 18 U.S.C.§1350 of John J. Zillmer, Chairman of the Board of Directors and Chief Executive Officer and Peter S. Hathaway, Executive Vice President and Chief Financial Officer.

* Filed herewith

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Signatures

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

ALLIED WASTE INDUSTRIES, INC.
By:	/s/ PETER S. HATHAWAY
	Peter S. Hathaway
	Executive Vice President and Chief Financial Officer
By:	/s/ JAMES E. GRAY
	James E. Gray
	Senior Vice President, Controller and
	Chief Accounting Officer

Date: August 2, 2006

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EX-10.1

EXHIBIT 10.1

     SECOND AMENDMENT dated as of March 30, 2006 (this “Amendment”), to the Credit Agreement dated as of July 21, 1999, as amended and restated as of March 21, 2005 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among ALLIED WASTE INDUSTRIES, INC. (“Allied Waste”), ALLIED WASTE NORTH AMERICA, INC. (the “Borrower”), the lenders party thereto (the “Lenders”), and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”) and collateral agent for the Lenders and as collateral trustee for the Shared Collateral Secured Parties.

          A. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement, as amended hereby.

          B. Allied Waste and the Borrower have requested that the Credit Agreement be amended to provide for a new tranche of term loans thereunder (the “New Term Loans”), the proceeds of which will be used to refinance all currently outstanding Term Loans. Except as otherwise provided herein, the New Term Loans will have the same terms as the Term Loans currently outstanding under the Credit Agreement.

          C. Allied Waste and the Borrower have further requested that such amendment provide for the refinancing of the existing Tranche A Credit-Linked Deposits with new credit-linked deposits in an equal amount (the “New Tranche A Credit-Linked Deposits”), which, except as otherwise provided herein, will have the same terms as such existing Tranche A Credit-Linked Deposits.

          D. Each existing Term Lender (an “Existing Term Lender”) that executes and delivers a signature page to this Amendment (a “Lender Addendum”) and does not notify JPMorgan Securities Inc. (the “Arranger”) that it does not want to make New Term Loans (a “Converting Term Lender”) will be deemed (i) to have agreed to the terms of this Amendment, (ii) to have agreed to convert its Term Loans (“Existing Term Loans”) outstanding on the Amendment Effective Date (as defined herein) into New Term Loans in an aggregate principal amount up to, but not in excess of, the aggregate principal amount of such Existing Term Loans, and (iii) upon the Amendment Effective Date, to have converted such amount of its Existing Term Loans as is determined by the Arranger and notified to such Existing Term Lender into New Term Loans in an equal principal amount.

          E. Each existing Tranche A Lender (an “Existing Tranche A Lender”) that executes and delivers a Lender Addendum and does not notify the Arranger that it does not want to make New Tranche A Credit-Linked Deposits (a “Converting Tranche A Lender”) will be deemed (i) to have agreed to the terms of this Amendment, (ii) to have agreed to convert its Tranche A Credit-Linked Deposits (“Existing Tranche A Credit-Linked Deposits”) existing on the Amendment Effective Date into New Tranche A Credit-Linked Deposits in an aggregate amount up to, but not in excess of, the aggregate amount of such Existing Tranche A Credit-Linked Deposits, and (iii) upon the Amendment Effective Date, to have converted such amount of its Existing Tranche A Credit-Linked Deposits as is determined by the Arranger and notified to such Existing Tranche A Lender into New Tranche A Credit-Linked Deposits in an equal amount.

          F. Each Person (other than a Converting Term Lender in its capacity as such) that executes and delivers a Lender Addendum and agrees to make New Term Loans (an “Additional Term Lender”), including any Existing Term Lender that notifies the Arranger that it does not want to be a Converting Term Lender but is willing to undertake a commitment to make and fund New Term Loans, will be deemed (i) to have agreed to the terms of this Amendment and (ii) to have committed to make New Term Loans to the Borrower on the Amendment Effective Date (“Additional Term Loans”), in such amounts (not in excess of any such commitment) as are determined by the Arranger and notified to such Additional Term Lender. The proceeds of such

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Additional Term Loans will be used by the Borrower to repay in full the outstanding principal amount of Existing Term Loans that are not converted by Converting Term Lenders into New Term Loans.

          G. Each Person (other than a Converting Tranche A Lender in its capacity as such) that executes and delivers a Lender Addendum and agrees to make New Tranche A Credit-Linked Deposits (an “Additional Tranche A Lender”), including any Existing Tranche A Lender that notifies the Arranger that it does not want to be a Converting Tranche A Lender but is willing to undertake a commitment to fund New Tranche A Credit-Linked Deposits, will be deemed (i) to have agreed to the terms of this Amendment and (ii) to have committed to make New Tranche A Credit-Linked Deposits on the Amendment Effective Date (“Additional Tranche A Credit-Linked Deposits”), in such amounts (not in excess of any such commitment) as are determined by the Arranger and notified to such Additional Tranche A Lender.

          H. Each Lender other than a New Lender (as defined below), including any Revolving Lender that executes and delivers a Lender Addendum solely in the capacity of a Revolving Lender or any Existing Term Lender or Existing Tranche A Lender that executes and delivers a Lender Addendum solely in the capacity of a Term Lender and/or Tranche A Lender and not specifically as a New Lender, will be deemed to have agreed to the terms of this Amendment but will not be deemed thereby to have agreed to (i) convert Existing Term Loans into New Term Loans or Existing Tranche A Credit-Linked Deposits into New Tranche A Credit-Linked Deposits or (ii) to have made any commitment to make New Term Loans or New Tranche A Credit-Linked Deposits.

          I. The Converting Term Lenders and the Additional Term Lenders (collectively, the “New Term Lenders”) are severally willing to convert their Existing Term Loans into New Term Loans or to make New Term Loans, as the case may be, subject to the terms and conditions set forth in this Amendment.

          J. The Converting Tranche A Lenders and the Additional Tranche A Lenders (collectively, the “New Tranche A Lenders” and, together with the New Term Lenders, the “New Lenders”) are severally willing to convert their Existing Tranche A Credit-Linked Deposits into New Tranche A Credit-Linked Deposits or to make New Tranche A Credit-Linked Deposits, as the case may be, subject to the terms and conditions set forth in this Amendment.

          K. The Required Lenders are willing, subject to the terms and conditions set forth in this Amendment, to effect such amendments to the Credit Agreement.

          Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:

          SECTION 1. Amendment of the Credit Agreement. The Credit Agreement is hereby amended, effective as of the Amendment Effective Date, in the form of the Credit Agreement immediately prior to the Amendment Effective Date with the following changes and revisions:

          (a) Amendment of Section 1.01. Section 1.01 of the Credit Agreement is hereby revised by:

          (i) inserting the following definitions in the appropriate alphabetical order therein:

     “Refinancing Funded LC Facility” has the meaning assigned to such term in Section 2.22(b).

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     “Refinancing Funded LC Facility Amendment” has the meaning assigned to such term in Section 2.22(b).

     “Refinancing Funded LC Facility Notice” has the meaning assigned to such term in Section 2.22(b).

     “Second Amendment” means the Second Amendment, dated as of March 30, 2006, to this Agreement.

     “Second Amendment Effective Date” means the date on which the Second Amendment became effective in accordance with Section 4 thereof.

     (ii) revising that portion of the first paragraph of the definition of “Applicable Margin” appearing prior to the table set forth therein to read as follows:

     “Applicable Margin” means, for any day (a) with respect to any ABR Term Loan, (i) 0.75% per annum at such times when the then current Leverage Ratio is greater than 4.25 to 1.00 and (ii) 0.50% per annum at such times when the then current Leverage Ratio is equal to or less than 4.25 to 1.00, (b) with respect to any Eurodollar Term Loan or Tranche A Participation Fee, (i) 1.75% per annum at such times when the then current Leverage Ratio is greater than 4.25 to 1.00 and (ii) 1.50% per annum at such times when the then current Leverage Ratio is equal to or less than 4.25 to 1.00 and (c) with respect to any ABR Revolving Loan or Eurodollar Revolving Loan, the applicable interest rate margin per annum set forth below under the caption ‘ABR Spread’ or ‘Eurodollar Spread’, as the case may be, based upon the Leverage Ratio as of the most recent determination date; provided that the ABR Spread relating to Swingline Loans, whenever the Leverage Ratio is in Category 2, 3, 4 or 5, will be .25% lower than the ABR Spread reflected in the table below:

     (iii) revising the following definitions contained therein to read as follows:

     “Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment or Acceptance or pursuant to the repayment in full of its Term Loans or Tranche A Credit-Linked Deposits pursuant to the Second Amendment. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lenders, the Term Lenders and the Tranche A Lenders.

     “Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement, including Term Loans made pursuant to the Second Amendment.

     “Term Loan” means any term loan made hereunder on the Second Amendment Effective Date.

     “Term Loan Commitment” means, with respect to each Term Lender, the commitment of such Term Lender to make Term Loans hereunder pursuant to Section 3 of the Second Amendment on the Second Amendment Effective Date. The amount of each Term Lender’s Term Loan Commitment to make Term Loans is set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Term Lender assumed its Term Loan Commitment. The aggregate amount of the Term Loan Commitments on the Second Amendment Effective Date is $1,274,968,250.

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     “Tranche A Credit-Linked Deposit” means, as to each Tranche A Lender, the cash deposit made by such Lender pursuant to Section 3 of the Second Amendment, as such deposit may be (a) reduced from time to time pursuant to Section 2.05(b)(iii)(B) or Section 2.08, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04 and (c) increased from time to time pursuant to Section 2.05(b)(iii). The amount of each Tranche A Lender’s Tranche A Credit-Linked Deposit on the Second Amendment Effective Date is set forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Tranche A Lender shall have acquired its Tranche A Credit-Linked Deposit, as applicable. The aggregate amount of the Tranche A Credit-Linked Deposits on the Second Amendment Effective Date is $495,000,000.

          (b) Amendment of Section 2.01. Section 2.01 of the Credit Agreement is revised by changing clause (a) of the first sentence thereof to read as follows: “(a) each Term Lender has, pursuant to the Second Amendment, agreed to make Term Loans to the Borrower on the Second Amendment Effective Date in an aggregate principal amount not exceeding its Term Loan Commitments and”.

          (c) Amendment of Section 2.05. Section 2.05 of the Credit Agreement is revised by replacing the reference to “the Restatement Effective Date” in paragraph (b)(ii)(B) thereof with a reference to “the Second Amendment Effective Date”.

          (d) Amendment of Section 2.08. Section 2.08(a) of the Credit Agreement is revised by changing clause (i) of the first sentence thereof to read as follows: “(i) the Term Loan Commitments shall terminate at 5:00 p.m., New York City time, on the Second Amendment Effective Date, and”.

          (e) Amendment of Section 2.10. (i) Section 2.10(a) of the Credit Agreement is revised to read in its entirety as follows:

     “Subject to giving effect to all prepayments after the Restatement Effective Date in accordance with clause (b) below, the Borrower shall repay Term Borrowings in an aggregate principal amount of $13,500,000 on September 30 of each year, beginning on September 30, 2006.”

     (ii) Section 2.10(d) of the Credit Agreement is revised by changing the first sentence thereof to read as follows:

     “The Administrative Agent shall return Tranche A Credit-Linked Deposits in the aggregate amount of $5,000,000 to the Tranche A Lenders on September 30 of each year, beginning on September 30, 2006.”

          (f) Amendment of Section 2.20. Section 2.20 of the Credit Agreement is revised by replacing the reference to “the Restatement Effective Date” in paragraph (a) thereof with a reference to “the Second Amendment Effective Date”.

          (g) Amendment of Section 2.22. Section 2.22 of the Credit Agreement is revised by (i) designating the sole paragraph of Section 2.22 of the Credit Agreement as paragraph (a) of Section 2.22 of the Credit Agreement and (ii) adding the following paragraph (b) to Section 2.22 of the Credit Agreement:

     “(b) At any time prior to the Tranche A Maturity Date, the Borrower may, by notice to the Administrative Agent which shall promptly deliver a copy thereof to each of

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the Lenders (the “Refinancing Funded LC Facility Notice”), request the addition of a new pre-funded letter of credit facility (the “Refinancing Funded LC Facility”), which will replace all then existing Tranche A Credit-Linked Deposits pursuant to Section 2.08; provided, however, that both (x) at the time of any such request and (y) after giving effect to any such Refinancing Funded LC Facility, (i) no Default shall exist, (ii) the Borrower shall be in compliance with each Financial Performance Covenant and (iii) there shall be no outstanding unreimbursed LC Disbursements with respect to Tranche A Letters of Credit. Refinancing Funded LC Facilities shall not constitute Additional Funded LC Facilities for purposes of this Section (or reduce the amounts of any Additional Funded LC Facilities that could be effected pursuant to paragraph (a) of this Section), and each Refinancing Funded LC Facility shall, on the date the applicable credit-linked deposits are made, replace all then existing Tranche A Credit-Linked Deposits. The aggregate amount of the Refinancing Funded LC Facility requested in a Refinancing Funded LC Facility Notice or thereafter established shall equal the outstanding amount of Tranche A Credit-Linked Deposits at the time of such notice or on the date the applicable credit-linked deposits are made in respect of the Refinancing Funded LC Facility, as the case may be. The obligations in respect of letters of credit issued under the Refinancing Funded LC Facility shall (i) rank pari passu in right of payment and of security with the other Loans (including the Incremental Term Loans (if any)), (ii) have such pricing as may be agreed by the Borrower and the Persons providing the Refinancing Funded LC Facility and (iii) otherwise be treated hereunder substantially the same as (and in any event no more favorably than) the Tranche A Letters of Credit. Letters of credit issued under the Refinancing Funded LC Facility shall be used solely to support payment obligations of Allied Waste, the Borrower and the Subsidiaries incurred in the ordinary course of business. Each credit-linked deposit in respect of the Refinancing Funded LC Facility will become a Tranche A Credit-Linked Deposit under this Agreement and the Refinancing Funded LC Facility will be implemented hereunder pursuant to an amendment to this Agreement (a “Refinancing Funded LC Facility Amendment”) executed by each of the Borrower, Allied Waste, each other Loan Party, each Lender (including any new Lender) agreeing to provide a credit-linked deposit under the Refinancing Funded LC Facility and the Administrative Agent, which Refinancing Funded LC Facility Amendment will not require the consent of any other Person. The effectiveness of any Refinancing Funded LC Facility Amendment will (in addition to any other conditions specified therein) be subject to the satisfaction on the date thereof and, if different, on the date on which the applicable credit-linked deposits are made, of each of the conditions set forth in Section 4.02.”

          (h) Amendment of Section 5.16. The first sentence of Section 5.16 of the Credit Agreement is revised to read in its entirety as follows:

     “The proceeds of the Term Loans made on the Second Amendment Effective Date will be used only to refinance Term Loans outstanding immediately prior to the Second Amendment Effective Date.

          (i) Amendment of Section 9.02. Section 9.02 of the Credit Agreement is amended by revising the last sentence of the first paragraph of paragraph (b) thereof to read in its entirety as follows:

     “Notwithstanding the foregoing, (i) each of the Incremental Facility Amendment, the Refinancing Facility Amendment, the Refinancing Funded LC Facility Amendment, the Funded LC Facility Amendment, and the Incremental Revolving Letter of Credit Facility Amendment shall become effective in the manner set forth in Sections 2.21(a), 2.21(b), 2.22(a), 2.22(b) and 2.23, respectively, and (ii) each of the Administrative Agent, the Collateral Agent and the Collateral Trustee, as applicable, shall be permitted to amend (and, at the request of the Borrower, shall so amend) the Shared Collateral

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Security Agreement or the Shared Collateral Pledge Agreement in a manner reasonably satisfactory to the Administrative Agent, the Collateral Agent or the Collateral Trustee, as the case may be, without the consent of any other Lender in order to add the holders of (and the agents with respect to) any Refinancing Indebtedness issued to refinance Indebtedness secured on the Restatement Effective Date by the Shared Collateral or Qualifying Senior Secured Indebtedness as secured parties thereunder.”

          (j) Amendment of Schedule 2.01. Schedule 2.01 of the Credit Agreement is deleted and replaced in its entirety with a new Schedule 2.01 (the “New Schedule 2.01”) that will, upon completion of the allocations of commitments to make New Term Loans and New Tranche A Credit-Linked Deposits in accordance with the terms hereof, set forth each Lender’s Term Loan Commitment, Tranche A Credit-Linked Deposit and Revolving Commitment as of the Second Amendment Effective Date, and shall be furnished to each New Lender and the Borrower promptly upon the completion of such allocations.

          SECTION 2. Representations and Warranties. To induce the other parties hereto to enter into this Amendment, each of the Borrower and Allied Waste represents and warrants to each of the Lenders, the New Lenders, the Administrative Agent and the Collateral Agent that, as of the Amendment Effective Date:

          (a) This Amendment has been duly authorized, executed and delivered by it and this Amendment and the Credit Agreement as amended hereby, constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

          (b) The representations and warranties set forth in Article III of the Credit Agreement are, after giving effect to this Amendment and the making of the New Term Loans and New Tranche A Credit-Linked Deposits, true and correct in all material respects on and as of the Amendment Effective Date with the same effect as though made on and as of the Amendment Effective Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case they were true and correct in all material respects as of such earlier date).

          (c) No Default or Event of Default has occurred and is continuing.

