S-4/A

      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 2002



                                                      REGISTRATION NO. 333-87116

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

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

                                AMENDMENT NO. 1


                                       TO


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

                           SYNAGRO TECHNOLOGIES, INC.
            (AND ITS SUBSIDIARIES IDENTIFIED ON THE FOLLOWING PAGE)
             (Exact name of registrant as specified in its charter)

                                                                
            DELAWARE                             4953                            76-0511324
 (State or other jurisdiction of     (Primary Standard Industrial             (I.R.S. Employer
 incorporation or organization)       Classification Code Number)            Identification No.)



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

                         1800 BERING DRIVE, SUITE 1000
                              HOUSTON, TEXAS 77037
                                 (713) 369-1700
    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)

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


                               ALVIN L. THOMAS II

                           EXECUTIVE VICE PRESIDENT,
                         GENERAL COUNSEL AND SECRETARY
                           SYNAGRO TECHNOLOGIES, INC.
                         1800 BERING DRIVE, SUITE 1000
                              HOUSTON, TEXAS 77037
                                 (713) 369-1700
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

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

                                   COPIES TO:
                                DAVID F. TAYLOR
                            LOCKE LIDDELL & SAPP LLP
                           3400 JP MORGAN CHASE TOWER
                               600 TRAVIS STREET
                           HOUSTON, TEXAS 77002-3095
                                 (713) 226-1200

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

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable following the effectiveness of this Registration
Statement.
     If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.  [ ]
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
     If this form is a post-effective amendment filed pursuant to rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]

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


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


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


                        TABLE OF ADDITIONAL REGISTRANTS




                                                  STATE OR OTHER    PRIMARY STANDARD
                                                 JURISDICTION OF       INDUSTRIAL      I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT                         INCORPORATION OR    CLASSIFICATION    IDENTIFICATION
AS SPECIFIED IN ITS CHARTER*                       ORGANIZATION       CODE NUMBER          NUMBER
- ----------------------------                     ----------------   ----------------   ---------------
                                                                              
Composting Corporation of America..............  Arkansas           4953               None
Environmental Protection & Improvement Company,
  Inc. ........................................  New Jersey         4953, 4212         22-1922397
Fairhaven Residual Systems, Inc. ..............  Delaware           4953               06-1450050
Fairhaven Residuals, Limited Partnership.......  Delaware           4953               06-1450051
Future -- Tech Environmental Services, Inc.....  California                            68-0281821
NETCO-Connecticut, Inc. .......................  Connecticut        4953               06-1345532
NETCO-Residuals Management Systems, Inc. ......  Delaware           4953               06-1391602
NETCO-Residuals Management, Limited
  Partnership..................................  Delaware           4953               06-1392669
NETCO-Waterbury Systems, Inc., f/k/a
NETCO-Waterbury, Inc. .........................  Delaware           4953               06-1372032
NETCO-Waterbury, Limited Partnership...........  Delaware           4953               06-1375202
New England Treatment Company, Inc. ...........  Rhode Island       4953               06-1201634
New Haven Residuals Systems, Inc. .............  Delaware           4953               06-1432757
New Haven Residuals, Limited Partnership.......  Delaware           4953               06-1432758
New York Organic Fertilizer Company............  New York           4953               36-4148694
NYOFCO Holdings Inc. ..........................  Delaware           4953               36-4122352
Organi-Gro, Inc. ..............................  Arkansas           4953               None
Providence Soils, LLC..........................  Rhode Island       4953               06-1559061
Residual Technologies Systems, Inc. ...........  Delaware           4953               06-1439485
Residual Technologies, Limited Partnership.....  Delaware           4953               06-1439486
Residuals Processing, Inc. ....................  California         4953               76-0366005
Soaring Vista Properties, Inc. ................  Maryland           6531               52-1444015
ST Interco, Inc. ..............................  Delaware           4953               None
Synagro -- Baltimore L.L.C.....................  Maryland           4953               36-4097600
Synagro Composting Company of California,
  Inc. ........................................  California         4953               33-0267671
Synagro Delaware, Inc. ........................  Delaware           4953               51-0405181
Synagro Digestion, Inc. .......................  California         4953               33-0979381
Synagro Management, L.P........................  Texas              8741               76-0664546
Synagro Mid-Atlantic, Inc. ....................  Delaware           4953               76-0612565
Synagro Midwest -- Enviroland, Inc., f/k/a
  Enviroland, Inc. ............................  Michigan           4953               38-2589060
Synagro Midwest, Inc. .........................  Delaware           4953               76-0612568
Synagro Northeast, Inc. .......................  Delaware           4953               76-0612564
Synagro of California, Inc. ...................  Arizona            4953               86-0468598
Synagro of Florida-A&J, Inc. ..................  Florida            4953               65-0751886
Synagro of Florida-Anti-Pollution, Inc. .......  Florida            4953               74-2917159
Synagro of Florida-Davis Water, Inc. ..........  Florida            4953               59-2210462
Synagro of Florida-Ecosystems, Inc. ...........  Florida            4953               59-2580855
Synagro of Michigan, Inc. .....................  Michigan           4953               38-3028422
Synagro of Minnesota -- Rehbein, Inc. .........  Minnesota          4953               41-1507969
Synagro of North Carolina-Amsco, Inc. .........  North Carolina     4953               76-0605487
Synagro of North Carolina-EWR, Inc. ...........  North Carolina     4953               56-2110110






                                                  STATE OR OTHER    PRIMARY STANDARD
                                                 JURISDICTION OF       INDUSTRIAL      I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT                         INCORPORATION OR    CLASSIFICATION    IDENTIFICATION
AS SPECIFIED IN ITS CHARTER*                       ORGANIZATION       CODE NUMBER          NUMBER
- ----------------------------                     ----------------   ----------------   ---------------
                                                                              
Synagro of Texas-CDR, Inc. ....................  Texas              4953               74-2648566
Synagro of Texas-Vital-Cycle, Inc. ............  Wisconsin          4953               39-1763997
Synagro of Wisconsin, Inc. ....................  Wisconsin          4953               39-1446277
Synagro Southeast, Inc. .......................  Delaware           4953               74-2924511
Synagro Southwest, Inc. .......................  Delaware           4953               76-0612567
Synagro Texas, Inc. ...........................  Texas              4953               76-0664372
Synagro West, Inc. ............................  Delaware           4953               76-0612566
Synagro-WWT, Inc., f/k/a Wheelabrator Water
  Technologies, Inc. ..........................  Maryland           4953               52-1130492
Synagro WCWNJ, Inc., f/k/a Wheelabrator Clean
  Water New Jersey , Inc. .....................  Delaware           4953               36-3960817


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

* Addresses and telephone numbers of principal executive offices are the same as
  that of Synagro Technologies, Inc.


THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY CHANGE. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.


                    SUBJECT TO COMPLETION DATED JUNE 6, 2002


                           SYNAGRO TECHNOLOGIES, INC.

                                  $150,000,000

                               OFFER TO EXCHANGE

                                   REGISTERED
                   9 1/2% SENIOR SUBORDINATED NOTES DUE 2009
                                      FOR
                                ALL OUTSTANDING
                   9 1/2% SENIOR SUBORDINATED NOTES DUE 2009

The exchange offer:

     - expires at 5:00 p.m., New York City time, on           , 2002, unless
       extended; and

     - is not conditional upon any minimum aggregate principal amount of old
       notes being tendered.

In addition, you should note that:

     - all old notes that are validly tendered and not withdrawn will be
       exchanged for registered new notes;

     - tenders of old notes may be withdrawn any time before the expiration of
       the exchange offer;

     - the exchange of new notes for old notes will not be a taxable event for
       U.S. federal income tax purposes;

     - we will not receive any cash proceeds from the exchange offer; and

     - the exchange offer is the initial offering of the new notes.

The new notes:

     - will be freely tradeable;

     - are otherwise substantially identical to the old notes;

     - will accrue interest at the same rate per annum as the old notes payable
       semi-annually in arrears on each April 1, and October 1, beginning
       October 1, 2002;

     - will be unsecured and will rank senior in right of payment to future
       subordinated indebtedness, equally with the old notes that are not
       exchanged and all future senior subordinated indebtedness, but will
       effectively be junior to all other existing and future senior
       indebtedness (including all borrowings under the proposed new credit
       facility);

     - will not be listed on any securities exchange or on any automated dealer
       quotation system; and

     - will be guaranteed by all of our existing and future domestic
       subsidiaries, other than subsidiaries treated as unrestricted
       subsidiaries.


     YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 11 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.


     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the new notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.


                  The date of this prospectus is June 6, 2002



                               TABLE OF CONTENTS




                                        PAGE
                                        ----
                                     
Summary...............................    1
Risk Factors..........................   11
Forward-Looking Statements............   22
Use of Proceeds.......................   24
Capitalization........................   25
Selected Consolidated Financial and
  Operating Data......................   26
The Exchange Offer....................   27
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   37
Business..............................   48
Management............................   64
Executive Compensation................   66






                                        PAGE
                                        ----
                                     
Certain Relationships and Related
  Party Transactions..................   68
Principal Stockholders................   72
Management Stockholdings..............   73
Description of Other Indebtedness and
  Preferred Stock.....................   74
Description of Notes..................   78
Material U.S. Federal Income Tax
  Considerations......................  120
Plan of Distribution..................  125
Legal Matters.........................  126
Independent Accountants...............  126
Where You Can Find More Information...  126
Index to Financial Statements.........  F-1



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

     Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of new notes. The letter of transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended, which we refer to as the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of new notes received in exchange
for old notes where the old notes were acquired by the broker-dealer as a result
of market-making activities or other trading activities. We have agreed that,
for a period of 180 days after the expiration date, we will make this prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."

     We are a Delaware corporation with executive offices located at 1800 Bering
Drive, Suite 1000, Houston, Texas 77037, and our telephone number at that
address is (713) 369-1700. Our website is located at www.synagro.com. The
information on our website or any other website is not incorporated into this
prospectus and does not constitute a part of this prospectus. Our common stock
is publicly traded on the Nasdaq National Market under the symbol "SYGR."

     References in this prospectus to "we," "us," "our," and "Synagro" refer to
Synagro Technologies, Inc. and its subsidiaries combined, unless context clearly
indicates otherwise. References in this prospectus to "notes" refers to both the
new notes and the old notes.

                                        i


                                    SUMMARY


     The following is a summary of the material information appearing elsewhere
in this prospectus. This summary may not contain all of the information that may
be important to you. You should read the entire prospectus carefully, including
the "Risk Factors" beginning on page 11 and the financial statements and related
notes.


                           SYNAGRO TECHNOLOGIES, INC.

THE EXCHANGE OFFER AND NEW CREDIT FACILITY

     In April 2002, we issued and sold $150 million in aggregate principal
amount of our 9 1/2% senior subordinated notes due 2009, or old notes. In
connection with that sale, we entered into an exchange and registration rights
agreement with the initial purchasers of the old notes in which we agreed to
deliver this prospectus to you and to complete an exchange offer for the old
notes. Pursuant to the exchange and registration rights agreement, we are
offering to issue $150 million in aggregate principal amount of our new 9 1/2%
senior subordinated notes due 2009, or new notes, in exchange for a like
aggregate principal amount of our old notes. We refer to this offer to issue new
notes in exchange for old notes in accordance with the terms set forth in this
prospectus and the accompanying letter of transmittal as the exchange offer. You
are entitled to exchange your old notes for new notes. We urge you to read the
discussions under the headings "Summary of the Exchange Offer" and "Summary of
Terms of the New Notes" in this summary for further information regarding the
exchange offer and the new notes.


     The proceeds from the old notes were used to repay and refinance existing
indebtedness under our old credit facility as of April 17, 2002 and our
subordinated debt. Affiliates of Banc of America Securities LLC, one of the
initial purchasers, were participating lenders under our old credit facility,
and as such, received a portion of the proceeds from the sale of the notes that
were used to repay amounts outstanding under such credit facility. Affiliates of
GTCR Golder Rauner LLC and The TCW Group, Inc., our majority stockholders, were
participating lenders under our subordinated debt, and as such, they received
the portion of the proceeds from the sale of the notes that were used to retire
all amounts outstanding under the subordinated debt.



     In May 2002, we entered into a new credit facility that replaced our old
credit facility. Our new credit facility provides senior secured financing of up
to $150 million of which approximately $78.5 million is currently drawn upon.


BUSINESS OVERVIEW


     We are the only national company exclusively focused on wastewater
residuals management. We serve more than 1,000 municipal and industrial
wastewater treatment plants and have operations in 35 states and the District of
Columbia. When wastewater is treated, it is separated into a liquid portion and
a solids (or residuals) portion. We use the term "wastewater residuals" to
include both solids that have been treated pursuant to certain federal
government regulations and those that have not. We believe we provide the
industry's broadest range of services for the beneficial reuse of these
wastewater residuals. We currently operate four heat-drying facilities, four
composting facilities, three incineration facilities, one manure-to-energy
facility, 27 permanent and 22 mobile dewatering units, and more than 250 small
wastewater treatment plants (ranging from 500 gallons per day to 500,000 gallons
per day).



     Approximately 80% of our 2001 revenue was generated through more than 450
contracts with original terms that range from one to twenty-five years in
length. These contracts have an estimated remaining contract value including
renewal options, which we call backlog, of approximately $1.8 billion. Our
estimated backlog will be recognized during the period from 2002 through 2027
and includes $.6 billion of estimated contract value related to renewal options
(see "Business -- Backlog" on page 57). In general, our contracts contain
provisions for inflation related annual price increases, renewal provisions, and
broad force majeure clauses. As of December 31, 2001, our top ten customers had
an average of 11.3 years remaining on their current contracts, including renewal
options. In 2001, we experienced a contract retention rate (both renewals and
rebids) of approximately 90%.


                                        1


     We benefit from customer diversification. For the years ended December 31,
2001 and 2000, our single largest customer accounted for 14% and 11% of our
revenues, respectively, and for the year ended December 31, 2001, our top ten
customers accounted for approximately 34% of our revenues. Our municipal
customers accounted for approximately 84% of our 2001 revenues. We believe that
the wastewater residuals management industry is less susceptible than most
industries to the effects of a general economic downturn.


     GTCR Golder Rauner, LLC, our majority stockholder, owns approximately $62.6
million face value of our convertible preferred shares. For the year ended
December 31, 2001, our revenue, our earnings before interest, taxes,
depreciation, amortization, accounting change, preferred stock dividends, and
noncash beneficial conversion charge, and our net income applicable to common
stock were $260 million, $66 million and $11 million, respectively.


INDUSTRY OVERVIEW

     Most residential, commercial, and industrial wastewater is collected
through an extensive network of municipal sewers and transported to wastewater
treatment plants, which are known as publicly owned treatment works, or POTWs.
The use and disposal of wastewater residuals is regulated by the 40 CFR Part 503
Regulations promulgated by the Environmental Protection Agency, or EPA, pursuant
to the Clean Water Act, or Part 503 Regulations. The Part 503 Regulations impact
POTWs and privately owned and managed wastewater treatment plants.

     We estimate that the wastewater residuals industry was approximately $11.6
billion in 2000, and will grow at 4 to 5% annually over the next decade. The
growth in the underlying volumes of wastewater residuals generated by the
municipal and industrial markets is driven by a number of factors. The amount of
municipal residuals generated by wastewater treatment plants should increase
with both the United States' underlying population growth and the growth in the
percentage of that population served by municipal wastewater systems. We believe
pressure on municipal and industrial wastewater generators to better manage
wastewater should drive the growth of more wastewater treatment facilities with
better separation technologies, which should increase the amount of residuals
ultimately produced. In addition, we believe the trend toward stricter laws and
regulations will continue to place increased pressure on wastewater generators
to spend more on treatment technologies that should ultimately result in more
residuals being removed from the wastewater streams.

     We believe that the management of wastewater residuals is a highly
fragmented industry. Historically, POTWs performed the necessary wastewater
residuals management services, and we believe this function is increasingly
being performed by private contractors in an effort to lower cost, increase
efficiency and comply with new regulations. In addition, there is greater
interest in using sophisticated treatment technologies to meet the highest EPA
standards of wastewater residuals management. We believe we are well positioned
to take advantage of industry fragmentation, the trend toward outsourcing
services and the increased use of more advanced treatment technologies.

COMPETITIVE STRENGTHS

     We believe that we benefit from the following competitive strengths:

  BROAD SERVICE OFFERING


     We provide our customers with complete, vertically-integrated services and
capabilities. Advantages to our customers include:



     - significant land base; and



     - large range of processing capabilities and product marketing experience.


                                        2



  LARGEST IN SCALE



     We are the only national company focused exclusively on wastewater
residuals management services. We believe the advantages of scale include:



     - knowledgeable sales force;



     - bonding capacity; and



     - financial stability.



  EXPERIENCED SENIOR MANAGEMENT TEAM



     Our eight most senior executives collectively have more than 90 years of
management experience in the municipal and industrial wastewater residuals
management industry. Senior management has extensive prior experience at
predecessor companies, as well as with firms such as Browning-Ferris Industries,
Wheelabrator Technologies, and Allied Waste. As of May 10, 2002, collectively,
this group of senior executives beneficially owned approximately 15% of our
common stock.


BUSINESS STRATEGY

     Our goals are to strengthen our position as the only national company
exclusively focused on wastewater residuals management and to continuously
improve our margins. Components of our strategy to achieve these goals include:


  INTERNAL GROWTH BASED ON OUTSOURCING


     We believe that we have the opportunity to expand our business by providing
services for new customers who currently perform their own wastewater residuals
management, and by increasing the range of services that our existing customers
outsource to us.


  IMPROVE MARGINS



     We actively work to improve our margins by increasing revenues while
leveraging our operating infrastructure in the field and our corporate overhead.



  SELECTIVELY SEEK COMPLEMENTARY ACQUISITIONS


     We selectively seek strategic opportunities to acquire businesses that
profitably expand our service offerings, increase our geographic coverage, or
increase our customer base. We believe that strategic acquisitions can enable us
to gain efficiencies in our existing operations.

THE EQUITY SPONSOR


     GTCR Golder Rauner, LLC, or GTCR, is a leading private equity investment
firm based in Chicago, Illinois. GTCR, through its limited partnership funds,
has more than $4.5 billion of assets under management. Since its founding in
1980, GTCR has invested more than $3.7 billion and partnered with more than 150
management teams. The principals of GTCR have extensive experience in the
outsourcing services sector, including investments in Coinmach Corporation,
American Medical Laboratories and Student Transportation of America. Investment
funds associated with GTCR own approximately $62.6 million face value of our
convertible preferred stock. GTCR and its affiliates have the right to vote
approximately 56.2% of our common stock and currently have two of the six
positions on our board of directors.


                                        3


                         SUMMARY OF THE EXCHANGE OFFER

     On April 17, 2002, we completed a private offering of the old notes. We
entered into an exchange and registration rights agreement with the initial
purchaser in the private offering. We agreed to file a registration statement
with the Securities and Exchange Commission, or Commission, within 90 days after
the date we issued the old notes and to use all commercially reasonable efforts
to have it declared effective within 180 days after the date we issued the old
notes. You are entitled to new registered notes with substantially identical
terms as your old notes in exchange for your old notes. You should read the
discussion under the headings "--Summary of Terms of New Notes" and "Description
of Notes" for further information regarding the new notes.

     We summarize the terms of the exchange offer below. You should read the
discussion under the heading "The Exchange Offer" for further information
regarding the exchange offer and resale of the new notes.

THE EXCHANGE OFFER............   We are offering to issue to you new registered
                                 9 1/2% senior subordinated notes due 2009.

EXPIRATION DATE...............   Unless sooner terminated, the exchange offer
                                 will expire at 5:00 p.m., New York City time,
                                 on [     ], 2002, or at a later date and time
                                 to which we extend it.


CONDITIONS TO THE EXCHANGE
OFFER.........................   We will not be required to accept outstanding
                                 notes for exchange if the exchange offer would
                                 violate applicable law or if any legal action
                                 has been instituted or threatened that would
                                 impair our ability to proceed with the exchange
                                 offer. The exchange offer is not conditioned on
                                 any minimum aggregate principal amount of old
                                 notes being tendered. Please read the section
                                 "The Exchange Offer -- Conditions to the
                                 Exchange Offer" beginning on page 29 for more
                                 information regarding the conditions to the
                                 exchange offer.


PROCEDURES FOR TENDERING OLD
NOTES.........................   If you wish to participate in the exchange
                                 offer, you must complete, sign and date the
                                 letter of transmittal and mail or deliver the
                                 letter of transmittal, together with your old
                                 notes, to the exchange agent. If your old notes
                                 are held through The Depository Trust Company,
                                 or DTC, you may deliver your old notes by
                                 book-entry transfer.

                                 In the alternative, if your old notes are held
                                 through DTC and you wish to participate in the
                                 exchange offer, you may do so through the
                                 automated tender offer program of DTC. If you
                                 tender under this program, you will agree to be
                                 bound by the letter of transmittal that we are
                                 providing with this prospectus as though you
                                 had signed the letter of transmittal.

                                 By signing or agreeing to be bound by the
                                 letter of transmittal, you will represent to
                                 us, among other things, that:

                                 - you are not our "affiliate," as defined in
                                   Rule 405 of the Securities Act or a
                                   broker-dealer tendering old notes acquired
                                   directly from us for your own account;

                                 - if you are not a broker-dealer or are a
                                   broker-dealer but will not receive new notes
                                   for your own account, you are not engaged in
                                   and do not intend to participate in a
                                   distribution of the new notes;

                                 - you have no arrangement or understanding with
                                   any person to participate in the distribution
                                   of the new notes or the old notes;

                                        4


                                 - any new notes you receive will be acquired in
                                   the ordinary course of your business; and

                                 - if you are a broker-dealer that will receive
                                   new notes for your own account in exchange
                                   for old notes, those old notes were acquired
                                   as a result of market-making activities or
                                   other trading activities, and you will
                                   deliver a prospectus, as required by law, in
                                   connection with any resale of those new
                                   notes.

PROCEDURES FOR BENEFICIAL
OWNERS........................   If you beneficially own old notes registered in
                                 the name of a broker, dealer, commercial bank,
                                 trust company or other nominee and you wish to
                                 tender your old notes in the exchange offer,
                                 you should promptly contact the registered
                                 holder and instruct it to tender the old notes
                                 on your behalf.

                                 If you wish to tender your old notes on your
                                 own behalf, you must either arrange to have
                                 your old notes registered in your name or
                                 obtain a properly completed bond power from the
                                 registered holder before completing and
                                 executing the letter of transmittal and
                                 delivering your old notes. The transfer of
                                 registered ownership may take considerable
                                 time.


GUARANTEED DELIVERY
PROCEDURES....................   If you wish to tender your old notes and cannot
                                 comply with the requirement to deliver the
                                 letter of transmittal and old notes or use the
                                 applicable procedures under the automated
                                 tender offer program of DTC, you must tender
                                 your old notes according to the guaranteed
                                 delivery procedures described in "The Exchange
                                 Offer -- Guaranteed Delivery Procedures" on
                                 page 34.



WITHDRAWAL RIGHTS.............   Except as otherwise provided in this
                                 prospectus, you may withdraw your tender at any
                                 time before 5:00 p.m., New York City time, on
                                 [          ], 2002, unless previously accepted
                                 for exchange.



U.S. FEDERAL INCOME TAX
CONSIDERATIONS................   The exchange of new notes for old notes in the
                                 exchange offer will not be a taxable event for
                                 U.S. federal income tax purposes. Please read
                                 "Material U.S. Income Tax Considerations"
                                 beginning on page 120.


USE OF PROCEEDS...............   We will not receive any cash proceeds from the
                                 issuance of the new notes.

PLAN OF DISTRIBUTION..........   All broker-dealers who receive new notes in the
                                 exchange offer have a prospectus delivery
                                 obligation.


                                 Based on Commission "no-action letters" issued
                                 to third parties in unrelated transactions,
                                 broker-dealers who acquired the old notes as a
                                 result of market-making or other trading
                                 activities may use this exchange offer
                                 prospectus, as supplemented or amended, in
                                 connection with the resales of the new notes.


                                 Broker-dealers who acquired the old notes from
                                 us may not rely on Commission staff
                                 interpretations in "no-action letters."

                                 Broker-dealers who acquired the old notes from
                                 us must comply with the registration and
                                 prospectus delivery requirements of the
                                 Securities Act including being named as selling
                                 noteholders, in order to resell the old notes
                                 or the new notes.

                                        5


                               THE EXCHANGE AGENT

     We have appointed Wells Fargo Bank Minnesota, National Association, as
exchange agent for the exchange offer. You should direct questions and requests
for assistance, requests for additional copies of this prospectus or of the
letter of transmittal and requests for the notice of guaranteed delivery to the
exchange agent addressed as follows:


                 For Delivery by Overnight Courier or by Hand:


                Wells Fargo Bank Minnesota, National Association

                           Corporate Trust Operations


                                 MAC N9303-121


                              Sixth and Marquette


                          Minneapolis, Minnesota 55479



                 For Delivery by Registered or Certified Mail:



                Wells Fargo Bank Minnesota, National Association


                           Corporate Trust Operations


                                 MAC N9303-121


                                 P.O. Box 1517


                       Minneapolis, Minnesota 55480-1517


          By Facsimile Transmission (for eligible institutions only):


                                 (612) 667-4927


                              To Confirm Receipt:


                                 (800) 344-5128


                                        6


                       SUMMARY OF TERMS OF THE NEW NOTES

     The new notes will be freely tradeable and otherwise substantially
identical to the old notes. The new notes will not have registration rights. The
new notes will evidence the same debt as the old notes, and the new notes will
be governed by the same indenture.

ISSUER........................   Synagro Technologies, Inc.

NEW NOTES.....................   $150,000,000 in aggregate principal amount of
                                 9 1/2% Senior Subordinated Notes due 2009.

GUARANTEES....................   All payments with respect to the new notes,
                                 including principal and interest, will be fully
                                 and unconditionally guaranteed on an unsecured
                                 senior subordinated basis by all of our
                                 existing and future domestic subsidiaries,
                                 other than subsidiaries treated as unrestricted
                                 subsidiaries.

MATURITY DATE.................   April 1, 2009.

INTEREST PAYMENT DATES........   April 1 and October 1, commencing October 1,
                                 2002.

RANKINGS......................   The new notes and the guarantees will be
                                 unsecured and:

                                 - subordinate in right of payment to all of our
                                   and our guarantors' existing and future
                                   senior indebtedness (including all borrowings
                                   under the new credit facility);

                                 - equal in right of payment to our and the
                                   guarantors' future senior subordinated
                                   indebtedness; and

                                 - senior in right of payment to our and our
                                   guarantors' future subordinated indebtedness.


                                 As of May 31, 2002:



                                 - our outstanding senior indebtedness under the
                                   new credit facility was $78.5 million; and



                                 - our guarantors had guaranteed senior
                                   indebtedness of $78.5 million, which
                                   consisted exclusively of guarantees of our
                                   borrowings under the new credit facility.



                                 The indenture permits us and the guarantors to
                                 incur substantial additional senior
                                 indebtedness. As of May 31, 2002, the maximum
                                 amount of additional senior indebtedness that
                                 we and the guarantors were permitted to borrow
                                 under the terms of our new credit facility was
                                 approximately $22 million.


OPTIONAL REDEMPTION...........   On or after April 1, 2006, we may redeem some
                                 or all of the new notes at any time at the
                                 redemption prices described in the section
                                 "Description of Notes -- Optional Redemption."

                                 Prior to April 1, 2005, we may redeem up to 35%
                                 of the original aggregate principal amount of
                                 the new notes with the net cash of certain
                                 public offerings of equity, provided at least
                                 65% of the original aggregate principal amount
                                 of the new notes remains outstanding after the
                                 redemption.

MANDATORY REDEMPTION..........   If we sell certain assets or experience
                                 specific kinds of changes in control, we must
                                 offer to repurchase the new notes at the
                                 prices, plus accrued interest, if any, to the
                                 date of redemption, listed in the

                                        7


                                 section entitled "Description of
                                 Notes -- Repurchase at the Option of Holders."

COVENANTS.....................   We will issue the new notes under an indenture
                                 among us, the guarantors and the trustee. The
                                 indenture will limit our ability and that of
                                 our restricted subsidiaries to:

                                 - incur additional indebtedness and issue
                                   preferred stock;

                                 - pay dividends or make other distributions;

                                 - make other restricted payments and
                                   investments;

                                 - create liens;

                                 - incur restrictions on the ability of our
                                   subsidiaries to pay dividends or other
                                   payments to us;

                                 - sell assets;

                                 - merge or consolidate with other entities; and

                                 - enter into transactions with affiliates.

                                 Each of the covenants is subject to a number of
                                 important exceptions and qualifications. See
                                 "Description of Notes -- Certain Covenants."


     Before deciding to participate in the exchange offer, you should carefully
consider, along with the other information set forth in this prospectus, the
specific factors set forth under "Risk Factors" beginning on page 11.


                                        8


                 SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA
                          FINANCIAL AND OPERATING DATA


     The following table summarizes our consolidated historical and pro forma
financial and operating data, which you should read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes. The
summary consolidated historical financial and other data as of December 31,
1999, 2000 and 2001 and for each of the years in the three-year period ended
December 31, 2001 have been derived from our audited consolidated financial
statements contained elsewhere in this prospectus. The summary consolidated
historical and pro forma financial and operating data for the quarters ended
March 31, 2002 and 2001 are derived from our unaudited consolidated financial
statements for the respective periods. In the opinion of our management, the
unaudited financial statements reflect all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
results of operations and financial position of our company as of the date of
and for the periods presented. Historical results are not necessarily indicative
of the results to be expected in the future. The supplemental pro forma data was
derived by applying the pro forma and other adjustments described in the notes
to our historical financial and other data.





                                                                                THREE MONTHS ENDED
                                                  YEAR ENDED DECEMBER 31,            MARCH 31,
                                              -------------------------------   -------------------
                                                1999       2000        2001       2001       2002
                                              --------   ---------   --------   --------   --------
                                              (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
                                                                            
STATEMENT OF OPERATIONS DATA:
Revenue.....................................  $ 56,463   $ 163,098   $260,196   $ 58,795   $ 56,817
Cost of services............................    42,471     119,900    192,919     45,327     43,258
                                              --------   ---------   --------   --------   --------
Gross profit................................    13,992      43,198     67,277     13,468     13,559
Selling, general and administrative
  expenses..................................     6,876      14,337     20,786      5,351      5,768
Amortization of goodwill....................     1,527       3,516      4,489      1,133         28
Special (credits) charges, net(1)...........     1,500          --     (4,982)        --         --
                                              --------   ---------   --------   --------   --------
Income from operations......................     4,089      25,345     46,984      6,984      7,763
Net income before certain noncash
  items(2)..................................  $  1,148   $   6,551   $ 19,664   $   (369)  $  1,431
Net income (loss) applicable to common
  stock.....................................  $  1,148   $ (34,433)  $ 10,555   $ (3,973)  $   (412)
OTHER DATA:
Earnings before interest, taxes,
  depreciation, amortization, accounting
  change, preferred stock dividends, and
  noncash beneficial conversion charge(3)...  $  8,824   $  36,533   $ 65,599   $ 11,412   $ 11,370
Operating margin............................       7.2%       15.5%      18.1%      11.9%      13.7%
Net cash provided by operating activities...  $  2,090   $  19,620   $ 38,208   $  6,404   $  5,498
Net cash used in investing activities.......   (16,316)   (250,946)   (14,049)    (4,166)    (3,810)
Net cash provided by (used in) financing
  activities................................    13,992     235,743    (28,505)    (4,543)    (1,685)
Depreciation and amortization of goodwill...     4,440      11,074     18,390      4,422      3,569
Capital expenditures........................     4,043       5,805     13,313      3,390      3,609
Cash paid for interest......................     3,294      15,913     25,577      5,013      3,400
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents...................  $    181   $   6,682   $  3,533   $  2,292   $  3,353
Working capital.............................     3,982      17,734      7,315      7,967      6,818
Property, plant and equipment, net..........    15,919     198,466    206,114    198,488    206,010
Goodwill, net...............................    64,280     166,699    163,739    168,270    164,150
                                              --------   ---------   --------   --------   --------
Total assets................................    99,172     443,821    446,168    441,339    444,247
Total debt..................................    43,429     284,933    258,416    281,264    256,736
Convertible preferred stock.................        --      63,367     70,431     65,110     72,274
Stockholders' equity........................    45,314      53,564     61,891     46,286     61,605
Ratio of earnings to fixed charges(4)             1.31        1.32       1.71                  1.39
SUPPLEMENTAL PRO FORMA DATA:(5)
Ratio of total debt to total
  capitalization............................                             67.2%
  EXCLUDING NONRECOURSE PROJECT DEBT(6)
  Ratio of total debt to total
    capitalization..........................                             63.2%



                                        9


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

(1) Special (credits) charges, net includes: (i) $1.5 million of legal,
    accounting and financing charges incurred in 1999 relating to the Azurix
    Corp. litigation and several other legal matters; (ii) $6.0 million gain
    from a cash legal settlement related to claims between us and Azurix Corp.
    in 2001; (iii) $1.1 million gain resulting from the settlement of other
    litigation in 2001; and (iv) $2.2 million charge, in 2001, for our estimated
    net exposure for unpaid insurance claims and other costs related to our 1998
    and 1999 policy periods with our previous underwriter, Reliance National
    Indemnity Company, which is in insolvency proceedings.