          SECTION 3. New Term Loans; New Tranche A Credit-Linked Deposits. (a) Subject to the terms and conditions set forth herein, (i) each Converting Term Lender and Additional Term Lender agrees to make New Term Loans to the Borrower on the Amendment Effective Date in amounts equal to its New Term Loan Commitment (as defined below) and (ii) each Converting Tranche A Lender and Additional Tranche A Lender agrees to make New Tranche A Credit-Linked Deposits on the Amendment Effective Date in amounts equal to its New Tranche A Commitment (as defined below). Such New Term Loans and New Tranche A Credit-Linked Deposits shall be made in the manner contemplated by paragraph (b) of this Section. The “New Term Loan Commitment” (i) of any Converting Term Lender will be such amount (not in excess of the amount of its Existing Term Loans) as is determined by the Arranger and notified to such Lender prior to the Amendment Effective Date and (ii) of any Additional Term Lender will be the amount (not exceeding any commitment offered by such Additional Term Lender) allocated to it by the Borrower and the Arranger and notified to it prior to the Amendment Effective Date. The “New Tranche A Commitment” (i) of any Converting Tranche A Lender will be such amount (not in excess of the amount of its Existing Tranche A Credit-Linked Deposits) as is determined by the Arranger and notified to such Lender prior to the Amendment Effective Date and (ii) of any Additional Tranche A Lender will be the amount (not exceeding any commitment offered by such Additional Tranche A Lender) allocated to it by the Borrower and the Arranger and notified to it

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prior to the Amendment Effective Date. The New Schedule 2.01 will separately set forth (i) the New Term Loan Commitment of each Converting Term Lender, (ii) the New Term Loan Commitment of each Additional Term Lender, (iii) the New Tranche A Commitment of each Converting Tranche A Lender and (iv) the New Tranche A Commitment of each Additional Tranche A Lender. The commitments of the New Lenders are several and no such Lender will be responsible for any other Lender’s failure to make or acquire by conversion New Term Loans or New Tranche A Credit-Linked Deposits.

          (b) Subject to the terms and conditions set forth herein, (i) each Converting Term Lender will make New Term Loans on the Amendment Effective Date by exchanging its Existing Term Loans for New Term Loans in an equal principal amount up to the amount of its New Term Loan Commitment and (ii) each Converting Tranche A Lender will make New Tranche A Credit-Linked Deposits on the Amendment Effective Date by exchanging its Existing Tranche A Credit-Linked Deposits for New Tranche A Credit-Linked Deposits in an equal amount up to the amount of its New Tranche A Commitment. Any portion of an Existing Term Loan exchanged for a New Term Loan as contemplated hereby is referred to herein as an “Exchanged Loan”, and any portion of an Existing Tranche A Credit-Linked Deposit exchanged for a New Tranche A Credit-Linked Deposit as contemplated hereby is referred to herein as an “Exchanged Deposit”. Subject to the terms and conditions set forth herein, (i) each Additional Term Lender will make its New Term Loans by transferring the amount thereof to the Administrative Agent on the Amendment Effective Date in the manner contemplated by Section 2.06 of the Credit Agreement and (ii) each Additional Tranche A Lender will make its New Tranche A Credit-Linked Deposits by transferring the amount thereof to the Administrative Agent on the Amendment Effective Date in the manner contemplated by Section 2.05(b)(ii)(B) of the Credit Agreement.

          (c) Notwithstanding anything herein or in the Credit Agreement to the contrary, (i) the aggregate principal amount of the New Term Loans will not exceed the aggregate principal amount of the Existing Term Loans immediately prior to the Amendment Effective Date and (ii) the aggregate amount of the New Tranche A Credit-Linked Deposits will not exceed the aggregate amount of the Existing Tranche A Credit-Linked Deposits immediately prior to the Amendment Effective Date.

          (d) The obligations of each Converting Term Lender and Additional Term Lender to make New Term Loans on the Amendment Effective Date and the obligations of each Converting Tranche A Lender and each Additional Tranche A Lender to fund New Tranche A Credit-Linked Deposits on the Amendment Effective Date are subject to the satisfaction of the following conditions:

     (i) The conditions set forth in Section 4.02 of the Credit Agreement shall be satisfied on and as of the Amendment Effective Date, and the Administrative Agent shall have received a certificate of a Financial Officer, dated the Amendment Effective Date, to such effect;

     (ii) The Administrative Agent shall have received favorable legal opinions of (A) Latham & Watkins LLP, special counsel to the Loan Parties, and (B) Steven M. Helm, General Counsel of Allied Waste, in each case addressed to the Lenders and dated the Amendment Effective Date, covering such matters relating to the New Term Loans, the New Tranche A Credit-Linked Deposits, this Amendment, the Credit Agreement as amended hereby, and the other Loan Documents and security interests thereunder as the Administrative Agent may reasonably request, which opinions shall be reasonably satisfactory to the Administrative Agent;

     (iii) The Administrative Agent shall have received for each of Allied Waste, the Borrower and each other Material Loan Party, a certificate of the Secretary or an Assistant Secretary of such Material Loan Party, dated the Amendment Effective Date

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and certifying that attached thereto is a true and complete copy of resolutions (or consent by members or partners, where applicable, to the extent required) duly adopted by the board of directors (or members or partners, where applicable) of such Material Loan Party authorizing the execution, delivery and performance of this Amendment and the Credit Agreement as amended hereby, and the amendment of any other Loan Documents to which it is party required to be amended hereby;

     (iv) Each Loan Party that has not executed and delivered this Amendment shall have entered into a written instrument reasonably satisfactory to the Administrative Agent pursuant to which it confirms that it consents to this Amendment and that the Security Documents to which it is party will continue to apply in respect of the Credit Agreement, as amended hereby, and the Obligations thereunder;

     (v) The aggregate amount of New Term Loan Commitments shall equal the aggregate principal amount of the Existing Term Loans. The aggregate amount of the New Tranche A Commitments shall equal the aggregate amount of the Existing Tranche A Credit-Linked Deposits;

     (vi) The Administrative Agent shall have received evidence satisfactory to it that the Borrower has made the payments referred to in Section 3(f) or is making such payments on the Amendment Effective Date with the cash proceeds of the New Term Loans and such other funds of the Borrower as may be required;

     (vii) There shall be no outstanding unreimbursed LC Disbursements with respect to Tranche A Letters of Credit on the Amendment Effective Date; and

     (viii) The conditions to effectiveness of this Amendment set forth in Section 4 hereof shall have been satisfied.

          (e) All Borrowings of New Term Loans made on the Amendment Effective Date will have initial Interest Periods ending on the same dates as the Interest Periods applicable to the Existing Term Loans being refinanced with such New Term Loans, and the Adjusted LIBO Rates applicable to such New Term Loans during such initial Interest Periods will be the same as those applicable to the Existing Term Loans being refinanced. For purposes of the foregoing, such Interest Periods shall be assigned to the New Term Loans of each Additional Term Lender in the same proportion that such Interest Periods applied to the Existing Term Loans on the Amendment Effective Date. The Borrower will not be required to make any payments to Converting Term Lenders under Section 2.16 of the Credit Agreement in respect of the repayment of Exchanged Loans on the Amendment Effective Date pursuant to their exchange for New Term Loans.

          (f) On the Amendment Effective Date, the Borrower shall apply the cash proceeds of the New Term Loans and such other amounts as may be necessary to (i) prepay in full all Existing Term Loans other than Exchanged Loans, (ii) pay all accrued and unpaid interest on Existing Term Loans, (iii) pay all accrued and unpaid Tranche A Participation Fees, (iv) pay to each Existing Term Lender all amounts payable pursuant to Section 2.16 of the Credit Agreement as a result of the prepayment of such Lender’s Existing Term Loans (other than any portion thereof constituting Exchanged Loans) on the Amendment Effective Date, and (v) pay all other Obligations then due and owing to the Existing Term Lenders and the Existing Tranche A Lenders, in their capacities as such, under the Credit Agreement. On the Amendment Effective Date, the Administrative Agent shall return to each Existing Tranche A Lender the amount of its Existing Tranche A Credit-Linked Deposit, other than any such deposit that constitutes an Exchanged Deposit.

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          (g) On the Amendment Effective Date, each Issuing Bank that has issued a Tranche A Letter of Credit prior to the Amendment Effective Date (an “Existing Tranche A Letter of Credit”) shall be deemed, without further action by any New Tranche A Lender or any other party hereto or to the Credit Agreement, to have granted to each New Tranche A Lender and each New Tranche A Lender shall have been deemed to have purchased from such Issuing Bank a participation in such Tranche A Letter of Credit in accordance with Section 2.05(b)(ii)(B) of the Credit Agreement. Concurrently with such grant, the participations in the Existing Tranche A Letters of Credit granted to the Existing Tranche A Lenders under the Credit Agreement shall be automatically canceled without further action by any of the parties thereto. On and after the Amendment Effective Date, each Existing Tranche A Letter of Credit shall constitute a Letter of Credit for all purposes of the Credit Agreement.

          (h) On and after the Amendment Effective Date, each reference in the Credit Agreement to “Term Loans” shall, except as the context may otherwise require, be deemed to be a reference to the New Term Loans contemplated hereby, and each reference in the Credit Agreement to “Tranche A Credit-Linked Deposits” shall, except as the context may otherwise require, be deemed to be a reference to the New Tranche A Credit-Linked Deposits contemplated hereby. Notwithstanding the foregoing, the provisions of the Credit Agreement with respect to indemnification, reimbursement of costs and expenses, increased costs and break funding payments (other than as set forth in Section 3(e) above) will continue in full force and effect with respect to, and for the benefit of, each Existing Term Lender and each Existing Tranche A Lender in respect of such Lender’s Existing Term Loans or Existing Tranche A Credit-Linked Deposit, as the case may be, existing under the Credit Agreement prior to the Amendment Effective Date.

          SECTION 4. Effectiveness. This Amendment of the Credit Agreement effected hereby shall become effective as of the first date (the “Amendment Effective Date”) on which the following conditions have been satisfied:

          (a) The Administrative Agent (or its counsel) shall have received (x) duly executed counterparts hereof that, when taken together, bear the signatures of (i) Allied Waste, (ii) the Borrower, (iii) the Required Lenders and (iv) the Administrative Agent and (y) counterparts of this Amendment that, when taken together, bear the signatures of each of the Converting Term Lenders, Converting Tranche A Lenders, Additional Term Lenders and Additional Tranche A Lenders.

          (b) The conditions to the making of the New Term Loans and the funding of the New Tranche A Credit-Linked Deposits set forth in Section 3(d) hereof shall have been satisfied.

          SECTION 5. Effect of Amendment. (a) Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders, the Administrative Agent or the Collateral Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower or Allied Waste to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.

          (b) On and after the Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the Credit Agreement in any other Loan Document shall be deemed a reference to

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the Credit Agreement as amended hereby. This Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

          SECTION 6. Costs and Expenses. The Borrower and Allied Waste, jointly and severally, agree to reimburse the Administrative Agent for its reasonable out of pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent.

          SECTION 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart.

          SECTION 8. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          SECTION 9. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized officers, all as of the date and year first above written.

ALLIED WASTE INDUSTRIES, INC.,
by
	Name:
	Title:
ALLIED WASTE NORTH AMERICA, INC.,
by
	Name:
	Title:
JPMORGAN CHASE BANK, N.A., individually and as administrative agent, collateral agent and collateral trustee,
by
	Name:
	Title:

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     LENDER ADDENDUM TO SECOND AMENDMENT DATED AS OF MARCH 30, 2006, TO THE ALLIED WASTE CREDIT AGREEMENT DATED AS OF JULY 21, 1999, AS AMENDED AND RESTATED AS OF MARCH 21, 2005

          This is a Lender Addendum referred to, and is a signature page to, the Second Amendment dated as of March 30, 2006 (the “Amendment”), to the Credit Agreement dated as of July 21, 1999, as amended and restated as of March 21, 2005 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Allied Waste Industries, Inc., Allied Waste North America, Inc., the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent for the Lenders and as collateral trustee for the Shared Collateral Secured Parties. Capitalized terms used but not defined herein have the meanings assigned to them in the Amendment or the Credit Agreement, as applicable. By executing this Lender Addendum, the undersigned institution agrees (i) if executing this Lender Addendum in the capacity of a Converting Term Lender, to the terms of the Amendment and, subject to the terms and conditions of the Amendment, to convert its Existing Term Loans into New Term Loans on the Amendment Effective Date in the amount of its New Term Loan Commitment, as reflected with respect to Converting Term Lenders in the New Schedule 2.01, (ii) if executing this Lender Addendum in the capacity of an Additional Term Lender, to the terms of the Amendment and, subject to the terms and conditions of the Amendment, to make and fund New Term Loans on the Amendment Effective Date in the amount of its New Term Loan Commitment, as reflected with respect to Additional Term Lenders in the New Schedule 2.01, (iii) if executing this Lender Addendum in the capacity of a Converting Tranche A Lender, to the terms of the Amendment and, subject to the terms and conditions of the Amendment, to convert its Existing Tranche A Credit-Linked Deposits into New Tranche A Credit-Linked Deposits on the Amendment Effective Date in the amount of its New Tranche A Commitment, as reflected with respect to Converting Tranche A Lenders in the New Schedule 2.01, (iv) if executing this Lender Addendum in the capacity of an Additional Tranche A Lender, to the terms of the Amendment and, subject to the terms and conditions of the Amendment, to make New Tranche A Credit-Linked Deposits on the Amendment Effective Date in the amount of its New Tranche A Commitment, as reflected with respect to Additional Tranche A Lenders in the New Schedule 2.01 and (v) if executing this Lender Addendum in the capacity of any other type of Lender, to the terms of the Amendment.

Name of Institution:
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	Title:
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EX-10.2

EXHIBIT 10.2

ALLIED WASTE INDUSTRIES, INC.
2006 INCENTIVE STOCK PLAN

Adopted by the Board of Directors on February 9, 2006
Approved by the Stockholders on May 25, 2006

     1. Purpose. The purpose of this Plan is to provide a means through which Allied Waste Industries, Inc. and its Subsidiaries may (a) attract able persons to provide valuable services to the Company as Employees or Consultants, (b) promote the interests of the Company by providing Employees and Consultants with a proprietary interest in the Company, thereby strengthening their concern for the welfare of the Company and their desire to continue to provide their services to the Company, and (c) provide such persons with additional incentive and reward opportunities to enhance the profitable growth of the Company. The Plan amends and restates the Company’s 1991 Incentive Stock Plan, as previously amended and restated in 2004 and as subsequently amended. Capitalized terms shall have the meanings set forth in Section 2.

     2. Definitions. As used in the Plan, the following definitions apply to the terms indicated below.

          (a) “Acquiror” means the surviving, continuing, successor or purchasing person or entity, as the case may be, in a Change in Control.

          (b) “Award” means an Option, a share of Restricted Stock, an RSU, a SAR, a Performance Award, a Dividend Equivalent, a Stock Bonus, a Cash Award, or other stock-based Awards granted pursuant to the terms of the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Cash Award” means an Award of a bonus payable in cash pursuant to Section 13.

          (e) “Cause,” when used in connection with the termination of a Participant’s Service with the Company, means the termination of the Participant’s Service by the Company by reason of (i) the conviction of the Participant by a court of competent jurisdiction as to which no further appeal can be taken, or a guilty plea or plea of nolo contendere by the Participant, with respect to a crime involving moral turpitude; (ii) the proven commission by the Participant of an act of fraud upon the Company; (iii) the willful and proven misappropriation of any material amount of funds or property of the Company by the Participant; (iv) the willful, continued and unreasonable failure by the Participant to perform duties assigned to the Participant and agreed to by the Participant; (v) the knowing engagement by the Participant in any direct, material conflict of interest with the Company without compliance with the Company’s conflict of interest policy, if any, then in effect; (vi) the knowing engagement by the Participant, without the written approval of the Board, in any activity that competes with the business of the Company or that would result in a material injury to the Company; or (vii) the knowing engagement in any activity that would constitute a material violation of the provisions of the Company’s Policies and Procedures Manual, if any, then in effect.

          (f) “Change in Control” means

               (i) a “change in control” of the Company of a nature that would be required to be reported (A) in response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act (or any successor provisions or reports thereunder), (B) in response to Item 1.01 or Item 2.01 of Form 8-K as in effect on the date of this Plan, as promulgated under the Exchange Act (or any successor provisions or reports thereunder), or (C) in any other filing by the Company with the Securities and Exchange Commission; or

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               (ii) the occurrence of any of the following events:

                    (A) a transaction or series of transactions after the Effective Date in which any “person” (as such term is used in Section 13(d) and Section 14(d)(2) of the Exchange Act, or any successor provisions thereunder) is or becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act, or any successor provisions thereunder), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then-outstanding voting securities; provided, however, that for purposes of this Section 2(f)(ii)(A), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company; (2) any acquisition of voting securities by the Company, including any acquisition that, by reducing the number of shares outstanding, is the sole cause for increasing the percentage of shares beneficially owned by any such Person to more than the percentage set forth above; (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company; (4) any acquisition by any Person pursuant to a transaction that complies with clauses (1), (2) and (3) of Section 2(f)(ii)(C); (5) the acquisition of additional voting securities after the Effective Date by any Person who is, as of the Effective Date, the beneficial owner, directly or indirectly, of 30% or more of the combined voting power of the Company’s then-outstanding securities; or (6) any transaction, acquisition, or other event that the Board (as constituted immediately prior to such Person becoming such a beneficial owner) determines, in its sole discretion, does not constitute a Change in Control in such a situation; or

                    (B) individuals who were the Board’s nominees for election as directors of the Company immediately prior to a meeting of the Company’s stockholders involving a contest for the election of directors do not constitute a majority of the Board following such election; or

                    (C) consummation by the Company of a Business Combination unless, following such Business Combination, (1) more than 50% of the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors or managers of the entity resulting from such Business Combination (including without limitation, an entity that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) is represented by voting securities of the Company that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by voting securities into which such previously outstanding voting securities of the Company were converted pursuant to such Business Combination) and such ownership of voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Company’s voting securities, (2) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the then-outstanding voting securities of the entity resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or managers of the entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

                    (D) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company; or

                    (E) the Board determines in its sole and absolute discretion that there has been a Change in Control of the Company.

For purposes of this Section 2(f), “Business Combination” means a reorganization, merger or consolidation of the Company with another Person or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation.

Notwithstanding the foregoing, however, with respect to any Section 409A Award the term “Change in Control” shall mean a change in the ownership or effective control of the Company or a change in the

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ownership of a substantial portion of the assets of the Company, as defined under Proposed Treasury Regulations Section 1.409A-3(g)(5), as such definition may be modified by subsequent Treasury Regulations or other guidance.

          (g) “Code” means the Internal Revenue Code of 1986, as amended from time to time. Reference in the Plan to any Code section shall be deemed to include any amendments or successor provisions to such section and any Treasury Regulations promulgated thereunder.

          (h) “Committee” means the Management Development/Compensation Committee of the Board or such other committee as the Board shall appoint from time to time to administer the Plan.

          (i) “Common Stock” means the Company’s common stock, par value $.01 per share.

          (j) “Company” means Allied Waste Industries, Inc., a Delaware corporation, each of its Subsidiaries, and its successors. With respect to Incentive Stock Options, the “Company” includes any Parent.

          (k) “Consultant” means any person who is engaged by the Company to render consulting services and is compensated for such services.

          (l) “Deferred Compensation Plan” means any nonqualified deferred compensation plan of the Company that is currently in effect or subsequently adopted by the Company.

          (m) “Disability” means (i) with respect to Incentive Stock Options, a Participant’s “permanent and total disability” within the meaning of Code Section 22(e)(3), and (ii) with respect to all other Awards, a Participant is “totally disabled” as determined by the Social Security Administration.

          (n) “Dividend Equivalents” means an amount of cash equal to all dividends and other distributions (or the economic equivalent thereof) that are payable by the Company on one share of Common Stock to stockholders of record.

          (o) “EBIT” means earnings before interest and taxes.

          (p) “EBITDA” means earnings before interest, taxes, depreciation and amortization.

          (q) “Effective Date” means the date on which the Company’s stockholders approve the Plan pursuant to Section 21.

          (r) “Employee” means any person who is an employee of the Company within the meaning of Code Section 3401(c) and the applicable interpretive authority thereunder.

          (s) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

          (t) “Exercise Date” means the date on which a Participant exercises an Award.

          (u) “Exercise Price” means the price at which a Participant may exercise his or her right to receive cash or Common Stock, as applicable, under the terms of an Award.

          (v) “Fair Market Value” of a share of Common Stock on any date is (i) the closing sales price on that date (or if that date is not a business day, on the immediately preceding business day) of a share of Common Stock as reported on the principal securities exchange on which shares of

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Common Stock are then listed or admitted to trading; (ii) if not so reported, the average of the closing bid and asked prices for a share of Common Stock on that date (or if that date is not a business day, on the immediately preceding business day) as quoted on Nasdaq; or (iii) if not quoted on Nasdaq, the average of the closing bid and asked prices for a share of Common Stock as quoted by the National Quotation Bureau’s “Pink Sheets” or the National Association of Securities Dealers’ OTC Bulletin Board System. If the price of a share of Common Stock is not so reported, the Fair Market Value of a share of Common Stock shall be determined by the Committee in its absolute discretion.

          (w) “Grant Date” means the date an Award is granted to a Participant pursuant to the Plan as determined by the Committee.

          (x) “Incentive Stock Option” means an Option that is an “incentive stock option” within the meaning of Code Section 422 and that is identified as an Incentive Stock Option in the agreement by which it is evidenced.

          (y) “Initial Award” means any and all Awards granted to a Participant in connection with such Participant’s commencement of Service with the Company.

          (z) “Nasdaq” means the Nasdaq Stock Market, Inc.

          (aa) “Non-Employee Director” means a member of the Board who, at the time in question, (i) is not an officer or Employee of the Company or any Parent; (ii) does not receive compensation, either directly or indirectly from the Company or any Parent, for services rendered as a consultant or in any capacity other than as a director of the Company, except for compensation in an amount that does not exceed the threshold for which disclosure would be required under Regulation S-K; (iii) does not possess an interest in any other transaction with the Company for which disclosure would be required under Regulation S-K; and (iv) is not engaged in a business relationship with the Company for which disclosure would be required under Regulation S-K.

          (bb) “Non-Qualified Performance Award” means an Award payable in cash or Common Stock upon achievement of certain Performance Goals established by the Committee that do not satisfy the requirements of Section 10(c).

          (cc) “Non-Qualified Stock Option” means an Option that is not an Incentive Stock Option and that is identified as a Non-Qualified Stock Option in the agreement by which it is evidenced, or an Option identified as an Incentive Stock Option that fails to satisfy the requirements of Code Section 422.

          (dd) “Option” means an option to purchase shares of Common Stock of the Company granted pursuant to Section 7. Each Option shall be identified as either an Incentive Stock Option or a Non-Qualified Stock Option in the agreement by which it is evidenced.

          (ee) “Parent” means a “parent corporation” of the Company, whether now or hereafter existing, as defined in Code Section 424(e).

          (ff) “Participant” means an Employee or Consultant who is eligible to participate in the Plan and to whom an Award is granted pursuant to the Plan and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be, to the extent permitted herein.

          (gg) “Performance Award” means either a Qualified Performance Award or a Non-Qualified Performance Award granted pursuant to Section 10, which may be denominated either in dollars or in a number of shares of Common Stock.

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          (hh) “Performance Goal” means one or more standards established by the Committee pursuant to Section 10 to determine, in whole or in part, whether a Performance Award shall be earned.

          (ii) “Person” means a “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations in effect from time to time thereunder.

          (jj) “Plan” means the Allied Waste Industries, Inc. 2006 Incentive Stock Plan (which amended and restated the Company’s Amended and Restated 1991 Incentive Stock Plan), as such plan subsequently may be amended from time to time.

          (kk) “Qualified Domestic Relations Order” means a qualified domestic relations order as defined in Code Section 414(p), Section 206(d)(3) of Title I of the Employee Retirement Income Security Act, or in the rules and regulations as may be in effect from time to time thereunder.

          (ll) “Qualified Performance Award” means an Award payable in cash or Common Stock upon achievement of certain Performance Goals established by the Committee that satisfy the requirements of Section 10(c).

          (mm) “Retirement” means, with respect to Awards granted prior to the Effective Date, termination of employment with the Company by a Participant at a time when the sum of the Participant’s total whole years (a “whole year” means 12 calendar months) of employment with the Company (including whole years of employment with any business which was acquired by the Company) and the Participant’s age is at least 55. For Awards granted on or after the Effective Date, “Retirement” shall have the meaning set forth in the respective agreements for such Awards or, if there is no agreement or no such definition in the agreement for any Award, then the term “Retirement” shall be inapplicable to such Award.

          (nn) “Restricted Stock” means a share of Common Stock that is granted pursuant to the terms of Section 8 and that is subject to the restrictions established by the Committee with respect to such share for so long as such restrictions continue to apply to such share.

          (oo) “Restricted Stock Unit” or “RSU” means the Company’s unfunded promise to pay one share of Common Stock or its cash equivalent that is granted pursuant to the terms of Section 8 and that is subject to the restrictions established by the Committee with respect to such unit for so long as such restrictions continue to apply to such unit.

          (pp) “SAR” or “Stock Appreciation Right” means a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value of one share of Common Stock on the Exercise Date over a specified Exercise Price, in each case as determined by the Committee subject to Section 9.

          (qq) “Section 409A Award” has the meaning set forth in Section 23(c).

          (rr) “Securities Act” means the Securities Act of 1933, as amended from time to time.

          (ss) “Service” has the meaning set forth in Section 18(a).

          (tt) “Share Limit” has the meaning set forth in Section 5(a).

          (uu) “Stock Bonus” means a grant of a bonus payable in shares of Common Stock pursuant to Section 12 and subject to the terms and conditions contained therein.

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          (vv) “Subsidiary” or “Subsidiaries” mean any and all corporations or other entities in which, at the pertinent time, the Company owns, directly or indirectly, equity interests vested with more than 50% of the total combined voting power of all classes of stock of such entities within the meaning of Code Section 424(f).

          (ww) “Substitute Award” means an Award issued or made upon the assumption, substitution, conversion, adjustment, or replacement of outstanding awards under a plan or arrangement of an entity acquired by the Company in a merger or other acquisition.

          (xx) “Vesting Date” means the date established by the Committee on which an Award may vest.

     3. Plan Administration.

          (a) In General. The Plan shall be administered by the Company’s Board. The Board, in its sole discretion, may delegate all or any portion of its authority and duties under the Plan to the Committee under such conditions and limitations as the Board may from time to time establish. The Board and/or any Committee that has been delegated the authority to administer the Plan shall be referred to throughout this Plan as the “Committee.” Except as otherwise explicitly set forth in the Plan, the Committee shall have the authority, in its discretion, to determine all matters relating to Awards under the Plan, including the selection of the individuals to be granted Awards, the time or times of grant, the type of Awards, the number of shares of Common Stock subject to an Award, vesting conditions, and any and all other terms, conditions, restrictions and limitations, if any, of an Award.

          (b) Committee’s Authority and Discretion with Respect to the Plan. The Committee shall have full authority and discretion (i) to administer, interpret, and construe the Plan and the terms of any Award issued under it, (ii) to establish, amend, and rescind any rules and regulations relating to the Plan, (iii) to determine, interpret, and construe the terms and provisions of any Award agreement made pursuant to the Plan, and (iv) to make all other determinations that may be necessary or advisable for the administration of the Plan and any Awards made under the Plan. In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to the Certificate of Incorporation and Bylaws of the Company, as amended from time to time, and applicable law. Subject to (A) the limitations with respect to Incentive Stock Options under Code Section 422 and the Plan and (B) Section 3(c), the Committee may, in its absolute discretion (1) accelerate the date on which any Award becomes vested, exercisable, or issuable, but only in connection with the termination of the Participant’s Service with the Company or upon a Change in Control; (2) extend the date on which any Award ceases to be exercisable or on which it terminates or expires; (3) waive, make less restrictive, or eliminate any restriction on or condition imposed with respect to any Award, and (4) amend the Plan as set forth in Section 19. In addition, the Committee may, in its absolute discretion, grant Awards to Participants on the condition that such Participants surrender to the Company for cancellation such other awards under the Plan or another plan of the Company (including, without limitation, Awards with higher Exercise Prices, but subject to Section 3(c)) as the Committee specifies. Notwithstanding Section 5, Awards granted on the condition of surrender of outstanding Awards shall not count against the limits set forth in Section 5 until such time as such Awards are surrendered. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to further the Plan purposes. All decisions made by the Committee in connection with the interpretation and administration of the Plan or with respect to any Awards made under the Plan and related orders and resolutions shall be final, conclusive, and binding on all persons.

          (c) No Repricing Without Stockholder Approval. Notwithstanding any other provision of the Plan to the contrary, no Options or SARs may be repriced without the approval of the stockholders of the Company. Stockholder approval shall be evidenced by the affirmative vote of the holders of the majority of the shares of the Company’s capital stock present in person or by proxy and

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voting at the meeting. For purposes of the Plan, “repricing” shall include (i) amendments or adjustments to Options or SARs that reduce the Exercise Price of such Options or SARs, (ii) situations in which new Options or SARS are issued to a Participant in place of cancelled Options or SARs with a higher Exercise Price, and (iii) any other amendment, adjustment, cancellation or replacement grant or other means of repricing an outstanding Option or SAR, including a buyout for a payment of cash or cash equivalents.

          (d) Delegation to Officers. Following the authorization of a pool of cash or shares of Common Stock to be available for Awards, the Committee may delegate to one or more subcommittees consisting of one or more officers of the Company any or all of its power and duties under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that the Committee shall not delegate to such officers its authority to (i) amend or modify the Plan pursuant to Section 19, (ii) act on matters affecting any Participant who is subject to the reporting requirements of Section 16(a) of the Exchange Act or the liability provisions of Section 16(b) of the Exchange Act, or otherwise take any action or fail to act in a manner that would cause any Award or other transaction under the Plan to cease to be exempt from Section 16(b) of the Exchange Act, or (iii) determine the extent to which Awards will conform to the requirements of Code Section 162(m). The Committee may authorize any one or more of its members or any officer of the Company to execute and deliver documents on behalf of the Committee.

          (e) Other Plans. The Committee also shall have authority to grant Awards as an alternative to, as a replacement of, or as the form of payment for grants or rights earned or due under the Plan or other compensation plans or arrangements of the Company, including Substitute Awards granted with respect to an equity compensation plan of any entity acquired by the Company.

          (f) Limitation of Liability. No member of the Committee or any person to whom the Committee delegates authority pursuant to Section 3(b) or 3(d) shall be liable for any action, omission or determination relating to the Plan, and the Company shall indemnify and hold harmless each member of the Committee and each other person to whom any duty or power relating to the administration or interpretation of the Plan has been delegated from and against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan unless, in either case, such action, omission or determination was taken or made by such Committee member or other person in bad faith and without reasonable belief that it was in the best interests of the Company.

     4. Eligibility. The persons who shall be eligible to receive Awards pursuant to the Plan shall be (a) those Employees who are largely responsible for the management, growth, and protection of the business of the Company (including officers of the Company, whether or not they are directors of the Company), and (b) any Consultant, as the Committee, in its absolute discretion, shall select from time to time; provided, however, that Incentive Stock Options may only be granted to Employees. An Award may be granted to a proposed Employee or Consultant prior to the date the proposed Employee or Consultant first performs services for the Company, provided that the grant of such Awards shall not become effective prior to the date the proposed Employee or Consultant first performs such services. Subject to the foregoing, the Committee, in its discretion, may grant any Award permitted under the provisions of the Plan to any eligible person and may grant more than one Award to any eligible person.

     5. Shares Subject to the Plan.

          (a) Number and Source. The shares offered under the Plan shall be shares of Common Stock and may be unissued shares or shares now held or subsequently acquired by the Company as treasury shares, as the Committee from time to time may determine. Subject to adjustment as provided in Section 20, the aggregate number of shares of Common Stock for which Awards, including Options that are intended to be Incentive Stock Options, may be granted during the term of the Plan shall not exceed an absolute maximum of 34,886,905 shares of Common Stock as of December 31, 2005 (the “Share Limit”).

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          (b) Determination of Shares Remaining Available Under the Share Limit. Any shares of Common Stock that are subject to Awards of Options or SARs shall be counted against the Share Limit as one (1) share for every one (1) share granted, regardless of the number of shares of Common Stock actually issued upon the exercise of an Option or SAR. Any shares of Common Stock that are subject to Awards other than Options or SARs (including Performance Awards denominated in dollars but settled in shares of Common Stock) shall be counted against the Share Limit as one and one-half (1-¹/2) shares for every one (1) share granted or issued.

               (i) Any shares subject to an Award granted under the Plan that are not delivered because the Award expires unexercised or is forfeited, terminated, canceled, or exchanged for Awards that do not involve Common Stock, or any shares of Common Stock that are not delivered because the Award is settled in cash, shall not be deemed to have been delivered for purposes of determining the Share Limit. Instead, such shares shall immediately be added back to the Share Limit and shall be available for future Awards; provided that (A) any shares of Common Stock that are subject to Awards of Options or SARs shall be added back as one (1) share for every one (1) share granted; and (B) any shares of Common Stock that are subject to Awards other than Options or SARs (including Performance Awards denominated in dollars but settled in shares of Common Stock) shall be added back as one and one-half (1-¹/2) shares for every one (1) share granted.

               (ii) The grant of a Cash Award shall not reduce or be counted against the Share Limit. The payment of cash dividends and Dividend Equivalents paid in cash in conjunction with outstanding Awards shall not reduce or be counted against the Share Limit. Shares of Common Stock delivered under the Plan as a Substitute Award or in settlement of a Substitute Award shall not reduce or be counted against the Share Limit to the extent that the rules and regulations of any stock exchange or other trading market on which the Common Stock is listed or traded provide an exemption from stockholder approval for assumption, substitution, conversion, adjustment, or replacement of outstanding awards in connection with mergers, acquisitions, or other corporate combinations.

               (iii) The Committee may from time to time adopt and observe such rules and procedures concerning the counting of shares against the Share Limit or any sublimit as it may deem appropriate, including rules more restrictive than those set forth above to the extent necessary to satisfy the requirements of any national stock exchange or other trading market on which the Common Stock is listed or traded or any applicable regulatory requirement.

     6. Terms of Awards.

          (a) Types of Awards. Awards granted under the Plan may include, but are not limited to, the types of Awards described in Sections 7 through 14. Such Awards may be granted either alone, in addition to, or in tandem with any other types of Award granted under the Plan.

          (b) Limit on Number of Awards. Notwithstanding any other provision of this Plan to the contrary, the following limitations shall apply to the following types of Awards made hereunder, other than Substitute Awards:

               (i) The aggregate number of shares of Common Stock that may be covered by Awards granted to any one individual in any year shall not exceed the following:

                    (A) 1,500,000 shares in the case of Options and SARs; and

                    (B) 750,000 shares in the case of Restricted Stock and RSUs (including Restricted Stock and RSUs granted subject to the terms and conditions contained in Section 10), Performance Awards denominated in shares of Common Stock, and Stock Bonuses.

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               (ii) The aggregate dollar value of Awards that may be paid to any one individual in any year shall not exceed the following:

                    (A) $5,000,000 in the case of Cash Awards; and

                    (B) $10,000,000 in the case of Performance Awards denominated in dollars.

          (c) Vesting. Except for Options and SARs issued as Substitute Awards, each Option and SAR shall be subject to a minimum vesting period of not less than one year from the Grant Date of such Option or SAR. Except as provided in the following sentence, Awards other than Options, SARs, or Performance Awards shall be subject to a minimum vesting period of not less than three years from the Grant Date for such Awards, provided that such Awards may vest ratably over the vesting period determined by the Committee at the time of grant. Notwithstanding the foregoing, up to 5% of Awards other than Options, SARs, or Performance Awards may have a vesting period of not less than one year from the Grant Date.