(2) Noncash items include cumulative effect of change in accounting for
    derivatives, preferred stock dividends and noncash beneficial conversion
    charge.


(3) Earnings before interest, taxes, depreciation, amortization, accounting
    change, preferred stock dividends, and noncash beneficial conversion charge
    is presented because we believe it is frequently used by securities
    analysts, investors and other interested parties in the evaluation of
    companies in the wastewater business. However, other companies in our
    industry may calculate this measure differently than we do. This is not a
    measure of performance under generally accepted accounting principles and
    should not be considered as an alternative to cash flows from operating
    activities or as a measure of liquidity or an alternative to net income as
    indicators of our operating performance or any other measure of performance
    derived in accordance with generally accepted accounting principles. See the
    Consolidated Statements of Cash Flow included in our Consolidated Financial
    Statements.



(4) Our ratio of earnings to fixed charges were computed by dividing earnings
    available for fixed charges by fixed charges. For this purpose, earnings
    available for fixed charges are the sum of income before provision for
    income taxes from continuing operations and fixed charges. Fixed charges are
    interest, amortization of debt expense and discount on premium relating to
    indebtedness, and such portion of rental expense that can be demonstrated to
    be representative of the interest factor in the particular case.



(5) Adjusted to reflect issuance of $150 million of 9 1/2% Senior Subordinated
    Notes and new credit facility, and application of proceeds therefrom.



(6) Excludes the impact of nonrecourse project debt of $48.7 million and
    restricted cash of $5.8 million. The nonrecourse debt is an obligation of
    one of our wholly-owned subsidiaries. This wholly-owned subsidiary will
    initially be an unrestricted guarantor subsidiary under the indenture.


                                        10


                                  RISK FACTORS


     You should carefully consider the risk factors set forth below as well as
the other information contained in this prospectus before deciding to
participate in the exchange offer. The risks described below are the most
significant risk factors facing us. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial may also
materially and adversely affect our business operations. Any of the following
risks could materially adversely affect our business, financial condition or
results of operations. In such case, you may lose all or part of your original
investment.


RISKS RELATING TO THE NEW NOTES AND OUR INDEBTEDNESS

  OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND
  PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NEW NOTES.


     We have now and will continue to have a significant amount of indebtedness.
On March 31, 2002, after giving pro forma effect to the sale of the old notes
and the application of the net proceeds as described under "Use of Proceeds,"
the exchange offer, and the new credit facility, we would have had total
indebtedness of approximately $263 million (of which approximately $150 million
would have consisted of the new notes, approximately $70 million of senior debt
and approximately $43 million of nonrecourse project revenue bonds).


     Our substantial indebtedness could have important consequences to you. For
example, it could:

     - make it more difficult for us to satisfy our obligations with respect to
       the new notes;

     - increase our vulnerability to general adverse economic and industry
       conditions;

     - require us to dedicate a substantial portion of our cash flow from
       operations to payments on our indebtedness, thereby reducing the
       availability of our cash flow to fund working capital, capital
       expenditures, research and development efforts and other general
       corporate purposes;

     - limit our flexibility in planning for, or reacting to, changes in our
       business and the industry in which we operate;

     - place us at a competitive disadvantage compared to our competitors that
       have less debt; and

     - limit our ability to borrow additional funds.

     In addition, the indenture contains, and our new credit facility will
contain financial and other restrictive covenants that limit and will limit our
ability to engage in activities that may be in our long-term best interests. Our
failure to comply with those covenants could result in an event of default
which, if not cured or waived, could result in the acceleration of all of our
debts.

  DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES MAY STILL BE ABLE
  TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE RISKS
  ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE.


     We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. If new debt is added to our and our
subsidiaries' current debt levels, the related risks that we and they now face
could intensify. As of May 31, 2002, the amount of additional senior
indebtedness that we and our subsidiary guarantors were permitted to borrow
under the terms of our new credit facility was approximately $22 million. All of
the borrowings rank senior to the new notes and the subsidiary guarantees. See
"Description of Other Indebtedness and Preferred Stock -- New Credit Facility."


  TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR
  ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.

     Our ability to make payments on and to refinance our indebtedness,
including the new notes, and to fund planned capital expenditures and research
and development efforts will depend on our ability to generate cash

                                        11


in the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control.


     It is possible that our business will not generate sufficient cash flow
from operations, that any cost savings and operating improvements will not be
realized or that future borrowings will not be available to us under our new
credit facility in an amount sufficient to enable us to pay our indebtedness,
including these new notes, or to fund our other liquidity needs. We may need to
refinance all or a portion of our indebtedness, including these new notes on or
before maturity. We may not be able to refinance any of our indebtedness,
including our new credit facility and these new notes, on commercially
reasonable terms or at all.



     Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available cash
and available borrowings under our new credit facility, will be adequate to meet
our liquidity needs for the foreseeable future.


  YOUR RIGHT TO RECEIVE PAYMENTS ON THE NEW NOTES IS JUNIOR TO OUR EXISTING
  INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE
  GUARANTEES OF THESE NEW NOTES ARE JUNIOR TO ALL OF OUR GUARANTORS' EXISTING
  INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS.

     The new notes and the subsidiary guarantees rank behind all of our and the
subsidiary guarantors' existing indebtedness (other than trade payables) and all
of our and their future borrowings (other than trade payables), except any
future indebtedness that expressly provides that it ranks equal with, or
subordinated in right of payment to, the new notes and the guarantees. As a
result, upon any distribution to our creditors or the creditors of the
guarantors in a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or the guarantors or our or their property, the holders of our
senior debt and the guarantors will be entitled to be paid in full and in cash
before any payment may be made with respect to the new notes or the subsidiary
guarantees.

     In addition, all payments on the new notes and the guarantees will be
blocked in the event of a payment default on senior debt and may be blocked for
up to 179 of 365 consecutive days in the event of certain non-payment defaults
on senior debt.

     In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors, holders of the new notes will
participate with trade creditors and all other holders of our and the guarantor
subordinated indebtedness in the assets remaining after we and the subsidiary
guarantors have paid all of our senior debt. However, because the indenture
requires that amounts otherwise payable to holders of the new notes in a
bankruptcy or similar proceeding be paid to holders of senior debt instead,
holders of the new notes may receive less, ratably, than holders of trade
payables in any such proceeding. In any of these cases, we and the subsidiary
guarantors may not have sufficient funds to pay all of our creditors and holders
of notes may receive less, ratably, than the holders of our senior debt.


     Assuming we had completed the sale of the old notes, the exchange offer,
and the execution of our new credit facility on March 31, 2002, the new notes
and the subsidiary guarantees would have been subordinated to $70 million of
senior debt and approximately $28 million would have been available for
borrowing as additional senior debt under our new credit facility. Based on
current interest rates, the annual debt service under the $70 million term loan
included as part of the new credit facility approximates $4.2 million per year,
with the remaining principal balance of $65.8 million due May 2008. The revolver
portion of the new credit facility does not require annual debt payments bears
interest at LIBOR plus 2.5% and is payable in full May 2007. In addition, the
new credit facility requires that 75% of excess annual cash flow, as defined, is
used to pay down the term loan portion of the new credit facility. We are
permitted to borrow substantial additional indebtedness, including senior debt,
in the future under the terms of the indenture.


  WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
  OF CONTROL OFFER REQUIRED BY THE INDENTURE.


     If a change of control, as defined in the indenture, occurs, we will be
required to make an offer for cash to repurchase all of the new notes at a price
equal to 101.0% of their principal amount plus any accrued and unpaid interest
and liquidated damages, if any. If a change of control occurs, we may not have
sufficient funds


                                        12


to pay the purchase price for any new notes tendered to it. Some events
involving a change of control may also cause an event of default under our new
credit facility or other indebtedness that we may incur in the future. If a
change of control occurs at a time when we are prohibited from purchasing the
new notes under other debt agreements, we could seek the consent of our lenders
to purchase the new notes or could attempt to refinance the borrowings that
prohibit our repurchase of the new notes. If we do not obtain that consent or
repay those borrowings, we would remain prohibited from purchasing the new
notes. In that case, our failure to purchase any of the tendered new notes would
constitute an event of default under the indenture governing the new notes,
which would likely cause a default under other indebtedness. In that event, we
would be required to repay all senior debt, including debt under our new credit
facility, before we could repurchase the new notes. You should read the
discussions under the headings "Description of Other Indebtedness and Preferred
Stock -- New Credit Facility," "Description of Notes -- Subordination" and
"Description of Notes -- Repurchase at the Option of Holders" for further
information about these restrictions.

  FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
  GUARANTEES AND REQUIRE NOTE HOLDERS TO RETURN PAYMENTS RECEIVED FROM
  GUARANTORS.

     Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee:

     - received less than reasonably equivalent value or fair consideration for
       the incurrence of such guarantee; and

     - was insolvent or rendered insolvent by reason of such incurrence; or

     - was engaged in a business or transaction for which the guarantor's
       remaining assets constituted unreasonably small capital; or

     - intended to incur, or believed that it would incur, debts beyond its
       ability to pay such debts as they mature.

     In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.

     The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:

     - the sum of its debts, including contingent liabilities, was greater than
       the fair saleable value of all of its assets; or

     - if the present fair saleable value of its assets was less than the amount
       that would be required to pay its probable liability on its existing
       debts, including contingent liabilities, as they become absolute and
       mature; or

     - it could not pay its debts as they become due.

     On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of the new notes, will not be insolvent, will not have unreasonably
small capital for the business in which it is engaged and will not have incurred
debts beyond its ability to pay such debts as they mature. We cannot assure you,
however, as to what standard a court would apply in making these determinations
or that a court would agree with our conclusions in this regard.


  INCREASES IN MARKET INTEREST RATES WILL INCREASE OUR DEBT SERVICE OBLIGATIONS.



     A portion of our debt, including all of the debt incurred under our new
credit facility, bears interest at floating rates. An increase in the interest
rates on our debt will reduce our funds available to repay the notes and our
other debt and to finance our operations and future business opportunities and,
as a result, will

                                        13



intensify the consequences of our leveraged capital structure. Total debt at May
10, 2002, included approximately $70,000,000 in floating rate debt attributed to
the new credit facility entered into in May 2002 at an average interest rate of
4.9%. Based on interest rates as of May 31, 2002, our interest expense will
increase approximately $1.22 million for each 1% increase in interest rates.



  RESTRICTIONS IN OUR OUTSTANDING DEBT INSTRUMENTS MAY LIMIT OUR ABILITY TO MAKE
  PAYMENTS ON THE NOTES OR OPERATE OUR BUSINESS.



     Our new credit facility and the indenture governing the notes contain
covenants that limit the discretion of our management with respect to certain
business matters. These covenants significantly restrict our ability to (among
other things):



     - incur additional indebtedness and issue preferred stock;



     - pay dividends or make certain other distributions;



     - make other restricted payments and investments;



     - create liens;



     - incur restrictions on the ability of our subsidiaries to pay dividends or
       other payments to us;



     - sell assets;



     - merge or consolidate with other entities; or



     - enter into transaction with affiliates.



     In addition, our new credit facility requires us to meet certain financial
ratios and financial condition tests. You should read the discussions under the
headings "Other Indebtedness and Preferred Stock -- Description of New Credit
Facility" and "Description of Notes -- Certain Covenants" for further
information about these covenants. Events beyond our control can affect our
ability to meet these financial ratios and financial condition tests. Our
failure to comply with these obligations could cause an event of default under
our new credit facility. If an event of default occurs, our lenders could elect
to declare all amounts outstanding and accrued and unpaid interest on our new
credit facility to be immediately due, and the lenders thereafter could
foreclose upon the assets securing the new credit facility. In that event, we
cannot assure you that we would have sufficient assets to repay all of our
obligations, including the notes and the related guarantees. We may incur other
indebtedness in the future that may contain financial or other covenants more
restrictive than those applicable to our new credit facility or the indenture
governing the notes.



  WE HAVE PLEDGED ALL OF OUR ASSETS TO SECURE OUR NEW CREDIT FACILITY.



     Our new credit facility will be secured by all of our assets and the assets
of the guarantors. Therefore, your notes will also be effectively subordinated
to the extent of the value of the assets that secure our new credit facility.


RISKS RELATING TO US AND OUR BUSINESS

  FEDERAL WASTEWATER TREATMENT AND BIOSOLID REGULATIONS MAY RESTRICT OUR
  OPERATIONS OR INCREASE OUR COSTS OF OPERATIONS.


     Federal wastewater treatment and wastewater residuals laws and regulations
impose substantial costs on us and affect our business in many ways. If we are
not able to comply with the governmental regulations and requirements that apply
to our operations, we could be subject to fines and penalties, and we may be
required to spend large amounts to bring operations into compliance or to
temporarily or permanently stop operations that are not permitted under the law.
Those costs or actions could have a material adverse effect on our business,
financial condition and results of operations.


     Federal environmental authorities regulate the activities of the municipal
and industrial wastewater generators and enforce standards for the discharge
from wastewater treatment plants (effluent wastewater) with permits issued under
the authority of the Clean Water Act, as amended. The treatment of wastewater

                                        14



produces an effluent and wastewater solids. The treatment of these solids
produces a semi-solid, nutrient-rich by-product known as biosolids. The Part 503
Regulations regulate the use and disposal of biosolids and wastewater residuals
and establish use and disposal standards for biosolids and wastewater residuals
that are applicable to publicly and privately owned wastewater treatment plants
in the United States. Biosolids may be surface disposed in landfills,
incinerated, or applied to land for beneficial use in accordance with the
requirements established by the regulations. To the extent demand for our
wastewater residuals treatment methods is created by the need to comply with the
environmental laws and regulations, any modification of the standards created by
such laws and regulations, or in their enforcement, may reduce the demand for
our wastewater residuals treatment methods. Changes in these laws or regulations
and/or changes in the enforcement of these laws or regulations may also
adversely affect our operations by imposing additional regulatory compliance
costs on us, and requiring the modification of and/or adversely affecting the
market for our wastewater residuals management services.



  WE ARE SUBJECT TO EXTENSIVE AND INCREASINGLY STRICT FEDERAL, STATE AND LOCAL
ENVIRONMENTAL REGULATION AND PERMITTING.



     Our operations are subject to increasingly strict environmental laws and
regulations, including laws and regulations governing the emission, discharge,
disposal and transportation of certain substances and related odor. Wastewater
treatment plants and other plants at which our biosolids management services may
be implemented are usually required to have permits, registrations and/or
approvals from state and/or local governments for the operation of such
facilities. Some of our facilities require air, wastewater, storm water,
composting, use or siting permits, registrations or approvals. We may not be
able to maintain or renew our current permits, registrations or licensing
agreements or to obtain new permits, registrations or licensing agreements,
including for the land application of biosolids when necessary. The process of
obtaining a required permit, registration or license agreement can be lengthy
and expensive. We may not be able to meet applicable regulatory or permit
requirements, and therefore may be subject to related legal or judicial
proceedings.



     Many states, municipalities and counties have regulations, guidelines or
ordinances covering the land application of biosolids, many of which set either
a maximum allowable concentration or maximum pollutant-loading rate for at least
one pollutant. The Part 503 Regulations also require certain monitoring to
ensure that certain pollutants or pathogens are below thresholds. The EPA has
considered increasing these thresholds or adding new thresholds for different
substances, which could increase our compliance costs. In addition, some states
have established management practices for land application of biosolids. Some
members of Congress, some state or local authorities, and some private parties,
have sought to prohibit or limit the land application, agricultural use, thermal
processing or composting of biosolids. Further such prohibition or limitation
efforts could be successful and have a material adverse effect on our business,
financial condition and results of operations. In addition, many states enforce
landfill restrictions for nonhazardous biosolids and some states have site
restrictions or other management practices governing lands. These regulations
typically require a permit to use biosolid products (including incineration ash)
as landfill daily cover material or for disposal in the landfill. It is possible
that landfill operators will not be able to obtain or maintain such required
permits.


     Any of the permits, registrations or approvals noted above, or related
applications may be subject to denial, revocation or modification, or challenge
by a third party, under various circumstances. In addition, if new environmental
legislation or regulations are enacted or existing legislation or regulations
are amended or are enforced differently, we may be required to obtain
additional, or modify existing, operating permits, registrations or approvals.

     Maintaining, modifying or renewing our current permits, registrations or
licensing agreements or obtaining new permits, registrations or licensing
agreements after new environmental legislation or regulations are enacted or
existing legislation or regulations are amended or enforced differently may be
subject to public opposition or challenge. Much of this public opposition and
challenge, as well as related complaints, relates to odor issues, even when we
are in compliance with odor requirements and even though we have worked hard to
minimize odor from our operations. Public misperceptions about our business and
any related odor could influence the governmental process for issuing such
permits, registrations and licensing agreements or for

                                        15


responding to any such public opposition or challenge. Community groups could
pressure local municipalities or state governments to implement laws and
regulations which could increase the costs of our operations.


  OUR ABILITY TO GROW MAY BE LIMITED BY DIRECT OR INDIRECT COMPETITION WITH
OTHER BUSINESSES THAT PROVIDE SOME OR ALL OF THE SAME SERVICES THAT WE PROVIDE.


     We provide a variety of services relating to the transportation and
treatment of wastewater residuals. We are in direct and indirect competition
with other businesses that provide some or all of the same services including
small local companies, regional residuals management companies and national and
international water and wastewater operations/privatization companies,
technology suppliers, municipal solid waste companies, farming operations and,
most significantly, municipalities and industries who choose not to outsource
their residuals management needs. Some of these competitors are larger, more
firmly established and have greater capital resources than we do.

     We derive a substantial portion of our revenue from services provided under
municipal contracts. Many of these will be subject to competitive bidding at
some time in the future. We also intend to bid on additional municipal
contracts. However, we may not be the successful bidder. In addition, some of
our contracts will expire in the near future and those contracts may be renewed
on less attractive terms. If we are not able to replace revenues from contracts
lost through competitive bidding or from the renegotiation of existing contracts
with other revenues within a reasonable time period, the lost revenue could have
a material and adverse effect on our business, financial condition and results
of operations.

  OUR CUSTOMER CONTRACTS MAY BE TERMINATED PRIOR TO THE EXPIRATION OF THEIR
  TERM.

     A substantial portion of our revenue is derived from services provided
under contracts and written agreements with our customers. Some of these
contracts, especially those contracts with large municipalities (including our
largest contract and four of our other top 10 contracts), provide for
termination of the contract by the customer after giving relatively short notice
(in some cases as little as 10 days). In addition, some of these contracts
contain liquidated damages clauses which may or may not be enforceable in the
case of early termination of the contracts. If one or more of these contracts
are terminated prior to the expiration of its term, and we are not able to
replace revenues from the terminated contract or receive liquidated damages
pursuant to the terms of the contract, the lost revenue could have a material
and adverse effect on our business, financial condition and results of
operations.

  A SIGNIFICANT AMOUNT OF OUR BUSINESS COMES FROM A LIMITED NUMBER OF CUSTOMERS
  AND OUR REVENUE AND PROFITS COULD DECREASE SIGNIFICANTLY IF WE LOST ONE OR
  MORE OF THEM AS CUSTOMERS.


     Our business depends on provision of our services to a limited number of
customers. One or more of these customers may stop buying services from us or
may substantially reduce the amount of services we provide them. Any
cancellation, deferral or significant reduction in the services we provide these
principal customers or a significant number of smaller customers could seriously
harm our business, financial condition and results of operations. For the year
ended December 31, 2001, our single largest customer accounted for 14% of our
revenues and our top ten customers accounted for approximately 34% of our
revenues.



  WE MAY NOT BE ABLE TO OBTAIN BONDING REQUIRED IN CONNECTION WITH CERTAIN
CONTRACTS ON WHICH WE BID.



     Consistent with industry practice, we are required to post performance
bonds in connection with certain contracts on which we bid. In addition, we are
often required to post both performance and payment bonds at the time of
execution of contracts for commercial, federal, state and municipal projects.
The amount of bonding capacity offered by sureties is a function of the
financial health of the entity requesting the bonding. Although we could issue
letters of credit under our credit facility for bonding purposes, if we are
unable to obtain bonding in sufficient amounts we may be ineligible to bid or
negotiate on projects. As of March 13, 2002, we have bonded a portion of our
services representing approximately $115 million of our contract revenues, with
the capacity to expand to $140 million of our contract revenues.


                                        16


  WE ALWAYS FACE THE RISK OF LIABILITY AND INSUFFICIENT INSURANCE.


     We carry $51 million of liability insurance (including umbrella coverage),
and under a separate policy, $10 million of aggregate pollution and legal
liability insurance ($10 million each loss) subject to retroactive dates, which
we consider sufficient to meet regulatory and customer requirements and to
protect our employees, assets and operations. It is possible that we will not be
able to maintain such insurance coverage in the future. Further, we could face
personal injury, third-party or environmental claims or other damages resulting
in substantial liability for which we are uninsured and which could have a
material adverse effect on our business financial condition and results of
operations.



  WE ARE DEPENDENT ON THE AVAILABILITY AND SATISFACTORY PERFORMANCE OF
  SUBCONTRACTORS FOR OUR DESIGN AND BUILD OPERATIONS.



     We participate in design and build construction operations usually as a
general contractor. Virtually all design and construction work is performed by
unaffiliated third-party subcontractors. As a consequence, we are dependent upon
the continued availability of and satisfactory performance by these
subcontractors for the design and construction of our facilities. The
insufficient availability of and unsatisfactory performance by these
unaffiliated third-party subcontractors could have a material adverse effect on
our business, financial condition and results of operations. Further, as the
general contractor, we are legally responsible for the performance of our
contracts and if such contracts are underperformed or non-performed by our
subcontractors we could be financially responsible. Although our contracts with
our subcontractors provide for indemnification, if our subcontractors do not
satisfactorily perform their contract, such indemnification may not cover our
financial losses in attempting to fulfill the contractual obligations.


  WE ARE AFFECTED BY UNUSUALLY ADVERSE WEATHER AND WINTER CONDITIONS.


     Our business is adversely affected by unusual weather conditions and
unseasonably heavy rainfall which can temporarily reduce the availability of
land in close proximity to our business upon which biosolids can be beneficially
reused and applied to crop land. In addition, our revenues and operational
results are adversely affected during the winter months when the ground freezes
thus limiting the level of land application that can be performed. Long periods
of inclement weather could reduce our revenues and operational results causing a
material adverse effect on our business and financial condition.



  FLUCTUATIONS IN FUEL COSTS COULD INCREASE OUR OPERATING EXPENSES AND
  NEGATIVELY IMPACT OUR NET INCOME.


     The price and supply of fuel is unpredictable and fluctuates based on
events outside our control, including geopolitical developments, supply and
demand for oil and gas, actions by OPEC and other oil and gas producers, war and
unrest in oil producing countries, regional production patterns and
environmental concerns. Because fuel is needed to run the fleet of trucks that
service our customers, our incinerators, our dryers and other facilities, price
escalations or reductions in the supply of fuel could increase our operating
expenses and have a negative impact on our net income. In the past, we have
implemented a fuel surcharge to off-set increased fuel costs. However, we are
not always able to pass through all or part of the increased fuel costs due to
the terms of certain customers' contracts and the inability to negotiate such
pass through costs in a timely manner.

  WE ARE NOT ABLE TO GUARANTEE THAT OUR ESTIMATED REMAINING CONTRACT VALUE,
  WHICH WE CALL BACKLOG, WILL RESULT IN ACTUAL REVENUES IN ANY PARTICULAR FISCAL
  PERIOD.


     Any of the contracts included in our backlog, or estimated remaining
contract value, presented herein may not result in actual revenues in any
particular period or the actual revenues from such contracts may not equal our
backlog. In determining backlog, we calculate the expected payments remaining
under the current terms of our contracts, assuming the renewal of contracts in
accordance with their renewal provisions, no increase in the level of services
during the remaining term, and estimated adjustments for changes in the consumer
price index for contracts that contain price indexing. However, it is possible
that all of our backlog will not be recognized as revenue or earnings.


                                        17


  IF WE LOSE THE PENDING LAWSUITS WE ARE CURRENTLY INVOLVED IN, WE COULD BE
  LIABLE FOR SIGNIFICANT DAMAGES AND LEGAL EXPENSES.


     In the ordinary course of business, we may become involved in various legal
and administrative proceedings, including some related to our permits, to land
use or to environmental laws and regulations. We are currently subject to
several lawsuits relating to our business. Our defense to these claims or any
other future claims against us may not be successful. If we lose these or future
lawsuits, we may have to pay significant damages and legal expenses and we could
be subject to injunctions, court orders, loss of revenues and defaults under our
credit and other agreements. Two of these lawsuits are described below.



     - Riverside County.  We operate and lease a composting facility in
       Riverside County, California, under a conditional use permit, or CUP,
       that expires January 1, 2010. The CUP allows for a reduction in material
       intake and CUP term in the event of noncompliance with the CUP's terms
       and conditions. On September 15, 1999, we were granted a preliminary
       injunction restraining and enjoining the County of Riverside, or County,
       from restricting our intake of biosolids at our Riverside composting
       facility. The parties are currently in settlement discussions for the
       relocation of the composting facility. Whether or not the parties reach
       settlement, the site may be closed, we may incur additional costs related
       to contractual agreements, relocation and site closure, as well as the
       need to obtain new permits (including some from the County) at a new
       site. If we are unsuccessful in our efforts, goodwill and certain assets
       may be impaired. Annual revenue and goodwill associated with this
       operation is approximately $8,000,000 and $13,813,000, respectively. If
       this site were closed, we may be required to write-off this goodwill thus
       reducing our net worth. For a further description of this lawsuit see
       "Business -- Legal and Other Proceedings -- Riverside County".



     - Reliance Insurance.  For the 24 months ended October 31, 2000, which we
       refer to as the Reliance Coverage Period, we insured certain risks,
       including automobile, general liability, and worker's compensation, with
       Reliance National Indemnity Company, or Reliance, through policies
       totaling $26 million in annual coverage. Subsequently, Reliance's
       ultimate parent, Reliance Holdings, Inc., filed for bankruptcy under
       Chapter 11 of the United States Bankruptcy Code of 1978, as amended and
       Reliance was placed into liquidation. We are a named defendant in a suit
       arising out of an automobile accident involving a vehicle operated by one
       of our wholly owned subsidiaries, in which one person was killed and two
       others were injured. It is possible that we will have no (or
       insufficient) insurance funds available to pay any potential losses. For
       a further description of this lawsuit, see "Business -- Legal and Other
       Proceedings -- Reliance Insurance."


     In addition, we may be subject to future lawsuits or legal proceedings.
These claims, even if they are without merit, could be expensive and time
consuming to defend and if we were to lose any future cases we could be subject
to injunctions and damages that could have a material adverse effect on our
business, financial condition and results of operations.

  WE COULD FACE CONSIDERABLE BUSINESS AND FINANCIAL RISK IN IMPLEMENTING OUR
ACQUISITION STRATEGY.

     As part of our growth strategy, we intend to consider acquiring
complementary businesses. Although we regularly engage in discussions with
respect to possible acquisitions, we do not currently have any understandings,
commitments or agreements relating to any material acquisitions. Future
acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt and contingent liabilities, which could have
a material adverse effect upon our business, financial condition and results of
operations. Risks we could face with respect to acquisitions include:

     - difficulties in the integration of the operations, technologies, products
       and personnel of the acquired company;

     - potential loss of employees;

     - diversion of management's attention away from other business concerns;

     - expenses of any undisclosed or potential legal liabilities of the
       acquired company; and

                                        18


     - risks of entering markets in which we have no or limited prior
       experience.


     In addition, it is possible that we will not be successful in consummating
future acquisitions on favorable terms or at all.



  WE ARE DEPENDENT ON THE MEMBERS OF OUR SENIOR MANAGEMENT TEAM FOR THEIR DEPTH
OF INDUSTRY EXPERIENCE AND KNOWLEDGE.



     We are highly dependent on the services of our senior management team, the
loss of any of whom may have a material adverse effect on our business,
financial condition and results of operations. Specifically, Ross M. Patten, our
CEO and Chairman of the Board has been in the industry for more than 28 years.
Mr. Patten has substantial industry knowledge and contacts. If Mr. Patten were
to terminate his employment with us, we would lose valuable human capital,
adversely affecting our business. We currently do not maintain key man insurance
on Mr. Patten or any other member of our senior management team.


     We generally enter into employment agreements with members of our senior
management team, which contain non-compete and other provisions. The laws of
each state differ concerning the enforceability of non-competition agreements.
State courts will examine all of the facts and circumstances at the time a party
seeks to enforce a non-compete covenant. We cannot predict with certainty
whether or not a court will enforce a non-compete covenant in any given
situation based on the facts and circumstances at that time. If one of our key
executive officers were to leave us and the courts refused to enforce the
non-compete covenant, we might be subject to increased competition, which could
have a material and adverse effect on our business, financial condition and
results of operations.

 EFFORTS BY LABOR UNIONS TO ORGANIZE OUR EMPLOYEES COULD DIVERT MANAGEMENT
 ATTENTION AND INCREASE OUR OPERATING EXPENSES.

     In the past, labor unions have made attempts to organize our employees, and
these efforts may continue in the future. Certain groups of our employees have
chosen to be represented by unions, and we have negotiated collective bargaining
agreements with some of the groups. We cannot predict which, if any, groups of
employees may seek union representation in the future or the outcome of
collective bargaining. The negotiation of these agreements could divert
management attention and result in increased operating expenses and lower net
income. If we are unable to negotiate acceptable collective bargaining
agreements, we might have to wait through "cooling off" periods, which are often
followed by union-initiated work stoppages, including strikes. Depending on the
type and duration of such work stoppage, our operating expenses could increase
significantly.

 WE MAY BECOME SUBJECT TO THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION
 AND LIABILITY ACT, OR "CERCLA".


     CERCLA generally imposes strict joint and several liability for cleanup
costs upon: (1) present owners and operators of facilities at which hazardous
substances were disposed; (2) past owners and operators at the time of disposal;
(3) generators of hazardous substances that were disposed at such facilities;
and (4) parties who arranged for the disposal of hazardous substances at such
facilities. The costs of a CERCLA cleanup can be very expensive. Given the
difficulty of obtaining insurance for environmental impairment liability, such
liability could have a material impact on our business and financial condition.


     CERCLA Section 107 liability extends to cleanup costs necessitated by a
release or threat of release of a hazardous substance. The definition of
"release" under CERCLA excludes the "normal application of fertilizer." The EPA
regards the land application of biosolids that meet the Part 503 Regulations as
a "normal application of fertilizer," and thus not subject to CERCLA. However,
if we were to transport or handle biosolids that contain hazardous substances in
violation of the Part 503 Regulations we could be liable under CERCLA.

     From time to time, we generate hazardous substances which we dispose at
landfills or we transport soils or other materials which may contain hazardous
substances to landfills. We also send residuals and ash from

                                        19



our incinerators to landfills for use as a daily cover over the landfill.
Liability under CERCLA, or comparable state statutes, can be founded on the
disposal, or arrangement for disposal, of hazardous substances at sites such as
landfills and for the transporting of such substances to landfills. Under
CERCLA, or comparable state statutes, we may be liable for the remediation of a
disposal site that was never owned or operated by us if the site contains
hazardous substances that we generated or transported to such site. We could
also be responsible for hazardous substances during actual transportation and
may be liable for environmental response measures arising out of disposal at a
third party site with whom we had contracted.