          (d) Individual Award Agreements. Options shall and other Awards may be evidenced by agreements between the Company and the Participant in such form and content as the Committee from time to time approves, which agreements shall substantially comply with and be subject to the terms of the Plan. Such individual agreements (i) may contain such provisions or conditions as the Committee deems necessary or appropriate to effectuate the sense and purpose of the Plan and (ii) may be amended from time to time in accordance with the terms thereof.

          (e) Payment; Deferral. Awards granted under the Plan may be settled through exercise, as set forth in Section 15, cash payments, the delivery of Common Stock (valued at Fair Market Value), through the granting of replacement Awards, or through combinations thereof as the Committee shall determine. The Committee may permit or require the deferral of any Award payment, subject to the terms of the applicable Deferred Compensation Plan and to such rules and procedures as the Committee may establish, which may include provisions for the payment or crediting of interest or Dividend Equivalents, including converting such credits to deferred Awards. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions, and contingencies as the Committee shall determine. A Participant’s deferral election must be made in accordance with the terms of the Deferred Compensation Plan. When the deferral occurs, the deferred Award(s) will be transferred into or credited to a deferred compensation account established under the Deferred Compensation Plan and will be subject to the terms of the Deferred Compensation Plan.

          (f) Buyout of Awards. The Committee may at any time (i) offer to buy out an outstanding Award for a payment of cash or cash equivalents, or (ii) authorize a Participant to elect to cash out an outstanding Award, in either case at such time and based upon such terms and conditions (but subject to Section 3(c)) as the Committee shall establish.

     7. Options. The Committee may grant Options designated as Incentive Stock Options or as Non-Qualified Stock Options. In the absence of any such designation, however, such Option shall be treated as a Non-Qualified Stock Option. A Participant and the Committee can agree at any time to convert an Incentive Stock Option to a Non-Qualified Stock Option.

          (a) Limitations on Grants of Incentive Stock Options. No Option that is intended to be an Incentive Stock Option shall be invalid for failure to qualify as an Incentive Stock Option under Code Section 422, but shall be treated as a Non-Qualified Stock Option. Options that are granted to a particular individual and that are intended to be Incentive Stock Options shall be treated as Non-Qualified Stock Options to the extent that the aggregate Fair Market Value of the Common Stock issuable upon exercise of such Options plus all other Incentive Stock Options held by such individual (whether granted under the Plan or any other plans of the Company) that become exercisable for the first time during any

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calendar year exceeds $100,000 (or such corresponding amount as may be set by the Code). Such Fair Market Value shall be determined as of the Grant Date of each such Incentive Stock Option.

          (b) Exercise Price of Options. The Exercise Price of a particular Option shall be determined by the Committee on the Grant Date; provided, however, that the Exercise Price shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date (110% of the Fair Market Value if Incentive Stock Options are granted to a stockholder who owns or is deemed to own stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company on the Grant Date).

          (c) Term of Options. The Committee shall set the term of each Option, provided, however, that except as set forth in Section 18(b), no Option shall be exercisable more than 10 years after the Grant Date (five years in the case of an Incentive Stock Option granted to a stockholder who owns or is deemed to own stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company on the Grant Date); and provided, further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or in the Option agreement.

     8. Restricted Stock and Restricted Stock Units. The Committee may grant Awards consisting of shares of Restricted Stock or denominated in Restricted Stock Units in such amounts and for such consideration as the Committee may determine in its discretion. Such Awards may be subject to (a) forfeiture of such shares or RSUs upon termination of Service during the applicable restriction period, (b) restrictions on transferability (which may be in addition to or in lieu of those specified in Section 16), (c) limitations on the right to vote such shares, (d) limitations on the right to receive dividends with respect to such shares, (e) attainment of certain Performance Goals, such as those described in Section 10, and (f) such other conditions, limitations, and restrictions as determined by the Committee, in its discretion, and as set forth in the instrument evidencing the Award. Certificates representing shares of Restricted Stock or shares of Common Stock issued upon vesting of RSUs shall bear an appropriate legend and may be held subject to escrow and such other conditions as determined by the Committee until such time as all applicable restrictions lapse.

     9. Stock Appreciation Rights. The Committee may grant SARs pursuant to the Plan, either in tandem with another Award granted under the Plan or independent of any other Award grant. Each grant of SARs shall be evidenced by an agreement in such form as the Committee shall from time to time approve. The Committee may establish a maximum appreciation value payable for SARs and such other terms and conditions for such SARs as the Committee may determine in its discretion. The Exercise Price of a SAR shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date. The holder of an SAR granted in tandem with an Option may elect to exercise either the Option or the SAR, but not both. Except as set forth in Section 18(b), the exercise period for a SAR shall extend no more than 10 years after the Grant Date. In addition, each grant of SARs shall comply with and be subject to the following terms and conditions:

          (a) Vesting Date and Conditions to Vesting. Upon the grant of SARs, the Committee may (i) establish a Vesting Date or Vesting Dates and expiration dates with respect to such rights, (ii) divide such rights into classes and assign a different Vesting Date for each class, and (iii) impose such restrictions or conditions, not inconsistent with the provisions herein, with respect to the vesting of such rights as the Committee, in its absolute discretion, deems appropriate. By way of example and not by way of limitation, the Committee may require, as a condition to the vesting of any class or classes of SARs, that the Participant or the Company achieve certain performance criteria, such criteria to be specified by the Committee on the Grant Date of such rights. Provided that all conditions to the vesting of SARs are satisfied, and except as provided in Section 18, upon the occurrence of the Vesting Date with respect to such SARs, such rights shall vest and the Participant shall be entitled to exercise such rights prior to their termination or expiration.

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          (b) Benefit Upon Exercise of Stock Appreciation Rights. Upon the exercise of a vested SAR, the Participant shall be entitled to receive one or more of the following benefits, as determined by the Committee on the Grant Date of such SAR and set forth in the agreement evidencing the SAR:

               (i) Within 90 days of the Exercise Date for the SAR, the Company shall pay to the Participant an amount in cash in a lump sum equal to the difference between (A) the Fair Market Value of one share of Common Stock of the Company on the Exercise Date, over (B) the Exercise Price of the SAR.

               (ii) At the discretion of the Committee, the agreement evidencing the SAR may give the Participant the right to elect to receive, in lieu of cash as set forth in Section 9(b)(i), shares of the Company’s Common Stock having a Fair Market Value as of the Exercise Date equal to the difference between (A) the Fair Market Value of one share of Common Stock of the Company on the Exercise Date, over (B) the Exercise Price of the SAR.

     10. Performance Awards. The Committee may grant Performance Awards pursuant to the Plan. Each grant of Performance Awards shall be evidenced by an agreement in such form as the Committee shall from time to time approve. Each grant of Performance Awards shall comply with and be subject to the following terms and conditions:

          (a) Performance Period and Amount of Performance Award. With respect to each grant of a Performance Award, the Committee shall establish a performance period over which the performance of the Company and/or of the applicable Participant shall be measured, provided that no performance period shall be shorter than one year. In determining the amount of the Performance Award to be granted to a particular Participant, the Committee may take into account such factors as the Participant’s responsibility level and growth potential, the amount of other Awards granted to or received by such Participant, and such other considerations as the Committee deems appropriate; provided, however, the maximum value that can be granted as a Performance Award to any one individual during any calendar year shall be limited to the amount set forth in Section 6(b).

          (b) Non-Qualified Performance Awards and Qualified Performance Awards. Non-Qualified Performance Awards, which are not intended to qualify as qualified performance-based compensation under Code Section 162(m), shall be based on achievement of such goals and be subject to such terms, conditions, and restrictions as the Committee or its delegate shall determine. Qualified Performance Awards, which are intended to qualify as qualified performance-based compensation under Code Section 162(m), shall be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective Performance Goals established by the Committee as set forth in Section 10(c).

          (c) Performance Goals. A Qualified Performance Award shall be paid solely on the attainment of certain pre-established, objective performance goals (within the meaning of Code Section 162(m)). Such Performance Goals shall be based on any one or any combination of the following business criteria, as determined by the Committee: total or net revenue; revenue growth; EBIT; EBITDA; operating income; net operating income after tax; pre-tax or after-tax income; cash flow; cash flow per share; net earnings; earnings per share; profit growth; return on equity; return on capital employed; return on assets; economic value added (or an equivalent metric); share price performance; other earnings criteria or profit-related return ratios; successful acquisitions of other companies or assets; successful dispositions of Subsidiaries, divisions or departments of the Company or any of its Subsidiaries; successful financing efforts; total stockholder return; market share; improvement in or attainment of expense levels; improvement in or attainment of working capital levels; or debt reduction. Such Performance Goals may be (i) stated in absolute terms, (ii) based on one or more business criteria that apply to the Participant, one or more Subsidiaries, business units or divisions of the Company, or the Company as a whole, (iii) relative to other companies or specified indices, (iv) achieved during a period

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of time, or (v) as otherwise determined by the Committee. Unless otherwise stated, a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In measuring a Performance Goal, the Committee may exclude certain extraordinary, unusual or non-recurring items, provided that such exclusions are stated by the Committee at the time the Performance Goals are determined. In interpreting Plan provisions applicable to Qualified Performance Awards, it is the intent of the Plan to conform with the standards of Code Section 162(m) and Treasury Regulation §1.162-27(e) with respect to grants to those Participants whose compensation is, or is likely to be, subject to Code Section 162(m), and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. The Committee shall establish, in writing, the applicable Performance Goal(s) and the specific targets related to such goal(s) prior to the earlier to occur of (1) 90 days after the commencement of the period of service to which the Performance Goal relates and (2) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain within the meaning of Code Section 162(m), subject to adjustment by the Committee as it deems appropriate to reflect significant unforeseen events or changes. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met.

          (d) Payment. Upon the expiration of the performance period relating to a Performance Award granted to a Participant, such Participant shall be entitled to receive payment of an amount not exceeding the maximum value of the Performance Award, based on the achievement of the Performance Goals for such performance period, as determined by the Committee. The Committee may, within its sole discretion, pay a Performance Award under any one or more of the Performance Goals established by the Committee with respect to such Performance Award. The Committee shall certify in writing prior to the payment of a Performance Award that the applicable Performance Goals and any other material terms of the grant have been satisfied. Subject to Sections 5 and 6, payment of a Performance Award may be made in cash, shares of Common Stock, other Awards, other property, or a combination thereof, as determined by the Committee. Payment shall be made in a lump sum or in installments as prescribed by the Committee.

     11. Dividends and Dividend Equivalents. The Committee may grant, as a separate Award or at the time of granting any other Award granted under the Plan (other than Options or SARs), Awards that entitle the Participant to receive dividends or Dividend Equivalents with respect to all or a portion of the number of shares of Common Stock subject to such Award, in each case subject to such terms as the Committee may establish in its discretion and as set forth in the instrument evidencing the Award. Dividends or Dividend Equivalents may accrue interest and the instrument evidencing the Award will specify whether dividends or Dividend Equivalents will be (a) paid currently (b) paid at a later, specified date (such as if, and when, and to the extent such related Award, if any, is paid), (c) deferrable by the Participant under and subject to the terms of the applicable Deferred Compensation Plan, (d) subject to the same vesting as the Award to which the dividends or Dividend Equivalents relate, if applicable, and/or (e) deemed to have been reinvested in shares of Common Stock or otherwise reinvested. Where Dividend Equivalents are deferred or subject to vesting, the Committee may permit for, or require, the conversion of Dividend Equivalents into RSUs. RSUs arising from such a conversion of Dividend Equivalents at the election of the Participant shall not count against the Share Limit, while RSUs arising from a conversion of Dividend Equivalents that is required by the Committee will count against the Share Limit.

     12. Stock Bonuses. The Committee may, in its absolute discretion, grant Stock Bonuses in such amounts as it shall determine from time to time. Subject to the last sentence of this Section 12, a Stock Bonus shall be paid at such time and subject to such terms, conditions, and limitations as the Committee shall determine on the Grant Date of such Stock Bonus. Certificates for shares of Common Stock granted as a Stock Bonus shall be issued in the name of the Participant to whom such grant was made and delivered to such Participant as soon as practicable after the date on which such Stock Bonus is required to be paid. Notwithstanding the foregoing, unless a Stock Bonus is granted only in lieu of cash

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compensation otherwise earned by the Participant, a Stock Bonus granted pursuant to this Section 12 shall be subject to the same minimum vesting periods as set forth in Section 6(c).

     13. Cash Awards. The Committee may, in its absolute discretion, grant Cash Awards in such amounts as it shall determine from time to time. A Cash Award may be granted (a) as a separate Award, (b) in connection with the grant, issuance, vesting, exercise, or payment of another Award under the Plan or at any time thereafter, or (c) on or after the date on which the Participant is required to recognize income for federal income tax purposes in connection with the grant, issuance, vesting, exercise, or payment of another Award under the Plan. Cash Awards shall be subject to such terms, conditions, and limitations as the Committee shall determine on the Grant Date of such Cash Award. Cash Awards intended to qualify as performance-based compensation under Code Section 162(m) shall be subject to the same terms and conditions as in the case of the Qualified Performance Awards described in Section 10.

     14. Other Stock-Based Awards. The Committee may grant such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Common Stock as may be deemed by the Committee to be consistent with the purposes of the Plan. Such other Awards may include, without limitation, (a) shares of Common Stock awarded purely as a bonus and not subject to any restrictions or conditions, (b) convertible or exchangeable debt or equity securities, (c) other rights convertible or exchangeable into shares of Common Stock, and (d) Awards valued by reference to the value of shares of Common Stock or the value of securities of or the performance of specified Subsidiaries of the Company. Notwithstanding the foregoing, unless a stock-based Award granted under this Section 14 is granted only in lieu of cash compensation otherwise earned by the Participant, such Award shall be subject to the same minimum vesting periods as set forth in Section 6(c).

     15. Award Exercise.

          (a) Precondition to Stock Issuance. Awards shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee. No shares of Common Stock shall be delivered pursuant to the exercise of any Award, in whole or in part, until the Company receives payment in full of the Exercise Price, if any, as provided in Section 15(c). No Participant or any legal representative, legatee or distributee shall be or be deemed to be a holder of any shares of Common Stock subject to such Award unless and until such Award is exercised, the full Exercise Price is paid, and such shares are issued.

          (b) No Vesting or Exercise of Fractional Amounts. With respect to any Award that vests in a manner that would result in fractional shares of Common Stock being issued, any fractional share that would be one-half of one share or greater shall be rounded up to a full share, and any fractional share that would be less than one-half of one share shall not be vested or issued unless and until the last increment of such Award becomes vested. No Award may at any time be exercised with respect to a fractional share. Instead the Company shall pay to the holder of such Award cash in an amount equal to the Fair Market Value of such fractional share on the Exercise Date.

          (c) Form of Payment. A Participant may exercise an Award using as the form of payment such means as the Committee may, from time to time, approve, whether in the agreement evidencing the Award or otherwise.

          (d) Form and Time of Exercises. Except as otherwise (i) set forth in the Plan, (ii) determined by the Committee, or (iii) set forth in the agreement or other documents evidencing the Award, each exercise required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing delivered to the Company at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, and any other agreement, as the Committee shall require.

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     16. Transferability. Awards may be assigned or transferred only as permitted pursuant to this Section 16. No Award may be assigned or transferred for value.

          (a) Restrictions on Transfer. Except as specifically allowed by the Committee, any Incentive Stock Option granted under the Plan shall, during the Participant’s lifetime, be exercisable only by such Participant and shall not be assignable or transferable by such Participant other than by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order. Except as specifically allowed by the Committee, any Non-Qualified Stock Option and any other Award granted under the Plan and any of the rights and privileges conferred thereby shall not be assignable or transferable by the Participant other than (i) pursuant to Section 16(b), or (ii) by will or the laws of descent and distribution or pursuant to a Qualified Domestic Relations Order, and such Award shall be exercisable during the Participant’s lifetime only by the Participant.

          (b) Permitted Transfers. Awards other than Incentive Stock Options may be assigned to (i) a child, stepchild, grandchild, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, (ii) any person sharing the Participant’s household (other than a tenant or employee), (iii) a trust in which the Participant or the persons described in (i) or (ii) hold more than 50% of the beneficial interest, or (iv) a private foundation in which the Participant or the persons described in (i) or (ii) own more than 50% of the voting interests. A transfer to any entity in which more than 50% of the voting interests are owned by the Participant or the persons described in (i) or (ii) in exchange for an interest in that entity shall not constitute a transfer for value.

          (c) Transfers Upon Death. Upon the death of a Participant, outstanding Awards granted to such Participant may be exercised only by the executors or administrators of the Participant’s estate or by any person or persons who shall have acquired such right to exercise by will or by the laws of descent and distribution or by assignment or transfer from the Participant as contemplated by Section 16(b) above. No transfer by will or the laws of descent and distribution, or as contemplated by Section 16(b) above, of any Award, or the right to exercise any Award, shall be effective to bind the Company unless the Committee shall have been furnished with (i) written notice thereof and with a copy of the will, assignment, or transfer document and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (ii) an agreement by the transferee to comply with all the terms and conditions of the Award that are or would have been applicable to the Participant and to be bound by the acknowledgments made by the Participant in connection with the grant of the Award.

     17. Withholding Taxes; Other Deductions. All distributions under the Plan are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any Awards, cash, shares of Common Stock, or other benefits under the Plan upon satisfaction of the applicable withholding obligations. The Company shall have the right to deduct from any grant, issuance, vesting, exercise, or payment of an Award under the Plan (a) an amount of cash or shares of Common Stock having a value sufficient to cover withholding as required by law for any federal, state or local taxes, and (b) any other amounts due from the Participant to the Company or to any Parent or Subsidiary of the Company, or to take such other action as may be necessary to satisfy any such withholding or other obligations, including withholding from any other cash amounts due or to become due from the Company to such Participant an amount equal to such taxes or obligations. The Committee, in its discretion, also may permit the Participant to deliver to the Company, at the time of grant, issuance, vesting, exercise, or payment of an Award, one or more shares of Common Stock owned by such Participant and having an aggregate Fair Market Value (as of the date of such grant, issuance, vesting, exercise, or payment, as the case may be) up to or equal to (but not in excess of) the amount of the taxes incurred in connection with such grant, issuance, vesting, exercise, or payment, as the case may be.

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     18. Termination of Services.

          (a) Definition of “Service.” For purposes of the Plan, unless otherwise (i) determined by the Committee, (ii) set forth in the agreement or other documents evidencing the Award, or (iii) set forth in an employment agreement or any other written agreement with or policy of the Company, a Participant will be deemed to be in “Service” to the Company so long as such individual renders continuous services on a periodic basis to the Company (or to any Parent or Subsidiary of the Company) in the capacity of an Employee, Consultant, director, or other advisor. In the discretion of the Committee, a Participant will be considered to be rendering continuous services to the Company even if the type of services change, e.g., from Employee to Consultant. A Participant will be considered to be an Employee for so long as such individual remains in the employ of the Company or any Parent or Subsidiary of the Company. Except as otherwise (A) determined by the Committee, (B) set forth in the agreement or other documents evidencing the Award, or (C) set forth in an employment agreement or any other written agreement with or policy of the Company, a Participant’s Service with the Company shall be deemed terminated if the Participant’s leave of absence (including military or other bona fide leave of absence) extends for more than 90 days and the Participant’s continued Service with the Company is not guaranteed by contract or statute; provided that whether an authorized leave of absence, or absence in military or government service, shall constitute termination of Service shall be determined by the Committee in its absolute discretion.

          (b) Termination of Awards Upon Termination of Service. Except as otherwise (i) determined by the Committee, (ii) set forth in the agreement or other documents evidencing the Award, or (iii) set forth in an employment agreement or any other written agreement with or policy of the Company:

               (i) Termination of Service Other than for Cause, Disability, Death, or Retirement. If the Participant’s Service with the Company is terminated for any reason other than Cause, or other than as the result of the Participant’s Disability, death, or Retirement, then (A) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the expiration of the longer of (1) 90 days after such termination, or (2) 30 days following the end of any blackout period to which the Participant may be subject, on which date they shall expire, provided, however, that no Option shall be exercisable after the expiration of its term; (B) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; (C) a portion of any unvested shares of Restricted Stock, RSUs, SARs, Dividend Equivalents, Stock Bonuses, Cash Awards, or other stock-based Awards, to the extent not otherwise forfeited or canceled on or prior to such termination, shall vest on the date of such termination in such amount (which may be equal to zero) as determined by the Committee (1) pursuant to a formula, (2) based on the achievement of any conditions imposed by the Committee on the Grant Date of such Awards, or (3) otherwise in the Committee’s discretion; and (D) all other unvested shares of Restricted Stock, RSUs, SARs, Dividend Equivalents, Stock Bonuses, Cash Awards, or other stock-based Awards shall be forfeited as of the commencement of business on the date of the Participant’s termination of Service.

               (ii) Termination of Service for Cause. Except as set forth in Section 18(b)(v), in the event of the termination of a Participant’s Service for Cause, all outstanding Awards granted to such Participant shall immediately expire and be forfeited as of the commencement of business on the date of such termination.

               (iii) Termination of Service Upon Disability or Death. If the Participant’s Service with the Company is terminated as the result of the Participant’s Disability or death, (A) all of the unvested Options and SARs granted to such Participant shall become fully and immediately exercisable, (B) all Incentive Stock Options granted to such Participant shall remain exercisable until the expiration of one year after such termination or, if earlier, until the expiration of their term(s), on which date they shall expire, (C) all Non-Qualified Stock Options, and SARs granted to such Participant shall remain exercisable until the expiration of one year after such termination, on which date they shall expire, and (D)

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all other Awards granted to such Participant shall immediately be forfeited as of the commencement of business on the date of such termination.

               (iv) Termination of Service Upon Retirement. To the extent provided in the agreement evidencing a Participant’s Award, if the Participant’s Service with the Company is terminated as a result of the Participant’s Retirement, the Participant’s Award will terminate in the manner set forth in the agreement governing the Award. If the agreement governing the Award does not address Retirement, this Section 18(b)(iv) shall not apply to the Award and, with respect to such Award, Section 18(b)(i) shall be applied without regard to the term “Retirement” contained therein.

               (v) Termination of Performance Awards Upon Termination of Service. With respect to Performance Awards, if the Participant’s Service is terminated for any reason prior to the expiration of the applicable performance period then such Performance Awards shall immediately be forfeited as of the commencement of business on the date of such termination, except (i) as may be determined by the Committee in its sole and absolute discretion, or (ii) as may be otherwise provided in the agreement evidencing such Performance Award.

          (c) Limitations with Respect to Incentive Stock Options. Notwithstanding any other provision of this Plan to the contrary, the period in which any Options that are intended to be Incentive Stock Options may remain exercisable following the termination of a Participant’s Service with the Company shall not exceed the maximum period of time that such Options may remain exercisable pursuant to Code Section 422.

          (d) Definitions. For purposes of this Section 18, the term “year” means 365 calendar days beginning with the calendar day on which the relevant event occurs.

     19. Plan Amendment and Termination; Bifurcation of the Plan. The Committee may amend, change, make additions to, or suspend or terminate the Plan as it may, from time to time, deem necessary or appropriate and in the best interests of the Company; provided that the Committee may not, without the consent of the affected Participant, take any action that disqualifies any Incentive Stock Option previously granted under the Plan for treatment as an Incentive Stock Option or that adversely affects or impairs the rights of any Award outstanding under the Plan; and provided further that, to the extent that stockholder approval of an amendment to the Plan is required by applicable law or the requirements of any securities exchange or trading market on which the Common Stock is listed or traded, such amendment shall not be effective prior to approval by the Company’s stockholders. Notwithstanding any provision of this Plan to the contrary, the Committee, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants.

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     20. Adjustment of Awards Upon the Occurrence of Certain Events.

          (a) Adjustment of Shares Available. The Committee shall have authority to proportionately adjust the aggregate number and type of shares available for Awards under the Plan, the maximum number and type of shares or other securities that may be subject to Awards to any individual under the Plan, the number and type of shares or other securities covered by each outstanding Award, and the Exercise Price per share (but not the total price) for Awards outstanding under the Plan as a result of any increase or decrease in the number of issued shares of Common Stock resulting from the payment of any stock dividend or from any stock split, reverse stock split, split-up, combination or exchange of shares, merger, consolidation, spin-off, reorganization, or recapitalization of shares or any like capital adjustment in order to prevent the enlargement or dilution of rights of the Participants under such Awards.

          (b) Change in Control. Except as otherwise (i) determined by the Committee, (ii) set forth in the agreement or other documents evidencing the Award, or (iii) set forth in an employment agreement or any other written agreement between a Participant and the Company or any policy of the Company, upon the occurrence of a Change in Control, (A) all unvested Options and SARs granted to each Participant shall become vested and fully and immediately exercisable and shall remain exercisable until their expiration, termination, or cancellation, (B) all shares of Restricted Stock, RSUs, Dividend Equivalents, Stock Bonuses, Cash Awards, and other stock-based Awards granted pursuant to the terms of the Plan that have not yet vested shall immediately vest, (C) the Committee (as constituted immediately prior to such Change in Control) shall determine, in its sole discretion, whether Performance Awards, for which the requisite Performance Goals have not been satisfied or for which the performance period has not expired, shall immediately be paid or whether such Performance Awards shall remain outstanding according to their respective terms, and (D) the Acquiror shall either assume the Company’s rights and obligations under all outstanding Awards or substitute for outstanding Awards substantially equivalent Awards for the Acquiror’s stock. The vesting and/or exercise of any Award that is permissible solely by reason of this Section 20(b) shall be conditioned upon the consummation of the Change in Control.

          (c) Adjustments to Outstanding Restricted Stock, RSUs, and SARs. If a Participant receives any securities or other property (including dividends paid in cash) with respect to a share of Restricted Stock, RSU, or SAR that has not vested as of the date of the payment of any stock dividend or any stock split, reverse stock split, split-up, combination or exchange of shares, merger, consolidation, spin-off, reorganization, or recapitalization of shares or any like capital adjustment, then such securities or other property will not vest until such share of Restricted Stock, RSU, or SAR vests and shall be held by the Company as if such securities or other property were non-vested shares of Restricted Stock, RSUs, or SARs.

          (d) Adjustment Upon Certain Mergers, etc. Subject to any required action by the stockholders of the Company, if the Company is the surviving corporation in any merger or consolidation (except a merger or consolidation as a result of which the holders of shares of Common Stock receive securities of another corporation), each Award outstanding on the date of such merger or consolidation shall entitle the Participant to acquire upon exercise, if applicable, the securities that a holder of the number of shares of Common Stock subject to such Award would have received in such merger or consolidation.

          (e) Adjustment Upon Certain Other Transactions. In the event of a dissolution or liquidation of the Company, a sale of all or substantially all of the Company’s assets, a merger or consolidation involving the Company in which the Company is not the surviving corporation or a merger or consolidation involving the Company in which the Company is the surviving corporation but the holders of shares of Common Stock receive securities of another entity and/or other property, including cash, the Committee shall, in its absolute discretion, have the power to (i) cancel, effective immediately prior to the occurrence of such event, each Award outstanding immediately prior to such event (whether or not then exercisable) and, in full consideration of such cancellation, pay to the Participant to whom such Award

17

was granted an amount in cash, for each share of Common Stock subject to such Award, equal to the excess of (A) the value, as determined by the Committee in its absolute discretion, of the property (including cash) received by the holder of a share of Common Stock as a result of such event over (B) the Exercise Price, if any, of such Award; or (ii) provide for the exchange of each Award outstanding immediately prior to such event (whether or not then exercisable) for an option on some or all of the property for which such Award is exchanged and, incident thereto, make an equitable adjustment as determined by the Committee in its absolute discretion in the Exercise Price of the Award, or the number of shares or amount of property subject to the Award or, if appropriate, provide for a cash payment to the Participant to whom such Award was granted in full or partial consideration for the exchange of the Award.

          (f) No Other Rights. Except as expressly provided in the Plan, or in any agreement governing the Award, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of the Company or any other entity. Except as expressly provided in the Plan, or in any agreement governing the Award, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to an Award or the Exercise Price of any Award.

     21. Approval by Stockholders; Effective Date and Term of Plan. The Plan was originally adopted by the Board on March 8, 1991, and has subsequently been amended and restated on several occasions. The Plan was most recently amended and restated by the Board on February 9, 2006. The Plan shall be submitted to the stockholders of the Company for their approval at a regular or special meeting to be held within 12 months after the adoption of this Plan by the Board. Stockholder approval shall be evidenced by the affirmative vote of the holders of a majority of the shares of the Company’s Common Stock present in person or by proxy and voting at the meeting. Upon stockholder approval, (a) the terms and conditions of the Plan as of the Effective Date (as the Plan may be subsequently amended) shall control all Awards granted under the Plan prior to or after the Effective Date, provided that, without the consent of the affected Participant, the terms and conditions of the Plan shall not be interpreted in a manner that disqualifies any Incentive Stock Option granted under the Plan prior to the Effective Date for treatment as an Incentive Stock Option or that adversely affects or impairs the rights of any Award outstanding under the Plan prior to the Effective Date, and (b) the Plan shall remain in full force and effect through the tenth anniversary of the Effective Date, unless sooner terminated by the Committee. After the Plan is terminated, no future Awards may be granted under the Plan, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions. If this Plan is not approved by the stockholders within 12 months after its adoption by the Board, this Plan shall automatically terminate and the Company’s Amended and Restated 1991 Incentive Stock Plan, as then amended, shall remain in full force and effect to the same extent and with the same effect as though this Plan had never been adopted.

     22. General Restrictions. Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act), and the applicable requirements of any securities exchange or other trading market on which the Common Stock is listed or traded. To the extent that the Plan provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a non-certificated basis to the extent not prohibited by applicable law or the applicable rules of any stock exchange or other trading market on which the Common Stock is listed or traded.

     23. Compliance With Applicable Law.

          (a) Exchange Act Section 16. Notwithstanding any provision of this Plan to the contrary, only the entire Board or a Committee composed of two or more Non-Employee Directors may

18

make determinations regarding grants of Awards to persons subject to Section 16 under the Exchange Act.

          (b) Code Section 162(m). The Committee shall have the authority and discretion to determine the extent to which Awards will conform to the requirements of Code Section 162(m) and to take such action, establish such procedures, and impose such restrictions as the Committee determines to be necessary or appropriate to conform to such requirements. To the extent any provisions of the Plan or action by the Committee or Board fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee or Board.

          (c) Code Section 409A. To the extent an Award granted under this Plan is subject to Code Section 409A because it both falls within the scope of Code Section 409A and does not satisfy an applicable exemption from Code Section 409A (“Section 409A Award”), the Section 409A Award is intended to comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such section by the U.S. Department of the Treasury or the Internal Revenue Service.

     24. No Rights as a Stockholder. No person shall have any rights as a stockholder of the Company with respect to any shares of Common Stock covered by or relating to any Award granted pursuant to this Plan until the date of the issuance of a stock certificate with respect to such shares or the date of issuance of shares on a non-certificated basis pursuant to policies adopted by the Company from time to time.

     25. No Special Employment Rights; No Right to Awards. Nothing contained in the Plan or any Award shall confer upon any Participant any right with respect to the continuation of his or her Service by the Company or interfere in any way with the right of the Company, subject to the terms of any separate employment or consulting agreement to the contrary, at any time to terminate such Service or to increase or decrease the compensation of the Participant from the rate in existence on the Grant Date of an Award. No person shall have any claim or right to receive any Award under this Plan. The grant of an Award to a Participant at any time shall neither require the Committee to grant an Award to such Participant or any other Participant or other person at any other time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person.

     26. Expenses and Receipts. The expenses of the Plan shall be paid by the Company. Any proceeds received by the Company in connection with any Award will be used for general corporate purposes.

     27. Failure to Comply. In addition to the remedies of the Company elsewhere provided for herein, failure by a Participant to comply with any of the terms and conditions of the Plan or the agreement executed by such Participant evidencing an Award, unless such failure is remedied by such Participant within 10 days after having been notified of such failure by the Committee, shall be grounds for the cancellation and forfeiture of such Award, in whole or in part as the Committee, in its absolute discretion, may determine.

     28. Plan Not Exclusive. This Plan is not intended to be the exclusive means by which the Company may issue options, warrants, or other rights to acquire shares of Common Stock.

     29. Governing Law. The Plan shall be governed by, and all questions arising hereunder shall be determined in accordance with, the laws of the State of Arizona, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.

     30. Limitation of Implied Rights. Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the

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Company or any Subsidiary whatsoever including, without limitation, any specific funds, assets, or other property that the Company, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Common Stock or other amounts, if any, payable under the Plan, unsecured by any assets of the Company, and nothing contained in the Plan shall constitute an obligation to pay any benefits to any person.

     31. Unfunded Plan. This Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants under this Plan, any such accounts shall be used merely as a bookkeeping convenience, including bookkeeping accounts established by a third party administrator retained by the Company to administer the Plan. The Company shall not be required to segregate any assets for purposes of this Plan or Awards hereunder, nor shall the Company, the Board or the Committee be deemed to be a trustee of any benefit to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to an Award under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.

     32. Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

     33. Substitution of Awards. Subject to Sections 3, 19, and 20, at the discretion of the Committee, a Participant may be offered an election to substitute an Award for another Award or Awards of the same or different type. The Grant Date for any Award granted pursuant to the substitution provisions of this Section 33 will have the Grant Date of the original Award.

ALLIED WASTE INDUSTRIES, INC.,
a Delaware corporation
 

By  

Title: 

20

EX-10.3

EXHIBIT 10.3

ALLIED WASTE INDUSTRIES, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN

(Approved by the Board of Directors on February 9, 2006;
Approved by the Stockholders on May 25, 2006)

1. Establishment, Objectives, Duration.

     Allied Waste Industries, Inc. (“Company”) hereby establishes a short-term incentive compensation plan to be known as the “Allied Waste Industries, Inc. Executive Incentive Compensation Plan” (“Plan”).

     The purpose of the Plan is to enhance the Company’s ability to attract and retain highly qualified executives and to provide such executives with additional financial incentives to promote the success of the Company and its Affiliates and Subsidiaries. Awards payable under the Plan are intended to constitute “performance-based compensation” under Code Section 162(m) and regulations promulgated thereunder, and the Plan shall be construed consistently with such intention.

     The Plan is effective as of January 1, 2006, subject to the approval of the Plan by the stockholders of the Company at the 2006 Annual Meeting. The Plan will remain in effect until such time as it shall be terminated by the Board, pursuant to Section 11 herein.

2. Definitions.

     The following terms, when capitalized, shall have the meanings set forth below:

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

     (b) “Award” means a bonus or other incentive compensation award payable in cash, Shares or any combination thereof, granted to a Participant under or pursuant to this Plan with respect to a particular Performance Period, in accordance with any applicable terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of the Plan.

     (c) “Board” means the Board of Directors of the Company.

     (d) “Code” means the Internal Revenue Code of 1986, as amended.

     (e) “Committee” means the Management Development/Compensation Committee of the Board or another committee appointed by the Board that satisfies the requirements of Code Section 162(m).

     (f) “Company” means Allied Waste Industries, Inc., a Delaware corporation.