     In addition, under CERCLA, or comparable state statutes, we could be
required to clean any of our current or former properties if hazardous
substances are released or are otherwise found to be present. We are currently
monitoring the remediation of soil and groundwater at one of our properties in
cooperation with the applicable state regulatory authority, but do not believe
any additional material expenditures will be required. However, there can be no
assurance that currently unknown contamination would not be found on this or
other properties.


     We currently lease one site that upon the expiration of the lease term we
will be required to return the property to an agreed standard. We have agreed
contractually to share the cost of any remediation effort that may be required
with a third party up to $1 million. We would have no further monetary
obligations once the $1 million threshold is met. We are not currently
undertaking any remediation activities.


 OUR INTELLECTUAL PROPERTY MAY BE MISAPPROPRIATED OR SUBJECT TO CLAIMS OF
 INFRINGEMENT.

     We attempt to protect our intellectual property rights through a
combination of patent, trademark, and trade secret laws, as well as licensing
agreements. Our failure to obtain or maintain adequate protection of our
intellectual property rights for any reason could have a material adverse effect
on our business, results of operations and financial condition.

     Our competitors, many of whom have substantially greater resources and have
made substantial investments in competing technologies, may have applied for or
obtained, or may in the future apply for and obtain, patents that will prevent,
limit or otherwise interfere with our ability to offer our services. We have not
conducted an independent review of patents issued to third parties.


     We also rely on unpatented proprietary technology. It is possible that
others will independently develop the same or similar technology or otherwise
obtain access to our unpatented technology. To protect our trade secrets and
other proprietary information, we require employees, consultants, advisors and
collaborators to enter into confidentiality agreements. These agreements may not
provide meaningful protection for our trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.
If we are unable to maintain the proprietary nature of our technologies, we
could be materially adversely affected.


 OUR INDEPENDENT PUBLIC ACCOUNTANT, ARTHUR ANDERSEN LLP, HAS BEEN INDICTED ON
 FEDERAL OBSTRUCTION OF JUSTICE CHARGES. THE INDICTMENT MAY IMPAIR OUR ABILITY
 TO ACCESS THE CAPITAL MARKETS AND TO MAKE TIMELY FILINGS WITH THE COMMISSION.

     Our independent public accountant, Arthur Andersen LLP, has informed us
that on March 14, 2002, an indictment was unsealed charging it with federal
obstruction of justice arising from the government's investigation of Enron
Corp. Arthur Andersen has indicated that it intends to contest vigorously the
indictment. We are a public company and are required to file periodically with
the Commission financial statements audited or reviewed by an independent public
accountant and will also be required to file them as part of the exchange offer
for the notes offered hereby. The Commission has recently adopted rules under
which it will continue accepting financial statements audited or reviewed by
Arthur Andersen. However, our access to the capital markets and our ability to
make timely Commission filings, including filings relating to the exchange offer
for the notes, could be impaired if the Commission ceases accepting financial
statements audited by Arthur Andersen or if for any reason Arthur Andersen is
unable to perform auditing services for us.

                                        20



     As a result of the criminal trial against Arthur Andersen in connection
with Enron Corp., and the volume of civil lawsuits filed against it, Arthur
Andersen may not have the ability to withstand liability for prior audits.



  IF WE DETERMINE THAT OUR GOODWILL IS IMPAIRED, WE MAY HAVE TO WRITE-OFF ALL OR
  PART OF IT.



     Goodwill represents the aggregate purchase price paid by us in acquisitions
accounted for as a purchase over the fair value of the net assets acquired.
Under SFAS No. 142, we no longer amortize goodwill, but review annually for
impairment. In the event that facts and circumstances indicate that goodwill may
be impaired, an evaluation of recoverability would be performed. If a write-down
to market value of all or part of our goodwill becomes necessary, our operating
results and net worth would be adversely affected.



  WE MAY EXPERIENCE A DECLINE IN OUR RECENT REVENUE AND INCOME DUE TO A SHIFT IN
  FOCUS AWAY FROM ACQUISITION TOWARDS INTERNAL GROWTH.



     In 2001, we shifted our focus away from acquisitions to internal growth. As
a result we may experience a reduction in the rate of increase of our revenues.
You should not expect revenues to increase at the same rates as when we were
focused on acquisitions. See "Business -- Acquisition History."


                                        21


                           FORWARD-LOOKING STATEMENTS


     This prospectus includes forward-looking statements relating solely to
Synagro Technologies, Inc. (and not any of its subsidiaries individually) within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, including without limitation the statements
under "Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." The words
"believes," "anticipates," "plans," "expects," "intends," "estimates" and
similar expressions are intended to identify forward-looking statements. You
should understand that these forward-looking statements are estimates reflecting
the best judgment of our management, not guarantees of future performance. These
forward-looking statements are subject to a number of known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
and achievements, or industry results, to be materially different from any
future results, performance, or achievements expressed or implied by such
forward-looking statements. Important factors that could cause our actual
results, performance and achievements, or industry results to differ materially
from estimates or projections contained in forward-looking statements include,
among others, the following:


     - our substantial indebtedness;

     - the inability to generate sufficient cash;

     - changes in federal wastewater treatment and biosolid regulation;

     - the inability to comply with federal, state and local environmental
       regulations or to maintain and obtain necessary permits;

     - the competitive nature of the wastewater residuals management business;

     - the risk of early termination of customer contracts;

     - the inability to obtain proper bonding;

     - the risk of liability and insufficient insurance coverage;

     - the unavailability or underperformance of subcontractors;

     - risks associated with future weather conditions;

     - the impact of increased fuel costs;

     - our calculation of estimated remaining contract value, or backlog;

     - the risk associated with pending legal proceedings;

     - the risk that our acquisition strategy could fail;

     - the impact of the loss of key employees;

     - risks associated with labor relations;

     - the risk of liability under the Comprehensive Environmental Response,
       Compensation and Liability Act;


     - the risk that our intellectual property may be misappropriated or subject
       to claims of infringement;



     - the risk associated with the indictment on federal obstruction of justice
       charges of our independent public accountant, Arthur Andersen;



     - the risk associated with goodwill impairment; and



     - the impact of our focus on internal growth.


                                        22



     In addition, we can give no assurance that:


     - we have correctly identified and assessed all of the factors affecting
       our business;

     - the publicly available and other information with respect to these
       factors on which we have based our analysis is complete or correct;

     - our analysis is correct; or

     - our strategies, which are based in part on this analysis, will be
       successful.


     Accordingly, you should not place undue reliance on forward-looking
statements, which speak only as of the date of this prospectus.


                                        23


                                USE OF PROCEEDS

     The exchange offer is intended to satisfy our obligations under the
exchange and registration rights agreement that we entered into in connection
with the private offering of the old notes. We will not receive any cash
proceeds from the issuance of the new notes. In consideration for issuing the
new notes as contemplated by this prospectus, we will receive in exchange old
notes in like principal amount. The form and terms of the new notes are
identical in all material respects to the form and terms of the old notes,
except as otherwise described herein under "Description of Notes." The old notes
surrendered in exchange for the new notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the new notes will not result in
any change in our capitalization.


     We received net proceeds from the sale of the old notes of approximately
$145 million after deducting fees and expenses. We used the net proceeds from
the sale of the old notes to repay our subordinated debt and to refinance
existing indebtedness under our old credit facility as of April 17, 2002.
Affiliates of Banc of America Securities LLC, one of the initial purchasers,
were participating lenders under our old credit facility, and as such, received
a portion of the proceeds from the sale of the old notes that were used to repay
amounts outstanding under such credit facility. Affiliates of GTCR Golder Rauner
LLC and The TCW Group, Inc., our majority stockholders, were participating
lenders under our subordinated debt, and as such, they received the portion of
the proceeds from the sale of the old notes that were used to retire all amounts
outstanding under the subordinated debt. See "Certain Relationships and Related
Party Transactions" and "Description of Other Indebtedness and Preferred
Stock -- Existing Credit Facility."


                                        24


                                 CAPITALIZATION


     The following table sets forth the cash and cash equivalents and our
consolidated capitalization as of March 31, 2002 on an actual basis and as
adjusted to give effect to the sale of the old notes and the execution of our
new credit facility. You should read this table in conjunction with our
consolidated financial statements and the related notes to the consolidated
financial statements included in this prospectus. See "Use of Proceeds,"
"Selected Consolidated Financial and Operating Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and "Description
of Other Indebtedness and Preferred Stock."





                                                               AS OF MARCH 31, 2002
                                                              -----------------------
                                                               ACTUAL      ADJUSTED
                                                              ---------   -----------
                                                                          (UNAUDITED)
                                                              (DOLLARS IN THOUSANDS)
                                                                    
Cash and cash equivalents...................................  $  3,353      $  3,353
                                                              ========      ========
Total debt:
  Old credit facility.......................................  $161,084      $     --
  New credit facility.......................................        --        69,944
  9 1/2% Senior Subordinated Notes due 2009.................        --       150,000
  Nonrecourse project revenue bonds.........................    42,517        42,517
  Other debt................................................    53,135            33
                                                              --------      --------
       Total debt...........................................   256,736       262,494
Convertible Preferred Stock.................................    72,274        72,274
Stockholders' equity:
  Common stock..............................................        39            39
  Additional paid-in capital................................   109,167       109,167
  Accumulated deficit and other comprehensive loss..........   (47,601)      (52,314)
                                                              --------      --------
       Total stockholders' equity...........................    61,605        56,892
                                                              --------      --------
       Total capitalization.................................  $390,615      $391,660
                                                              ========      ========



                                        25


               SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA


     The following table summarizes our consolidated financial and operating
data, which you should read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements and related notes. The selected consolidated financial data
and other financial data as of December 31, 2000 and 2001 and for each of the
years in the three-year period ended December 31, 2001 have been derived from
our audited consolidated financial statements included elsewhere in this
prospectus. The selected consolidated financial data and other financial data as
of December 31, 1997, 1998 and 1999 and for the years ended December 31, 1997
and 1998 have been derived from our audited consolidated financial statements
not included in this prospectus. The selected consolidated financial data and
other financial data for the quarters ended March 31, 2001 and 2002 are derived
from our unaudited consolidated financial statements for the respective periods.
In the opinion of our management, the unaudited financial statements reflect all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation of the results of operations and financial position of
our company as of the date of and for the periods presented.





                                                                                                      THREE MONTHS
                                                                                                          ENDED
                                                            YEAR ENDED DECEMBER 31,                     MARCH 31,
                                               -------------------------------------------------   -------------------
                                                1997      1998      1999       2000       2001       2001       2002
                                               -------   -------   -------   --------   --------   --------   --------
                                                                       (DOLLARS IN THOUSANDS)          (UNAUDITED)
                                                                                         
STATEMENT OF OPERATIONS DATA:
Revenue......................................  $28,036   $33,565   $56,463   $163,098   $260,196   $ 58,795   $ 56,817
Cost of services.............................   23,239    28,116    42,471    119,900    192,919     45,327     43,258
                                               -------   -------   -------   --------   --------   --------   --------
  Gross profit...............................    4,797     5,449    13,992     43,198     67,277     13,468     13,559
Selling, general and administrative
  expenses...................................    3,576     4,181     6,876     14,337     20,786      5,351      5,768
Amortization of goodwill.....................      229       629     1,527      3,516      4,489      1,133         28
Special (credits) charges, net...............     (721)      (64)    1,500         --     (4,982)        --         --
                                               -------   -------   -------   --------   --------   --------   --------
  Income from operations.....................    1,713       703     4,089     25,345     46,984      6,984      7,763
Other (income) expense:
Other income, net............................     (409)     (318)     (294)      (114)      (221)       (24)       (38)
Interest expense, net........................    1,007     1,558     3,236     18,908     26,969      7,377      5,493
                                               -------   -------   -------   --------   --------   --------   --------
  Total other expense, net...................      598     1,241     2,942     18,794     26,747      7,353      5,455
Income (loss) before provision for income
  taxes......................................    1,116      (537)    1,148      6,551     20,237       (369)     2,308
Provision for income taxes...................       --        --        --         --        573         --        877
                                               -------   -------   -------   --------   --------   --------   --------
Net income (loss) before cumulative effect of
  change in accounting for derivatives,
  preferred stock dividends and noncash
  beneficial conversion charge...............    1,116      (537)    1,148      6,551     19,664       (369)     1,431
Cumulative effect of change in accounting for
  derivatives................................       --        --        --         --      1,861      1,861         --
                                               -------   -------   -------   --------   --------   --------   --------
Net income (loss) before preferred stock
  dividends and noncash beneficial conversion
  charge.....................................    1,116      (537)    1,148      6,551     17,803     (2,230)     1,431
Preferred stock dividends....................       --       420        --      3,938      7,248      1,743      1,843
Noncash beneficial conversion charge.........       --     3,515        --     37,045         --         --         --
                                               -------   -------   -------   --------   --------   --------   --------
Net income (loss) applicable to common
  stock......................................  $ 1,116   $(4,472)  $ 1,148   $(34,433)  $ 10,555   $ (3,973)  $   (412)
                                               =======   =======   =======   ========   ========   ========   ========
Net income (loss) per share
  basic......................................  $   .13   $  (.40)  $   .07   $  (1.78)  $    .54       (.21)      (.02)
  diluted....................................      .13      (.40)      .07      (1.78)       .36       (.21)      (.02)
OTHER DATA:
Depreciation and amortization of goodwill....  $ 1,839   $ 2,486   $ 4,440   $ 11,074   $ 18,390   $  4,422   $  3,569
Capital expenditures.........................    1,635     2,558     4,043      5,805     13,313      3,390      3,609

BALANCE SHEET DATA:
Cash and cash equivalents....................  $   404   $ 1,095   $   181   $  6,682   $  3,533   $  2,292   $    256
Working capital..............................     (796)    5,692     3,982     17,734      7,315      7,967      6,818
Property, plant and equipment, net...........    8,915    12,394    15,919    198,466    206,114    198,488    206,010
Total assets.................................   19,945    66,622    99,172    443,821    446,168    441,339    444,247
Total debt...................................    8,446    28,330    43,429    284,932    258,416    281,264    256,736
Convertible preferred stock..................       --        --        --     63,367     70,431     65,110     72,274
Stockholders' equity.........................    7,478    34,249    45,314     53,564     61,891     46,286     61,605



                                        26


                               THE EXCHANGE OFFER

     We are offering to issue new 9 1/2% senior subordinated notes due 2009 in
exchange for a like principal amount of our old 9 1/2% senior subordinated notes
due 2009. We may extend, delay or terminate the exchange offer. Holders of old
notes will need to complete the exchange offer documentation related to the
exchange.

PURPOSE AND EFFECT OF THE EXCHANGE

     We entered into an exchange and registration rights agreement with the
initial purchasers of the old notes in which we agreed to use all commercially
reasonable efforts to file a registration statement relating to an offer to
exchange the old notes for new notes within 90 days after issuing the old notes
and to use all commercially reasonable efforts to have it declared effective
within 180 days after issuing the old notes. We are offering the new notes under
this prospectus to satisfy those obligations under the exchange and registration
rights agreement.

     If we are not required to file a registration statement or the exchange
offer is not permitted by applicable law or Commission policy or if any holder
of the old notes notifies us prior to the 20th day following the consummation of
the exchange offer that:

     - it is prohibited by applicable law or Commission policy from
       participating in the exchange offer;

     - it may not resell the new notes to the public without delivering a
       prospectus and this prospectus is not appropriate or available for those
       resales by it; or

     - it is a broker-dealer that owns notes acquired directly from us or any of
       our affiliates,

we will use all commercially reasonable efforts to file with the Commission a
shelf registration statement within 30 days after the filing obligation arises
to cover resales of old notes.

     If we fail to comply with deadlines for completion of the exchange offer,
we will be required to pay liquidated damages to holders of the old notes. See
"Description of the Notes -- Registration Rights; Liquidated Damages" for more
details regarding the exchange and registration rights agreement.

     To receive transferable new notes in exchange for your old notes in the
exchange offer, you, as the holder of that old note, will be required to make
the following representations:


     - you are not one of our "affiliates," as defined in Rule 405 of the
       Securities Act, or a broker-dealer tendering old notes acquired directly
       from us for your own account;


     - if you are not a broker-dealer or are a broker-dealer but will not
       receive new notes for your own account in exchange for old notes, you are
       not engaged in and do not intend to participate in a distribution of the
       new notes;

     - you have no arrangement or understanding with any person to participate
       in a distribution of the old notes or the new notes within the meaning of
       the Securities Act;

     - you are acquiring the new notes in the ordinary course of your business;
       and

     - if you are a broker-dealer that will receive new notes for your own
       account in exchange for old notes, you represent that the old notes to be
       exchanged for new notes were acquired by you as a result of market-making
       activities or other trading activities and you acknowledge that you will
       deliver a prospectus meeting the requirements of the Securities Act in
       connection with the resale of any new notes. It is understood that you
       are not admitting that you are an "underwriter" within the meaning of the
       Securities Act by acknowledging that you will deliver, and by delivery
       of, a prospectus.

RESALE OF NEW NOTES

     Based on interpretations of the Commission staff in "no action letters"
issued to third parties, we believe that each new note issued under the exchange
offer may be offered for resale, resold, and otherwise transferred

                                        27


by you, the holder of that new note, without compliance with the registration
and prospectus delivery provisions of the Securities Act if:

     - you are not our "affiliate" within the meaning of Rule 405 under the
       Securities Act;

     - the new note is acquired in the ordinary course of your business; and

     - you do not intend to participate in the distribution of new notes.

     However, the Commission has not considered the legality of our exchange
offer in the context of a "no action letter," and there can be no assurance that
the Commission staff would make a similar determination with respect to our
exchange offer as in other circumstances.

     If you tender old notes in the exchange offer with the intention of
participating in any manner in a distribution of the new notes:

     - you cannot rely on these interpretations by the Commission staff; and

     - you must comply with the registration and prospectus delivery
       requirements of the Securities Act in connection with a secondary resale
       transaction.

     Unless an exemption from registration is otherwise available, any security
holder intending to distribute new notes should be covered by an effective
registration statement under the Securities Act containing the selling security
holder's information required by Item 507 or Item 508, as applicable, of
Regulation S-K under the Securities Act. This prospectus may be used by you to
offer for resale, resell or otherwise transfer new notes only as specifically
described in this prospectus. Failure to comply with the registration and
prospectus delivery requirements by a holder subject to these requirements could
result in that holder incurring liability for which it is not indemnified by us.
Only broker-dealers that acquired the old notes as a result of market-making
activities or other trading activities may participate in the exchange offer.
Please read the section captioned "Plan of Distribution" for more details
regarding the transfer of new notes.

TERMS OF THE EXCHANGE OFFER

     Upon the terms and subject to the conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange any old notes
properly tendered and not withdrawn before the expiration date. We will issue
$1,000 principal amount of new notes in exchange for each $1,000 principal
amount of old notes surrendered under the exchange offer. Old notes may be
tendered only in integral multiples of $1,000. The exchange offer is not
conditioned upon any minimum aggregate principal amount of old notes being
tendered for exchange.

     As of the date of this prospectus, $150 million in aggregate principal
amount of old notes are outstanding. This prospectus and the letter of
transmittal included with this prospectus are being sent to all registered
holders of old notes. There will be no fixed record date for determining
registered holders of old notes entitled to participate in the exchange offer.

     We intend to conduct the exchange offer according to the provisions of the
exchange and registration rights agreement, the applicable requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and the rules and regulations of the Commission. Old notes that
are not tendered for exchange in the exchange offer will remain outstanding and
continue to accrue interest and will be entitled to the rights and benefits the
holders have under the indenture. However, these old notes will not be freely
tradeable. See "-- Consequences of Failure to Exchange" below.

     We will be deemed to have accepted for exchange properly tendered old notes
when we have given oral or written notice of the acceptance to the exchange
agent and complied with the applicable provisions of the registration rights
agreement. The exchange agent will act as agent for the tendering holders for
the purposes of receiving the new notes.

     Holders tendering old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old

                                        28


notes. We will pay all charges and expenses, other than certain applicable taxes
described below, in connection with the exchange offer. It is important for
holders to read the section labeled "-- Fees and Expenses" for more details
regarding fees and expenses incurred in the exchange offer.


     We will return any old notes that we do not accept for exchange for any
reason without expense to the tendering holder promptly after the expiration or
termination of the exchange offer.


EXPIRATION DATE


     The exchange offer will expire at 5:00 p.m., New York City time, on
          , 2002, not less than 20 full business days after the date of
commencement of the exchange offer, unless, in our sole discretion, we extend
the exchange offer.


EXTENSIONS, DELAY IN ACCEPTANCE, TERMINATION OR AMENDMENT


     We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. During any
extensions, all old notes previously tendered will remain subject to the
exchange offer, including withdrawal rights, and we may accept them for
exchange.


     To extend the exchange offer, we will notify the exchange agent orally or
in writing of any extension. We will also make a public announcement of the
extension no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.

     If any of the conditions described below under "-- Conditions to the
Exchange Offer" have not been satisfied, we reserve the right, in our sole
discretion:


     - to extend the exchange offer and thereby delay acceptance for exchange of
       old notes; or


     - to terminate the exchange offer;


in each case by giving oral or written notice of a delay, extension or
termination to the exchange agent. We will promptly return any old notes in the
event of termination of the exchange offer. Subject to the terms of the
registration rights agreement, we also reserve the right to amend the terms of
the exchange offer in any manner.


     Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of the old notes. If we amend an exchange offer in a manner we determine
to constitute a material change, we will promptly disclose the amendment by
means of a prospectus supplement. The supplement will be distributed to the
registered holders of the old notes. Depending upon the significance of the
amendment and the manner of disclosure to the registered holders, we will extend
the exchange offer if the exchange offer would otherwise expire during that
period.

     Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we will have no obligation to publish, advertise or
otherwise communicate any public announcement, other than by making a timely
release to the Dow Jones News Service.

CONDITIONS TO THE EXCHANGE OFFER

     Despite any other term of the exchange offer, if in our reasonable judgment
the exchange offer, or the making of any exchange by a holder of old notes,
would violate applicable law or any applicable interpretation of the staff of
the Commission:

     - we will not be required to accept for exchange, or exchange any new notes
       for, any old notes; and

     - we may terminate the exchange offer as provided in this prospectus before
       accepting any old notes for exchange.

                                        29



     In addition, we will not be obligated to accept for exchange the old notes
of any holder that has not made the following representations:



     - the holder is not one of our "affiliates," as defined in Rule 405 of the
       Securities Act, or a broker-dealer tendering old notes acquired directly
       from us for its own account;



     - if the holder is not a broker-dealer or is a broker-dealer but will not
       receive new notes for its own account in exchange for old notes, the
       holder is not engaged in and does not intend to participate in a
       distribution of the new notes;



     - the holder has no arrangement or understanding with any person to
       participate in a distribution of the old notes or the new notes within
       the meaning of the Securities Act;



     - the holder is acquiring the new notes in the ordinary course of its
       business; and



     - if the holder is a broker-dealer that will receive new notes for its own
       account in exchange for old notes, the holder represents that the old
       notes to be exchanged for new notes were acquired by the holder as a
       result of market-making activities or other trading activities and the
       holder represents that it will deliver a prospectus meeting the
       requirements of the Securities Act in connection with the resale of any
       new notes. It is understood that the holder is not admitting that it is
       an "underwriter" within the meaning of the Securities Act by
       acknowledging that the holder will deliver, and by delivery of, a
       prospectus.



     - other representations as may be reasonably necessary under applicable
       Commission rules, regulations or interpretations.


     We expressly reserve the right to amend or terminate the exchange offer,
and to reject for exchange any old notes not previously accepted for exchange,
upon the occurrence of any of the conditions to the exchange offer specified
above. We will give oral or written notice of any extension, amendment,
nonacceptance or termination to the holders of the old notes as promptly as
practicable. These conditions are for our sole benefit, and we may assert them
or waive them, in whole or in part, at any time or at various times in our sole
discretion. If we fail at any time to exercise any of these rights, this failure
will not mean that we have waived our rights. Each right will be deemed an
ongoing right that we may assert at any time or at various times. In addition,
we will not accept for exchange any old notes tendered and will not issue new
notes in exchange for any old notes, if at that time any stop order has been
threatened or is in effect with respect to the registration statement of which
this prospectus constitutes a part or the qualification of the indenture
relating to the notes under the Trust Indenture Act of 1939.

PROCEDURES FOR TENDERING

  HOW TO TENDER GENERALLY

     Only a holder of old notes may tender their old notes in the exchange
offer. To tender in the exchange offer, you must either comply with the
procedures for manual tender or comply with the automated tender offer program
procedures of DTC described below under "-- Tendering Through DTC's Automated
Tender Offer Program."

     To complete a manual tender, you must:

     - complete, sign and date the letter of transmittal, or a facsimile of the
       letter of transmittal;

     - have the signature on the letter of transmittal guaranteed if the letter
       of transmittal so requires;

     - mail or deliver the letter of transmittal or a facsimile of the letter of
       transmittal to the exchange agent before the expiration date; and

                                        30


     - deliver and the exchange agent must receive, before the expiration date:

      - the old notes along with the letter of transmittal; or

      - a timely confirmation of book-entry transfer of the old notes into the
        exchange agent's account at DTC according to the procedure for
        book-entry transfer described below under "-- Book-Entry Transfer."

     If you wish to tender your old notes and cannot comply with the requirement
to deliver the letter of transmittal and your old notes or use the automated
tender offer program of DTC before the expiration date, you must tender your old
notes according to the guaranteed delivery procedures described below.

     To be tendered effectively, the exchange agent must receive physical
delivery of the letter of transmittal and other required documents at its
address provided above under "Prospectus Summary -- The Exchange Agent" before
the expiration date. The tender by a holder that is not withdrawn before the
expiration date will constitute an agreement between the holder and us according
to the terms and subject to the conditions described in this prospectus and in
the letter of transmittal.

     The method of delivery of old notes, the letter of transmittal and all
other required documents to the exchange agent is at your election and risk.
Rather than mail these items, we recommend that you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to assure
delivery to the exchange agent before the expiration date. You should not send
the letter of transmittal or old notes to us. You may request your brokers,
dealers, commercial banks, trust companies or other nominees to effect the above
transactions on your behalf.

BOOK-ENTRY TRANSFER

     The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus. Any financial institution participating in DTC's system
may make book-entry delivery of old notes by causing DTC to transfer the old
notes into the exchange agent's account at DTC according to DTC's procedures for
transfer. Holders of old notes who are unable to deliver confirmation of the
book-entry tender of their old notes into the exchange agent's account at DTC or
all other documents required by the letter of transmittal to the exchange agent
on or before the expiration date must tender their old notes according to the
guaranteed delivery procedures described below.

TENDERING THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM

     The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender its old notes. Participants in the program may, instead of
physically completing and signing the letter of transmittal and delivering it to
the exchange agent, transmit their acceptance of the exchange offer
electronically. They may do so by causing DTC to transfer the old notes to the
exchange agent according to its procedures for transfer. DTC will then send an
agent's message to the exchange agent.

     The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, stating
that:

     - DTC has received an express acknowledgment from a participant in its
       automated tender offer program that the participant is tendering old
       notes that are the subject of book-entry confirmation;

     - the participant has received and agrees to be bound by the terms of the
       letter of transmittal or, in the case of an agent's message relating to
       guaranteed delivery, that the participant has received and agrees to be
       bound by the applicable notice of guaranteed delivery; and

     - the agreement may be enforced against the participant.

                                        31


HOW TO TENDER IF YOU ARE A BENEFICIAL OWNER

     If you beneficially own old notes that are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and you wish to
tender those notes, you should contact the registered holder promptly and
instruct it to tender on your behalf. If you are a beneficial owner and wish to
tender on your own behalf, you must, before completing and executing the letter
of transmittal and delivering your old notes, either:

     - make appropriate arrangements to register ownership of the old notes in
       your name; or

     - obtain a properly completed bond power from the registered holder of old
       notes.

     The transfer of registered ownership may take considerable time and may not
be completed before the expiration date.

SIGNATURES AND SIGNATURE GUARANTEES

     Except as described below, you must have signatures on a letter of
transmittal or a notice of withdrawal described below guaranteed by:

     - a member firm of a registered national securities exchange;

     - a member of the National Association of Securities Dealers, Inc.;

     - a commercial bank or trust company having an office or correspondent in
       the United States; or

     - an "eligible guarantor institution" within the meaning of Rule 17Ad-15
       under the Exchange Act.

     The above must be a member of one of the recognized signature guarantee
programs identified in the letter of transmittal, unless the old notes are
tendered:

     - by a registered holder who has not completed the box entitled "Special
       Issuance Instructions" or "Special Delivery Instructions" on the letter
       of transmittal and the new notes are being issued directly to the
       registered holder of the old notes tendered in the exchange for those new
       notes; or

     - for the account of a member firm of a registered national securities
       exchange or of the National Association of Securities Dealers, Inc., a
       commercial bank or trust company having an office or correspondent in the
       United States, or an eligible guarantor institution.

WHEN ENDORSEMENTS OR BOND POWERS ARE NEEDED

     If the letter of transmittal is signed by a person other than the
registered holder of any old notes, the old notes must be endorsed or
accompanied by a properly completed bond power. The bond power must be signed by
the registered holder as the registered holder's name appears on the old notes
and a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an eligible
guarantor institution must guarantee the signature on the bond power.

     If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, those
persons should so indicate when signing. They should also submit evidence of
their authority to deliver the letter of transmittal satisfactory to us unless
we waive this requirement.

DETERMINATIONS UNDER THE EXCHANGE OFFER

     We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered old notes and
withdrawal of tendered old notes. Our determination will be final and binding.
We reserve the absolute right to reject any old notes not properly tendered or
any old notes our acceptance of which would, in the opinion of our counsel, be
unlawful. We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular old notes. Our interpretation of the terms
and

                                        32



conditions of the exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of old notes must be cured
within the time we shall determine. Neither we, the exchange agent nor any other
person will be under any duty to give notification of defects or irregularities
with respect to tenders of old notes, and none of the aforementioned will incur
liability for failure to give notification. Tenders of old notes will not be
deemed made until any defects or irregularities have been cured or waived. Any
old notes received by the exchange agent that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned to the tendering holder, unless otherwise provided in the letter of
transmittal, promptly following the expiration date.


WHEN WE WILL ISSUE NEW NOTES

     In all cases, we will issue new notes for old notes that we have accepted
for exchange under the exchange offer only after the exchange agent timely
receives:

     - old notes or a timely book-entry confirmation of the old notes into the
       exchange agent's account at DTC; and

     - a properly completed and duly executed letter of transmittal and all
       other required documents or properly transmitted agent's message.

RETURN OF OLD NOTES NOT ACCEPTED OR EXCHANGED


     If we do not accept any tendered old notes for exchange for any reason
described in the terms and conditions of the exchange offer or if old notes are
submitted for a greater principal amount than the holder desires to exchange,
the unaccepted or nonexchanged old notes will be returned without expense to the
tendering holder. In the case of old notes tendered by book-entry transfer into
the exchange agent's account at DTC according to the procedures described below,
the nonexchanged old notes will be credited to an account maintained with DTC.
These actions will occur promptly after the expiration or termination of the
exchange offer.


YOUR REPRESENTATIONS TO US

     By signing or agreeing to be bound by the letter of transmittal, you will
represent that, among other things:

     - you are not our "affiliate" as defined in Rule 405 of the Securities Act
       or a broker-dealer tendering old notes acquired directly from us for your
       own account;

     - if you are not a broker-dealer or are a broker-dealer but will not
       receive new notes for your own account in exchange for old notes, you are
       not engaged in and do not intend to participate in a distribution of the
       new notes;

     - you have no arrangement or understanding with any person to participate
       in a distribution of the old notes or the new notes within the meaning of
       the Securities Act;

     - you are acquiring the new notes in the ordinary course of your business;
       and

     - if you are a broker-dealer that will receive new notes for your own
       account in exchange for old notes, you represent that the old notes to be
       exchanged for new notes were acquired by you as a result of market-making
       activities or other trading activities and you acknowledge that you will
       deliver a prospectus meeting the requirements of the Securities Act in
       connection with the resale of any new notes. It is understood that you
       are not admitting that you are an "underwriter" within the meaning of the
       Securities Act by acknowledging that you will deliver, and by delivery
       of, a prospectus.