     (g) “Employee” means any person who is employed by the Company or any of its Affiliates or Subsidiaries.

     (h) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (i) “Fair Market Value” means, as of any date, the value of a Share determined as follows:

     (i) Where there exists a public market for the Share, the Fair Market Value shall be (A) the closing sales price for a Share for the last market trading day prior to the

time of the determination (or, if no sales were reported on that date, on the last trading date on which sales were reported) on the principal securities exchange on which the Share is then listed for trading, or (B) if not so reported, the average of the closing bid and asked prices of a Share on that date (or if that date is not a business day, on the immediately preceding business day) as quoted on the NASDAQ National Market, or (C) if not quoted on the NASDAQ National Market, the average of the closing bid and asked prices of a Share on that date (or if that date is not a business day, on the immediately preceding business day) as quoted on the NASDAQ Small Cap Market, the National Quotation Bureau’s “Pink Sheets”, or the National Association of Securities Dealers’ OTC Bulletin Board System, or such other source as the Committee deems reliable; or

     (ii) In the absence of an established market of the type described above for the Share, the Fair Market Value thereof shall be determined by the Committee in good faith, and such determination shall be conclusive and binding on all persons.

     (j) “Operating Income Before Depreciation and Amortization” means revenue minus (i) the cost of operations, and (ii) selling, general and administrative expenses, as adjusted to exclude the effect of restructurings, discontinued operations, extraordinary items, write-offs associated with goodwill, the gain or loss associated with the sale of a business, the transition costs associated with the acquisition of a business, and the cumulative effect of tax and accounting changes, as each of those items is calculated in accordance with generally accepted accounting principles, if applicable, as of the date on which the calculation is made.

     (k) “Participant” means any person that the Committee determines, in its discretion, is or may be a “covered employee” of the Company within the meaning of Code Section 162(m) and regulations promulgated thereunder and who is selected by the Committee to participate in the Plan. “Participant” also means any other Employee(s) who the Committee may select to participate in the Plan for one or more specified Performance Periods.

     (l) “Performance Period” means the fiscal year of the Company, or such shorter or longer period as designated by the Committee; provided, however, that a Performance Period shall in no event be less than six (6) months or more than five (5) years.

     (m) “Plan” means the Allied Waste Industries, Inc. Executive Incentive Compensation Plan.

     (n) “Share” means a share of common stock of the Company, par value one cent ($.01) per share.

     (o) “Section 409A” means Section 409A of the Code and any related regulations or other guidance promulgated thereunder by the U.S. Department of Treasury or the Internal Revenue Service.

     (p) “Subsidiary” means any corporation in which the Company owns, directly or indirectly, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns, directly or indirectly, at least fifty percent (50%) of the combined equity thereof.

3. Administration of the Plan.

     (a) The Committee. The Plan shall be administered by the Committee.

     (b) Authority of the Committee. Subject to applicable laws and the provisions of the Plan (including any other powers given to the Committee hereunder), and except as otherwise provided by the Board, the Committee shall have full and final authority in its discretion to

2

establish rules and take all actions, including, without limitation, interpreting the terms of the Plan and Awards, and any related rules or regulations or other documents enacted hereunder and deciding all questions of fact arising in their application, determined by the Committee to be necessary in the administration of the Plan.

     (c) Effect of Committee’s Decision. All decisions, determinations and interpretations of the Committee shall be final, binding and conclusive on all persons, including the Company, its Subsidiaries, its stockholders, the Participants and their estates and beneficiaries.

     (d) Limit on Liability. No member of the Committee or any Employee or committee of the Company to whom the Committee has delegated authority under this Plan will be liable for anything done or omitted to be done by him, by any member of the Committee or by any Employee of the Company in connection with the performance of any duties under this Plan, except for his own willful misconduct or as expressly provided by statute.

4. Eligibility.

     Eligibility under this Plan is limited to Participants designated by the Committee, in its sole and absolute discretion. Except as otherwise specified in a written agreement between the Company and an Employee, no Employee shall at any time have the right (a) to be selected as a Participant in the Plan for any Performance Period, (b) if so selected, to be entitled to an Award, or (c) if selected as a Participant in one Performance Period, to be selected as a Participant in any subsequent Performance Period.

5. Form of Payment of Awards.

     Payment of Awards under the Plan shall be made in cash, Shares or a combination thereof, as the Committee shall determine, subject to the limitations set forth in Sections 6 and 7 herein.

6. Shares Subject to the Plan.

     Award payments that are made in the form of Shares, in whole or in part, shall be made from the aggregate number of Shares authorized to be issued under and otherwise in accordance with the terms of the Allied Waste Industries, Inc. 2006 Incentive Stock Plan (or any successor stock incentive plan approved by the stockholders of the Company); provided, however, that if the Company’s stockholders do not approve the 2006 Incentive Stock Plan, then Award payments that are made in the form of Shares, in whole or in part, shall be made from the aggregate number of Shares authorized to be issued under and otherwise in accordance with the terms of the Allied Waste Industries, Inc. Amended and Restated 1991 Incentive Stock Plan (or any successor incentive stock plan approved by the Company’s stockholders).

7. Awards.

     (a) Selection of Participants and Designation of Performance Period and Terms of Award. Within ninety (90) days after the beginning of each Performance Period or, if less than ninety (90) days, the number of days which is equal to twenty-five percent (25%) of the relevant Performance Period applicable to an Award, the Committee shall, in writing, (i) select the Participants to whom Awards shall be granted, (ii) designate the applicable Performance Period, and (iii) specify terms and conditions for the determination and payment of the Award for each Participant for such Performance Period, including, without limitation, the extent to which the Participant shall have the right to receive an Award following termination of the Participant’s employment. The terms and conditions for the determination and payment of each Award shall be determined in the sole discretion of the Committee, need not be uniform among all Awards, and may reflect distinctions based on such criteria as the Committee determines in its sole discretion.

3

     (b) Awards. The Company’s Chief Executive Officer shall be eligible to receive an Award for each designated Performance Period equal to one-half percent (0.50%) of Operating Income Before Depreciation and Amortization for such Performance Period. Each of the Participants other than the Company’s Chief Executive Officer shall be eligible to receive an Award for each designated Performance Period equal to one quarter percent (0.25%) of Operating Income Before Depreciation and Amortization for such Performance Period. Notwithstanding the foregoing, the maximum Award that may be paid under the Plan to the Company’s Chief Executive Officer for any fiscal year of the Company shall be the lesser of (i) one-half percent (0.50%) of Operating Income Before Depreciation and Amortization for such Performance Period, or (ii) five million dollars ($5,000,000.00), and the maximum Award that may be paid under the Plan to any Participant other than the Company’s Chief Executive Officer for any fiscal year of the Company shall be the lesser of (A) one-quarter percent (0.25%) of Operating Income Before Depreciation and Amortization for such Performance Period, or (B) three million dollars ($3,000,000.00). Notwithstanding the foregoing, the Committee may condition payment of an Award upon the satisfaction of such objective or subjective standards as the Committee shall determine to be appropriate, in its sole and absolute discretion, and the Committee shall retain the discretion to reduce the amount of any Award that would otherwise be payable to a Participant, including a reduction in such amount to zero.

8. Committee Certification and Payment of Awards.

     As soon as reasonably practicable following the end of each Performance Period, the Committee shall determine the amount of the Award to be paid to each Participant for such Performance Period and shall certify such determination in writing. Awards shall be paid to the Participants following such certification by the Committee no later than seventy (70) days following the close of the Performance Period with respect to which the Awards are made, unless all or a portion of a Participant’s Award is deferred pursuant to the Participant’s timely and validly made election made in accordance with such terms of any Company sponsored deferred compensation plan in which the Participant is eligible to participate.

9. Termination of Employment.

     Except as may be specifically provided in an Award pursuant to Section 7(a), a Participant shall have no right to an Award under the Plan for any Performance Period in which the Participant is not actively employed by the Company, an Affiliate or a Subsidiary on the last day of the Performance Period to which such Award relates. In establishing Awards under Section 7(a), the Committee may provide that in the event a Participant is not employed by the Company, an Affiliate or a Subsidiary on the date on which the Award is paid, the Participant may receive a pro rata portion of the Award or forfeit all or a portion of his or her right to the Award paid under the Plan.

10. Taxes.

     The Company shall have the power and right to deduct or withhold, or require a Participant to remit to the Company (or an Affiliate or Subsidiary), an amount (in cash, or in Shares valued at Fair Market Value), sufficient to satisfy any applicable tax withholding requirements applicable to an Award. Whenever under the Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any applicable tax withholding requirements. Subject to such restrictions as the Committee may prescribe, a Participant may satisfy all or a portion of any tax withholding requirements relating to Awards payable in Shares by electing to have the Company withhold Shares having a Fair Market Value equal to the amount to be withheld.

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11. Amendment or Termination of the Plan.

     The Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, however, that no amendment that requires stockholder approval in order to maintain the qualification of Awards as performance-based compensation pursuant to Code Section 162(m) and regulations promulgated thereunder shall be made without such stockholder approval. If changes are made to Code Section 162(m) or regulations promulgated thereunder to permit greater flexibility with respect to any Award or Awards available under the Plan, the Committee may, subject to this Section 11, make such adjustments to the Plan and/or Awards as it deems appropriate.

12. No Rights to Employment.

     The Plan shall not confer upon any Participant any right with respect to continuation of employment with the Company, any Affiliate, or Subsidiary, nor shall it interfere in any way with his right or the Company’s right to terminate his employment at any time, with or without cause.

13. No Assignment.

     Except as otherwise required by applicable law, any interest, benefit, payment, claim or right of any Participant under the Plan shall not be sold, transferred, assigned, pledged, encumbered or hypothecated by any Participant and shall not be subject in any manner to any claims of any creditor of any Participant or beneficiary, and any attempt to take any such action shall be null and void. During the lifetime of any Participant, payment of an Award shall only be made to such Participant. Notwithstanding the foregoing, the Committee may establish such procedures as it deems necessary for a Participant to designate a beneficiary to whom any amounts would be payable in the event of any Participant’s death.

14. Legal Construction.

     (a) Gender, Number and References. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural. Any reference in the Plan to a section of the Plan either in the Plan or to an act or code or to any section thereof or rule or regulation thereunder shall be deemed to refer to such section of the Plan, act, code, section, rule or regulation, as it may be amended from time to time, or to any successor section of the Plan, act, code, section, rule or regulation.

     (b) Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

     (c) Requirements of Law. The granting of Awards and the issuance of cash or Shares under the Plan shall be subject to all applicable laws and to such approvals by any governmental agencies or national securities exchanges as may be required.

     (d) Unfunded Plan. Awards under the Plan will be paid from the general assets of the Company, and the rights of Participants under the Plan will be only those of general unsecured creditors of the Company.

     (e) Governing Law. To the extent not preempted by federal law, the Plan shall be construed in accordance with and governed by the laws of the State of Arizona, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.

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     (f) Non-Exclusive Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable.

     (g) Code Section 409A Compliance. To the extent applicable, it is intended that this Plan and any Awards granted hereunder comply with the requirements of Code Section 409A.

ALLIED WASTE INDUSTRIES, INC.,
a Delaware corporation
 

By  

Title:  

6

EX-10.4

EXHIBIT 10.4

CORETRUST PURCHASING GROUP
PARTICIPATION AGREEMENT

     Participant Name: Allied Waste North America, Inc.

     Effective Date: July 1, 2006

TABLE OF CONTENTS

1. Definitions	1
2. Purchase of Products and Services	3
3. Term	4
4. CPG’s Responsibilities	4
5. Representations, Warranties and Covenants of Participant	5
6. CPG Disclaimer and Participant Release	7
7. GPO Fees and Rebates	8
8. Termination	8
9. Confidentiality	10
10. Attorneys’ Fees	10
11. Force Majeure	11
12. Notices	11
13. Assignment	11
14. Severability	12
15. Governing Law	12
16. Consent to Jurisdiction	12
17. Counterparts	12
18. Audit Rights	12
19. Waiver of Jury Trial	13
20. Rights Cumulative; Waiver	13
21. Headings	13
22. Amendments	14
23. Data	14
Exhibits A-E

PARTICIPATION AGREEMENT

     This Participation Agreement (together with all Exhibits, this “Agreement”), effective July 1, 2006 (the “Effective Date”), is between CoreTrust Purchasing Group, (“CPG”), a division of HealthTrust Purchasing Group, LP, a Delaware limited partnership (“HPG”), with their principal places of business located at 104 Continental Place, Suite 300, Brentwood, Tennessee 37027 and,

“Participant”:	Allied Waste North America, Inc.	Contact:	Tom Piersa, Vice President
		Purchasing and Supply Chain Management
Phone #	480-627-2213	Fax #	480-627-2206
Address:	15880 N. Greenway-Hayden Loop	Email	tom.piersa@awin.com
	Suite 100
	Scottsdale, AZ 85260	FEIN No.	860843596

for the purposes of permitting Participant and its Locations to obtain certain products and services under Vendor Contracts between CPG and Vendors. CPG and Participant are each sometimes referred to herein as a “party” and collectively, as the “parties”.

     WHEREAS, CPG is a “group purchasing organization” that maintains agreements with Vendors, pursuant to which CPG members may purchase certain products and services as described in more detail on its Internet website; and

     WHEREAS, Participant desires to participate in CPG’s group purchasing program, and to purchase certain products and services under Vendor Agreements in accordance with the terms and conditions thereof, subject to certain exceptions stated in this Agreement and listed in Exhibit A hereto.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.	Definitions.
	As used herein, the following terms have the following meanings:

(a)	“Access Agreement” has the meaning set forth in Exhibit E.
(b)	“Affiliate” means, with respect to a specified person or entity, any person or entity that directly or indirectly controls, is controlled by or is under common control with the specified person or entity. A person or entity shall be deemed to control another person or entity if such first person or entity has the power to direct or cause the direction of the management and policies of such other person or entity, whether through ownership of voting securities, by contract or otherwise.
(c)	“Blackstone” means, collectively, Blackstone GPO L.L.C. and its Affiliates.
(d)	“Calendar Quarter” means the three-month period commencing on the first day of each of January, April, July and October.

Page 1 of 14

(e)	“Competitor GPO” means a group purchasing organization that maintains agreements with vendors pursuant to which members in such group purchasing organization can purchase products and services that are the same or comparable to the Products and Services.
(f)	“Compliance Level” means, subject to the provisions of Paragraph 5(d), with respect to purchases of Products and Services in all of the Committed Categories, taken as a whole, a dollar amount equal to at least eighty percent (80%) of the total dollar volume of Participant’s requirements of products and services comparable to Products and Services in the Committed Categories for the combined business operations of Participant and its Locations (excluding all small, disadvantaged and minority business purchases), taken as a whole.
(g)	“Committed Categories” means the specific lines of Products and Services listed under the heading of “Committed Categories” in Exhibit D hereto.
(h)	“Committed Vendor Contracts” means Vendor Contracts for Products and/or Services under Committed Categories.
(i)	“CPG Category” means either a Committed Category or a Non-committed Category, and “CPG Categories” means both Committed Categories and Non-committed Categories, as well as any other categories of products and services that CPG participants can obtain under CPG Vendor Agreements.
(j)	“GPO Affiliation Certificate” means a certificate in the form set forth as Exhibit C hereto.
(k)	“HPG” means, collectively, HealthTrust Purchasing Group, L.P. and its Affiliates.
(l)	“Location” or “Locations” means Participant Affiliates identified on Exhibit B hereto.
(m)	“Non-committed Categories” means the specific lines of Products and Services that are offered to CPG participants, including Participant, without any compliance or purchase obligations. A list of such Non-committed Categories and the associated Non-committed Vendor Contracts will be provided by CPG and listed on CPG’s proprietary website for its participants.
(n)	“Non-committed Vendor Contracts” means Vendor Contracts for Products and/or Services under Non-committed Categories.
(o)	“Participant” means the entity indicated in the preamble paragraph of this Agreement.
(p)	“Products and Services” means the equipment, products, supplies, and services available pursuant to the Vendor Contracts.
(q)	“Program” means the group-purchasing program conducted by CPG, pursuant to which Participant and the Locations are entitled to purchase Products and Services in accordance with this Agreement and the Vendor Contracts.
(r)	“Term” shall be defined as the period this Agreement is in effect, including the initial term and any renewal terms as provided in Section 3.

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(s)	“Transition Period” has the meaning set forth in Paragraph 5(i).
(t)	“Vendor Contracts” means the purchasing agreements between Vendors and CPG for the purchase of Products and Services, which are available to CPG participants, under Committed Categories and Non-committed Categories.
(u)	“Vendor” or “Vendors” means the supplier of Products and Services under the Vendor Contracts.