                                        33


GUARANTEED DELIVERY PROCEDURES

     If you wish to tender your old notes but your old notes are not immediately
available or you cannot deliver your old notes, the letter of transmittal or any
other required documents to the exchange agent or comply with the applicable
procedures under DTC's automated tender offer program before the expiration
date, you may tender if:

     - the tender is made through a member firm of a registered national
       securities exchange or of the National Association of Securities Dealers,
       Inc., a commercial bank or trust company having an office or
       correspondent in the United States or an eligible guarantor institution;

     - before the expiration date, the exchange agent receives from the member
       firm of a registered national securities exchange or of the National
       Association of Securities Dealers, Inc., commercial bank or trust company
       having an office or correspondent in the United States, or eligible
       guarantor institution either a properly completed and duly executed
       notice of guaranteed delivery by facsimile transmission, mail or hand
       delivery or a properly transmitted agent's message and notice of
       guaranteed delivery:

      - stating your name and address, the registered number(s) of your old
        notes and the principal amount of old notes tendered;

      - stating that the tender is being made;

      - guaranteeing that, within three business days after the expiration date,
        the letter of transmittal or facsimile thereof, together with the old
        notes or a book-entry confirmation and any other documents required by
        the letter of transmittal will be deposited by the eligible guarantor
        institution with the exchange agent; and

      - the exchange agent receives the properly completed and executed letter
        of transmittal or facsimile thereof, as well as all tendered old notes
        in proper form for transfer or a book-entry confirmation, and all other
        documents required by the letter of transmittal, within three business
        days after the expiration date.

     Upon request to the exchange agent, the exchange agent will send you a
notice of guaranteed delivery if you wish to tender your old notes using the
guaranteed delivery procedures described above.

WITHDRAWAL OF TENDERS

     Except as otherwise provided in this prospectus, you may withdraw your
tender at any time before 5:00 p.m., New York City time, on the expiration date
unless previously accepted for exchange. For a withdrawal to be effective:

     - the exchange agent must receive a written notice of withdrawal at one of
       the addresses listed above under "Prospectus Summary -- The Exchange
       Agent"; or

     - the withdrawing holder must comply with the appropriate procedures of
       DTC's automated tender offer program system.

     Any notice of withdrawal must:

     - specify the name of the person who tendered the old notes to be withdrawn
       (the "Depositor");

     - identify the old notes to be withdrawn, including the registration number
       or numbers and the principal amount of the old notes;

     - be signed by the Depositor in the same manner as the original signature
       on the letter of transmittal used to deposit those old notes or be
       accompanied by documents of transfer sufficient to permit the trustee for
       the old notes to register the transfer into the name of the Depositor
       withdrawing the tender; and

     - specify the name in which the old notes are to be registered, if
       different from that of the Depositor.

                                        34


     If old notes have been tendered under the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawn old notes and otherwise
comply with the procedures of DTC.

     We will determine all questions as to the validity, form, eligibility and
time of receipt of notice of withdrawal, and our determination shall be final
and binding on all parties. We will deem any old notes so withdrawn not to have
been validly tendered for exchange for purposes of the exchange offer.


     Any old notes that have been tendered for exchange but that are not
exchanged for any reason will be returned to their holder without cost to the
holder or, in the case of old notes tendered by book-entry transfer into the
exchange agent's account at DTC according to the procedures described above, the
old notes will be credited to an account maintained with DTC for the old notes.
This return or crediting will take place promptly after withdrawal, rejection of
tender or termination of the exchange offer. Holders may retender properly
withdrawn old notes by following one of the procedures described under
"-- Procedures for Tendering" above at any time on or before the expiration
date.


FEES AND EXPENSES

     We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by
telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.

     We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses. We may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus, letters of transmittal
and related documents to the beneficial owners of the old notes and in handling
or forwarding tenders for exchange.

     We will pay the cash expenses to be incurred in connection with the
exchange offer, including:

     - Commission registration fees;

     - fees and expenses of the exchange agent and trustee;

     - accounting and legal fees and printing costs; and

     - related fees and expenses.

TRANSFER TAXES

     We will pay all transfer taxes, if any, applicable to the exchange of old
notes under the exchange offer. The tendering holder, however, will be required
to pay any transfer taxes, whether imposed on the registered holder or any other
person, if:

     - certificates representing old notes for principal amounts not tendered or
       accepted for exchange are to be delivered to, or are to be issued in the
       name of, any person other than the registered holder of old notes
       tendered;

     - tendered old notes are registered in the name of any person other than
       the person signing the letter of transmittal; or

     - a transfer tax is imposed for any reason other than the exchange of old
       notes under the exchange offer.

     If satisfactory evidence of payment of any transfer taxes payable by a note
holder is not submitted with the letter of transmittal, the amount of the
transfer taxes will be billed directly to that tendering holder.

                                        35


CONSEQUENCES OF FAILURE TO EXCHANGE


     If you do not exchange your old notes for new notes in the exchange offer,
your notes will remain subject to the existing restrictions on transfer. In
general, you may not offer or sell the old notes unless they are registered
under the Securities Act or the offer or sale is exempt from registration under
the Securities Act and applicable state securities laws. Except as required by
the exchange and registration rights agreement, we do not intend to register
resales of the old notes under the Securities Act. Based on interpretations of
the Commission staff in no-action letters to third parties in unrelated
transactions, you may offer for resale, resell or otherwise transfer new notes
issued in the exchange offer without compliance with the registration and
prospectus delivery provisions of the Securities Act, if:


     - you are not our "affiliate" within the meaning of Rule 405 under the
       Securities Act;

     - you acquired the new notes in the ordinary course of your business; and

     - you have no arrangement or understanding with respect to the distribution
       of the new notes to be acquired in the exchange offer.

     If you tender in the exchange offer for the purpose of participating in a
distribution of the new notes:

     - you cannot rely on the applicable interpretations of the Commission; and

     - you must comply with the registration and prospectus delivery
       requirements of the Securities Act in connection with a secondary resale
       transaction.

ACCOUNTING TREATMENT

     We will not recognize a gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize expenses of the exchange
offer over the term of the new notes under accounting principles generally
accepted in the United States of America.

OTHER

     Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.

     We may, in the future, seek to acquire untendered old notes in open market
or privately negotiated transactions, through subsequent exchange offers or
otherwise. We have no present plans to acquire any old notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any untendered old notes.

                                        36


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

OVERVIEW

     The following is a discussion of our results of operations and financial
position for the periods described below. This discussion should be read in
conjunction with the consolidated financial statements included in this offering
memorandum. Our discussion of our results of operations and financial condition
includes various forward-looking statements about our markets, the demand for
our products and services and our future results. These statements are based on
certain assumptions that we consider reasonable. Our actual results may differ
materially from these indicated forward-looking statements. For information
about these assumptions and other risks and exposures relating to our business
and our company, you should refer to the section entitled "Risk Factors."

BACKGROUND

     We generate substantially all of our revenue by providing wastewater
residuals management services to municipal and industrial customers. We provide
our customers with complete, vertically-integrated services and capabilities,
including facility operations, facility cleanout services, regulatory
compliance, dewatering, collection and transportation, composting, drying and
pelletization, product marketing, incineration, alkaline stabilization, and land
application. We currently serve more than 1,000 customers in 35 states and the
District of Columbia. Our contracts typically have inflation price adjustments,
renewal clauses and broad force majeure provisions. In 2001, we experienced a
contract retention rate (both renewals and rebids) of approximately 90%.

     Revenues under our facilities operations and maintenance contracts are
recognized either when wastewater residuals enter the facilities or when the
residuals have been processed, depending on the contract terms. All other
revenues under service contracts are recognized when the service is performed.
We provide for losses in connection with long-term contracts where an obligation
exists to perform services and it becomes evident that the projected contract
costs will exceed the related revenue.

     Our costs relating to service contracts include processing, transportation,
spreading and disposal costs, and depreciation of operating assets. Our costs
relating to construction contracts primarily include subcontractor costs related
to design, permit and general construction. Our selling, general and
administrative expenses are comprised of accounting, information systems,
marketing, legal, human resources, regulatory compliance, and regional and
executive management costs. Historically, we have included amortization of
goodwill resulting from acquisitions as a separate line item in our income
statement. Beginning January 1, 2002, goodwill will no longer be amortized in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets."


RECENT DEVELOPMENTS



     On May 8, 2002, we announced that the City and County of Honolulu awarded
to us and signed a contract to design, build, and operate a biosolids digestion,
dewatering, and heat drying/pelletization facility providing service for
Honolulu's largest wastewater treatment plant. The contract provides for an
initial term of 15 years with an option to renew for an additional 10 years.
Based on the agreed terms, we can generate revenues between $92 and $144 million
over the life of the contract.


                                        37


RESULTS OF OPERATIONS

     The following table sets forth certain items as a percentage of revenue for
the periods indicated:




                                                                            THREE MONTHS
                                                                                ENDED
                                                 YEAR ENDED DECEMBER 31,      MARCH 31,
                                                 ------------------------   -------------
                                                  1999     2000     2001    2001    2002
                                                 ------   ------   ------   -----   -----
                                                                     
STATEMENT OF OPERATIONS DATA:
Revenue........................................  100.0%   100.0%   100.0%   100.0%  100.0%
Gross profit...................................   24.8     26.5     25.9     22.9    23.9
Selling, general and administrative expenses...   12.2      8.8      8.0      9.1    10.2
Amortization of goodwill.......................    2.7      2.2      1.7      1.9      --
Special (credits) charges, net.................    2.7       --     (1.9)
Income from operations.........................    7.2     15.5     18.1     11.9    13.7
Interest expense, net..........................    5.7     11.6     10.4     12.5     9.7
Income (loss) before provision for income
  taxes........................................    2.0      4.0      7.8      (.6)    4.1
Net income (loss) before cumulative effect of
  change in accounting for derivatives,
  preferred stock dividends and noncash
  beneficial conversion charge.................    2.0      4.0      7.6      (.6)    2.5
Net income (loss) applicable to common stock...    2.1    (21.1)     4.1     (6.8)    (.7)




RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2002 AND 2001



     For the three months ended March 31, 2002, net sales were approximately
$56,817,000 compared to approximately $58,795,000 for the three months ended
March 31, 2001, representing a decrease of approximately $1,978,000 or 3.4%. The
decrease for the three months ended March 31, 2002, relates primarily to an
anticipated decrease in cleanout services.



     Cost of services and gross profit for the three months ended March 31,
2002, were approximately $43,257,000 and approximately $13,559,000,
respectively, compared with approximately $45,326,000 and approximately
$13,469,000, respectively, for the three months ended March 31, 2001, resulting
in gross profit as a percentage of sales increasing to 23.9% in 2002 from 22.9%
in 2001. The increase in gross profit and margin for the three months ended
March 31, 2002, relates to lower storage costs and a planned reduction in
certain transportation expenses.



     Selling, general and administrative expenses were approximately $5,768,000
for the three months ended March 31, 2002, compared to approximately $5,352,000
for the three months ended March 31, 2001, representing an increase of
approximately $416,000. The increase relates to additional marketing development
costs.



     Amortization was approximately $28,000 for the three months ended March 31,
2002, compared to approximately $1,133,000 for the three months ended March 31,
2001. The decrease results from the adoption of SFAS No. 141 as beginning
January 1, 2002, the Company no longer amortizes goodwill.



     As a result of the foregoing, income from operations for the three months
ended March 31, 2002, was approximately $7,763,000 or 13.7% of sales compared to
approximately $6,984,000 or 11.9% of sales.



     Other expenses, net were approximately $5,455,000 for the three months
ended March 31, 2002, compared to approximately $7,353,000 for the three months
ended March 31, 2001, representing a decrease of approximately $1,898,000. The
decrease relates to interest savings related to repayments of debt funded from
operational cash flow and significant reductions in market interest rates on our
floating rate debt.



     For the three months ended March 31, 2002, we recorded a provision for
income taxes of approximately $876,000 as the prior year valuation allowance
related to certain deferred tax assets no longer offset deferred tax provision
requirements.


                                        38



     As a result of the foregoing, net income (loss) before cumulative effect of
change in accounting for derivatives and preferred stock dividends of
approximately $1,432,000 for the three months ended March 31, 2002, compared to
a net loss of approximately $369,000 for the same period in 2001.



     Net loss applicable to common stock for the three months ended March 31,
2002 totaled approximately $412,000 compared to a loss of approximately
$3,973,000 for the three months ended March 31, 2001. The improvement is due
primarily to the $1,861,000 cumulative effect of change in accounting for
derivatives recognized during the three months ended March 31, 2001 and the
foregoing changes in operating results.


RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


     For the year ended December 31, 2001, revenue was approximately
$260,196,000 compared to approximately $163,098,000 for the same period in 2000,
an increase of approximately $97,098,000, or 59.5%. The increase primarily
relates to the full year effect on revenues from our acquisitions in 2000 and
internal growth. Revenue for 2001 of $260,196,000 compared to pro forma revenue
of $248,700,000 in 2000, an increase of $11,496,000, or 4.6%. Pro forma revenue
for 2000 assumes that acquisitions completed during 2000 had occurred at the
beginning of 2000. There were no acquisitions during 2001.


     Cost of services and gross profit for the year ended December 31, 2001,
were approximately $192,919,000 and $67,277,000, respectively, compared to
approximately $119,900,000 and $43,198,000, respectively, for the year ended
2000, resulting in a decrease in gross profit as a percentage of revenue from
26.5% in 2000 to 25.9% in 2001. The decrease in gross profit as a percentage of
revenue is primarily attributable to pass through construction revenue on a
$4,500,000 contract to design and build a manure-to-energy anaerobic digester
facility for the Inland Empire Utilities Agency and lower margins on another
contract that is incurring startup expenses.

     Selling, general and administrative expenses were approximately $20,786,000
for the year ended December 31, 2001, compared to approximately $14,337,000 for
2000, an increase of approximately $6,449,000 or 45.0%. The increase relates
primarily to personnel added as a result of our acquisitions in 2000. Selling,
general and administrative expenses decreased from 8.8% of revenue in 2000 to
8.0% of revenue in 2001. The decrease relates to leverage of certain fixed
administrative costs and cost savings resulting from the integration of our
acquisitions in 2000.

     Amortization of goodwill increased from approximately $3,516,000 in 2000 to
approximately $4,489,000 in 2001 due to full year amortization on our
acquisitions in 2000.

     Special (credits) charges, net totaling approximately $4,982,000 in 2001
included an approximately $6,043,000 nonrecurring gain from a litigation
settlement related to claims between us and Azurix Corp. arising from financing
and merger discussions between the companies that were terminated in October
1999 and settled in September 2001, an approximately $1,100,000 gain resulting
from the settlement of other litigation, partially offset by a $2,161,000 charge
for our estimated net exposure for unpaid insurance claims and other costs
related to our 1998 and 1999 policy periods with our previous underwriter,
Reliance Insurance Company, which is in insolvency proceedings. There were no
special charges or credits in 2000.

     As a result of the foregoing, income from operations for the year ended
December 31, 2001, was approximately $46,984,000 compared to approximately
$25,345,000 for the same period in 2000, an increase of approximately
$21,639,000 or 85.4%. Income from operations, excluding the special (credit)
charges, net, as a percentage of revenue increased from 15.5% in 2000 to 16.2%
in 2001.

     Interest expense for the year ended December 31, 2001, was approximately
$26,969,000 compared to approximately $18,908,000 for the same period in 2000.
Interest expense as a percent of revenue decreased from 11.6% in 2000 to 10.4%
in 2001. The increase in interest expense is related to the additional debt
incurred to finance our acquisitions in 2000 partially offset by interest
savings due to approximately $27,000,000 of principle payments made in 2001 from
cash generated from operations and lower market interest rates on our floating
rate debt.

                                        39


     Other income for the year ended December 31, 2001, was approximately
$221,000 compared to approximately $114,000 for the same period in 2000. The
increase relates primarily to gains on sale of assets.


     For the year ended December 31, 2001, we recorded a provision for income
taxes of approximately $573,000 as the prior year valuation allowance related to
certain deferred tax assets no longer offset deferred tax provision
requirements. Our effective income tax rate was 2.8% in 2001 and 0% in 2000. The
effective tax rate is significantly lower than the statutory rate of 35% because
changes in our tax valuation allowance have historically offset current and
deferred tax provisions. A valuation allowance has been recorded because we have
deferred tax assets that primarily consist of net operating loss carryforwards,
which exceed our deferred tax liabilities. This net deferred tax asset may not
be realizable due to the federal tax laws which limit the amount of
carryforwards that can be utilized if a change of ownership occurs, and the time
during which operating loss carryforwards may be applied against future taxes.
The valuation allowance decreased by $1,696,000 for the year ended December 31,
2001, due to basis differences in fixed assets and goodwill partially reduced by
deferred tax assets related to increases in tax net operating loss
carryforwards. See Note 7 in the accompanying Notes to Consolidated Financial
Statements. We estimate that our effective tax rate for 2002 will total
approximately 38% of pretax income. This 2002 tax provision is expected to be
deferred due to significant tax deductions in excess of book deductions for
goodwill and depreciation.


     As a result of the foregoing, net income before cumulative effect of change
in accounting for derivatives, preferred stock dividends, and noncash beneficial
conversion charges of approximately $19,664,000 was reported for the year ended
December 31, 2001, compared to approximately $6,551,000 for the same period in
2000.


     During the twelve months ended December 31, 2000, we issued approximately
$65,100,000 of preferred stock in connection with refinancing our debt and
completing eight acquisitions. This preferred stock is convertible into common
stock at $2.50 per share, which was below the market price of our stock at the
time of issuance. Financial accounting rules require that we record a noncash
beneficial conversion charge for the difference between the market price and the
conversion price at the date of issuance of this preferred stock. Accordingly,
we recorded a noncash beneficial conversion charge of approximately $37,045,000
in fiscal 2000. There were no noncash beneficial conversion charges in 2001.



     Net income (loss) applicable to common stock for the year ended December
31, 2001 totaled income of $10,555,284 in 2001 compared to a loss of $34,432,654
for the year ended December 31, 2000. The increase is due primarily to the
noncash beneficial conversion charge of approximately $37,045,000 recognized
during 2000 and the other foregoing changes in operating results.


RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


     For the year ended December 31, 2000, revenue was approximately
$163,098,000 compared to approximately $56,463,000 for the same period in 1999,
an increase of approximately $106,635,000, or 188.9%. The increase relates
primarily to additional revenue from our acquisitions in 2000 and 1999. Pro
forma revenue for 2000 of $248,700,000 compared to pro forma revenue of
$235,783,000 in 1999, an increase of $12,917,000, or 5.5%. Pro forma revenue for
2000 and 1999 assumes that acquisitions completed during 2000 and 1999 had
occurred at the beginning of 1999.


     Cost of operations and gross profit for the year ended December 31, 2000,
were approximately $119,900,000 and $43,198,000, respectively, compared to
approximately $42,471,000 and $13,992,000, respectively, for the year ended
1999, resulting in an increase in gross profit as a percentage of revenue to
26.5% in 2000 from 24.8% in 1999. The increase in gross profit as a percentage
of revenue is primarily attributable to the addition of higher margin drying and
pelletization, and incineration services resulting from certain acquisitions
completed in 2000.

     Selling, general and administrative expenses were approximately $14,337,000
for the year ended December 31, 2000, compared to approximately $6,876,000 for
1999, an increase of approximately $7,461,000 or 108.5%. The increase relates
primarily to increased corporate staffing and expense to implement and manage
our acquisitions and additional selling, general and administrative costs
associated with the businesses

                                        40


acquired. Selling, general and administrative expenses decreased from 12.2% of
revenue in 1999 to 8.8% of revenue in 2000 due to cost savings resulting from
integration of acquired operations and leverage of certain fixed administrative
costs on significantly higher revenue.

     Amortization of goodwill increased from approximately $1,527,000 in 1999 to
approximately $3,516,000 in 2000 due to our acquisitions in 2000 and 1999.

     Special (credits) charges, net, were approximately $1,500,000 in 1999. The
charges related to approximately $1,500,000 in charges for legal, accounting and
financing costs related to the proposed preferred stock and merger discussions
with Azurix Corp., both of which were terminated in October 1999, and several
other legal matters. There were no special charges or credits in 2000.

     As a result of the foregoing, income from operations for the year ended
December 31, 2000 was approximately $25,345,000 compared to approximately
$4,090,000 for the same period in 1999, an increase of approximately $21,255,000
or 519.7%. Income from operations, excluding the special (credit) charges, net,
as a percentage of revenue increased from 9.9% in 1999 to 15.5% in 2000.

     Interest expense for the year ended December 31, 2000, was approximately
$18,908,000 compared to approximately $3,236,000 for the same period in 1999.
The increase in interest expense is related to the additional debt incurred to
finance acquisitions.

     Other income for the year ended December 31, 2000, was approximately
$114,000 compared to approximately $294,000 for the same period in 1999. The
decrease relates primarily to a reduction of gains on sale of assets.


     Our effective income tax rate was 0% in both 2000 and 1999. The effective
tax rate is significantly lower than the statutory rate of 35% because changes
in our tax valuation allowance have historically offset current and deferred tax
provisions. A valuation allowance has been recorded because we have deferred tax
assets that primarily consist of net operating loss carryforwards, which exceed
our deferred tax liabilities. This net deferred tax asset may not be realizable
due to federal tax laws which limit the amount of carryforwards that can be
utilized if a change of ownership occurs, and the time during which operating
loss carryforwards may be applied against future taxes. The valuation allowance
decreased by $333,000 for the year ended December 31, 2000, due to basis
differences in fixed assets and goodwill reduced by net deferred tax assets
related to increases in tax net operating loss carryforwards. See Note 7 on the
accompanying Notes to Consolidated Financial Statements.


     As a result of the foregoing, net income before preferred stock dividends
and noncash beneficial conversion charges of approximately $6,551,000 was
reported for the year ended December 31, 2000, compared to approximately
$1,148,000 for the same period in 1999.

     During the twelve months ended December 31, 2000, we issued approximately
$65,100,000 of preferred stock in connection with refinancing our debt and
completing eight acquisitions. This preferred stock is convertible into common
stock at $2.50 per share, which was below the market price of our stock at the
time of issuance. Financial accounting rules require that we record a noncash
beneficial conversion charge for the difference between the market price and the
conversion price at the date of issuance of this preferred stock. Accordingly,
we recorded a noncash beneficial conversion charge of approximately $37,045,000
in fiscal 2000. There were no noncash beneficial conversion charges in 1999.


     Net income (loss) applicable to common stock for the year ended December
31, 2000 totaled a loss of $34,432,654 compared to income of $1,148,013 for the
year ended December 31, 1999. The decrease is due primarily to the noncash
beneficial conversion charge of approximately $37,045,000 recognized during 2000
and the other foregoing changes in operating results.


                                        41



LIQUIDITY AND CAPITAL RESOURCES


  OVERVIEW

     During the past three years, our principal sources of funds were cash
generated from our operating activities and long-term borrowings. We use cash
mainly for capital expenditures, working capital and debt service. In the
future, we expect that we will use cash principally to fund working capital, our
debt service and repayment obligations and capital expenditures In addition, we
may use cash to pay dividends on our preferred stock and potential earnout
payments resulting from prior acquisitions. We have historically financed our
acquisitions principally through the issuance of equity and debt securities, our
credit facility, and funds provided by operating activities.

  HISTORICAL CASH FLOWS


     Cash Flows from Operating Activities.  For the three months ended March 31,
2002, cash flows from operating activities were approximately $5,498,000
compared to approximately $6,404,000 for the same period in 2001, a decrease of
approximately $906,000, or 14.1%. The decrease primarily relates to change in
working capital.


     For the year ended December 31, 2001, cash flows from operating activities
were approximately $38,208,000 compared to approximately $19,620,000 for the
same period in 2000, an increase of approximately $18,588,000, or 94.7%. The
increase primarily relates to the full year effect on cash flows from operating
activities of our acquisitions in 2000, and internal growth and decreases from
changes in working capital between periods.


     Cash Flows from Investing Activities.  For the three months ended March 31,
2002, cash flows used for investing activities were approximately $3,810,000
compared to approximately $4,166,000 for the same period in 2001, a decrease of
approximately $356,000.


     For the year ended December 31, 2001, cash flows used for investing
activities were approximately $14,049,000 compared to approximately $250,946,000
for the same period in 2000, a decrease of approximately $236,897,000. The
decrease primarily relates to a decrease in cash paid for acquisitions from
approximately $245,386,000 in 2000 to approximately $1,709,000 in 2001.


     Cash Flows from Financing Activities.  For the three months ended March 31,
2002, cash flows used for financing activities were approximately $1,685,000
compared to cash flows used by financing activities of approximately $4,543,000
for the same period in 2001, a decrease of approximately $2,858,000. The
decrease primarily relates to additional debt payments made in 2001 using excess
cash at the end of 2000 and cash paid in 2002 for debt issuance costs related to
the old notes issued in April 2002.


     For the year ended December 31, 2001, cash flows used for financing
activities were approximately $28,505,000 compared to cash flows generated by
financing activities of approximately $235,743,000 for the same period in 2000,
a decrease of approximately $264,248,000. The decrease primarily relates to net
debt borrowings and preferred stock issuances to fund the cash paid for
acquisitions in 2000 and cash used to repay debt in 2001.

  CAPITAL EXPENDITURE REQUIREMENTS


     Capital expenditures for the three months ended March 31, 2002, totaled
approximately $3,609,000 compared to approximately $3,390,000 in 2001. Our
ongoing capital expenditure program consists of expenditures for replacement
equipment, betterments, and growth. We expect our capital expenditures for 2002
to be approximately $14 to $15 million.


     Capital expenditures for the year ended December 31, 2001, totaled
approximately $13,313,000 compared to approximately $5,805,000 in 2000. Our
ongoing capital expenditure program consists of expenditures for replacement
equipment, betterments, and growth. We expect our capital expenditures for 2002
to be approximately $14,300,000.

                                        42


  DEBT SERVICE REQUIREMENTS

     On January 27, 2000, we entered into a $110,000,000 senior credit facility
to fund working capital for acquisitions, to refinance existing debt, to provide
working capital for operations, to fund capital expenditures and for other
general corporate purposes. On February 25, 2002, the existing credit facility
was amended to, among other things, increase the revolving loan from $30,000,000
to approximately $51,330,000, increase sublimits for letters of credit from
$20,000,000 to $50,000,000, provide limitations for restricted payments and
investments, and increase the permitted amounts of nonrecourse financing and
operating lease obligations. The senior credit agreement contains standard
covenants including compliance with laws, limitations on capital expenditures,
restrictions on dividend payments, limitations on mergers and compliance with
certain financial covenants. See "Description of Other Indebtedness and
Preferred Stock -- Existing Credit Facility."


     In May 2002, the Company entered into a new $150 million senior credit
facility that provides for a $70 million funded term loan and up to a $50
million revolver, with the ability to increase the total commitment to $150
million. The term loan proceeds were used to pay off the existing senior debt
that remained unpaid after the $150 million offering of the old notes. This new
facility is secured by substantially all of our assets and those of our
subsidiaries (other than assets securing nonrecourse debt) and includes
covenants restricting the incurrence of additional indebtedness, liens, certain
payments and sale of assets. During the three months ended June 30, 2002, we
expect to record a noncash extraordinary charge, net of tax, of approximately
$5.0 million, which represents the unamortized deferred debt costs related to
the debt that was repaid with the net proceeds received from the old notes and
the new credit facility. We believe that our effective interest rate on the old
notes and the new credit facility is not materially different than the effective
interest rate on our previously existing debt. Our 2002 minimum principal
payments due on our long-term debt will decrease by approximately $12 million
under the terms of the old notes and the new credit facility compared to the
terms of our previously existing debt. Requirements for mandatory debt payments
from excess cash flows, as defined, are unchanged in the new credit facility.
See "Description of Other Indebtedness and Preferred Stock -- New Credit
Facility."


     At December 31, 2001, we had working capital of approximately $7,315,000.
Accounts receivable and prepaid expenses and other current assets increased by
approximately $1,097,000 during fiscal 2001. We evaluate the collectibility of
these receivables on a specific account-by-account review. We had allowances of
approximately $2,165,000 and $1,701,000 at December 31, 2001 and 2000,
respectively, and write-offs of approximately $0 and $45,000 in 2001 and 2000,
respectively. Accounts payable and accrued expenses increased by approximately
$4,637,000 during fiscal 2001 primarily as a result of additional trade
payables.

     In 1996, the Maryland Energy Financing Administration issued non-recourse
tax-exempt project revenue bonds, or Nonrecourse Project Revenue Bonds, in the
aggregate amount of $58,550,000. The Administration loaned the proceeds of the
Nonrecourse Project Revenue Bonds to Wheelabrator Water Technologies Baltimore
L.L.C., now our wholly owned subsidiary and known as Synagro-Baltimore, L.L.C.
pursuant to a June 1996 loan agreement, and the terms of the loan mirror the
terms of the Nonrecourse Project Revenue Bonds. The loan financed a portion of
the costs of constructing thermal facilities located in Baltimore County,
Maryland, at the site of its Back River Wastewater Treatment Plant, and in the
City of Baltimore, Maryland, at the site of its Patapsco Wastewater Treatment
Plant. We assumed all obligations associated with the Nonrecourse Project
Revenue Bonds in connection with our acquisition of Bio Gro in 2000. Nonrecourse
Project Revenue Bonds in the aggregate amount of $9,885,000 have already been
paid, and the remaining Nonrecourse Project Revenue Bonds bear interest at
annual rates between 5.45% and 6.45% and mature on dates between December 1,
2002 and December 1, 2016.

                                        43


     At December 31, 2001, future minimum principal payments of long-term debt
and Nonrecourse Project Revenue Bonds are as follows:



                                                             NONRECOURSE
                                              LONG-TERM        PROJECT
YEAR ENDING DECEMBER 31,                         DEBT       REVENUE BONDS      TOTAL
- ------------------------                     ------------   -------------   ------------
                                                                   
2002.......................................  $ 12,880,693    $ 2,300,000    $ 15,180,693
2003.......................................    11,267,073      2,430,000      13,697,073
2004.......................................    14,272,541      2,570,000      16,842,541
2005.......................................    38,761,075      2,710,000      41,471,075
2006.......................................    84,787,584             --      84,787,584
2007-2010..................................    53,562,250     16,295,000      69,857,250
2011-2016..................................            --     16,579,848      16,579,848
                                             ------------    -----------    ------------
     Total.................................  $215,531,216    $42,884,848    $258,416,064
                                             ============    ===========    ============


     We lease certain facilities and equipment under noncancelable, long-term
lease agreements. Minimum annual rental commitments under these leases are as
follows:



YEAR ENDING DECEMBER 31,
- ------------------------
                                                            
2002........................................................   $ 4,768,418
2003........................................................     4,384,249
2004........................................................     4,254,919
2005........................................................     3,687,492
2006........................................................     3,035,267
Thereafter..................................................    18,366,326
                                                               -----------
                                                               $38,496,671
                                                               ===========


     We believe we will have sufficient cash generated by our operations and
available through our new credit facility to provide for future working capital
and capital expenditure requirements that will be adequate to meet our liquidity
needs for the foreseeable future, including scheduled payments for interest on
the notes, payment of interest on our new credit facility and payments on the
Nonrecourse Project Revenue Bonds. We cannot assure you, however, that our
business will generate sufficient cash flow from operations, that any cost
savings and any operating improvements will be realized or that future
borrowings will be available to us under our new credit facility in an amount
sufficient to enable us to pay our indebtedness, including the notes, or to fund
our other liquidity needs. We may need to refinance all or a portion of our
indebtedness, including the notes, on or before maturity. We cannot assure you
that we will be able to refinance any of our indebtedness, including our new
credit facility and the notes, on commercially reasonable terms or at all. See
"Risk Factors -- To service our indebtedness, we will require a significant
amount of cash. Our ability to generate cash depends on many factors beyond our
control."

  RECENT ACCOUNTING PRONOUNCEMENTS

     Effective January 1, 2001, we adopted Statement of Financial Accounting
Standards, or SFAS, No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS 138, "Accounting for Certain Derivative
Instruments and Hedging Activities," which requires that we recognize all
derivative instruments as assets or liabilities in our balance sheet and measure
them at their fair value. Changes in the fair value of a derivative are recorded
in income or directly to equity, depending on the instrument's designed use. For
derivative instruments that are designated and qualify as a cash flow hedge, the
effective portion of the gain or loss on the derivative instrument is reported
as a component of other comprehensive income and reclassified into income when
the hedged transaction affects income, while the ineffective portion of the gain
or loss on the derivative instrument is recognized currently in earnings. For
derivative instruments that are designated and qualify as a fair value hedge,
the gain or loss on the derivative instrument as well as the

                                        44


offsetting loss or gain on the hedged item attributable to the hedged risk are
recognized in current income during the period of the change in fair values. The
noncash transition adjustment related to the adoption of this statement has been
reflected as a "cumulative effect of change in accounting for derivatives" of
approximately $1,861,000 charged to net income and approximately $2,058,000
charged to other comprehensive income included in stockholders' equity as of
January 1, 2001. See Note 5 in the accompanying Notes to Consolidated Financial
Statements for Synagro for discussion of our current derivative contracts and
hedging activities.

     In July 2001, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 141, "Business Combinations," and No. 142, "Goodwill and Other
Intangible Assets." SFAS 141 requires all business combinations initiated after
June 30, 2001, to be accounted for using the purchase method. Under SFAS 142,
goodwill and intangible assets with indefinite lives are no longer amortized but
are reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives will be amortized over their useful lives. Management has completed the
initial impairment test required by the provisions of SFAS 142 as of January 1,
2002, and determined that there has not been an impairment of our goodwill.
Beginning January 1, 2002, we will no longer amortize goodwill. During 2001, we
recorded goodwill amortization of approximately $4.5 million.

     In June 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 covers all legally enforceable obligations associated
with the retirement of tangible long-lived assets and provides the accounting
and reporting requirements for such obligations. SFAS No. 143 is effective for
us beginning January 1, 2003. Management has yet to determine the impact that
the adoption of SFAS No. 143 will have on our consolidated financial statements.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." SFAS No. 144 establishes a single accounting method for long-
lived assets to be disposed of by sale, whether previously held and used or
newly acquired, and extends the presentation of discontinued operations to
include more disposal transactions. SFAS No. 144 also requires that an
impairment loss be recognized for assets held-for-use when the carrying amount
of an asset (group) is not recoverable. The carrying amount of an asset (group)
is not recoverable if it exceeds the sum of the undiscounted cash flows expected
to result from the use and eventual disposition of the asset (group), excluding
interest charges. Estimates of future cash flows used to test the recoverability
of a long-lived asset (group) must incorporate the entity's own assumptions
about its use of the asset (group) and must factor in all available evidence.
SFAS No. 144 is effective for us for the quarter ending March 31, 2002.
Management believes the impact of the adoption of SFAS No. 144 is not material
to our results of operations and financial position.

  CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

     In preparing financial statements in conformity with accounting principles
generally accepted in the United States, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
following are our significant estimates and assumptions made in preparation of
its financial statements:

     Allowance for Doubtful Accounts. We estimate losses for uncollectible
accounts based on the aging of the accounts receivable and the evaluation and
the likelihood of success in collecting the receivable.

     Loss Contracts. We evaluate our revenue producing contracts to determine
whether the projected revenues of such contracts exceed the direct cost to
service such contracts. These evaluations include estimates of the future
revenues and expenses. Accruals for loss contracts are adjusted based on these
evaluations.

                                        45


     Purchase Accounting. We estimate the fair value of assets, including
property, machinery and equipment and its related useful lives and salvage
values, and liabilities when allocating the purchase price of an acquisition.

     Income Taxes. We assume the deductibility of certain costs in our income
tax filings and estimates the recovery of deferred income tax assets.

     Legal and Contingency Accruals. We estimate and accrue the amount of
probable exposure we may have with respect to litigation, claims and
assessments.

     Self Insurance Reserves. Through the use of actuarial calculations, we
estimate the amounts required to settle insurance claims.

     Actual results could differ materially from the estimates and assumptions
that we use in the preparation of our financial statements.

  OTHER

     We also maintain two leases with an affiliate of one of our stockholders.
The first lease has an initial term through July 31, 2004 with an option to
renew for an additional five-year period. Rental payments made under this lease
in 2001 totaled approximately $97,000. The second lease has an initial term
through December 31, 2013. Rental payments made under the second lease in 2001
totaled approximately $110,000.

     As of December 31, 2001, we had generated net operating loss, or NOL,
carryforwards of approximately $67,209,000 available to reduce future income
taxes. These carryforwards begin to expire in 2008. A change in ownership, as
defined by federal income tax regulations, could significantly limit our ability
to utilize its carryforwards. Accordingly, our ability to utilize our NOLs to
reduce future taxable income and tax liabilities may be limited. Additionally,
because federal tax laws limit the time during which these carryforwards may be
applied against future taxes, we may not be able to take full advantage of these
attributes for federal income tax purposes. As we have incurred losses in recent
years and the utilization of these carryforwards could be limited as discussed
above, a valuation allowance has been established to partially offset the
deferred tax asset at December 31, 2001 and 2000. We estimate that our effective
tax rate in 2002 will approximate 38% of pretax income. Substantially all of our
tax provision over the next several years is expected to be deferred in nature
due to significant tax deductions in excess of book deductions for goodwill and
depreciation.

     For a discussion of risks relating to potential cancellation of contracts
by customers, potential regulatory changes and current litigation matters, see
"Risk Factors -- Risks Relating to Us and Our Business."

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We utilize financial instruments, which inherently have some degree of
market risk due to interest rate fluctuations. Management is actively involved
in monitoring exposure to market risk and continues to develop and utilize
appropriate risk management techniques. We are not exposed to any other
significant market risks, including commodity price risk, foreign currency
exchange risk or interest rate risks from the use of derivative financial
instruments. Management does not currently use derivative financial instruments
for trading or to speculate on changes in interest rates or commodity prices.

  DERIVATIVES AND HEDGING ACTIVITIES

     Prior to June 25, 2001, our derivative contracts consisted of interest rate
swap agreements and option agreements related to hedging requirements under our
existing credit facility. The option agreements did not qualify for hedge
accounting under SFAS 133. Changes in the fair value of these derivatives were
recognized in earnings. Our interest rate swap agreements qualified for hedge
accounting as cash flow hedges of our exposure to changes in variable interest
rates.

     On June 25, 2001, we entered into a reverse swap on our subordinated debt,
and terminated the previously existing interest rate swap and option agreements
noted above. The balance included in accumulated other comprehensive loss
included in stockholders' equity is being recognized in future periods' income
                                        46



over the remaining term of the original swap agreement. We have designated the
reverse swap agreement on our subordinated debt as a fair value hedge of changes
in the value of the underlying debt as a result of changes in the benchmark
interest rate. Under the terms of the reverse swap, we receive 12% per annum on
$52.8 million notional and we pay a spread over a floating rate on $52.8 million
notional. The reverse swap currently receives hedge accounting treatment under
FAS 133. Because the underlying subordinated debt, which this reverse swap has
been designated as a fair value hedge, has been retired future changes in the
mark to market value of this reverse swap will no longer receive hedge
accounting treatment and will be recognized in earnings currently. The liability
related to the reverse swap agreement totaling approximately $5,151,000 is
reflected in other long-term liabilities at December 31, 2001; additionally, a
fair value adjustment on our subordinated debt of approximately $802,000 is
reflected in long-term debt at December 31, 2001. The amount of the
ineffectiveness of the reverse swap agreement credited to interest expense, net
for the twelve months ended December 31, 2001, totaled approximately $267,000.


     On July 3, 2001, we entered into an interest rate cap agreement
establishing a maximum fixed LIBOR rate on $125,000,000 of our floating rate
debt at an interest rate of 6.50% in order to meet the hedging requirements of
our existing credit facility. Changes in the fair value of the agreement charged
to interest expense, net and totaled $66,000 during 2001.

  INTEREST RATE RISK


     Total debt at March 31, 2002, included approximately $161,084,000 in
floating rate debt attributed to borrowings under the old credit facility at an
average interest rate of 4.66%. As a result, our annual interest cost in 2002
will fluctuate based on short-term interest rates. Total debt at May 10, 2002
included approximately $70,000,000 in floating rate debt attributed to the new
credit facility entered into in May 2002 at an average interest rate of 4.9%. We
have entered into an interest rate cap agreement at July 3, 2001, establishing a
maximum fixed LIBOR rate on $125,000,000 of our floating rate debt at an
interest rate of 6.50% and entered into a reverse swap agreement at June 25,
2001, on our subordinated debt in order to manage risk and reduce exposure to
interest rate fluctuations as required under our bank credit facility. We have
designated the reverse swap agreement as a fair value hedge. Based on interest
rates as of May 31, 2002, the impact on annual cash flow of a ten percent change
in the floating rate would be approximately $122,000 after taking into
consideration the hedge agreements.


                                        47


                                    BUSINESS

BUSINESS OVERVIEW

     We are a national wastewater residuals management company serving more than
1,000 municipal and industrial wastewater treatment plants and have operations
in 35 states and the District of Columbia. We offer many services that focus on
the beneficial reuse of organic non-hazardous residuals resulting from the
wastewater treatment process. We believe that the services we offer are
compelling to our customers because they allow our customers to avoid the
significant capital and operating costs that they would have to incur if they
internally managed their wastewater residuals.

     We provide a broad range of services, including facility operations,
facility cleanout services, regulatory compliance, dewatering, collection and
transportation, composting, drying and pelletization, product marketing,
incineration, alkaline stabilization, and land application. We currently operate
four heat-drying facilities, four composting facilities, three incineration
facilities, one manure-to-energy facility, 27 permanent and 22 mobile dewatering
units, and more than 250 small wastewater treatment plants (ranging from 500
gallons per day to 500,000 gallons per day).


     Approximately 80% of our 2001 revenue was generated through more than 450
contracts that range from one to twenty-five years in length. These contracts
have a backlog of approximately $1.8 billion, which represents more than seven
times our 2001 revenue. In general, our contracts contain provisions for
inflation related annual price increases, renewal provisions, and broad force
majeure clauses. Our top ten customers have an average of 11.3 years remaining
on their current contracts, including renewal options. In 2001, we experienced a
contract retention rate (both renewals and rebids) of approximately 90%. For the
year ended December 31, 2001, our revenue, our earnings before interest, taxes,
depreciation, amortization, accounting change, preferred stock dividends, and
noncash beneficial conversion charge, and our net income applicable to common
stock were $260 million, $66 million and $11 million, respectively.



     We benefit from significant customer diversification, with our single
largest customer, New York Department of Environmental Protection, accounting
for 14% of our 2001 revenues and 11% of our 2000 revenues, and our top ten
customers accounting for approximately 34% of our 2001 revenues. For the year
ended December 31, 2001, our municipal and industrial customers accounted for
84% and 11%, respectively, of our revenues.



     We are a holding company with essentially no independent operations or
assets other than our subsidiaries. All of our operations are conducted at the
subsidiary level.


INDUSTRY OVERVIEW

  HISTORY

     Most residential, commercial, and industrial wastewater is collected
through an extensive network of sewers and transported to wastewater treatment
plants, which are known as POTWs. When wastewater is treated at POTWs or at
industrial wastewater pre-treatment facilities, the process separates the liquid
portion of the wastewater from the solids (or wastewater residuals) portion. The
water is treated for ultimate discharge, typically into a river or other surface
water. Prior to the promulgation of the Part 503 Regulations in 1993, most POTWs
simply disposed of untreated wastewater residuals through surface water dumping,
incineration, and landfilling. The Part 503 Regulations began a phase-out of
surface water dumping of wastewater residuals and, after one of the EPA's most
thorough risk assessments, encouraged their beneficial reuse. This created
significant growth for the wastewater residuals management industry. To
establish beneficial reuse as an option for wastewater generators, the EPA
established a classification methodology for the wastewater residuals that is
based on how the wastewater residuals are processed. Now, in most cases, the
POTW further processes the wastewater residuals and produces a semisolid,
nutrient-rich byproduct known as biosolids. We use the term "wastewater
residuals" to include both solids that have been treated pursuant to the Part
503 Regulations and those that have not. Biosolids, as a subset of wastewater
residuals, is intended to

                                        48


refer to wastewater solids that meet either the Class A or Class B standard as
defined in the Part 503 Regulations.

  CLASSES OF BIOSOLIDS


     When treated and processed according to the Part 503 Regulations, biosolids
can be land applied, that is they can be beneficially reused and applied to crop
land to improve soil quality and productivity due to the nutrients and organic
matter that they contain. Biosolids applied to agricultural land, forest, public
contact sites, or reclamation sites must meet either Class A or Class B
bacteria, or pathogen and insect and rodent attraction, or vector attraction,
reduction requirements contained in the Part 503 Regulations. This
classification is determined by the level of processing the biosolids have
undergone. Pursuant to the Part 503 Regulations, there are specific methods
available to achieve Class A standards and other specific methods available to
achieve Class B standards, otherwise the biosolids are considered Sub-Class B.
Each alternative for Class A requires that the resulting biosolids be
essentially pathogen free. In general, Class A biosolids are generated by more
capital intensive processes, such as composting, heat drying, heat treatment,
high temperature digestion (releasing microorganisms that absorb the pathogens)
and alkaline stabilization (mixing of lime with biosolids creating heat to
eliminate the pathogens). Class A biosolids have the highest market value, are
sold as fertilizer, and can be applied to any type of land or crop.


     Class B biosolids are treated to a lesser degree by processes such as
digestion or alkaline stabilization. These biosolids are typically land applied
on farmland by professional farmers or agronomists and are monitored to comply
with associated federal and state reporting requirements. The Part 503
Regulations, however, regulate the type of agricultural crops for which Class B
biosolids may be used.

     Finally, in some cases, the POTW does not treat its wastewater residuals to
either Class A or Class B standards and such residuals are considered Sub-Class
B. These residuals can either be processed to Class A standards or Class B
standards by an outside service provider or disposed of through incineration or
landfilling.

  MARKET SIZE/FRAGMENTATION

     According to the EPA's 1999 study entitled Biosolids Generation, Use, and
Disposal in the United States, the quantity of municipal biosolids produced in
the United States was projected to be approximately 7.1 million dry tons in
2000, processed through approximately 16,000 POTWs. It is estimated that 8.2
million dry tons of biosolids will be generated in 2010, and that an additional
3,000 POTWs will be built by 2012. It is also estimated that 63% of these
biosolid volumes are currently beneficially reused, growing to 70% in 2010. An
independent 2000 study by the Water Infrastructure Network, entitled Clean &
Safe Water for the 21st Century, estimates that municipalities spend more than
$22 billion per year on the operations and maintenance of wastewater treatment
plants. We estimate, based on conversations with consulting engineers, that up
to 40% of those annual costs, or $8.8 billion, are associated with the
management of municipal wastewater residuals.

     Industry sources estimate that industrial generators of wastewater (such as
food and beverage processors and pulp and paper manufacturers) spend
approximately $7 billion per year on operations and maintenance. Assuming that,
as is the case with POTWs, 40% of these expenditures are associated with the
management of residuals, annual related costs represent approximately $2.8
billion. Therefore, we estimate the total size of the combined municipal and
industrial wastewater residuals market to be $11.6 billion.

     An emerging component of the industrial market with significant potential
that we are monitoring closely involves the residuals generated by large
Concentrated Animal Feeding Operations, or CAFOs. According to the EPA,
agriculture is a contributor to the pollution found in rivers, streams, and
lakes in the United States. The EPA estimates that 376,000 livestock operations
confine animals and generate approximately 64 million tons of manure annually.
Under proposed federal regulations, the largest CAFOs will be required to apply
waste management practices similar to those currently used by municipal and
industrial wastewater generators. We believe that our wastewater residuals
management capabilities will provide us with significant growth opportunities as
this market develops.

                                        49


     We believe that the management of wastewater residuals is a highly
fragmented industry and that we are the only dedicated provider of a full range
of services on a national scale. Historically, POTWs performed the necessary
wastewater residuals management services, but this function is increasingly
being performed by private contractors in an effort to lower cost, increase
efficiency and comply with stricter regulations.

  MARKET GROWTH

     We estimate the $11.6 billion wastewater residuals industry will grow at 4
to 5% annually over the next decade. The growth in the underlying volumes of
wastewater residuals generated by the municipal and industrial markets is driven
by a number of factors. These factors include:

          Population Growth and Population Served.  As the population grows, the
     amount of biosolids produced by municipal POTWs is expected to increase
     proportionately. In addition to population growth, the amount of residuals
     available for reuse should also grow as more of the population is served by
     municipal sewer networks. As urban sprawl continues and cities' desires to
     annex surrounding areas increases, POTWs will treat more wastewater. It is
     expected that the amount of wastewater managed on a daily basis by
     municipal wastewater treatment plants will increase more than 40% by 2012,
     which should significantly increase the amount of municipal residuals
     generated.

          Pressures To Better Manage Wastewater.  There is tremendous pressure
     from many stakeholders, including environmentalists, land owners, and
     politicians, being applied to municipal and industrial wastewater
     generators to better manage the wastewater treatment process. The costs
     (such as regulatory penalties and litigation exposure) of not applying the
     best available technology to properly manage waste streams have now grown
     to material levels. This trend should continue to drive the growth of more
     wastewater treatment facilities with better separation technologies, which
     increase the amount of residuals ultimately produced.

          Stricter Regulations.  If the trend continues and laws and regulations
     that govern the quality of the effluent from wastewater treatment plants
     become stricter, POTWs and industrial wastewater treatment facilities will
     be forced to remove more and more residuals from the wastewater, thereby
     increasing the amount of residuals needing to be properly managed. With
     respect to industrial generators in the agricultural sector, such as
     livestock growers and processors, the pending CAFO regulations being
     promulgated by the EPA will have a material impact on how these operations
     manage their large production of wastewater. Under proposed federal
     regulations, the largest CAFOs will be required to apply waste management
     practices similar to those currently used by municipal and other industrial
     wastewater generators, thereby significantly increasing the size of the
     industrial residuals market.

          Advances in Technology.  The total amount of residuals produced
     annually continues to increase due to advancements in municipal and
     industrial wastewater treatment technology. In addition to improvements in
     secondary and tertiary treatment methods, which can increase the quantity
     of residuals produced at a wastewater treatment plant, segregation
     technologies, such as microfiltration, also result in more residuals being
     separated from the wastewater.

  MARKET TRENDS

     In addition to the growth of the underlying volumes of wastewater
residuals, there is a trend of municipalities converting from Sub-Class B and
Class B processes to Class A processes. There are numerous reasons for this
trend, including:

          Decaying Infrastructure.  Many municipal POTWs operate aging and
     decaying wastewater infrastructure. According to the Water Infrastructure
     Network's 2000 study, municipalities will need to spend more than $900
     billion over the next 20 years to upgrade these systems. As this effort is
     rolled out and POTWs undergo design changes and new construction,
     opportunities will exist to also upgrade wastewater residuals treatment
     processes. We expect that the trend toward more facility-based approaches,
     such as drying and pelletization, will increase with this infrastructure
     spending. In addition, the need to provide capital for these expenditures
     should create pressures for more outsourcing opportunities.

                                        50


          Shrinking Agricultural Base and Urbanization.  As population density
     increases, the availability of nearby farmland for land application of
     Class B biosolids becomes diminished. Under these circumstances, the
     transportation costs associated with a Class B program may increase to such
     an extent that the higher upfront processing costs of Class A programs may
     become attractive to generators. Production of Class A pellets offer
     significant volume reduction, greatly reduced transportation costs, and the
     enhanced value of pellets allows, in many cases, revenue realization from
     product sales.

          Public Sentiment.  While the Part 503 Regulations provide equal levels
     of public safety in the distribution of Class A and Class B biosolids, the
     public sometimes perceives a greater risk from the application of Class B
     biosolids. This is particularly true in heavily populated areas. Some
     municipalities have and others may respond to these public and political
     pressures by upgrading their programs to the Class A level. Certain
     municipalities and wastewater agencies have industry leadership mindsets
     where they endeavor to provide their constituents with the highest level,
     most advanced treatment technologies available. These municipalities and
     agencies may be more likely to fulfill at least a portion of their
     residuals management needs with Class A technologies.

          Regulatory Stringency.  With the promulgation of the Part 503
     Regulations, the EPA and, subsequently, state regulatory agencies have made
     the distribution of Class A biosolids products largely unrestricted.
     Utilization requirements for Class B biosolids are significantly more
     onerous. Based on this, municipalities are moving to Class A programs to
     avoid the governmental permitting, public hearings, compliance and
     enforcement bureaucracy associated with Class B programs. This regulatory
     support to reduce and recycle residuals, and to increase the quality of the
     biosolids, works in our favor.

COMPETITIVE STRENGTHS

     We believe that we benefit from the following competitive strengths:

  BROAD SERVICE OFFERING

     We provide our customers with complete, vertically-integrated services and
capabilities, including facility operations, facility cleanout services,
regulatory compliance, dewatering, collection and transportation, composting,
drying and pelletization, product marketing, incineration, alkaline
stabilization, and land application. Advantages to our customers include:

          Significant Land Base.  We have a large land base available for the
     land application of wastewater residuals. We currently maintain permits and
     registration or licensing agreements on more than 950,000 acres of land in
     29 states. We feel that this land base provides us with an important
     advantage when bidding new work and retaining existing business.

          Large Range of Processing Capabilities and Product Marketing
     Experience.  We are one of the most experienced firms in treating
     wastewater residuals to meet the EPA's Class A standards. We have numerous
     capabilities to achieve Class A standards, and we currently operate four
     heat-drying facilities and four composting facilities. In addition, we are
     the leader in marketing Class A biosolids either generated by us or by
     others. In 2001, we marketed approximately 64% of the heat dried pellets
     produced in the United States, produced either by us or by municipally
     owned facilities.

          Regulatory Compliance and Reporting.  An important element for the
     long-term success of a wastewater residuals management program is the
     certainty of compliance with local, state and federal regulations. Accurate
     and timely documentation of regulatory compliance is mandatory. We provide
     this service, as part of our turn-key operations, through a proprietary
     integrated data management system (the Residuals Management System) that
     has been designed to store, manage and report information about our
     clients' wastewater residuals programs. We believe that our regulatory
     compliance and reporting capabilities provide us with an important
     competitive advantage when presented to the municipal and industrial
     wastewater generators.

                                        51


  LARGEST IN SCALE

     We are the only national company focused exclusively on wastewater
residuals management services. We believe that our leading market position
provides us with more operating leverage and a unique competitive advantage in
attracting and retaining customers and employees as compared to our regional and
local competitors. We believe the advantages of scale include:

          Knowledgeable Sales Force.  We have a large sales force dedicated to
     the wastewater residuals market. We market our services via a multi-tiered
     sales force, utilizing a combination of more than 60 experienced business
     developers, engineering support staff, and seasoned operations directors.
     This group of individuals is responsible for maintaining our existing
     business and identifying new wastewater residuals management opportunities.
     On average, these individuals have in excess of 10 years of industry
     experience. We believe that their unique knowledge and longstanding
     customer relationships gives us a competitive advantage in identifying and
     successfully securing new business.

          Bonding Capacity.  Commercial, federal, state and municipal projects
     often require operators to post performance and, in some cases, payment
     bonds at the execution of a contract. The amount of bonding capacity
     offered by sureties is a function of financial health of the company
     requesting the bonding. Operators without adequate bonding may be
     ineligible to bid or negotiate on many projects. We have strong bonding
     relationships with large national sureties. As of March 13, 2002, we have
     bonded a portion of our services representing approximately $115 million of
     our contract revenues, with the capacity to expand to $140 million of our
     contract revenues. We believe the existing capacity is sufficient to meet
     bonding needs for the foreseeable future. To date, no payments have been
     made by any bonding company for bonds issued on our behalf.


          Financial Stability.  With assets of $444 million and total
     capitalization of $392 million as of March 31, 2002, we believe we have a
     degree of financial stability greater than our local and regional
     competitors, which makes us an attractive long-term partner for municipal
     and industrial customers.


  EXPERIENCED SENIOR MANAGEMENT TEAM


     Our eight most senior executives collectively have more than 90 years of
management experience in the municipal and industrial wastewater residuals
management industry. Our Chief Executive Officer, Ross M. Patten, had more than
24 years of senior management experience at Browning-Ferris Industries and
Wheelabrator Technologies and, since joining us in 1998, has overseen our growth
from a small regional land application company to a national full service
wastewater residuals management company. Prior to joining us, Robert Boucher,
our President and Chief Operating Officer, had more than 10 years of operations
management experience at Allied Waste. Randall Tuttle, the President of our
Operations Division, has been in the wastewater residuals business for more than
16 years as the owner and president of AMSCO, Inc., a regional land application
company we acquired in 1999. James Carmichael, the President of our Facilities
Division, has been in the wastewater residuals business for more than 12 years
overseeing many sophisticated facilities, such as the nation's largest Class A
thermal dryer and pelletizer located in New York City. Pam Racey, our Vice
President of Sales and Marketing, has been in the wastewater residuals
management business for more than 15 years, primarily in the role of project
developer and sales management. Corporate support is provided by Paul Withrow,
our Chief Financial Officer, Alvin Thomas, our General Counsel, and Mark Rome,
our Chief Development Officer. As of May 10, 2002, collectively, this group of
senior executives beneficially owned approximately 15% of our common stock.


                                        52


BUSINESS STRATEGY

     Our goals are to strengthen our position as the only national company
exclusively focused on wastewater residuals management and to continuously
improve our margins. Components of our strategy to achieve these goals include:

  INTERNAL GROWTH BASED ON OUTSOURCING

     We believe that we have the opportunity to expand our business by providing
services for new customers who currently perform their own wastewater residuals
management, and by increasing the range of services that our existing customers
outsource to us.

     Developing New Customers.  We estimate that a majority of the wastewater
treatment facilities located in the United States perform their own wastewater
residuals management services. In many cases, we believe that we can provide the
customer with better service at a cost that is lower than what it costs to
provide the service internally. We take a collaborative approach with potential
customers where our sales force consults with potential customers and positions
us as a solution provider. For example, at a customer's plant in Illinois, we
recently took over responsibility for managing 15,000 dry tons per year of lime
residuals. By saving the customer costs by land applying materials as opposed to
landfilling, the customer has now asked us to offer solutions for their
residuals management needs at three other facilities. In addition, because we do
not manufacture equipment, we are able to provide unbiased solutions to our
clients' needs.

     Expanding Services to Existing Customers.  We have the opportunity to
provide many of our existing customers with additional services as part of a
complete residuals management program. We endeavor to educate these existing
customers about the benefits of a complete residuals management solution and
offer other services where the value is compelling. These opportunities may
provide us with long-term contracts, increased barriers to entry, and better
relationships with our customers. For example, we have made a concerted effort
to provide in-plant dewatering services to our customers, because we believe we
can typically provide this necessary service below the customer's internal
operating costs. As a result, we now operate more than 22 mobile and 27
permanent dewatering facilities throughout the United States.

  IMPROVE MARGINS


     We actively work to improve our margins by increasing revenues while
leveraging our operating infrastructure in the field and our corporate overhead.
This strategy encompasses increasing revenues by providing additional services
to our existing customer base, targeting new work in specific market segments
that have historically generated the highest returns for us, and prospective
marketing initiatives with both industrial and municipal clients to
strategically position us for success in securing new business. By executing
this strategy, we have improved our earnings before interest, taxes,
depreciation, amortization, accounting change, preferred stock dividends, and
noncash beneficial conversion charge as a percentage of revenue from 15.6% in
1999 to 25.2% in 2001 and our net income applicable to common stock from $1.1
million in 1999 to $10.6 million in 2001.


  SELECTIVELY SEEK COMPLEMENTARY ACQUISITIONS

     We selectively seek strategic opportunities to acquire businesses that
profitably expand our service offerings, increase our geographic coverage, or
increase our customer base. We believe that strategic acquisitions can enable us
to gain efficiencies in our existing operations.

SERVICES AND OPERATIONS

     Today, generators of municipal and industrial residuals must provide sound
environmental management practices with limited economic resources. For help
with these challenges, municipal and industrial generators throughout the United
States have turned to us for solutions.

     We partner with our clients to develop cost-effective, environmentally
sound solutions to their residuals processing and beneficial use requirements.
We provide the flexibility and comprehensive services that
                                        53


generators need, with negotiated pricing, regulatory compliance, and operational
performance. We work with our clients to find new and better solutions to their
wastewater residuals management challenges. In addition, because we do not
manufacture equipment, we are able to provide unbiased solutions to our
customers' needs. We provide our customers with complete, vertically-integrated
services and capabilities, including design/build services, facility operations,
facility cleanout services, regulatory compliance, dewatering, collection and
transportation, composting, drying and pelletization, product marketing,
incineration, alkaline stabilization, and land application.

                                    (GRAPH)

     1.  Design and Build Services.  We designed, built, and operate four heat
drying and pelletization facilities and four composting facilities. We currently
have a new drying facility under construction, which we will operate when it is
completed. We operate three incineration facilities, two of which we have
significantly upgraded and one of which we built. Lastly, we designed, built,
and operate over twenty biosolids dewatering facilities. All of our facility
design, construction and operating experience is with biosolids projects.

     2.  Facility Operations.  Our facility operations and maintenance group
provides contract operations to customers that desire to out-source the overall
management of their wastewater treatment facilities. Our operations and
maintenance personnel are experienced in many different types of treatment
processes. Our staff members have operated wastewater treatment plants ranging
in size from 127 million gallons per day down to facilities that serve
individual homes. They have managed processes including activated sludge,
rotating biological contactors, membrane separation, biological nutrient removal
and chemical precipitation. Our maintenance staff provides maintenance and
repair services to municipal and industrial wastewater treatment systems,
including automated instrumentation and controls. Our certified laboratories
provide

                                        54


analytical data that our customers need for regulatory compliance monitoring. We
currently operate over 250 small wastewater treatment plants (ranging from 500
gallons per day to over 500,000 gallons per day).

     3.  Facility Cleanout Services.  Our facility cleanout services focus on
the cleaning and maintenance of the digesters at municipal and industrial
wastewater facilities. Digester cleaning involves complex operational and safety
considerations. Our self-contained pumping systems and agitation equipment
remove a high percentage of biosolids without the addition of large quantities
of dilution water. This method provides our customers a low bottom-line cost per
dry ton of solids removed. Solids removed from the digesters can either be
recycled through our ongoing agricultural land application programs or
landfilled.

     4.  Regulatory Compliance.  An important element for the long-term success
of a wastewater residuals management program is the certainty of compliance with
local, state and federal regulations. Accurate and timely documentation of
regulatory compliance is mandatory. We provide this service through our
proprietary Residuals Management System, or RMS.

     RMS is an integrated data management system that has been designed to
store, manage and report information about our clients' wastewater residuals
programs. Every time our professional operations or technical staff perform
activities relating to a particular project, RMS is updated to record the
characteristics of the material, how much material was moved, when it was moved,
who moved it and where it went. In addition to basic operational information,
laboratory analyses are input in order to monitor both annual and cumulative
loading rates for metals and nutrients. This loading information is coupled with
field identification to provide current information for agronomic application
rate computations.

     This information is used in two ways. First and foremost, it provides a
database for regulatory reporting and provides the information required for
monthly and annual technical reports that are sent to the EPA and state
regulatory agencies. Second, information entered into RMS is used as an
important part of the invoicing process. This check and balance system provides
a link between our operational, technical and accounting departments to ensure
correct accounting and regulatory compliance.

     RMS is a tool that gives our clients timely access to information regarding
their wastewater residuals management program. We continue to dedicate resources
to the continuous improvement of RMS. We believe that our regulatory compliance
and reporting capabilities provide us with a competitive advantage when
presented to the municipal and industrial wastewater generators.