2. Purchase of Products and Services.

(a)	Subject to the terms and conditions set forth in this Agreement, Participant, on behalf of itself and its Locations, hereby designates CPG to act as its exclusive group purchasing organization for the Committed Categories, subject to any exceptions expressly stated in this Agreement or Exhibit A to this Agreement. Participant and its Locations are hereby granted access to the Committed Vendor Contracts, pursuant to which Participant and its Locations will purchase Products and Services available thereunder for use by Participant and Locations, in compliance with the terms of such Committed Vendor Contracts. Participant and its Locations are also granted access to the Non-committed Vendor Contracts for Participant and its Locations to purchase Products and Services available thereunder for use by Participant and Locations, on an optional basis in compliance with the terms of such Non-committed Vendor Contracts. Participant, on behalf of itself and its Locations, hereby authorizes CPG, as its agent for such purposes, to (i) negotiate the terms of and enter into Vendor Contracts, and to cancel or modify any Vendor Contracts as it deems necessary, advisable or appropriate; (ii) receive rebates from Vendors based on purchases by Participant and its Locations under Vendor Contracts, for payment by CPG to Participant, and (iii) subject to the terms of Section 9 hereof, to receive from Vendors, distributors, and e-commerce companies, data relating to purchases of Products and Services under Vendor Contracts by Participant and Locations.
(b)	Before any Locations are granted access to the Program, upon request by CPG, Participant shall provide a signed GPO Affiliation Certificate (a copy of which is attached hereto as Exhibit C) for itself and its Locations that are to participate in the Program, so that copies of such Certificate can be provided by CPG to Vendors to indicate such Location is a participant in CPG and is bound by the terms of this Agreement, and to further indicate the Committed Categories in which participation in CPG will initially take place. Participant shall provide CPG with an electronic file containing a list of all Locations along with additional relevant information for each Location in a format designated by CPG. Participant shall provide to CPG an updated electronic file of its Locations that are to participate in the Program on a periodic basis. Participant and CPG hereby agree that upon Participant’s provision of each updated electronic file or acceptable alternative listing of Locations, such will be deemed to be an amendment to Exhibit B to this Agreement as well as to the GPO Affiliation Certificate signed by Participant. Notwithstanding, CPG shall have the right to deny addition of any Location if such would result in Participant being in breach of any terms of this Agreement.
(c)	Participant and its Locations shall have the right to purchase Products and Services under any Vendor Contracts within the Committed Categories and Non-committed

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Categories. Participant and its Locations shall also have the right to purchase products and services under any other Vendor Contracts CPG may have for CPG Categories that are not listed in Exhibit D and which are not Non-committed Categories, provided the Participant signs an amended or new GPO Affiliation Certificate for its Locations (if so requested by CPG), as well as an amendment to this Agreement to update the list of Committed Categories for Exhibit D.

(d)

Vendor Contracts in Non-committed Categories are available to Participant and Locations without any compliance or purchase obligations. Participant may place purchase orders for Products and Services available under any Vendor Contracts in Non-committed Categories and even after having done so, Participant will not be obligated to make any future purchases or meet any compliance levels for any Non-committed Categories.

3.	Term.
	Subject to termination under Section 8 hereof, the term of this Agreement shall be for a period of five (5) years commencing on the Effective Date, with automatic renewals thereafter for terms of one (1) year each unless either party gives written notice of non-renewal of this Agreement at least ninety (90) days prior to the end of the initial term or any subsequent renewal term.
4.	CPG’s Responsibilities.

(a)	CPG shall deliver, or cause to be delivered, on a timely basis to Participant a brief summary of the Products and Services for Committed Vendor Contracts and Non-committed Vendor Contracts, including pricing, delivery, ordering requirements and other relevant contract terms to which Participant will be held accountable. Upon request by Participant, CPG shall provide Participant with access to Committed Vendor Contracts and Non-committed Vendor Contracts at CPG premises and any other information related to the purchase of Products and Services thereunder reasonably requested by Participant. CPG shall, on a timely basis, notify Participant of any changes thereto, of any termination of any of such Vendor Contracts, and of any additional Vendor Contracts that can be selected as Committed Vendor Contracts, as well as any additional Non-committed Vendor Contracts. CPG shall periodically provide this information directly to Participant and its Locations, or through a CPG website.
(b)	CPG shall provide information and documentation to assist Participant in its transition to and participation in the Program.
(c)	CPG shall notify each of the Vendors under the Committed Vendor Contracts that Participant and its Locations are participating in those Vendor Contracts.
(d)	CPG shall use its best efforts to negotiate terms with Vendors concerning the purchases of Products and Services that are beneficial to the Participant.
(e)	CPG shall use its best efforts to require that all Vendors agree in their respective Vendor Contracts that CPG participants purchasing under such contracts be third party beneficiaries under such Vendor Contracts.

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5.	Representations, Warranties and Covenants of Participant.
	Participant, for itself and each Location hereby covenants with CPG as follows:

(a) Indemnity and Limitation of Liability. Participant and each Location shall indemnify and hold CPG, and the equity owners of CPG, and CPG’s respective Affiliates, agents, officers, directors and employees (the “Indemnitees”) harmless from and against Participant’s and/or each Location’s allocable share of any and all losses, liabilities, damages, costs and expenses (whatsoever, including, without limitation, reasonable attorneys’ fees,) that are awarded against or incurred after the date hereof by any of them (“Damages”) to the extent that the Damages relate to acts or omissions of Participant and/or any Location with respect to Products and Services obtained by Participant, including, without limitation, any claims resulting from a failure to pay for any Products and Services purchased by Participant and any Location. CPG agrees to provide Participant notice in the event it receives any claim for which Participant and Locations have indemnity obligations hereunder. Notwithstanding the foregoing,

(i)

in no event will Participant or any of its Affiliates, agents, officers, directors and employees be liable for any indirect, punitive, special, incidental or consequential damage in connection with or arising out of this Agreement (including loss of profits, use, data or other economic advantage), however it arises, whether for breach of this Agreement, or in tort, even if the Participant has been previously advised of the possibility of such damage; and

(ii)

Participant shall not be liable hereunder for any settlement made by any Indemnitee without Participant’s advance written approval or for any award from any action in which Participant was not granted the opportunity to control the defense.

(b)

Compliance with Contract Terms. Subject to CPG’s compliance with its obligations under Paragraph 4(a), Participant agrees to cause each of its Locations: (i) to comply with all terms of this Agreement as if such Location was a party hereto, (ii) to comply with all commercially reasonable terms of the Vendor Contracts, including without limitation, payment terms, own use requirements, arbitration of dispute requirements and compliance level requirements contained therein, and (iii) to execute the necessary acknowledgements or other legal documentation as reasonably requested by CPG or any particular Vendor in writing evidencing such Location’s agreement to comply with the terms of the relevant Vendor Contract, provided that any such acknowledgements or documents shall not be inconsistent with the Vendor Contract information provided by CPG pursuant to Paragraph 4(a) above and this Participation Agreement.

(c)

Exclusive GPO Relationship. Except as provided in Paragraph 5(f) below or as otherwise provided herein, during the term of this Agreement, neither Participant nor any of its Locations shall utilize, participate in or maintain membership in any other group purchasing organization, or other similar agreement or arrangement, for purchasing Products and Services within the selected Committed Categories and Non-committed Categories. Subject to any exceptions provided herein, the parties intend that this Agreement shall be the exclusive arrangement that Participant and its Locations utilize for the purchase through a group purchasing organization or similar entity of Products and Services and other products and services within a CPG Category.

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	Notwithstanding the foregoing, CPG acknowledges that Participant may enter into a group purchasing arrangement for the purchase of products or services that may be comparable to products or services under any vendor contracts with CPG that could qualify for the Non-committed Category, provided, that Participant agrees to provide CPG reasonable notice of its intent to enter into such a group purchasing arrangement, and Participant further agrees to provide CPG with the opportunity to demonstrate the benefits of participating in any such Non-committed Category under the Program rather than purchasing such products and/or services through such other group purchasing arrangement.
(d)	Meeting the Compliance Level. Except as provided in Paragraph 5(f) below, Participant and its Locations shall purchase Products and Services pursuant to the Vendor Contracts in (i) the twelve-month period commencing on the Effective Date and (ii) each twelve-month period commencing on the first day of each Calendar Quarter during the term of this Agreement, an amount of Products and Services under each of the Committed Categories equal to at least the Compliance Level, as applicable; provided, however, that if Participant or any of its Locations purchase any Products and Services under a Vendor Contract under any Committed Category that requires the purchase of (x) a higher percentage of the Products and Services than would otherwise be necessary for the Participant to comply with the Compliance Level, then Participant shall comply with such requirement for such Committed Vendor Contract(s); or (y) a lower percentage or no percentage of Products and Services, then CPG shall make appropriate downward adjustments to the Compliance Level applicable to Participant to reflect such lower or no Compliance Level under such Committed Vendor Contract. Adjustments shall also be made in cases where Participant purchases more than just its needs for a calendar quarter from a supplier (e.g., purchases of yearly needs in Q1 which result in no other purchases in Q2, Q3, or Q4). If Participant advises that it and/or certain of its Locations are unable to meet a Compliance Level applicable to any Vendor Contract, then CPG shall make a commercially reasonable effort to arrange for a Compliance Level with respect to purchases of Products and/or Services under such Vendor Contract that is mutually acceptable to CPG, Participant and the applicable Vendor. In the event that such mutually acceptable arrangement cannot be reached by the parties, appropriate adjustments shall be made by excluding such non-compliant Locations for which despite the commercially reasonable efforts of Participant such Locations cause Participant and all Locations as a whole to not meet the Compliance Level.
(e)	Notice of Compliance. At the written request of CPG, to the extent Participant is able to obtain such with reasonable efforts, within sixty (60) days after the last day of any Calendar Quarter, Participant shall deliver to CPG (i) a notice setting forth the percentage of purchases of Products and Services in all of the Committed Categories, taken as a whole, over the total dollar volume of Participant’s requirements of products and services comparable to Products and Services in the Committed Categories for the combined business operations of Participant and its Locations (excluding all small, disadvantaged and minority businesses purchases), taken as a whole and (ii) such additional information as CPG shall reasonably request to evidence compliance with any Compliance Level.
(f)	Exception for Conversion to Committed Vendor Contracts. In the event that

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	Participant’s existing vendor agreements set forth on Exhibit A hereto do not permit Participant and/or its Locations to comply with Paragraphs 5(c) and 5(d) hereof with respect to one or more particular Committed Vendor Contracts, Participant shall, and/or cause such Location(s) to, unless a consent by CPG is provided in Exhibit A, promptly transition such Location or Locations to the Committed Vendor Contracts in the Program supplying such comparable Products and Services upon the termination of such existing vendor agreements. In the event that Participant identifies on Exhibit A any existing group purchasing arrangement in which Participant purchases products and/or services comparable to Products and Services under any Vendor Contracts for any CPG Category, such relationship shall be an exception to Participant’s designation of CPG as its exclusive group purchasing organization with respect to Committed Categories and any Non-committed Categories selected by Participant, for the Term of this Agreement. Nothing in this Paragraph 5(f) shall be construed to require or encourage Participant or any of its Locations to improperly terminate or breach in any way any existing vendor agreement to which Participant or any of its Locations is a party.
(g)	Purchases are for own use. Participant covenants that all products purchased by it and Locations under the Vendor Contracts will be for use by Participant and/or Locations and not for resale or distribution to third parties other than as part of an end product sold to Participant’s customers.
(h)	Location divestiture. Any Locations divested by Participant or its Affiliate, or which no longer qualify as an Affiliate, shall be removed from participation under this Agreement at the conclusion of the Transition Period (defined below). Upon any divestiture of any of its Locations, Participant shall provide CPG with written notice thereof on the date such Location ceases to be an Affiliate of Participant (“Divestiture Date”), or thirty (30) days prior to the Divestiture Date if such divestiture is publicly known, whichever first occurs. Such divested Location shall have the right to continue to participate under this Agreement for the ninety (90) day transition period following the Divestiture Date (the “Transition Period”), unless otherwise agreed to by CPG and such Location.

6. CPG Disclaimer and Participant Release.

(a)

CPG DOES NOT MAKE, AND EXPRESSLY DISCLAIMS, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, AS TO ANY PRODUCTS AND SERVICES SOLD BY ANY VENDOR; AND PARTICIPANT HEREBY EXPRESSLY RELEASES CPG AND ITS AFFILIATES FROM ANY AND ALL LIABILITY AND CLAIMS RELATING TO THE PRODUCTS AND SERVICES, AND ANY BREACH OR ALLEGED BREACH OF WARRANTY IN CONNECTION WITH THE PRODUCTS AND SERVICES.

(b)

In no event will CPG, HPG or any of their Affiliates, agents, officers, directors and employees be liable for any indirect, punitive, special, incidental or consequential damage in connection with or arising out of this Agreement (including loss of profits, use, data or other economic advantage), however it arises, whether for breach of this Agreement, or in tort, even if CPG or HPG has been previously advised of the possibility of such damage.

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7. GPO Fees and Rebates.

(a)	Participant acknowledges that CPG will receive payment of fees for administrative and other services provided by CPG from one or more Vendors based on Products and Services, purchased, licensed or leased by Participant pursuant to the Program. Participant also acknowledges that CPG will share a portion of such fees with Blackstone on the terms set forth in Exhibit E.
(b)	CPG agrees to pay to Participant any funds received from Vendors designated as Vendor rebates based on purchases of Products and Services by Participant.

8. Termination.

(a)	CPG, as its sole and exclusive remedy, may terminate this Agreement on one hundred twenty (120) days prior written notice to Participant if (i) Participant and its Locations, taken as a whole, fail to maintain the Compliance Level for any two consecutive Calendar Quarters (provided, that, notwithstanding the right of CPG to terminate this Agreement under this clause (i), any such failure by Participant and its Locations to comply with this clause (i) shall not be considered a breach of this Agreement and CPG shall have no right to claim damages, equitable or other relief as a result of such failure), (ii) Participant and any Location fails to comply with the terms and conditions of any of the Vendor Contracts, or (iii) Participant or any Location otherwise breaches any provision of this Agreement, provided, however, that CPG may so terminate this Agreement in the event of failure by Participant and/or any Locations to comply with the foregoing clauses (i) or (ii), or a breach described in the foregoing clause (iii) only if CPG shall have given Participant written notice of the specifics of such failure or breach and Participant (or Location) shall not have cured such failure or breach or caused such failure or breach to be cured within fifteen (15) days after such notice.
(b)	CPG shall also have the right to terminate this Agreement in its entirety upon one hundred twenty (120) days prior written notice (i) upon the transfer, directly or indirectly, by sale, merger or otherwise, of substantially all of the assets of Participant or its ultimate parent or any permitted assignee to an independent third party if such independent third party is an Affiliate of, or a participant in a Competitor GPO; (ii) in the event that more than forty-nine percent (49%) of Participant’s capital stock or equity ownership, or the capital stock or equity ownership of its ultimate parent, or any such permitted assignee is transferred to an independent third party entity if such independent third party is an Affiliate of, or a participant in a Competitor GPO; (iii) upon Participant filing for protection under any bankruptcy laws or being the subject of any involuntary bankruptcy proceeding; or (iv) upon Participant and all Locations failing to make any purchases under any Vendor Contracts over any sixty (60) day period; provided, that CPG shall only have the right to terminate this Agreement pursuant to the foregoing clause (i) or (ii) of this Paragraph 8(b) for the thirty (30) day period commencing on the closing of the transfer of assets or capital stock or equity ownership, as applicable, described in such clauses (provided written notice of such closing is provided to CPG on or before the closing date). If Participant or any Location ceases to do business as a going concern, CPG shall have the right to terminate this Agreement effective fifteen (15) days after sending notice of termination to Participant and the Location.
(c)	CPG shall also have the right to terminate this Agreement with respect to any particular

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	Location, upon one hundred twenty (120) days prior written notice to Participant and such Location (i) upon the transfer, directly or indirectly, by sale, merger or otherwise, of substantially all of the assets of the Location to an independent third party if such independent third party is an Affiliate of, or a participant in a Competitor GPO; (ii) in the event that more than forty-nine percent (49%) of the Location’s capital stock or equity ownership is transferred to an independent third party entity if such independent third party is an Affiliate of, or a participant in a Competitor GPO; (iii) upon Location filing for protection under any bankruptcy laws or being the subject of any involuntary bankruptcy proceeding; or (iv) upon Location failing to make any purchases under any Vendor Contracts over any sixty (60) day period; provided, that CPG shall only have the right to terminate this Agreement pursuant to the foregoing clause (i) or (ii) of this Paragraph 8(c) for the thirty (30) day period commencing on the closing of the transfer of assets or capital stock or equity ownership, as applicable, described in such clauses (provided written notice of such closing is provided to CPG on or before the closing date). Subject to the foregoing, a Location shall be entitled to remain a CPG Participant provided it enters into its own participation agreement with CPG. If a Location ceases to do business as a going concern at the address (addresses) listed in Exhibit A to this Agreement, CPG shall have the right to terminate this Agreement with respect to such Location effective fifteen (15) days after sending notice of termination to Participant and the Location.
(d)	Participant shall have the right to terminate this Agreement upon thirty (30) days prior notice to CPG if CPG is in breach of a material provision of this Agreement (including, without limitation any provision in Section 4 hereof), and fails to cure such breach within the thirty (30) days of receipt of written notice specifying the breach of this Agreement. Errors in pricing or other information provided by CPG to Participant and Locations shall not be deemed to be a breach of this Agreement provided appropriate steps are taken by CPG to correct the error.
(e)	If (i) Participant provides CPG with written notice of a reasonable business justification for Participant to no longer be in a position to purchase Products and Services in any single Committed Category at any time (such as, but not limited to, pricing or other terms of Products and Services is not competitive; customer service from Vendor or CPG is not satisfactory; Participant enters into a major transaction and its management believes participation in CPG is no longer in Participant’s best interest following such major transaction; costs and/or time of administration of participation in CPG becomes uneconomical; participation in CPG materially and negatively impacts Participant’s corporate governance or compliance policies); and (ii) CPG, Participant and the Vendor (from which such Products and Services in such Committed Category are purchased) are unable to mutually agree on the terms of Participant’s continued participation in such Committed Category, then Participant shall have the right to terminate this Agreement ninety (90) days after the notice referred to in the foregoing clause (i). Participant acknowledges that any termination pursuant to this Section 8(e) shall completely terminate Participant’s participation in CPG, including its participation in all CPG Categories and any right to purchase Products and Services under any Vendor Contract.
(f)	If CPG or HPG shall file for protection under any bankruptcy laws or is the subject of any involuntary bankruptcy proceeding, Participant shall have the right to terminate this

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	Agreement upon thirty (30) days prior written notice provided such notice is given no later than ninety (90) days following Participant’s receipt of notice such filing. In such event, Participant have access to all CPG vendor contracts to allow facilitate transition during the thirty (30) day period.
(g)	If CPG terminates it’s Access Agreement with Blackstone other than for an uncured breach, Participant shall have the right to terminate this Agreement on thirty (30) days notice provided such notice is given within ninety (90) days following the later of either Participant’s receipt of notice of the date of termination of the Access Agreement or ninety (90) days following the date of termination of the Access Agreement.
(h)	In the event of a termination of this Agreement in accordance with the provisions herein, for any reason, by either CPG or Participant, the terminating party shall have no direct or indirect financial responsibility to the other party or such party’s equity owners or Affiliates, arising from the termination, either in the form of a termination fee, cancellation fee, or penalty, either liquidated or otherwise, or in the nature of lost profits or benefit of the Agreement.