     5.  Dewatering.  We provide residuals dewatering services for wastewater
treatment facilities on either a permanent, temporary or emergency basis. These
services include design, procurement, and operations. We provide the staffing to
operate and maintain these facilities to ensure satisfactory operation and
regulatory compliance of the residuals management program. We currently operate
27 permanent and 22 mobile dewatering facilities.

     6.  Collection and Transportation.  For our liquid residuals operations, a
combination of mixers, dredges and/or pumps are used to load our tanker
trailers. These tankers transport the residuals to either a land application
site or one of our residuals processing facilities. For our dewatered residuals
operations, the dewatered residuals are loaded into trailers by either front end
loaders or conveyors. These trailers are then transported to either land
application sites or to one of our residuals processing facilities.

     7.  Composting.  For composting projects, we provide a comprehensive range
of technologies, operations services and end product marketing through our
various divisions and regional offices. All of our composting alternatives
provide high-quality Class A products that we market to landscapers, nurseries,
farms and fertilizer companies through our Organic Product Marketing Group
described below. In some cases, fertilizer companies package the product and
resell it for home consumer use. We utilize three different types of composting
methodologies: aerated static pile, in-vessel, and open windrow. Aerated static
pile composting offers economic advantages when a totally enclosed facility is
not required. In-vessel composting uses an automated, enclosed system that
mechanically agitates and aerates blended organic materials in concrete bays. We
also offer the windrow method of composting to clients with favorable climatic
conditions. In areas with a hot, dry climate, the windrow method lends itself to
the efficient evaporation of excess water from dewatered

                                        55


residuals. This makes it possible to minimize or eliminate any need for bulking
agents other than recycled compost. We currently operate four composting
facilities and one manure-to-energy facility.

     8.  Drying and Pelletizing.  The heat drying process utilizes a
recirculating system to evaporate water from wastewater residuals and create
pea-sized pellets. A critical aspect of any drying technology is its ability to
produce a consistent and high quality Class A end product that is marketable to
identified end-users. This requires the system to manufacture pellets that meet
certain criteria with respect to size, dryness, dust elimination,
microbiological cleanliness, and durability. We market heat dried biosolids
products to the agricultural and fertilizer industries through our Organic
Product Marketing Group described below.

     We built and currently operate four drying and pelletization facilities
with municipalities including Baltimore, Maryland; Hagerstown, Maryland; and New
York, New York. We are currently in the construction phase of a drying and
pelletization facility for Pinellas County, Florida, which we will operate when
it is completed.

     9.  Product Marketing.  In 1992, we formed the Organic Product Marketing
Group, or OPMG, to market composted and pelletized biosolids from our own
facilities as well as municipally owned facilities. OPMG currently markets in
excess of 500,000 yards of compost and 155,000 tons of pelletized biosolids
annually. OPMG markets a majority of its biosolids products under the trade
names Granulite(TM) and AllGro(TM). We are the leader in marketing end use
wastewater residuals products, such as compost and heat dried pellets used for
fertilizers, and in 2001 we marketed approximately 64% of the heat dried pellets
produced in the United States.

     10.  Incineration.  In the Northeast, we economically and effectively
process wastewater residuals through the utilization of the proven thermal
processing technologies of multiple-hearth and fluid bed incineration. In
multiple-hearth processing, residuals are fed into the top of the incinerator
and then mechanically passed down to the hearths below. The heat from the
burning residuals in the middle of the incinerator dries the residuals coming
down from the top until they begin to burn. Since residuals have approximately
the same British thermal unit value as wood chips, very little additional fuel
is needed to make the residuals start to burn. The resulting ash by-product is
non-toxic and inert, and can be beneficially used as alternative daily cover for
landfills. In fluid bed processing, residuals are pumped directly into a boiling
mass of super heated sand and air (the fluid bed) that vaporizes the residuals
on contact. The top of the fluid bed burns off any remaining compounds resulting
in very low air emissions and very little ash by-product. Computerized control
of the entire process makes this modern technology fuel efficient, easy to
operate, and an environmentally friendly disposal method. We currently operate
three incineration facilities.

     11.  Alkaline Stabilization.  We provide alkaline stabilization services by
using lime to treat Sub-Class B biosolids to Class-B standards. Lime chemically
reacts with the residuals and creates a Class B product. We offer this treatment
process through our BIO*FIX process. Due to its very low capital cost, BIO*FIX
is used in interim and emergency applications as well as long-term programs. The
BIO*FIX process is designed to effectively inactivate pathogenic microorganisms
and to prevent vector attraction and odor. The BIO*FIX process combines specific
high-alkalinity materials with residuals at minimal cost. During the past
several years, our engineers have developed and improved the BIO*FIX chemical
formulations, material handling and instrumentation and control systems in
concert with clients, federal and state regulators, consulting engineers and
academic researchers.

     12.  Land Application.  The beneficial reuse of municipal and industrial
biosolids through land application has been successfully performed in the United
States for more than 100 years. Direct agricultural land application has the
proven benefits of fertilization and organic matter addition to the soil.
Agricultural communities throughout the country are well acquainted with the
practice of land application of biosolids and have first hand experience with
the associated agricultural and environmental benefits. Currently, we recycle
Class B biosolids through agricultural land application programs in 29 states.
Our revenues from land application services are the highest among our service
offerings.

                                        56


CONTRACTS

     Approximately 80% of our 2001 revenue was generated through more than 450
contracts with original terms that range from one to twenty-five years in
length. In general, our contracts contain provisions for inflation related
annual price increases, renewal provisions, and broad force majeure clauses. Our
top ten customers have an average of 11.3 years remaining on their current
contracts, including renewal options. In 2001, we experienced a contract
retention rate (both renewals and rebids) of approximately 90%.

     Although we have a standard form of agreement, terms may vary depending
upon the customer's service requirements and the volume of residuals generated
and, in some situations, requirements imposed by statute or regulation.
Contracts associated with our land application business are typically two to
four year exclusive arrangements excluding renewal options. Contracts associated
with drying and pelletizing, incineration or composting are typically longer
term contracts, from five to 20 years, excluding renewal options, and generally
include provisions such as put-or-pay arrangements and estimated adjustments for
changes in the consumer price index for contracts that contain price indexing.
Other services such as cleanout and dewatering typically may or may not be under
long-term contract depending on the circumstances.

     The majority of our contracts are with municipal entities. Typically a
municipality will advertise a request for proposal, and numerous entities will
bid to perform the services requested. Often the municipality will choose the
best qualified bid, weighing multiple factors including range of services
provided, experience, financial capability and lowest cost. The successful
bidder then enters into contract negotiations with the municipality.

     Contracts typically include provisions relating to the allocation of risk,
insurance, certification of the material, force majeure conditions, change of
law situations, frequency of collection, pricing, form and extent of treatment,
and documentation for tracking purposes. Many of our agreements with
municipalities and water districts provide options for extension without the
necessity of going to bid. In addition, many contracts have termination
provisions that the customer can exercise; however, in many cases, such
terminations create obligations to our customers to compensate us for lost
profits.

BACKLOG

     At December 31, 2001, our estimated remaining contract value, which we call
backlog, was $1.8 billion of which we estimate approximately $200 million will
be realized in 2002. In determining backlog, we calculate the expected payments
remaining under the current terms of our contracts, assuming the renewal of
contracts in accordance with their renewal provisions, no increase in the level
of services during the remaining term, and estimated adjustments for changes in
the consumer price index for contracts that contain price indexing. On the same
basis, except assuming the renewal provisions are not exercised, we estimate our
backlog at December 31, 2001 would have been $1.2 billion. These estimates are
based on our operating experience, and we believe them to be reasonable.
However, there can be no assurance that our backlog will be realized as contract
revenue or earnings. See "Risk Factors -- We are not able to guarantee that our
estimated remaining contract value, which we call backlog, will result in actual
revenues in any particular fiscal period."

SALES AND MARKETING

     We have a sales and marketing group which has developed and is implementing
a comprehensive internal growth strategy which is to expand our business by
providing services for new customers who currently perform their own wastewater
residuals management, and by increasing the range of services that our existing
customers outsource to us.

     In addition, to maintain our existing market base, we endeavor to achieve a
100% renewal rate on expiring service contracts. For 2001, we achieved
approximately a 90% renewal rate. We believe that the ability to renew existing
contracts is a direct indication of the level of customer satisfaction with our
operations. Although we value our current customer base, our focus is to
increase revenues that generate long-term, stable income at acceptable margins
rather than simply increasing market share.

                                        57


     Our sales and marketing group also works with our operations staff which
typically respond to requests to proposals for routine work that is awarded to
the lowest cost bidder. This allows our sales and marketing group to focus on
prospective rather than reactive marketing activities. Our sales and marketing
group is focused on developing new business from specific market segments that
have historically netted the highest returns. These are segments where we
believe we should have an enhanced competitive advantage due to the complexity
of the job, the proximity of the work to our existing business, or a unique
technology or facility that we are able to offer. We seek to maximize profit
potential by focusing on negotiated versus low-bid procurements, long versus
short-term contracts and projects with multiple services. In addition, we are
focusing on the rapidly growing Class A market. Our sales incentive program is
designed to reward the sales force for success in these target markets.

     We proactively approach municipal market segments, as well as new
industrial segments, through professional services contracts. We are in a unique
industry position to successfully market through professional services
contracts, because we are an operations company that is solution and technology
neutral as we offer virtually every type of proven service category marketed in
the industry today. This means we can customize a wastewater residuals
management program for a client with no technology or service category bias.

ACQUISITIONS HISTORY

     Historically, acquisitions have been an important part of our growth
strategy. We completed a total of 16 acquisitions from 1998 through 2000,
highlighted by our last acquisition in August 2000 of Waste Management's Bio Gro
Division. Bio Gro had been the one of the largest providers of wastewater
residuals management services in the United States, with 1999 annual revenues of
$118 million and EBITDA of $27 million. Bio Gro provided wastewater residuals
management services in 24 states and was the market leader in thermal drying and
pelletization. Other acquisitions from 1998 to the present include the
following:



COMPANY                               DATE ACQUIRED   MARKET SERVED    CAPABILITIES ACQUIRED
- -------                               -------------   -------------   -----------------------
                                                             
A&J Cartage, Inc. ..................  June 1998       Midwest         Land Application
Recyc, Inc. ........................  July 1998       West            Composting
Environmental Waste Recycling,
  Inc. .............................  November 1998   Southeast       Land Application
National Resource Recovery, Inc. ...  March 1999      Midwest         Land Application
Anti-Pollution Associates...........  April 1999      Florida Keys    Facility Operations
D&D Pumping, Inc. ..................  April 1999      Florida Keys    Land Application
Vital Cycle, Inc. ..................  April 1999      Southwest       Product Marketing
AMSCO, Inc. ........................  May 1999        Southeast       Land Application
Residual Technologies, LP...........  January 2000    Northeast       Incineration
Davis Water Analysis, Inc. .........  February 2000   Florida Keys    Facility Operations
AKH Water Management, Inc. .........  February 2000   Florida Keys    Facility Operations
Ecosystematics, Inc. ...............  February 2000   Florida Keys    Facility Operations
Rehbein, Inc. ......................  March 2000      Midwest         Land Application
Whiteford Construction Company......  March 2000      Mid-Atlantic    Cleanouts
Environmental Protection &
  Improvement Co....................  March 2000      Mid-Atlantic    Rail Transportation


     With the Bio Gro acquisition in August 2000, we substantially increased our
service offerings and geographic coverage. As a result, we have shifted our
focus to internal growth. We will continue to selectively seek acquisitions if
strategically and economically attractive.

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FACILITIES

     We currently lease approximately 11,300 square feet of office space at our
principal place of business located in Houston, Texas. We also lease regional
operational facilities in: Houston, Texas; Corona, California; Advance, North
Carolina; Millersville, Maryland; Baltimore, Maryland; and Miamisburg, Ohio, and
have 11 district offices throughout the United States.

     We own and operate four drying and pelletization facilities; one located in
New York, New York, two in Baltimore, Maryland and one in Hagerstown, Maryland.
We also operate three incineration facilities located in Woonsocket, Rhode
Island; Waterbury, Connecticut; and New Haven, Connecticut. Additionally, we own
property in Salome, Arizona, Maysville, Arkansas, Lancaster, California, King
George, Virginia, and Wicomico County, Maryland. These properties are utilized
for composting, storage or land application.

     We maintain permits, registrations or licensing agreements on more than
950,000 acres of land in 29 states for applications of biosolids.

COMPETITION

     We provide a variety of services relating to the transportation and
treatment of wastewater residuals. We are not aware of another company focused
exclusively on the management of wastewater residuals from a national
perspective. We have several types of direct competitors. These include small
local companies, regional residuals management companies and national and
international water and wastewater operations/ privatization companies.

     We compete with these competitors through several mechanisms including
providing quality services at competitive prices, partnering with technology
providers to offer proprietary processing systems, and utilizing strategic land
application sites. Municipalities often structure bids for large projects based
on the best qualified bid, weighing multiple factors, including experience,
financial capability and lowest cost. We also believe that the full range of
wastewater residuals management services we offer provide a competitive
advantage over other entities offering a lesser complement of services.

     In many cases, municipalities and industries choose not to outsource their
residuals management needs. In the municipal market, we estimate that up to 60%
of the POTW plants are not privatized. We are actively reaching out to this
segment to persuade them to explore the benefits of outsourcing these services
to us. For these generators we can offer increased value through numerous areas,
including lower cost, ease of management, technical expertise, liability
assumption/risk management, access to capital or technology and performance
guarantees.

FEDERAL, STATE AND LOCAL GOVERNMENT REGULATION

     Federal, state and local environmental authorities regulate the activities
of the municipal and industrial wastewater generators and enforce standards for
the discharge from wastewater treatment plants (effluent wastewater) with
permits issued under the authority of the Clean Water Act, as amended, and state
water quality control acts. The treatment of wastewater produces an effluent and
wastewater solids. The treatment of these solids produces biosolids. To the
extent demand for our residuals treatment methods is created by the need to
comply with the environmental laws and regulations, any modification of the
standards created by such laws and regulations may reduce the demand for our
residuals treatment methods. Changes in these laws or regulations, or in their
enforcement, may also adversely affect our operations by imposing additional
regulatory compliance costs on us, requiring the modification of and/or
adversely affecting the market for our wastewater residuals management services.

     CERCLA generally imposes strict joint and several liability for cleanup
costs upon: (1) present owners and operators of facilities at which hazardous
substances were disposed; (2) past owners and operators at the time of disposal;
(3) generators of hazardous substances that were disposed at such facilities;
and (4) parties who arranged for the disposal of hazardous substances at such
facilities. CERCLA Section 107 liability extends to cleanup costs necessitated
by a release or threat of release of a hazardous substance. However, the
definition of "release" under CERCLA excludes the "normal application of
fertilizer." The EPA regulations regard biosolids applied to land as a
fertilizer substitute or soil conditioner. The EPA has indicated in a
                                        59


published document that it considers biosolids applied to land in compliance
with the applicable regulations not to constitute a "release." However, the land
application of biosolids that do not comply with Part 503 Regulations could be
considered a release and lead to CERCLA liability. Monitoring as required under
Part 503 Regulations is thus very important. Although the biosolids and alkaline
waste products may contain limited quantities or concentrations of hazardous
substances (as defined under CERCLA), we have developed plans to manage the risk
of CERCLA liability, including training of operators, regular testing of the
biosolids and the alkaline admixtures to be used in treatment methods and
reviewing incineration and other permits held by the entities from which
alkaline admixtures are obtained.

PERMITTING PROCESS

     We operate in a highly regulated environment and the wastewater treatment
plants and other plants at which our biosolids management services may be
provided are usually required to have permits, registrations and/or approvals
from federal, state and/or local governments for the operation of such
facilities.

     Many states, municipalities and counties have regulations, guidelines or
ordinances covering the land application of Class B biosolids, many of which set
either a maximum allowable concentration or maximum pollutant-loading rate for
at least one pollutant. The Part 503 Regulations also require monitoring Class B
biosolids to ensure that certain pollutants or pathogens are below thresholds.
The EPA has considered increasing these thresholds or adding new thresholds for
different substances, which could increase our compliance costs. In addition,
some states have established management practices for land application of Class
B biosolids. In some jurisdictions, state and/or local authorities have imposed
permit requirements for, or have prohibited, the land application or
agricultural use of Class B biosolids. There can be no assurance that any such
permits will be issued or that any further attempts to require permits for, or
to prohibit, the land application or agricultural use of Class B biosolids
products will not be successful.

     Any of the permits, registrations or approvals noted above, or applications
therefore may be subject to denial, revocation or modification under various
circumstances. In addition, if new environmental legislation or regulations are
enacted or existing legislation or regulations are amended or are enforced
differently, we may be required to obtain additional, or modify existing,
operating permits, registrations or approvals. The process of obtaining or
renewing a required permit, registration or approval can be lengthy and
expensive and the issuance of such permit or the obtaining of such approval may
be subject to public opposition or challenge. Much of this public opposition or
challenge, as well as related complaints, relates to odor issues, even when we
are in compliance with odor requirements and even though we have worked hard to
minimize odor from our operations. There can be no assurances that we will be
able to meet applicable regulatory requirements or that further attempts by
state or local authorities to prohibit, or public opposition or challenge to,
the land application, agricultural use of biosolids, thermal processing or
biosolids composting will not be successful.

PATENTS AND PROPRIETARY RIGHTS


     We have several patents and licenses relating to the treatment and
processing of biosolids. Our patents have durations from 2008 to 2020. While
there is no single patent that is material to our business, we believe that our
aggregate patents are important to our prospects for future success. However, we
cannot be certain that future patent applications will issue as patents or that
any issued patents will give us a competitive advantage. It is also possible
that our patents could be successfully challenged or circumvented by competition
or other parties. In addition, we cannot assure that our treatment processes do
not infringe patents or other proprietary rights of other parties.


     In addition, we make use of our trade secrets or "know-how" developed in
the course of our experience in the marketing of our services. To the extent
that we rely upon trade secrets, unpatented know-how and the development of
improvements in establishing and maintaining a competitive advantage in the
market for our services, we can provide no assurances that such proprietary
technology will remain a trade secret or that others will not develop
substantially equivalent or superior technologies to compete with our services.

                                        60


EMPLOYEES

     As of March 13, 2002, we had approximately 906 full-time employees. These
employees include: eight executive officers, 15 non-executive officers, 116
operations managers, 57 environmental specialists, 64 maintenance personnel, 179
drivers and transportation personnel, 99 land application specialists, 101
general operation specialists, 29 sales employees and 86 financial and
administrative employees. Additionally, we use contract labor for various
operating functions, including hauling and spreading services, when it is
economically advantageous.

     Although we have 39 union employees, our employees are generally not
represented by a labor union or covered by a collective bargaining agreement. We
believe we have good relations with our employees. We provide our employees with
certain benefits, including health, life, dental, and accidental death and
disability insurance and 401(k) benefits.

POTENTIAL LIABILITY AND INSURANCE

     The wastewater residuals management industry involves potential liability
risks of statutory, contractual, tort, environmental and common law liability
claims. Potential liability claims could involve, for example:

     - personal injury;

     - damage to the environment;

     - violations of environmental permits;

     - transportation matters;

     - employee matters;

     - contractual matters;

     - property damage; or

     - alleged negligence or professional errors or omissions in the planning or
       performance of work.

     We could also be subject to fines or penalties in connection with
violations of regulatory requirements.

     We carry $51 million of liability insurance (including umbrella coverage),
and under a separate policy, $10 million of aggregate pollution and legal
liability insurance ($10 million each loss) subject to retroactive dates, which
we consider sufficient to meet regulatory and customer requirements and to
protect our employees, assets and operations. There can be no assurance that we
will not face claims under CERCLA or similar state laws resulting in substantial
liability for which we are uninsured and which could have a material adverse
effect on our business.

     Our insurance programs utilize large deductible/self-insured retention
plans offered by a commercial insurance company. Large deductible/self-insured
retention plans allow us the benefits of cost-effective risk financing while
protecting us from catastrophic risk with specific stop loss insurance limiting
the amount of self-funded exposure for any one loss and aggregate stop loss
insurance limiting the self-funding exposure for any one year.

LEGAL AND OTHER PROCEEDINGS

     Our business activities are subject to environmental regulation under
federal, state and local laws and regulations. In the ordinary course of
conducting our business activities, we become involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. We believe that these matters will not have a material
adverse effect on our business, financial condition and results of operations.
However, the outcome of any particular proceeding cannot be predicted with
certainty. We are required, under various regulations, to procure licenses and
permits to conduct our operations. These licenses and permits are subject to
periodic renewal without which our operations could be adversely affected. There

                                        61


can be no assurance that regulatory requirements will not change to the extent
that it would materially affect our consolidated financial statements.

  MARSHALL CASE

     In January 2002, we settled a lawsuit that was filed in Rockingham County
Superior Court, New Hampshire in November 1998. The plaintiff claimed that the
death of an individual was allegedly caused by exposure to certain biosolids
land applied by one of our wholly owned subsidiaries. The plaintiff in the
settlement represented that there was no scientific support to the allegations
as previously alleged.

  RIVERSIDE COUNTY

     We operate and lease a composting facility in Riverside County, California,
under a CUP, that expires January 1, 2010. The CUP allows for a reduction in
material intake and CUP term in the event of noncompliance with the CUP's terms
and conditions. In response to alleged noncompliance due to excessive odor, on
or about June 22, 1999, the Riverside County Board of Supervisors attempted to
reduce our intake of biosolids from 500 tons per day to 250 tons per day. We
believe that this was not an authorized action for the Board of Supervisors. On
September 15, 1999, we were granted a preliminary injunction restraining and
enjoining the County from restricting our intake of biosolids at our Riverside
composting facility.

     In the lawsuit that we filed in the Superior Court of California, County of
Riverside, we have also complained that the County's treatment of us is in
violation of our civil rights under U.S.C. Section 1983 and that our due process
rights were being affected because the County was improperly administering the
odor protocol in the CUP. The County alleges that the odor "violations," as well
as our actions in not reducing intake, could reduce the term of the CUP to
January 2002. We disagree and are challenging the County's position in the
lawsuit.


     No trial date has been set at this time. The case is currently subject to
an agreed stay until July 12, 2002 and we continue to operate under the existing
CUP while the parties explore settlement. Proposed terms of settlement set forth
in an expired Memorandum of Understanding with the County serve as the basis for
continuing settlement discussions, which terms include a plan to relocate the
compost facility to a piece of land owned by the County.



     Whether or not the parties reach settlement based on the terms of the
expired Memorandum of Understanding or otherwise, the site may be closed, we may
incur additional costs related to contractual agreements, relocation and site
closure, as well as the need to obtain new permits (including some from the
County) at a new site. If we are unsuccessful in our efforts, goodwill and
certain assets may be impaired. Total goodwill associated with the operations is
approximately $13,843,000 at December 31, 2001. The financial impact associated
with a site closure cannot be reasonably estimated at this time. Although we
feel that our case is meritorious, the ultimate outcome cannot be determined at
this time.


  RELIANCE INSURANCE

     During the Reliance Coverage Period, we insured certain risks, including
automobile, general liability, and worker's compensation, with Reliance through
policies totaling $26 million in annual coverage. On May 29, 2001, the
Commonwealth Court of Pennsylvania entered an order appointing the Pennsylvania
Insurance Commissioner as Rehabilitator and directing the Rehabilitator to take
immediate possession of Reliance's assets and business. On June 11, 2001,
Reliance's ultimate parent, Reliance Group Holdings, Inc., filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code of 1978, as amended. On
October 3, 2001, the Pennsylvania Insurance Commissioner removed Reliance from
rehabilitation and placed it into liquidation.


     On January 21, 2000, several plaintiffs filed suit in the District Court of
Jackson County, Texas against our wholly owned subsidiary, Synagro of Texas-CDR,
Inc. The Lopez Suit was later amended to name us as an additional defendant. The
suit arises out of an automobile accident involving a vehicle operated by
Synagro of Texas-CDR, Inc., in which one person was killed and two others were
injured.


                                        62


     We are vigorously defending ourselves against this lawsuit. In addition,
other third parties have asserted claims and/or brought suit against us and our
affiliates related to alleged acts or omissions occurring during the Reliance
Coverage Period. It is possible, depending on the outcome of the AON Suit
(discussed below) and the Intervention Action, and possible claims made with the
Texas Property and Casualty Insurance Guaranty Association, that we will have no
(or insufficient) insurance funds available to pay any potential losses. There
are uncertainties relating to: (1) our ultimate liability, if any, for damages
in the Lopez Suit or the other cases arising during the covered period; (2) the
availability of the insurance coverage; (3) the potential for recovery from the
AON Suit; (4) the Intervention Action; and (5) possible recovery from the Texas
Property and Casualty Insurance Guaranty Association.

     Based upon information available as of March 13, 2002, we have estimated
that our net probable exposure for unpaid insurance claims and other costs for
which coverage may not be available due to the pending liquidation of Reliance
is $1.9 million and, accordingly, have recorded a special charge of $2.2 million
in our December 31, 2001, financial statements to record the estimated exposure
for this matter and related legal expenses. Although we believe $1.9 million of
the charge represents our current probable exposure related to the Reliance
matter, the final resolution could be substantially different from the amount
recorded.

  AON

     On October 4, 2001, we filed suit in the 24th Judicial District Court of
Jackson County, Texas, against our insurance broker, AON Risk Services of Texas,
Inc., or AON, and the several insurance companies that reinsured the policies
issued by Reliance, or the Reinsurers. We refer to this matter as the AON Suit.
In the AON Suit, we are seeking a judgment against AON for any and all sums that
we may become liable for as a result of any settlement of, or the entry of any
judgment in, the Lopez Suit, and any and all costs associated with defense
thereof, as a result of our assertion of negligence by AON in placing the
entirety of our insurance coverage with Reliance and AON's failure to obtain
"cut through endorsements" to the Reliance policies which would enable us to
proceed directly against the Reinsurers. We are also seeking a declaratory
judgment against the Reinsurers declaring that the Reinsurers owe us a duty of
defense and indemnity in the Lopez Suit as a result of the Reinsurers'
participation in the investigation, evaluation, and handling of the Lopez Suit,
as a result of any "cut through endorsements" that may have been obtained by
AON, and by virtue of a "fronting arrangement" whereby most or all of certain
Reliance policies were reinsured. The AON Suit is at an early stage, and the
ultimate outcome of this litigation, including amounts, if any, that may be
recovered by us, cannot be determined at this time.

  OTHER

     There are various other lawsuits and claims pending against us that have
arisen in the normal course of our business and relate mainly to matters of
environmental, personal injury and property damage. The outcome of these matters
is not presently determinable but, in the opinion of our management, the
ultimate resolution of these matters will not have a material adverse effect on
our consolidated financial condition or results of operations.

                                        63


                                   MANAGEMENT

DIRECTORS AND OFFICERS

     The following table sets forth information with respect to our executive
officers and directors:




                NAME                   AGE                      POSITION
- -------------------------------------  ---   -----------------------------------------------
                                       
Ross M. Patten.......................  58    Director*, Chairman of the Board and Chief
                                             Executive Officer
Robert C. Boucher, Jr. ..............  37    President and Chief Operating Officer
Mark A. Rome.........................  35    Executive Vice President and Chief Development
                                             Officer
Alvin L. Thomas II...................  36    Executive Vice President and General Counsel
J. Paul Withrow......................  36    Executive Vice President and Chief Financial
                                             Officer
James P. Carmichael..................  43    President and Chief Operating Officer,
                                             Processing
Randall S. Tuttle....................  38    President and Chief Operating Officer,
                                             Operations
Kenneth Ch'uan-k'ai Leung............  57    Director*
David A. Donnini.....................  36    Director*
Vincent J. Hemmer....................  33    Director*
Gene Meredith........................  60    Director*
Alfred Tyler, 2nd....................  59    Director*



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


* Directors are elected each year at the annual meeting of the stockholders.
  Each director serves until his successor is elected and qualified or until his
  death, resignation or removal.



     ROSS M. PATTEN was appointed by the board of directors as Chief Executive
Officer in February 1998 and was elected to the position of Chairman of the
Board in August 1998. Prior to joining Synagro, Mr. Patten enjoyed a 17-year
career at Browning-Ferris Industries from 1972 to 1989, where he last served as
Divisional Vice President -- Corporate Development. He also served as Executive
Vice President for Development of Wheelabrator Technologies, a Waste Management,
Inc. subsidiary from 1989 to 1991, and Director and Vice President -- Business
Development of Resource NE, Inc., prior to its acquisition by Waste Management,
Inc. From 1996 to 1998 Mr. Patten was a founder, principal and managing director
of Bedford Capital, an investment firm specializing in environmental companies,
and Bedford Management, which provides consulting services to publicly held
waste management and environment related companies in the area of growth and
acquisition strategy, formation and implementation.


     ROBERT C. BOUCHER, JR. was appointed President and Chief Operating Officer
in February 2002. Prior to joining us, Mr. Boucher served as Regional Vice
President of Allied Waste Industries in Tynsboro, Massachusetts. From 1994 to
1997, Mr. Boucher worked for Waste Management of Greater Boston, last serving as
Division President. Mr. Boucher attended Bridgeton Academy in Maine and studied
business administration at Northeastern University in Boston.


     MARK A. ROME was appointed Executive Vice President and Chief Development
Officer in 1998. Mr. Rome, an attorney and CPA, joined Synagro from Sanders
Morris Mundy (now Sanders Morris Harris), where he worked from 1997 to 1998 an
investment banking firm specializing in industry consolidations. He previously
practiced tax and corporate law at Fulbright & Jaworski L.L.P. from 1992 to
1995. Mr. Rome received his law degree from the University of Texas School of
Law and a Masters in Professional Accounting from the University of Texas
Graduate School of Business.



     ALVIN L. THOMAS II was appointed Executive Vice President and General
Counsel during 1998. Mr. Thomas practiced law with the national law firm of
Littler Mendelson, P.C. from 1996 to 1998 prior to joining Synagro. Mr. Thomas
also practiced law at Fulbright & Jaworski L.L.P. from 1993 to 1996. Mr. Thomas
received his law degree from the University of Pittsburgh School of Law and an
LL.M. in


                                        64


Taxation from New York University School of Law. His legal background is
broad-based with emphasis in tax law, employment law, corporate law and
litigation.


     J. PAUL WITHROW was appointed Executive Vice President and Chief Financial
Officer during 1999. From 1997 to 1999 Mr. Withrow was Vice President and Chief
Accounting Officer of Integrated Electrical Services, Inc., which is a leading
national provider of electrical contracting and maintenance services. Prior to
that, Mr. Withrow was a Senior Audit Manager at Arthur Andersen LLP from 1987 to
1997. Mr. Withrow is a Certified Public Accountant and received his Bachelor of
Business Administration in Accounting from the University of Houston.



     JAMES P. CARMICHAEL was appointed President and Chief Operating Officer,
Processing in June 2001. Prior to joining us, Mr. Carmichael served as Vice
President and General Manager of the Thermal Operations Group of the Bio Gro
Division of Wheelabrator Technologies, Inc. from 1990 to 1998. Mr. Carmichael
joined Synagro in connection with the acquisition by Synagro of Bio Gro in
August 2000 and initially became Vice President responsible for all of our
Pelletizing Operations. He holds a Bachelor of Science degree in engineering
from the University of Connecticut.



     RANDALL S. TUTTLE was appointed President and Chief Operating Officer,
Operations in January 2000. Prior to joining us, Mr. Tuttle served as President
of AMSCO, Inc., the leading provider of residuals management, recycling and land
application services in the Southeastern United States. Mr. Tuttle worked for
AMSCO from 1986 to 1990. Mr. Tuttle joined Synagro in connection with the
acquisition of AMSCO in April 1999 and became a Regional Vice President
responsible for all of Synagro's operations in the Southeast. Mr. Tuttle is a
1985 graduate of Duke University with degrees in Political Science and
Economics.



     KENNETH CH'UAN-K'AI LEUNG has been a managing director of investment
banking at Sanders Morris Harris since 1995 and is the Chief Investment Officer
of the Environmental Opportunities Fund, Ltd. Additionally, he is the Editor of
Environmental Review. Previously, Mr. Leung was associated with Smith Barney
from 1978 to 1994, and before that with F. Eberstadt & Co. Inc. from 1974 to
1978, Chemical Bank from 1968 to 1979 and Chase Manhattan Bank from 1967 to
1968. He received his B.A. from Fordham College and his M.B.A. from Columbia
University. Mr. Leung serves on the boards of SystemOne, U.S. Plastic Lumber
Corporation, Waterlink, Avista Resources, Inc. and North Star Passenger.



     DAVID A. DONNINI is currently a principal and member with GTCR and has been
with GTCR since 1991. He previously worked as an associate consultant with Bain
& Company. Mr. Donnini earned a BA in Economics, summa cum laude, Phi Beta Kappa
with distinction, from Yale University and an MBA from Stanford University where
he was the Robichek Finance Award recipient and an Arjay Miller Scholar. Mr.
Donnini serves on the board of directors of various companies including American
Sanitary, Cardinal Logistics Management, Inc., FutureNext Consulting, Inc., U.S.
Aggregates, Inc. and U.S. Fleet Services.



     VINCENT J. HEMMER is currently a principal with GTCR and has been with GTCR
since 1996. Mr. Hemmer worked as a consultant with the Monitor Company from 1990
to 1996. He earned a BS in Economics, magna cum laude, and was a Benjamin
Franklin Scholar at The Wharton School of the University of Pennsylvania. Mr.
Hemmer received his MBA from Harvard University. Mr. Hemmer serves on the board
of directors of several companies including Hawkeye Communications, Student
Transportation of America, Alliant Resources Group, Inc., Health Quest Global
Communication Partners and Coinmach Corporation.



     GENE MEREDITH served more than 30 years in senior management roles in the
solid waste industry. He was a Regional Vice President at Browning-Ferris
Industries, Inc. where he worked from 1974 to 1989, and Chairman, President and
CEO of Mid-American Waste Systems from 1995 to 1997. He previously served as a
director of USA Waste Services from 1994 to 1995, Envirofil, Inc. from 1992 to
1994, and as general manager of a waste company in St. Paul, Minnesota from 1966
to 1971. Mr. Meredith also has a law degree, and spent five years as Senior
Partner at Meredith & Addicks in St. Paul, Minnesota.



     ALFRED TYLER, 2ND has been associated with the environmental services
industry for over 25 years, serving most recently as President and CEO of
Enviro-Gro Technologies until that provider of biosolids management services was
sold in 1992 to Wheelabrator Technologies Inc. Mr. Tyler was employed with
Enviro-Gro Technologies from 1982 to 1989. Mr. Tyler also heads a private
investment company, is President of a landfill

                                        65


and construction company, Managing Director of Bedford Capital, and currently
serves on the Board of Directors of US Liquids, Inc.


                             EXECUTIVE COMPENSATION



     The following table reflects all forms of compensation for services to us
for the periods indicated for (i) the Chief Executive Officer and, (ii) the next
four most highly compensated Executive Officers, or collectively, the Named
Executives.





                                           ANNUAL COMPENSATION
                                    ----------------------------------    STOCK OPTION
NAME AND PRINCIPAL POSITION         YEAR    SALARY     BONUS    OTHER    AWARDS (SHARES)
- ---------------------------         ----   --------   -------   ------   ---------------
                                                          
Ross M. Patten....................  2001   $225,908   $86,409   $9,600       520,000
  Chief Executive Officer and       2000   $150,000   $91,200   $9,600       315,000
  Chairman of the Board of
     Directors                      1999   $134,038   $40,500   $9,600       150,000
Mark A. Rome......................  2001   $177,718   $67,977   $6,000       230,000
  Executive Vice President and      2000   $170,417   $69,900   $6,000       120,000
  Chief Development Officer         1999   $120,000   $31,500   $6,000        90,000
Alvin L. Thomas II................  2001   $177,718   $67,977   $6,000       230,000
  Executive Vice President          2000   $170,417   $69,900   $6,000       240,000
  and General Counsel               1999   $120,000   $31,500   $6,000        10,000
Randall S. Tuttle.................  2001   $177,718   $67,977   $6,000       320,000
  President and Chief Operating     2000   $170,417   $69,900   $5,000            --
  Officer, Operations Division      1999   $ 66,666   $31,500       --            --
J. Paul Withrow...................  2001   $177,718   $67,977   $6,000       230,000
  Executive Vice President and      2000   $170,417   $69,900   $6,000       250,000
  Chief Financial Officer           1999   $ 60,000   $31,500   $3,000       200,000




OPTION GRANTS



     The following table sets forth certain information with respect to stock
options granted to the Named Executives during 2001.





                                                                                   POTENTIAL REALIZABLE
                                                 INDIVIDUAL GRANTS(2)                VALUE AT ASSUMED
                                       ----------------------------------------    ANNUAL RATES OF STOCK
                                       PERCENT OF TOTAL                           PRICE APPRECIATION FOR
                                       OPTIONS GRANTED                                OPTION TERM(1)
                             OPTIONS     TO EMPLOYEES     EXERCISE   EXPIRATION   -----------------------
NAME                         GRANTED       IN YEAR         PRICE        DATE         5%           10%
- ----                         -------   ----------------   --------   ----------   ---------   -----------
                                                                            
Ross M. Patten.............  520,000        12.3%          $2.50       1/2/11     $182,294    $1,060,306
Mark A. Rome...............  230,000         5.4%          $2.50       1/2/11     $ 80,630    $  468,981
Alvin L. Thomas II.........  230,000         5.4%          $2.50       1/2/11     $ 80,630    $  468,981
Randall S. Tuttle..........  320,000         7.5%             --       1/2/11     $112,181    $  652,496
J. Paul Withrow............  230,000         5.4%          $2.50       1/2/11     $ 80,630    $  468,981



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


(1) Potential values stated are the result of using the Commission's method of
    calculation of 5% and 10% appreciation in value from the date of grant to
    the end of the option term. Such assumed rates of appreciation and potential
    realizable values are not necessarily indicative of the appreciation, if
    any, which may be realized in future periods. The market price of the common
    stock on the date of grant was $1.75 per share.



(2) Unvested options will immediately vest upon our change of control, including
    acquisition by any person or group of persons of at least 25 percent of our
    common stock, a merger resulting in our existing stockholders owning less
    than 50 percent of our outstanding stock following a merger, termination of
    employment without cause and election by the stockholders of a director not
    nominated by a majority of the board.


                                        66



OPTION EXERCISES AND YEAR END VALUES



     The following table sets forth information with respect to the exercised
and unexercised options to purchase shares of common stock held by each of the
Named Executives at December 31, 2001. Of the Named Executives, none exercised
stock options during 2001.





                                                NUMBER OF UNEXERCISED         VALUE OF UNEXERCISED
                        SHARES                       OPTIONS AT              IN-THE-MONEY OPTIONS AT
                       ACQUIRED                   DECEMBER 31, 2001           DECEMBER 31, 2001(1)
                          ON       VALUE     ---------------------------   ---------------------------
NAME                   EXERCISE   REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- ----                   --------   --------   -----------   -------------   -----------   -------------
                                                                       
Ross M. Patten.......    --         --         548,000        922,000          $--            $--
Mark A. Rome.........    --         --         279,000        401,000          $--            $--
Alvin L. Thomas II...    --         --         258,000        422,000          $--            $--
Randall S. Tuttle....    --         --              --        320,000          $--            $--
J. Paul Withrow......    --         --         250,000        430,000          $--            $--



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


(1) Value of in-the-money options calculated based on the closing price per
    share of the common stock on December 31, 2001 ($2.17 per share) as reported
    on the Nasdaq Small-Cap Market.


EMPLOYMENT AGREEMENTS

     We employ Ross M. Patten, Robert Boucher, Mark A. Rome, Alvin L. Thomas II,
Randall S. Tuttle and J. Paul Withrow under employment agreements. Each
employment agreement, except that of Mr. Boucher, has a continuous 24 month
term. Mr. Boucher's employment agreement has a continuous 12 month term. The
current annual salary under the respective employment agreements is $275,000 per
year for Mr. Patten, $240,000 per year for Mr. Boucher, and $177,718 per year
for each of Messrs. Rome, Thomas, Tuttle and Withrow. Additionally, Messrs.
Patten, Boucher, Rome, Thomas, Tuttle and Withrow may be entitled to bonus
awards up to 50% of their respective base salaries, as may be approved by the
Board of Directors, and are entitled to participate in any applicable
profit-sharing, stock option or similar benefit plan. These agreements contain
confidentiality and non-compete provisions.

     We employ James P. Carmichael under an employment and confidentiality
agreement which became effective September 1, 2001. This agreement has a two
year term. The annual salary under his employment agreement is $177,718 and Mr.
Carmichael may be entitled to such bonus awards as determined by our management
based on the financial performance and Mr. Carmichael's individual job
performance. Mr. Carmichael is entitled to participate in any applicable stock
options or similar benefit plan. His employment agreement contains non-compete
provisions.

     On January 27, 2000, we entered into an Agreement Concerning Employment
Rights, or Employment Rights Agreement, with each of Messrs. Patten, Rome,
Thomas and Withrow. The Employment Rights Agreement provides that in the event
that (i) we terminate the executive's employment for any reason other than for
Cause (as defined), death or disability, (ii) the executive terminates their
employment with us for Good Reason (as defined), or (iii) a Change in Control
(as defined) occurs, then the executive shall have the right to receive an
option payment from us. In satisfying this obligation, we will, at our option:
(x) issue options to purchase a certain number of registered shares of our
common stock, or Base Option Amount, at an exercise price of $2.50 per share,
which shall be fully vested and non-transferable, and shall expire 90 days from
the date of issue; (y) issue registered shares of our common stock equal to the
result of (A) the product of the Base Option Amount multiplied by the fair
market value per share of our common stock less $2.50, or Stock Value, divided
by (B) the fair market value per share of our common stock; or (z) a cash
payment equal to the Stock Value. The Base Option Amount, as modified on March
1, 2001, is equal to the number of outstanding options issued to Messrs Patten,
Rome, Thomas and Withrow as of the date hereof. These executives would be
required to forfeit their existing vested and unvested stock options if such
payment has been made by us. As of December 31, 2001, Messrs. Patten, Rome,
Thomas and Withrow had options to purchase stock totaling 1,470,000, 680,000,
680,000, and 680,000, respectively.

                                        67


              CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS


LEASES WITH STOCKHOLDERS


     We maintain two leases with James A. Jalovec, one of our stockholders, or
one of his affiliates. The first lease has an initial term through July 31, 2004
with an option to renew for an additional five-year period. Rental payments made
under this lease in 2001 totaled approximately $97,000. The second lease has an
initial term through December 31, 2013. Rental payments made under the second
lease in 2001 totaled approximately $110,000. We believe the terms of these
arrangements are at least as favorable to us as would be available from an
unaffiliated party.

SUBORDINATED DEBT


     In August 2000, we entered into an amended and restated Senior Subordinated
Loan Agreement with GTCR Capital Partners L.P., or GTCR Capital, and certain
affiliates of The TCW Group, Inc., or the TCW/ Crescent Lenders, in which GTCR
Capital and the TCW/Crescent Lenders agreed to provide up to $230 million in
subordinated debt financing to fund acquisitions and for certain other uses, in
each case as approved by our Board of Directors and the Board of Directors of
GTCR Capital. As of December 31, 2001, the amount of subordinated debt
outstanding was $52.8 million with an average interest rate of 12%. The highest
amount of subordinated debt outstanding in 2001 was $52.8 million. GTCR Capital
is an affiliate of GTCR, our majority stockholder. Affiliates of GTCR and The
TCW Group, Inc. received the portion of the proceeds from the sale of the old
notes that were used to retire all amounts outstanding under this debt. See "Use
of Proceeds" and "Description of Other Indebtedness and Preferred
Stock -- Subordinated Debt."


MONITORING AGREEMENT

     In connection with the transactions contemplated by the amended and
restated Senior Subordinated Loan Agreement we entered into an amended and
restated Monitoring Agreement, or the Monitoring Agreement, with GTCR and the
TCW/Crescent Lenders. The primary purpose for the Monitoring Agreement was to
allow the TCW/Crescent Lenders to share in the monitoring fees granted to GTCR
in our original monitoring agreement with GTCR entered into in January 2000.
Under the Monitoring Agreement, we agreed that at the time of any financing
under the Senior Subordinated Loan Agreement, we would pay GTCR and the
TCW/Crescent Lenders a monitoring fee equal to 0.5% of the aggregate amount of
such financing at the time of issuance. The Monitoring Agreement terminated upon
repayment of all of our loan obligations under the Senior Subordinated Loan
Agreement.

PROFESSIONAL SERVICES AGREEMENT

     In connection with the initial issuance of convertible preferred stock to
GTCR under the Purchase Agreement dated January 27, 2000, we entered into a
Professional Services Agreement with GTCR in which GTCR agreed to provide
certain management and financial services for us. As consideration for such
services, we agreed that at the time of any purchase of convertible preferred
stock under the Purchase Agreement we would pay GTCR a placement fee equal to
0.5% of the amount paid to us in connection with such purchase. The Professional
Services Agreement will continue in effect until such time as GTCR Fund ceases
to own at least 25% of the convertible preferred stock issued under the Purchase
Agreement.


OLD CREDIT FACILITY



     In 2000, we entered into a senior credit facility with Bank of America,
N.A., and certain other lenders to fund working capital for acquisitions, to
refinance existing debt, to provide working capital for operations, to fund
capital expenditures and for other general corporate purposes. As of December
31, 2001, $161,936,000 was borrowed under the old credit facility at an average
interest rate of 4.66%. Bank of America, N.A., is an affiliate of Banc of
America Securities LLC, one of the initial purchasers of this offering.
Affiliates of Banc of America Securities LLC received a portion of the proceeds
from this offering that were used to repay amounts


                                        68



outstanding under this old credit facility. See "Use of Proceeds" and
"Description of Other Indebtedness and Preferred Stock -- Old Credit Facility."


REGISTRATION RIGHTS AGREEMENTS

  JALOVEC REGISTRATION RIGHTS AGREEMENT


     On June 23, 1998, and in connection with our acquisitions of A&J Cartage,
Inc., Michigan Organic Resources, Inc. and A&J Cartage, Inc. Southeast, we
entered into a registration rights agreement with James A. Jalovec, Donald R.
Hoekstra and Karl Hoekstra, or each referred to as a Jalovec Stockholder and
together the Jalovec Stockholders. James A. Jalovec is one of our principal
stockholders. Under this agreement, the Jalovec Stockholders are each entitled
to request the inclusion of their registrable securities in any registration
statement at our expense whenever we propose to register any offering of our
common stock for our own account under the Securities Act for a public offering
for cash (other than pursuant to employee compensation or benefit plans or one
or more acquisition transactions on Form S-4 or Form S-1 (or such successor
forms)).


  ENVIRONMENTAL OPPORTUNITIES REGISTRATION RIGHTS AGREEMENT


     On March 31, 1998, we entered into a registration rights agreement with
Environmental Opportunities Fund, L.P., or EOF, and Environmental Opportunities
Fund (Cayman), L.P., or EOFC, in connection with a subscription agreement
between the same parties. EOF and EOFC are principal stockholders. Under this
agreement, for a five-year period, EOF and EOFC may demand that we prepare and
file a registration statement under the Securities Act registering the resale of
the registrable securities of EOF and EOFC. Additionally, EOF and EOFC are each
entitled to request the inclusion of their registrable securities in any
registration statement at our expense whenever we propose to register for sale
for cash any of our equity securities (excluding registrations on Form S-8 or
S-4 or comparable successor forms).


  GTCR INVESTORS AND TCW/CRESCENT LENDERS REGISTRATION AGREEMENT


     On August 14, 2000, we entered into an amended and restated registration
agreement with GTCR Fund VII, L.P., GTCR Co-Invest, L.P., and GTCR Capital, or
collectively referred to as the GTCR Investors, and the TCW/Crescent Lenders,
together with the GTCR Investors, the Investors. The GTCR Investors are
affiliates of GTCR, our majority stockholder. Pursuant to this agreement, the
holders of a majority of the Investors' registrable securities have the right at
any time, subject to certain conditions, to require us to register any or all of
their securities at our expense under the Securities Act on Form S-1, which we
refer to as a "long-form registration" or on Form S-2 or S-3, which we refer to
as a "short form registration," each a "demand registration". We are not
required to effect any such long-form registration 90 days after the effective
date of a previous long-form registration or a previous registration in which
the holders of registrable securities were given piggyback rights thereunder.


     In addition, the Investors are each entitled to request the inclusion of
their registrable securities in any registration statement at our expense
whenever we register any offering of our securities under the Securities Act
(other than pursuant to a demand registration or in connection with
registrations on Form S-4 or S-8 (or such successor forms)).

  RESTEC REGISTRATION RIGHTS

     Pursuant to the terms and provisions of the Purchase and Sale Agreement
dated October 20, 1999, by and among us, Paul A. Toretta, or Toretta, Eileen
Toretta, as Trustee of the Paul A. Toretta 1998 Grant, or the Grant, Frances A.
Guerrera, Frances A. Guerrera, as executrix of the Estate of Richard J.
Guerrera, or the Estate and together with Toretta and the Grant, the RESTEC
Shareholders, and Frances A. Guerrera and Robert Dionne, as Co-Trustees of the
Richard J. Guerrera Revocable Trust under Agreement dated November 2, 1998, as
amended by that certain Letter Amendment dated January 7, 2000, and that certain
Second Amendment to Purchase and Sale Agreement dated January 26, 2000, or the
RESTEC Purchase Agreement, the RESTEC Shareholders, as a group, are entitled to
a maximum of four demand registrations at our expense. The RESTEC Shareholders
also are entitled to request the inclusion of certain of their securities

                                        69


in any registration statement at our expense whenever we propose to register for
sale for cash any of our securities (excluding registrations on Form S-8 or S-4,
a registration statement filed in connection with an exchange offer or an
offering of securities solely to our existing shareholders, or a registration
statement filed in connection with an exchange offer or an offering of
securities by any of our shareholders).

     Additionally, we granted Toretta and the Estate registration rights
pursuant to an Agreement and Plan of Merger, dated as of October 20, 1999, by
and among us, RESTEC Acquisition Corp, New England Treatment Company, Inc.,
Toretta, Frances A. Guerrera, the Estate, and the Trust, or the RESTEC Merger
Agreement. We are required to use reasonable efforts to file with the Commission
promptly upon receipt of a written request from Toretta and the Estate as a
group a registration statement registering all of the shares of our common stock
issued to Toretta and the Estate under the RESTEC Merger Agreement. Toretta and
the Estate also are entitled to request the inclusion of their stock in any
registration statement at our expense whenever we propose to register for sale
for cash any of our securities (excluding registrations on Form S-8 or S-4, a
registration statement filed in connection with an exchange offer or an offering
of securities solely to our existing shareholders, or a registration statement
filed in connection with an exchange offer or an offering of securities by any
of our shareholders).

  TUTTLE REGISTRATION RIGHTS


     Pursuant to the terms of the Agreement and Plan of Merger, or AMSCO Merger
Agreement, we entered into with AMS Acquisition Corp, AMSCO, Inc., Randall S.
Tuttle, or the Tuttles, we are required to use reasonable efforts to file with
the Commission promptly upon receipt of a written request from either of the
Tuttles a registration statement at our expense registering the shares of our
common stock issued to the Tuttles under the AMSCO Merger Agreement. Randall S.
Tuttle is our President and Chief Operating Officer of Operations.


  DRAMAN REGISTRATION RIGHTS

     Pursuant to the terms of the Agreement and Plan of Merger, or EWR Merger
Agreement, entered into with EWR Acquisition Corp, Environmental Waste
Recycling, Inc. and Grace A. Draman and Dennis Draman, or the Dramans, we are
required to use reasonable efforts to file with the Commission promptly upon
receipt of a written request from the either of the Dramans a registration
statement registering the shares of our common stock issued to the Dramans under
the EWR Merger Agreement.

  EVANS REGISTRATION RIGHTS


     Pursuant to the terms of the Agreement and Plan of Merger, or APA Merger
Agreement, we entered into with APA Acquisition Corp, Anti-Pollution Associates,
Inc., D&D Pumping, Inc. and Don Evans, or Evans, we are required to use
reasonable efforts to file with the Commission promptly upon receipt of a
written request from Evans a registration statement at our expense registering
the shares of our common stock issued to Evans under the APA Merger Agreement.


  ROSENDALLS REGISTRATION RIGHTS


     Pursuant to the terms of the Agreement and Plan of Merger, or NRR Merger
Agreement, entered into with NRR Acquisition Corp, National Resource Recovery,
Inc. and James R. Rosendall, Jr. and Kevin P. Rosendall, or the Rosendalls, we
are required to use reasonable efforts to file with the Commission a
registration statement on Form S-3 at our expense registering the shares of our
common stock issued to the Rosendalls under the NRR Merger Agreement. James
Rosendall is one of our principal stockholders.


                                        70


WARRANT AGREEMENTS


     We entered into separate warrant agreements with the TCW Crescent Lenders
and GTCR Capital on August 14, 2000 in connection with the amended and restated
Senior Subordinated Loan Agreement referred to above under "-- Subordinated
Debt." GTCR Capital is an affiliate of GTCR, our majority stockholder. Under
this warrant agreement, we are required to issue a warrant to purchase
convertible preferred stock to both the TCW/Crescent Lenders and GTCR Capital in
connection with any loan under the amended and restated Senior Subordinated Loan
Agreement.


                                        71


                             PRINCIPAL STOCKHOLDERS


     The following table provides certain information regarding the beneficial
ownership of our common stock as of May 10, 2002, by each person known by us to
be the beneficial owner of more than 5% of our outstanding common stock. As
required by the Commission, the ownership percentages shown reflect beneficial
ownership by a stockholder as if no other stockholder has converted its
preferred stock or exercised its options.





NAME OF PERSON OR IDENTITY OF GROUP SHARES           NUMBER OF SHARES       PERCENT OF CLASS
- ------------------------------------------           ----------------       ----------------
                                                                      
GTCR Golder Rauner, LLC...........................      25,015,130(1)            56.2%
GTCR Fund VII, L.P.
GTCR Partners VII, L.P.
David A. Donnini
  6100 Sears Tower
  Chicago, IL 60606
TCW/Crescent Mezzanine, LLC ......................       2,321,428(2)            10.7%
  11100 Santa Monica Boulevard, Suite 2000
  Los Angeles, CA 90025
Astoria Capital Management, Inc. .................       1,946,700(3)             9.9%
Astoria Capital Partners, L.P.
Richard Koe
  6600 S.W. Ninety-Second Ave., Suite 370
  Portland, OR 97223
James A. Jalovec..................................       1,814,527(4)             9.2%
  2841 South 5th Court
  Milwaukee, WI 53207
Randall S. Tuttle.................................       1,785,377(4)             9.1%
  1900 Virginia Road
  Winston-Salem, NC 27107
James Rosendall...................................       1,603,501                8.2%
  323 Martindale Street
  Sparta, MI 49345
Environmental Opportunities Fund, L.P.
Environmental Opportunities Fund, (Cayman) L.P.
Kenneth Ch'uan-k'ai Leung.........................       1,263,900(5)             6.5%
  126 E. 56th Street, 24th Floor
  New York, NY 10022
Bill E. Tuttle....................................       1,194,668                6.1%
  711 East Twain Avenue
  Las Vegas, NV 89109



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

(1) Represents 62,537.819 total shares of Series D and E Convertible Preferred
    Stock convertible into 25,015,130 shares of Common Stock

(2) Represents the following shares held by the following entities which are
    indirectly controlled by TCW/ Crescent Mezzanine, LLC, a registered
    investment adviser:



                                                                               NUMBER OF SHARES
                                                  NUMBER OF SHARES OF        OF COMMON STOCK UPON
                                                OF SERIES E CONVERTIBLE     CONVERSION OF SERIES E
                                                    PREFERRED STOCK       CONVERTIBLE PREFERRED STOCK
                                                -----------------------   ---------------------------
                                                                    
TCW/Crescent Mezzanine Partners II, L.P.......         4,671.257                 1,868,502.80
TCW/Crescent Mezzanine Trust II...............         1,132.313                   452,925.20



(3) Based on a Schedule 13G filed on May 10, 2002, Astoria Capital Management,
    Inc. is the beneficial owner of these shares pursuant to separate
    arrangements whereby it acts as investment advisor to Astoria Capital


                                        72


    Partners, L.P. Richard Koe is the beneficial owner of these shares pursuant
    to his ownership interest in Astoria Capital Management, Inc. and Astoria
    Capital Partners, L.P.


(4) Includes shares of common stock underlying vested stock options of 221,332
    for Mr. Jalovec, 128,000 for Mr. Tuttle, and 3,500 for Mr. Rosendall.


(5) Includes 137,875 shares and 1,112,125 shares owned by Environmental
    Opportunities Fund (Cayman), L.P., and Environmental Opportunities Fund,
    L.P., respectively. Mr. Leung is the chief investment officer of these
    investment funds.


                            MANAGEMENT STOCKHOLDINGS



     The following table sets forth certain information regarding the beneficial
ownership of our common stock at May 10, 2002, by (i) all current directors,
(ii) the Chief Executive Officer and (iii) the next four most highly compensated
executive officers (iv) and, all directors and all executive officers as a
group.





                                                               NUMBER OF     PERCENT
NAME OF PERSON OR IDENTITY OF GROUP                            SHARES(1)     OF CLASS
- -----------------------------------                           ------------   --------
                                                                       
Ross M. Patten..............................................       658,006      3.3%
Kenneth Ch'uan-k'ai Leung(2)................................   1,265,900(2)     6.5%
Gene Meredith...............................................        18,000        *
Alfred Tyler 2nd............................................        34.030        *
David A. Donnini............................................  25,015,130(3)    56.2%
Vincent J. Hemmer...........................................            --        *
Mark A. Rome................................................       329,000      1.7%
Alvin L. Thomas II..........................................       306,745      1.6%
Randall S. Tuttle...........................................     1,785,377      9.1%
J. Paul Withrow.............................................       301,000      1.5%
All directors and executive officers as a group (12
  persons)..................................................  29,723,188(4)    64.3%



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


*Less than 1% of outstanding shares.



(1)Includes shares common stock underlying stock options as follows: Mr.
   Patten--652,000; Mr. Rome-325,000; Mr. Thomas-304,000; Mr. Tuttle-128,000;
   Mr. Withrow-296,000.



(2)Includes shares of 1,112,125 and 137,875 held by the Environmental
   Opportunities Fund L.P. and Environmental Opportunities Fund (Cayman) L.P.,
   respectively, of which Mr. Leung is chief investment offer.



(3)Includes 25,015,130 shares of common stock underlying Series D and E
   Preferred Stock held by GTCR, of which Mr. Donnini is a principal.



(4)Includes (without duplication) all shares referred to above.


                                        73


             DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK

NEW CREDIT FACILITY


     On May 8, 2002, we amended and restated our Senior Credit Agreement by and
among the Company, Bank of America, N.A., and certain other lenders to fund
working capital for acquisitions, to provide working capital for operations, to
refinance existing debt, to fund capital expenditures and other general
corporate purposes. The Senior Credit Agreement bears interest at LIBOR or prime
plus a margin based on a pricing schedule as set out in the Senior Credit
Agreement.



     The loan commitments under the Senior Credit Agreement are as follows:



          (i.) Revolving Loan up to $50,000,000 outstanding at any one time;



          (ii.) Term A Loans (which, once repaid, may not be reborrowed) of
     $70,000,000; and



          (iii.) Letters of credit issuable by us up to $50,000,000 as a subset
     of the Revolving Loan. At March 31, 2002, we had approximately $21,750,000
     of letters of credit outstanding.



     The total credit facility can be increased to $150 million. The amounts
borrowed under the Senior Credit Agreement are subject to repayment as follows:





                                                              REVOLVING    TERM
PERIOD ENDING DECEMBER 31,                                      LOAN       LOANS
- --------------------------                                    ---------   -------
                                                                    
2002........................................................      --        1.00%
2003........................................................      --        1.00%
2004........................................................      --        1.00%
2005........................................................   100.00%      1.00%
2006........................................................      --       94.50%
2007........................................................      --        1.00%
2008........................................................      --       94.75%
                                                               -------    -------
                                                               100.00%    100.00%
                                                               =======    =======



  GUARANTEES; SECURITY


     Our obligations under the new credit facility are unconditionally and
irrevocably guaranteed by all of our existing and future domestic subsidiaries,
other than subsidiaries treated as unrestricted subsidiaries.



     In addition, the new credit facility is secured by first priority security
interests in substantially all of our assets and those of our subsidiaries
(other than assets securing nonrecourse debt).


  REPAYMENT

     All or any portion of the outstanding loans under the new credit facility
may be prepaid at any time and commitments may be terminated in whole or in part
at our option (in each case upon prior notice) without premium or penalty,
except that LIBOR-based loans may only be voluntarily prepaid at the end of the
applicable interest period.

  CERTAIN COVENANTS


     The new credit facility requires compliance with various financial
covenants, including a senior debt-to-cash flow ratio, as defined, determined at
the end of each quarter, a total debt-to-cash flow ratio, as defined, an
interest coverage ratio, as defined, and a fixed charge ratio, as defined. The
new credit facility also contains a number of covenants that, among other
things, restrict our ability and that of certain of our subsidiaries to dispose
of assets, incur additional indebtedness, incur guarantee obligations, repay
other indebtedness, pay certain restricted payments and dividends, create liens
on assets, make investments, loans or advances, engage


                                        74



in mergers or consolidations, make capital expenditures, enter into sale and
leaseback transactions, or engage in certain transactions with subsidiaries and
affiliates and otherwise restrict corporate activities. The new credit facility
also contains other usual and customary negative and affirmative covenants.


  EVENTS OF DEFAULT


     Our new credit facility contains events of default including, without
limitation, (subject to customary cure periods and materiality thresholds):


     - failure to make payments when due;

     - material inaccuracies of representations and warranties;

     - breach of covenants;

     - certain cross-defaults and cross-accelerations;

     - events of insolvency, bankruptcy or similar events;

     - certain judgments against us;

     - certain occurrences with respect to employee benefit plans;

     - failure of certain liens and security documents; and

     - the occurrence of a change in control.

  NONRECOURSE PROJECT REVENUE BONDS


     The debt, interest expense and EBITDA (all as defined in the new credit
facility) associated with the Nonrecourse Project Revenue Bonds and other
nonrecourse debt is excluded from the financial covenant calculations required
by the new credit facility.



NONRECOURSE PROJECT REVENUE BONDS


     In 1996, the Maryland Energy Financing Administration, or the
Administration, issued the Nonrecourse Project Revenue Bonds in the aggregate
amount of $58,550,000. The Administration loaned the proceeds of the Nonrecourse
Project Revenue Bonds to Wheelabrator Water Technologies Baltimore L.L.C., now
our wholly owned subsidiary and known as Synagro-Baltimore, L.L.C., pursuant to
a June 1996 loan agreement, and the terms of the loan mirror the terms of the
Nonrecourse Project Revenue Bonds. The loan financed a portion of the costs of
constructing thermal facilities located in Baltimore County, Maryland, at the
site of its Back River Wastewater Treatment Plant, and in the City of Baltimore,
Maryland, at the site of its Patapsco Wastewater Treatment Plant. We assumed all
obligations associated with the Nonrecourse Project Revenue Bonds in connection
with our acquisition of Bio Gro in 2000. The Nonrecourse Project Revenue Bonds
in the aggregate amount of $9,885,000 have already been paid, and the remaining
Nonrecourse Project Revenue Bonds bear interest at annual rates between 5.45%
and 6.45% and mature on dates between December 1, 2002 and December 1, 2016.

     The Nonrecourse Project Revenue Bonds are primarily secured by the pledge
of revenues and assets related to our Back River and Patapsco thermal
facilities. The underlying service contracts between us and the City of
Baltimore obligated us to design, construct and operate the thermal facilities
and obligated the City to deliver biosolids for processing at the thermal
facilities. The City makes all payments under the service contracts directly to
a trustee for the purpose of paying the Nonrecourse Project Revenue Bonds.

     At our option, we may cause the redemption of the Nonrecourse Project
Revenue Bonds at any time on or after December 1, 2006, subject to redemption
prices specified in the loan agreement. The Nonrecourse Project Revenue Bonds
will be redeemed at any time upon the occurrence of certain extraordinary
conditions, as defined in the loan agreement.