9.	Confidentiality.
	CPG and Participant (on behalf of itself and its Locations) hereby acknowledge that the terms and Exhibits of this Agreement, and all information, documents and instruments (including, without limitation, all information regarding (x) the pricing, rebates, customer lists, discounts, shipping terms and other terms and conditions of the Vendor Contracts or (y) the Participant’s purchasing of Products and Services in any CPG Category or otherwise) delivered or otherwise provided to Participant or CPG in connection with this Agreement, or any of their respective agents, directors, officers or employees, is confidential (hereinafter, “Confidential Information”). CPG and Participant (on behalf of itself and its Locations) agree that throughout the term of this Agreement and for a period of three (3) years thereafter it shall maintain all Confidential Information in strict confidence and shall not disclose such Confidential Information to any third parties (including competing vendors) but may disclose such Confidential Information, (i) on a “need to know” basis to its duly authorized officers, directors, representatives, consultants, accountants, attorneys and agents, and (ii) in respect of any legal, tax or regulatory obligation or requirement; provided, that, the foregoing shall not be construed to prohibit CPG from disclosing certain Confidential Information regarding Participant’s purchasing volume of Products and Services as permitted under Section 23. CPG shall have no right to use or publicly disclose the name of the Participant or any derivation thereof in any advertisement or promotion of CPG without the prior written consent of Participant. The foregoing shall not be construed to prevent CPG from disclosing to Vendors and others that Participant is a member of CPG without any confidentiality requirement attached. Participant acknowledges that Confidential Information related to Vendor Contracts, including pricing thereunder, is highly sensitive and confidential information, and the unauthorized disclosure or use of which may potentially be damaging to CPG and Vendors. This Agreement supersedes the Confidentiality Agreement between Participant and HPG covering the substance of this Participation Agreement, it being understood by the parties that the confidentiality provisions of this Agreement shall apply to any Confidential Information received from the other prior to the Effective Date.
10.	Attorneys’ Fees.

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	If either party commences legal action related to any claim or controversy between the parties for any matter arising out of this Agreement, the non-prevailing party shall pay all costs and reasonable attorneys’ fees incurred by the prevailing party in connection therewith.
11.	Force Majeure.
	Neither party shall be liable to the other party for any delay or failure to perform its obligations hereunder if such delay or failure results from causes beyond its reasonable control. Such causes may include, without limitation, acts of God, fires or other catastrophes, telecommunications failures, equipment failures, power failures, labor disputes, strikes, delays in transportation, riots, war, governmental regulations, non-performance by suppliers and Vendors, or problems experienced by CPG’s computer software or hardware failures (an “Event of Force Majeure”). Each party shall give the other party prompt notice of any Event of Force Majeure that may cause delay or non-performance of its obligations hereunder.
12.	Notices.
	All notices or other communications required or permitted under this Agreement shall be in writing and sent by registered or certified mail, postage prepaid, or by express delivery service, or delivered personally, by private courier or fax, and followed by such mailing. Notice shall be deemed to have been given upon receipt. Notices shall be addressed to each party as set forth below:

          CPG:

CoreTrust Purchasing Group
104 Continental Place, Suite 300
Brentwood, Tennessee 37027
Fax No. (615) 344-3161
Attn: Assistant Vice President, GPO Operations

          With a copy to:

Managing Counsel
CoreTrust Purchasing Group
104 Continental Place, Suite 300
Brentwood, TN 37027

          Participant: to the address provided in the preamble with a copy to:

Allied Waste Industries, Inc.
15880 N. Greenway-Hayden Loop
Suite 100
Scottsdale, Arizona 85260
Attn: General Counsel

13.	Assignment.
	Except as otherwise indicated in this Agreement, neither party may assign this Agreement or any of its rights or duties set forth herein, without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed); no assignment in

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	violation of the provisions of this Agreement, shall vest any rights in any purported assignee. Notwithstanding, CPG shall have the right to subcontract or outsource to third parties specific obligations of CPG hereunder provided that CPG shall remain obligated for performance of such obligations. None of a sale of all or substantially all of the assets or securities of Participant, the public offering and sale, or subsequent public trading, of all or a portion any class of equity securities of Participant or any Affiliate of Participant, shall constitute an assignment for the purposes of this Agreement. Either party may assign without consent from the other, their rights and obligations under this Agreement to a successor entity as part of an internal reorganization which results in being organized in a different legal entity or corporate form, whether through conversion, merger, or otherwise.
14.	Severability.
	This Agreement shall be construed to be in accordance with any and all applicable federal and state laws and regulations. In the event there is a change in such laws and regulation, whether by statute, regulation, agency or judicial decision that has any material effect on the legality of any provision of this Agreement (“Affected Provision”) then the Affected Provision shall be deemed ineffective to the extent of such change in law or holding without invalidating the remaining provisions hereof or affecting the validity or enforceability of such Affected Provision in any other jurisdiction.
15.	Governing Law.
	This Agreement shall be governed by, and construed in accordance with, the laws of the State of Tennessee without regard to the conflict of laws and principles thereof.
16.	Consent to Jurisdiction and Venue.
	Participant and CPG on a non-exclusive basis each hereby expressly (a) submits and consents to the non-exclusive jurisdiction and venue of the United States District Court for the Middle District of Tennessee with respect to any legal proceedings arising out of or relating to this Agreement; (b) waives any objection which it may have based upon lack of personal jurisdiction, improper venue or forum non conveniens; (c) agrees that all claims with respect to such legal proceedings may be heard and determined in any Tennessee State Court sitting in Nashville, Tennessee or the United States District Court for the Middle District of Tennessee.
17.	Counterparts.
	This Agreement may be executed in any number of separate counterparts, each of which shall be deemed to constitute an original, but which together shall constitute one and the same instrument.
18.	Audit Rights.
	In the event CPG of reasonable evidence of the failure to meet the Compliance Level by Participant, CPG and Participant shall jointly review such evidence to assess its integrity and relevance. Participant may, at its election, provide CPG with additional evidence supporting its belief that it meets the Compliance Level or disputing the integrity or relevance of such claims of inaccuracy. Following such review and after further evaluation of the additional evidence from Participant, in the event CPG reasonably determines that substantial evidence

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	exists to support the likelihood that Participant doesn’t meet the Compliance Level, CPG shall have the right, at its expense, to review and audit the books, records, and documents (whether in hardcopy, electronic or other form) of Participant to verify compliance with their obligations under this Agreement, the volumes of purchases of Products and Services under Vendor Contracts, and to obtain, upon written request, any data and information directly related to the purchases of Products and Services by the Participant and Locations pursuant to this Agreement, required for CPG to fulfill its responsibilities as a group purchasing organization. The audit shall be conducted only after reasonable notice and during normal business hours, and may be conducted by CPG’s employees or agents, or by a third party auditor, subject to mutually agreed to reasonable terms. This right of audit may be exercised no more than one (1) time per year by CPG.
19.	Waiver of Jury Trial.
	PARTICIPANT AND CPG EACH HEREBY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT WHICH SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (c) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND, (d) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
20.	Rights Cumulative; Waiver; Merger Clause.
	Subject to the provisions in Section 8(a), all rights and remedies conferred under this Agreement or by any other instrument or law shall be cumulative and may be exercised singularly or concurrently. The failure by either party to enforce any term shall not be deemed to be a waiver of future enforcement of that or any other term of this Agreement. This Agreement, together with the exhibits thereto, as such exhibits may be modified or supplemented from time to time pursuant to the terms of this Agreement, sets forth the entire agreement and understanding of the parties hereto in respect of the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings relating to the subject matter hereof. No party hereto has relied upon any oral or written statement, representation, warranty, covenant, condition, understanding or agreement made by any other party or any representative, agent or employee thereof, except for those expressly set forth in this Agreement or in the exhibits hereto.
21.	Headings.
	The section headings contained in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

Page 13 of 14

22.	Amendments.
	This Agreement may only be amended, modified, superseded or supplemented by a written instrument expressly amending, modifying, superseding, or supplementing this Agreement, executed and delivered by each of the parties hereto.
23.	Data.
	CPG shall be the exclusive owner of the compilation of pricing data related to Vendor Products and Services. All purchasing transaction data (other than pricing data related to Vendor Products and Services) resulting from purchase of Vendor Products and Services by Participant shall be owned by Participant. Participant hereby authorizes CPG and Blackstone to have access to Participant’s purchasing transaction data, whether through Vendors, distributors, or any business-to-business e-commerce companies through which orders for Vendor Products and Services are placed by Participant. Participant further authorizes CPG to aggregate Participant purchasing transaction data with purchasing transaction data from other Participants of CPG for statistical analysis and other similar purposes, and to provide such aggregate data to third parties, provided, that, in connection with providing such aggregate data to third parties, in no event shall CPG identify or otherwise disclose specific data as being related to Participant.

IN WITNESS WHEREOF, each party hereto has duly executed, or has caused this Agreement to be duly executed, as of the date first above written.

CoreTrust Purchasing Group	Allied Waste North America, Inc.
a Division of HealthTrust Purchasing Group, LP
by CMS GP, LLC, its general partner
By:	By:
Name:	Name:	Thomas J. Piersa
Title:	Title:	Vice President, Procurement and Supply Chain Management
Date:	Date:

Page 14 of 14

LIST OF EXHIBITS

Exhibit A	Product/Services Exclusion List
Exhibit B	Location List
Exhibit C	GPO Affiliation Certificate
Exhibit D	List of selected Committed Categories
Exhibit E	Terms of Fee Sharing Arrangement between CPG and Blackstone

EXHIBIT A

GPO Participation Agreement

GPO: CoreTrust Purchasing Group

Participant: Allied Waste North America, Inc.

Date of Participation Agreement: July 1, 2006

Product/Services Exclusion List

Participant currently has an agreement with Staples for office supplies which is scheduled to expire on March or 2008. Participant agrees to commence purchasing under the CPG Vendor Contract(s) for the office supplies category after this expiration date.

Participant currently has an agreement with Global Office Solutions for copiers which is scheduled to expire in February of 2008. Participant agrees to commence purchasing under the CPG Vendor Contract(s) for the copiers category after this expiration date.

Page A-1

EXHIBIT B

GPO Participation Agreement

GPO: CoreTrust Purchasing Group

Participant: Allied Waste North America, Inc.

Date of Participation Agreement: July 1, 2006

Location List

Included and provided herein as “Attachment A”, dated June 12, 2006 and consisting of nine (9) pages, file named, “CPG Site List_Allied Waste_Print Version.xls”.

Page B-1

EXHIBIT C

[Type on Location Letterhead]

GPO Affiliation Certificate
CoreTrust Purchasing Group

     ___(“Participant”) hereby confirms that it has entered into a group purchasing organization relationship with CoreTrust Purchasing Group (“CPG”), a division of HealthTrust Purchasing Group, pursuant to a written Participation Agreement having an effective date of ___. Under the terms of the Participation Agreement, Participant has agreed that it and each of its locations (“Locations”) listed in the Participation Agreement, as amended from time to time, will purchase products and/or services under CPG products and/or services categories designated in the Participation Agreement (a list of Locations and designated categories to be provided by CPG to applicable vendors). Vendors having contracts with CPG that fall within these categories are hereby instructed and authorized to remove Participant and each Location from any other GPO affiliations for products and/or services in the designated categories. CPG is hereby authorized to provide copies of this certificate to CPG Vendors and such Vendors shall be entitled to rely on the contents of this Certificate. This Certificate shall remain in effect until written notice signed by Participant or any Location is provided to Vendors.

     Participant and each Location will comply with all terms and conditions of Vendor Contracts in the designated categories, including without limitation payment terms, compliance levels, and arbitration or other dispute resolution provisions. Each Location recognizes that failure to comply with these obligations could result in termination of the Participation Agreement with respect to Participant or such Location.

     Participant acknowledges for itself and on behalf of the Locations, for the purposes of the Participation Agreement, (i) that CPG is acting as a group purchasing organization for which it will earn fees to be paid by the Vendors, and (ii) that, from time to time, it may receive rebates from Vendors either directly or through CPG.

[PARTICIPANT LEGAL ENTITY NAME]	GPOID: CPG Use Only
By:	Contact Name:
Name:	Mailing Address:
Title:	Phone:
Date:	Fax:
	E-mail:

Page C-1

EXHIBIT D

GPO Participation Agreement

GPO: CoreTrust Purchasing Group

Participant: Allied Waste North America

Date of Participation Agreement: July 1, 2006

List of Committed Categories

Committed Categories:

1.	Desktop computers, laptops (only those used for truck diagnostics) and peripherals.
2.	Small Parcel shipment services (when made available by CPG)
3.	Rental cars (when made available by CPG)

CoreTrust Purchasing Group	Participant
a Division of HealthTrust Purchasing Group, LP
by CMS GP, LLC, its general partner
By:	By:
Name:	Name:	Thomas J. Piersa
Title:	Title:	Vice President, Procurement and Supply Chain Management
Date:	Date:

Page C-1

EXHIBIT E

Terms of Fee Sharing Arrangement between CPG and Blackstone

CPG and Blackstone shall enter into a GPO Access Agreement (the “Access Agreement”) pursuant to which Blackstone will receive a portion of the gross fees CPG and/or any affiliate receives from vendors (“GPO Fees”) in respect of purchases by the Participant under the Agreement, as set forth below. Distributions of amounts owed to Blackstone under the Access Agreement will occur periodically (but no less frequently than quarterly) based on actual GPO Fees received as a result of purchases by Portfolio Participants under CPG and/or any affiliate (non-clinical) vendor agreements. The Access Agreement shall have an initial term of five (5) years.

Blackstone’s fee for purchasing volume by the Participant and other participants in CPG that are or were Blackstone portfolio companies (collectively “Portfolio Participants”) under CPG and/or any affiliate (non-clinical) vendor agreements shall be equal to the sum of (i) fifty percent (50%) of the GPO Fees received in respect of purchasing volume under the CPG and/or any affiliate (non-clinical) vendor agreements by the Portfolio Participant for annual purchasing volume by Portfolio Participants up to Two Hundred Fifty Million Dollars ($250,000,000) and (ii) sixty percent (60%) of the GPO Fees received in respect of purchasing volume under the CPG and/or any affiliate (non-clinical) vendor agreements by Portfolio Participants for annual purchasing volume by Portfolio Participants in excess of Two Hundred Fifty Million Dollars ($250,000,000).

Blackstone’s fee for purchasing volume by participants in CPG that are not Blackstone portfolio companies but were previously identified and solicited by Blackstone for participation in CPG (“Blackstone Targets”) who become CPG Participants under CPG and/or any affiliate (non-clinical) vendor agreements shall be forty percent (40%) of the GPO Fees received in respect of purchasing volume under the CPG and/or any affiliate (non-clinical) vendor agreements by such Blackstone Targets.

Blackstone’s fee for purchasing volume by participants that are not Portfolio Participants or Blackstone Targets (“Non-Portfolio Participants” and together with Portfolio Participants and Blackstone Targets “Blackstone Participants”) under CPG and/or any affiliate (non-clinical) vendor agreements shall be a mutually agreed to percentage of the GPO Fees received in respect of purchasing volume under the CPG and/or any affiliate (non-clinical) vendor agreements by such Non-Portfolio Participants.

Blackstone shall not have any right to any GPO Fees related to purchases by GPO Participants that are not Blackstone Participants and shall only have a right to GPO Fees related to purchases by Non-Portfolio Participants, if applicable, as is set forth in a subsequent agreement between Blackstone and CPG.

Either CPG or Blackstone shall have the right to terminate the Access Agreement without cause on one hundred eighty (180) days prior written notice. CPG shall also have the right to terminate the Access Agreement on sixty (60) days prior notice given prior to July 31, 2006, if six (6) Portfolio Companies including Blackstone have not become Portfolio Participants. If termination is by CPG (other than for material, uncured breach by Blackstone) CPG shall continue to pay Blackstone the fees as set forth above in respect of Blackstone Participants after the effective date of termination. If termination is by Blackstone (other than for a material, uncured breach by CPG) Blackstone will forfeit the right to continue to receive fees as set forth above in respect of Blackstone Participants after the effective date of termination.

Page E-1

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, John J. Zillmer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Allied Waste Industries, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

ALLIED WASTE INDUSTRIES, INC.
By:	/s/ JOHN J. ZILLMER
	John J. Zillmer
	Chairman of the Board of Directors and
	Chief Executive Officer

Date: August 2, 2006

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Peter S. Hathaway, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Allied Waste Industries, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

ALLIED WASTE INDUSTRIES, INC.
By:	/s/ PETER S. HATHAWAY
	Peter S. Hathaway
	Executive Vice President and Chief Financial Officer

Date: August 2, 2006

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. §1350

We hereby certify that this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof, to the best of our knowledge, fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Allied Waste Industries, Inc.

ALLIED WASTE INDUSTRIES, INC.
By:	/s/ JOHN J. ZILLMER
	John J. Zillmer
	Chairman of the Board of Directors and
	Chief Executive Officer
ALLIED WASTE INDUSTRIES, INC.
By:	/s/ PETER S. HATHAWAY
	Peter S. Hathaway
	Executive Vice President and Chief Financial Officer

Date: August 2, 2006