                                        75


     Synagro-Baltimore, L.L.C., one of our wholly owned subsidiaries, guarantees
the performance of services under the underlying service agreements with the
City of Baltimore. Under the terms of Bio Gro acquisition agreement, Waste
Management, Inc. also guarantees the performance of services under those service
agreements. We have agreed to pay Waste Management $500,000 per year beginning
in 2007 until the Nonrecourse Project Revenue Bonds are paid or its guarantee is
removed. Neither Synagro-Baltimore, L.L.C. nor Waste Management has guaranteed
payment of the Nonrecourse Project Revenue Bonds or the loan funded by the
Nonrecourse Project Revenue Bonds.

     The loan agreement, based on the terms of the related indenture, requires
that we place certain monies in restricted fund accounts and that those funds be
used for various designated purposes (e.g., debt service reserve funds, bond
funds, etc.). Monies in these funds will remain restricted until the Nonrecourse
Project Revenue Bonds are paid.

     At December 31, 2001, the Nonrecourse Project Revenue Bonds were secured by
property, machinery and equipment with a net book value of approximately
$60,083,000 and restricted cash of approximately $8,557,000, of which
approximately $5,780,000 was netted against long-term debt and the difference
was shown as restricted cash.

     These Nonrecourse Project Revenue Bonds, totaling $42,900,000 of debt (net
of restricted cash) as of December 31, 2001 and $3,100,000 of related interest
expense paid in 2001 are excluded from the financial covenant calculations
required by our existing credit facility.

PREFERRED STOCK

     We are authorized to issue up to 10,000,000 shares of preferred stock,
which may be issued in one or more series or classes by our Board of Directors.
Each such series or class shall have such powers, preferences, rights and
restrictions as determined by resolution of our Board of Directors.

  SERIES D REDEEMABLE PREFERRED STOCK

     We have authorized 32,000 shares of Series D Preferred Stock, par value
$.002 per share. In 2000, we issued a total of 25,033.601 shares of the Series D
Preferred Stock to GTCR Fund VII, L.P. and its affiliates which is convertible
by the holders into a number of shares of our common stock computed by dividing
(i) the sum of (a) the number of shares to be converted multiplied by the
liquidation value and (b) the amount of accrued and unpaid dividends by (ii) the
conversion price then in effect. The initial conversion price is $2.50 per
share, provided that in order to prevent dilution, the conversion price may be
adjusted. The Series D Preferred Stock is senior to our common stock or any
other of our equity securities. The liquidation value of each share of Series D
Preferred Stock is $1,000 per share. Dividends on each share of Series D
Preferred Stock accrue daily at the rate of eight percent per annum on the
aggregate liquidation value and may be paid in cash or accrued, at our option.
Upon conversion of the Series D Preferred Stock by the holders, the holders may
elect to receive the accrued and unpaid dividends in shares of our common stock
at the conversion price. The Series D Preferred Stock is entitled to one vote
per share. Shares of Series D Preferred Stock are subject to mandatory
redemption by us on January 26, 2010, at a price per share equal to the
liquidation value plus accrued and unpaid dividends. If the Series D Preferred
Stock were converted, they would represent 10,013,441 shares of common stock.

  SERIES E REDEEMABLE PREFERRED STOCK

     We have authorized 55,000 shares of Series E Preferred Stock, par value
$.002 per share. GTCR Fund VII, L.P. and its affiliates own 37,504.229 shares of
Series E Preferred Stock and TCW/Crescent Lenders own 7,024.58 shares. The
Series E Preferred Stock is convertible by the holders into a number of shares
of our common stock computed by dividing (i) the sum of (a) the number of shares
to be converted multiplied by the liquidation value and (b) the amount of
accrued and unpaid dividends by (ii) the conversion price then in effect. The
initial conversion price is $2.50 per share, provided that in order to prevent
dilution, the conversion price may be adjusted. The Series E Preferred Stock is
senior to our common stock or any other of our equity securities. The
liquidation value of each share of Series E Preferred Stock is $1,000 per
                                        76


share. Dividends on each share of Series E Preferred Stock accrue daily at the
rate of eight percent per annum on the aggregate liquidation value and may be
paid in cash or accrued, at our option. Upon conversion of the Series E
Preferred Stock by the holders, the holders may elect to receive the accrued and
unpaid dividends in shares of our common stock at the conversion price. The
Series E Preferred Stock is entitled to one vote per share. Shares of Series E
Preferred Stock are subject to mandatory redemption by us on January 26, 2010,
at a price per share equal to the liquidation value plus accrued and unpaid
dividends. If the Series E Preferred Stock were converted, they would represent
17,903,475 shares of common stock.

     The Series D and Series E Preferred Stock may result in noncash beneficial
conversions valued in future periods recognized as preferred stock dividends if
the market value is higher than the conversion price. See Note 8 in the
accompanying Notes to the Consolidated Financial Statements.

SUBORDINATED DEBT


     In January 2000, we entered into an agreement with GTCR Capital which
agreed to provide up to $125 million in subordinated debt financing to fund
acquisitions and for certain other uses, in each case as approved by our Board
of Directors and the Board of Directors of GTCR Capital. GTCR Capital is an
affiliate of GTCR, our majority stockholder. The agreement was amended in August
2000, allowing, among other things, for GTCR Capital to syndicate a portion of
the commitment. The loans bear interest at an annual rate of 12% paid quarterly
and provided warrants that were convertible into Preferred Stock at $.01 per
share. The unpaid principal plus unpaid and accrued interest must be paid in
full by January 27, 2008. The agreement contains general and financial
covenants. As of December 31, 2001, we had borrowed approximately $52,760,000 of
indebtedness under the terms of the agreement, which was used to partially fund
our acquisitions in 2000. Affiliates of GTCR and TCW/Crescent Mezzanine, L.L.C.,
our majority stockholders, were participating lenders under the existing
subordinated debt, and as such, they received the portion of the proceeds from
the sale of the old notes that were used to retire all amounts outstanding under
that debt. GTCR will continue to own $62,537,000 million face value of our
convertible preferred stock. See "Principal Stockholders" and "Certain
Relationships And Related Party Transactions".


                                        77


                              DESCRIPTION OF NOTES

     You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Synagro" refers only to Synagro Technologies, Inc. and not to any of its
subsidiaries.

     Synagro issued the old notes to the initial purchasers on April 17, 2002.
The initial purchasers sold all of the outstanding notes to "qualified
institutional buyers," as defined in Rule 144A under the Securities Act, and to
persons outside the United States under Regulation S. The form and terms of the
new notes are the same as the form and terms of the old notes they will replace,
except that:

     - Synagro will register the new notes under the Securities Act;

     - the new notes, once registered, will not bear legends restricting
       transfer; and

     - holders of the new notes will not be entitled to some rights under the
       exchange and registration rights agreement, including our payment of
       additional interest for failure to meet specified deadlines, which
       terminate when the exchange offer is consummated.

     Synagro issued the old notes under the Indenture, or Indenture, among
itself, the Guarantors and Wells Fargo Bank Minnesota, National Association, as
trustee, in a private transaction that was not subject to the registration
requirements of the Securities Act. The terms of the Indenture apply to the old
notes and the new notes to be issued in exchange for the old notes in this
exchange offer (all such notes being referred to herein collectively as the
"notes"). The terms of the notes include those expressly set forth in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended.

     The following description is a summary of the material provisions of the
indenture and the exchange and registration rights agreement. It does not
restate those agreements in their entirety. We urge you to read the indenture
and the exchange and registration rights agreement because they, and not this
description, define your rights as holders of the notes. Copies of the indenture
and the exchange and registration rights agreement are available as set forth
below under "-- Additional Information." Certain defined terms used in this
description but not defined below under "-- Certain Definitions" have the
meanings assigned to them in the indenture or the exchange and registration
rights agreement.

     The registered Holder of a note will be treated as the owner of it for all
purposes. Only registered Holders will have rights under the indenture.

BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES

  THE NOTES

     The notes:

          - are general unsecured obligations of Synagro;

          - are subordinated in right of payment to all existing and future
            Senior Debt of Synagro;

          - are pari passu in right of payment with any future senior
            subordinated Indebtedness of Synagro; and

          - are unconditionally guaranteed by the Guarantors.

  THE GUARANTEES

     The notes are guaranteed by all of Synagro's current Domestic Subsidiaries.
Each guarantee of the notes:

          - is a general unsecured obligation of the Guarantors;

          - is subordinated in right of payment to all existing and future
            Senior Debt of the Guarantors; and

          - is pari passu in right of payment with any future senior
            subordinated Indebtedness of the Guarantors.
                                        78



     As of May 31, 2002, Synagro and the Guarantors had total Senior Debt of
approximately $78.5 million. As indicated above and as discussed in detail below
under the caption "-- Subordination," payments on the notes and under these
guarantees will be subordinated to the payment of Senior Debt. The indenture
will permit us and the Guarantors to incur additional Senior Debt.


     As of the date of the indenture, all of our subsidiaries, except for
Synagro-Baltimore and Providence Soils, will be "Restricted Subsidiaries."
However, under the circumstances described below under the subheading
"-- Certain Covenants -- Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate certain of our subsidiaries as
"Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be subject
to many of the restrictive covenants in the indenture. Our Unrestricted
Subsidiaries will not guarantee the notes, except that as of the date of the
indenture, each of Synagro-Baltimore and Providence Soils will be an
Unrestricted Subsidiary Guarantor and will guarantee the notes. We will be
permitted to designate certain of our subsidiaries as "Unrestricted Subsidiary
Guarantors" as described below under the subheading "-- Certain
Covenants -- Additional Guarantees."

PRINCIPAL, MATURITY AND INTEREST

     The indenture does not limit the maximum aggregate principal amount of
notes that Synagro may issue thereunder. Synagro will issue notes in an
aggregate principal amount of $150 million in connection with this offering.
Synagro may issue additional notes from time to time after this offering. Any
offering of additional notes is subject to the covenant described below under
the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock." The notes and any additional notes subsequently issued under
the indenture will be treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. Synagro will issue notes in denominations of $1,000 and
integral multiples of $1,000. The notes will mature on April 1, 2009.

     Interest on the notes will accrue at the rate of 9 1/2% per annum and will
be payable semi-annually in arrears on April 1 and October 1, commencing on
October 1, 2002. Synagro will make each interest payment to the Holders of
record on the immediately preceding March 15 and September 15.

     Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.

METHODS OF RECEIVING PAYMENTS ON THE NOTES

     If a Holder has given wire transfer instructions to Synagro, Synagro will
pay all principal, interest and premium and Liquidated Damages, if any, on that
Holder's notes in accordance with those instructions. All other payments on
notes will be made at the office or agency of the paying agent and registrar
within the City and State of New York unless Synagro elects to make interest
payments by check mailed to the Holders at their address set forth in the
register of Holders.

PAYING AGENT AND REGISTRAR FOR THE NOTES

     The trustee will initially act as paying agent and registrar. Synagro may
change the paying agent or registrar without prior notice to the Holders of the
notes, and Synagro or any of its Subsidiaries may act as paying agent or
registrar only with the prior written consent of the administrative agent under
the Credit Agreement.

TRANSFER AND EXCHANGE

     A Holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents in connection with a
transfer of notes. Holders will be required to pay all taxes due on transfer.
Synagro is not required to transfer or exchange any note selected for
redemption. Also, Synagro is not required to transfer or exchange any note for a
period of 15 days before a selection of notes to be redeemed.

                                        79


SUBSIDIARY GUARANTEES

     The notes will be guaranteed by each of Synagro's current and future
Domestic Subsidiaries that are Restricted Subsidiaries, by Synagro-Baltimore and
Providence Soils, as the only Unrestricted Subsidiary Guarantors as of the date
of the indenture, and by any other future Unrestricted Subsidiaries that may be
designated Unrestricted Subsidiary Guarantors. These Subsidiary Guarantees will
be joint and several obligations of the Guarantors. Each Subsidiary Guarantee
will be subordinated to the prior payment in full in cash of all Senior Debt of
that Guarantor. The obligations of each Guarantor under its Subsidiary Guarantee
will be limited as necessary to prevent that Subsidiary Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors -- Federal and state statutes allow courts, under specific
circumstances, to void guarantees and require note holders to return payments
received from guarantors."

     A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than Synagro or
another Guarantor, unless:

          (1) immediately after giving effect to that transaction, no Default or
     Event of Default exists; and

          (2) either:

             (a) the Person acquiring the property in any such sale or
        disposition or the Person formed by or surviving any such consolidation
        or merger assumes all the obligations of that Guarantor under the
        indenture, its Subsidiary Guarantee and the registration rights
        agreement pursuant to a supplemental indenture reasonably satisfactory
        to the trustee; or

             (b) the Net Proceeds of such sale or other disposition are applied
        in accordance with the applicable provisions of the indenture.

     The Subsidiary Guarantee of a Guarantor will be released:

          (1) in connection with any sale, disposition or transfer of all or
     substantially all of the assets of that Guarantor (including by way of
     merger or consolidation) to a Person that is not (either before or after
     giving effect to such transaction) a Subsidiary of Synagro, if the sale or
     other disposition complies with the "Asset Sale" provisions of the
     indenture;

          (2) in connection with any sale of all of the Capital Stock of a
     Guarantor to a Person that is not (either before or after giving effect to
     such transaction) a Subsidiary of Synagro, if the sale complies with the
     "Asset Sale" provisions of the indenture;

          (3) if Synagro designates any Restricted Subsidiary that is a
     Guarantor as an Unrestricted Subsidiary in accordance with the applicable
     provisions of the indenture;

          (4) if Synagro designates any Unrestricted Subsidiary Guarantor to no
     longer be a Guarantor in accordance with the provisions of the indenture
     that would be applicable if such Unrestricted Subsidiary Guarantor was
     treated as if it was a Restricted Subsidiary that Synagro designated as an
     Unrestricted Subsidiary in accordance with clause (3) above; or

          (5) in connection with the sale, disposition or transfer of all of the
     assets of a Guarantor to another Guarantor or Synagro.

     See "-- Repurchase at the Option of Holders -- Asset Sales."

SUBORDINATION

     The payment of principal, interest and premium and Liquidated Damages and
other Obligations, if any, on the notes will be subordinated to the prior
payment in full in cash of all Senior Debt of Synagro, including Senior Debt
incurred after the date of the indenture.

     The holders of Senior Debt will be entitled to receive payment in full in
cash of all Obligations due in respect of Senior Debt (including interest after
the commencement of any bankruptcy proceeding at the rate

                                        80


specified in the applicable Senior Debt), before the Holders of notes will be
entitled to receive any payment or distribution with respect to the notes
(except that Holders of notes may receive and retain Permitted Junior Securities
and payments made from the trust described under "-- Legal Defeasance and
Covenant Defeasance"), in the event of any distribution to creditors of Synagro:

          (1) in a liquidation or dissolution of Synagro;

          (2) in a bankruptcy, reorganization, insolvency, receivership or
     similar proceeding relating to Synagro or its property;

          (3) in an assignment for the benefit of creditors; or

          (4) in any marshaling of Synagro's assets and liabilities.

     Synagro also may not make any payment in respect of the notes (except in
Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:

          (1) a payment default on Designated Senior Debt occurs; or

          (2) any other default occurs and is continuing on any series of
     Designated Senior Debt that permits holders of that series of Designated
     Senior Debt to accelerate its maturity and the trustee receives a notice of
     such default (a "Payment Blockage Notice") from (x) if the Credit Agreement
     is in effect, the credit agent thereunder or (y) if the Credit Agreement is
     not in effect, the holders of any Designated Senior Debt.

     Payments on the notes may and will be resumed:

          (1) in the case of a payment default, upon the date on which such
     default is cured or waived; and

          (2) in the case of a nonpayment default, upon the earliest of (a) the
     date on which such nonpayment default is cured or waived, (b) 179 days
     after the date on which the applicable Payment Blockage Notice is received,
     and (c) the Trustee receives notice from the representative for the
     Designated Senior Debt that gave such Payment Blockage Notice rescinding
     the Payment Blockage Notice, unless the maturity of any Designated Senior
     Debt has been accelerated.

     No new Payment Blockage Notice may be delivered unless and until (1) 360
days have elapsed since the delivery of the immediately prior Payment Blockage
Notice; and (2) all scheduled payments of principal, interest and premium and
Liquidated Damages, if any, on the notes that have come due have been paid in
full in cash.

     No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 days.

     If the trustee or any Holder of the notes receives a payment in respect of
the notes (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance"), when the payment is
prohibited by these subordination provisions; the trustee or the Holder, as the
case may be, will hold the payment in trust for the benefit of the holders of
Senior Debt. Upon the written request of the holders of Senior Debt, the trustee
or the Holder, as the case may be, will promptly deliver the amounts in trust to
the holders of Senior Debt or their proper representative.

     Synagro must promptly notify holders of Senior Debt if payment of the notes
is accelerated because of an Event of Default.

     As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Synagro, Holders of notes may
recover less ratably than creditors of Synagro who are holders of Senior Debt.
See "Risk Factors -- Your right to receive payments on these new notes is junior
to our existing indebtedness and possibly all of our future borrowings. Further,
the guarantees of these notes are junior to all of our guarantors' existing
indebtedness and possibly to all of their future borrowings."

                                        81


OPTIONAL REDEMPTION

     At any time prior to April 1, 2005, Synagro may on any one or more
occasions redeem up to 35% of the aggregate principal amount of notes issued
under the indenture (including additional notes, if any) at a redemption price
of 109.5% of the principal amount, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, with the net cash proceeds
of one or more Equity Offerings by Synagro; provided that:

          (1) at least 65% of the aggregate principal amount of notes issued
     under the indenture (including additional notes, if any) remains
     outstanding immediately after the occurrence of such redemption; and

          (2) the redemption occurs within 90 days of the date of the closing of
     such Equity Offering.

     Except pursuant to the preceding paragraph, the notes will not be
redeemable at Synagro's option prior to April 1, 2006. Synagro is not
prohibited, however, from acquiring the notes by means other than a redemption,
whether pursuant to a tender offer or otherwise, assuming such acquisition does
not otherwise violate the terms of the indenture.

     After April 1, 2006, Synagro may redeem all or a part of the notes upon not
less than 30 nor more than 60 days' notice, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, on the notes redeemed, to the
applicable redemption date, if redeemed during the 12-month period beginning on
April 1 of the years indicated below:



YEAR                                                          PERCENTAGE
- ----                                                          ----------
                                                           
2006........................................................   104.750%
2007........................................................   102.375%
2008 and thereafter.........................................   100.000%


MANDATORY REDEMPTION

     Synagro is not required to make mandatory redemption or sinking fund
payments with respect to the notes.

REPURCHASE AT THE OPTION OF HOLDERS

  CHANGE OF CONTROL

     If a Change of Control occurs, each Holder of notes will have the right to
require Synagro to repurchase all or any part (equal to $1,000 or an integral
multiple of $1,000) of that Holder's notes pursuant to a Change of Control Offer
on the terms set forth in the indenture. In the Change of Control Offer, Synagro
will offer a Change of Control Payment in cash equal to 101% of the aggregate
principal amount of notes repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, on the notes repurchased, to the date of purchase.
Within ten days following any Change of Control, Synagro will mail a notice to
each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase notes on the Change of Control
Payment Date specified in the notice, which date will be no earlier than 30 days
and no later than 60 days from the date such notice is mailed, pursuant to the
procedures required by the indenture and described in such notice. Synagro will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with the repurchase of the notes as a
result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions of
the indenture, Synagro will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Change of Control provisions of the indenture by virtue of such conflict.

     On the Change of Control Payment Date, Synagro will, to the extent lawful:

          (1) accept for payment all notes or portions of notes properly
     tendered pursuant to the Change of Control Offer;

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          (2) deposit with the paying agent an amount equal to the Change of
     Control Payment in respect of all notes or portions of notes properly
     tendered; and

          (3) deliver or cause to be delivered to the trustee the notes properly
     accepted together with an officers' certificate stating the aggregate
     principal amount of notes or portions of notes being purchased by Synagro.

     The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for such notes, and the trustee will
promptly authenticate and mail (or cause to be transferred by book entry), to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.

     Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, Synagro
will either repay all outstanding Senior Debt or obtain the requisite consents,
if any, under all agreements governing outstanding Senior Debt to permit the
repurchase of notes required by this covenant. Synagro will publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date.

     The provisions described above that require Synagro to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the indenture are applicable. Except as described above
with respect to a Change of Control, the indenture does not contain provisions
that permit the Holders of the notes to require that Synagro repurchase or
redeem the notes in the event of a takeover, recapitalization or similar
transaction.

     Synagro will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by Synagro and
purchases all notes properly tendered and not withdrawn under the Change of
Control Offer.

     The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of Synagro and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require Synagro to repurchase its notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of Synagro and its Subsidiaries taken as a whole to another Person or
group may be uncertain.

  ASSET SALES

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:

          (1) Synagro (or the Restricted Subsidiary, as the case may be)
     receives consideration at the time of the Asset Sale at least equal to the
     fair market value of the assets or Equity Interests issued or sold or
     otherwise disposed of;

          (2) the fair market value is determined by Synagro's Board of
     Directors and evidenced by a resolution of the Board of Directors set forth
     in an officers' certificate delivered to the trustee; and

          (3) at least 75% of the consideration received in the Asset Sale by
     Synagro or such Restricted Subsidiary is in the form of cash or Cash
     Equivalents. For purposes of this provision, each of the following (and any
     combination thereof) will be deemed to be cash:

             (a) any liabilities, as shown on Synagro's most recent consolidated
        balance sheet, of Synagro or any Restricted Subsidiary (other than
        contingent liabilities and liabilities that are by their terms
        subordinated to the notes or any Subsidiary Guarantee of such Restricted
        Subsidiary) that are either (i) expressly assumed by the transferee of
        any such assets pursuant to a customary novation

                                        83


        agreement that releases Synagro or such Restricted Subsidiary from
        further liability or (ii) otherwise released from further liability by
        operation of law, as confirmed in the case of subclause (ii), at the
        time such release is effected, by Synagro delivering to the trustee an
        opinion of counsel acceptable to the trustee; and

             (b) any securities, notes or other obligations received by Synagro
        or any such Restricted Subsidiary from such transferee that are
        converted by Synagro or such Restricted Subsidiary into cash within 90
        days following the closing of such Asset Sale, to the extent of the cash
        received in that conversion; and

             (c) any Designated Noncash Consideration received by Synagro or any
        of its Restricted Subsidiaries in any Asset Sale having a fair market
        value, taken together with all other Designated Noncash Consideration
        received pursuant to this clause (c) that is at the time outstanding,
        not to exceed 5% of Total Assets at the time of the receipt of such
        Designated Noncash Consideration.

     Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Synagro may apply those Net Proceeds at its option:

          (1) to repay Senior Debt and, if the Senior Debt repaid is revolving
     credit Indebtedness, to correspondingly permanently reduce commitments with
     respect thereto;

          (2) to acquire all or substantially all of the assets of, or a
     majority of the Voting Stock of, another Permitted Business;

          (3) to make a capital expenditure;

          (4) to acquire other long-term assets that are used or useful in a
     Permitted Business;

          (5) to redeem the notes with the Net Proceeds of such Asset Sale
     pursuant to any of the provisions described above under the caption
     "Optional Redemption;" or

          (6) any combination of the foregoing.

     Pending the final application of any Net Proceeds, Synagro may temporarily
reduce revolving credit borrowings or otherwise invest the Net Proceeds in any
manner that is not prohibited by the indenture.

     Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $15.0 million, Synagro will make an
Asset Sale Offer to all Holders of notes and all holders of other Indebtedness
that is pari passu with the notes containing provisions similar to those set
forth in the indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets to purchase the maximum principal amount of notes
and such other pari passu Indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, Synagro may use those
Excess Proceeds for any purpose not otherwise prohibited by the indenture. If
the aggregate principal amount of notes and other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
trustee will select the notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds will be reset at zero.

     Synagro will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sale provisions of the
indenture, Synagro will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Asset Sale provisions of the indenture by virtue of such conflict.

     The agreements governing Synagro's outstanding Senior Debt currently
prohibit, and the new credit facility is also expected to prohibit, Synagro from
purchasing any notes, and also provides, and is expected to

                                        84


provide, that certain change of control or asset sale events with respect to
Synagro would constitute a default under these agreements. Any future credit
agreements or other agreements relating to Senior Debt to which Synagro becomes
a party may contain similar restrictions and provisions. In the event a Change
of Control or Asset Sale occurs at a time when Synagro is prohibited from
purchasing notes, Synagro could seek the consent of its senior lenders to the
purchase of notes or could attempt to refinance the borrowings that contain such
prohibition. If Synagro does not obtain such a consent or repay such borrowings,
Synagro will remain prohibited from purchasing notes. In such case, Synagro's
failure to purchase tendered notes would constitute an Event of Default under
the indenture which would, in turn, constitute a default under such Senior Debt.
In such circumstances, the subordination provisions in the indenture would
likely restrict payments to the Holders of notes.

SELECTION AND NOTICE

     If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:

          (1) if the notes are listed on any national securities exchange, in
     compliance with the requirements of the principal national securities
     exchange on which the notes are listed; or

          (2) if the notes are not listed on any national securities exchange,
     on a pro rata basis, by lot or by such method as the trustee deems fair and
     appropriate.

     No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a defeasance of the
notes or a satisfaction and discharge of the indenture. Notices of redemption
may not be conditional.

     If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the Holder of notes
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.

CERTAIN COVENANTS

  RESTRICTED PAYMENTS

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:

          (1) declare or pay any dividend or make any other payment or
     distribution on account of Synagro's or such Restricted Subsidiary's Equity
     Interests (including, without limitation, any payment in connection with
     any merger or consolidation involving Synagro or any of its Restricted
     Subsidiaries) or to the direct or indirect holders of Synagro's or such
     Restricted Subsidiary's Equity Interests in their capacity as such (other
     than dividends or distributions payable in Equity Interests (other than
     Disqualified Stock) of Synagro or to Synagro or another Restricted
     Subsidiary of Synagro);

          (2) purchase, redeem or otherwise acquire or retire for value
     (including, without limitation, in connection with any merger or
     consolidation involving Synagro or any of its Restricted Subsidiaries) (a)
     any Equity Interests of Synagro, (b) any Equity Interests of any direct or
     indirect parent of Synagro or (c) any Equity Interests of any Restricted
     Subsidiary of Synagro that are owned by an Affiliate of Synagro that is not
     a Restricted Subsidiary of Synagro;

          (3) make any payment on or with respect to, or purchase, redeem,
     defease or otherwise acquire or retire for value any Indebtedness that is
     subordinated to the notes or the Subsidiary Guarantees of such Restricted
     Subsidiaries, except a payment of interest or principal at the Stated
     Maturity thereof; or

                                        85


          (4) make any Restricted Investment (all such payments and other
     actions set forth in these clauses (1) through (4) above being collectively
     referred to as "Restricted Payments"),

     unless, at the time of and after giving effect to such Restricted Payment:

          (1) no Default or Event of Default has occurred and is continuing or
     would occur as a consequence of such Restricted Payment;

          (2) Synagro would, at the time of such Restricted Payment and after
     giving pro forma effect thereto as if such Restricted Payment had been made
     at the beginning of the applicable four-quarter period, have been permitted
     to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
     Charge Coverage Ratio test set forth in the first paragraph of the covenant
     described below under the caption "-- Incurrence of Indebtedness and
     Issuance of Preferred Stock;" and

          (3) such Restricted Payment, together with the aggregate amount of all
     other Restricted Payments made by Synagro and its Restricted Subsidiaries
     after the date of the indenture (excluding Restricted Payments permitted by
     clauses (2), (3), (4), (5), (6), (7) and (8) of the next succeeding
     paragraph), is less than the sum, without duplication, of:

             (a) 50% of the Consolidated Net Income of Synagro for the period
        (taken as one accounting period) from April 1, 2002 to the end of
        Synagro's most recently ended fiscal quarter for which internal
        financial statements are available at the time of such Restricted
        Payment (or, if such Consolidated Net Income for such period is a
        deficit, less 100% of such deficit); plus

             (b) 100% of the aggregate net cash proceeds received by Synagro
        since the date of the indenture as a contribution to its common equity
        capital or from the issue or sale of Equity Interests of Synagro (other
        than Disqualified Stock), or the amount by which Indebtedness is reduced
        on Synagro's balance sheet upon the conversion or exchange of any
        Indebtedness of Synagro or its Restricted Subsidiaries into Equity
        Interests of Synagro (other than Disqualified Stock or Equity Interests
        (or debt securities), sold to a Subsidiary of Synagro); plus

             (c) except, in order to avoid duplication, to the extent any such
        payment or proceeds have been included in the calculation of
        Consolidated Net Income, or included in clause (14) of the definition of
        Permitted Investments an amount equal to the sum of (i) the net
        reduction in Restricted Investments that were made by Synagro or any
        Restricted Subsidiary since the date of the indenture in any Person
        resulting from repurchases, repayments or redemptions of such
        Investments by such Person, proceeds realized on the sale of such
        Investments and proceeds representing the return of capital (excluding
        dividends and distributions), in each case received by Synagro or any
        Restricted Subsidiary, and (ii) to the extent such Person is an
        Unrestricted Subsidiary, the portion (proportionate to Synagro's equity
        interest in such Subsidiary) of the fair market value of the net assets
        of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary
        is designated a Restricted Subsidiary; provided, however, that, the
        foregoing sum shall not exceed, in the case of any Person or
        Unrestricted Subsidiary, the amount of Restricted Investments previously
        made (and treated as a Restricted Payment) by Synagro or any Restricted
        Subsidiary in such Person or Unrestricted Subsidiary.

     The preceding provisions will not prohibit:

          (1) the payment of any dividend within 60 days after the date of
     declaration of the dividend, if at the date of declaration the dividend
     payment would have complied with the provisions of the indenture;

          (2) so long as no Default has occurred and is continuing or caused
     thereby, the redemption, repurchase, retirement, defeasance or other
     acquisition of any subordinated Indebtedness of Synagro or any Restricted
     Subsidiary or of any Equity Interests of Synagro in exchange for, or out of
     the net cash proceeds of the substantially concurrent sale (other than to a
     Restricted Subsidiary of Synagro) of, Equity Interests of Synagro (other
     than Disqualified Stock); provided that the amount of any such net cash
     proceeds that are utilized for any such redemption, repurchase, retirement,
     defeasance or other acquisition will be excluded from clause (3)(b) of the
     preceding paragraph;
                                        86


          (3) so long as no Default has occurred and is continuing or caused
     thereby, the defeasance, redemption, repurchase or other acquisition of
     subordinated Indebtedness of Synagro or any Restricted Subsidiary with the
     net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

          (4) the payment of any dividend by a Restricted Subsidiary of Synagro
     to Synagro or to another Restricted Subsidiary of Synagro;

          (5) so long as no Default has occurred and is continuing or would be
     caused thereby, the repurchase, redemption or other acquisition or
     retirement for value of any Equity Interests of Synagro held by any former
     or current employees, officers, directors or consultants of Synagro or any
     of its Restricted Subsidiaries or their respective estates, spouses or
     family members under any management equity plan or stock option or other
     management or employee benefit plan, in an aggregate amount not to exceed
     $2.0 million in any calendar year pursuant to this clause (5); provided
     that Synagro may carry forward and make in a subsequent calendar year, in
     addition to the amounts permitted for such calendar year, the amount of
     such purchases, redemptions or other acquisitions or retirements for value
     permitted to have been made but not made in any preceding calendar year up
     to a maximum of $5.0 million in any calendar year pursuant to this clause
     (5); and provided further, that such amount in any calendar year may be
     increased by the cash proceeds of key man life insurance policies received
     by Synagro and its Restricted Subsidiaries after the date of the indenture
     less any amount previously applied to the payment of Restricted Payments
     pursuant to this clause (5); provided further, that cancellation of the
     Indebtedness owing to Synagro from employees, officers, directors and
     consultants of Synagro or any of its Restricted Subsidiaries in connection
     with a repurchase of Equity Interests of Synagro from such Persons will not
     be deemed to constitute a Restricted Payment for purposes of this covenant
     or any other provisions of the indenture;

          (6) repurchases of Capital Stock of Synagro deemed to occur upon the
     cashless exercise of stock options and warrants;

          (7) the repayment of approximately $52.8 million of the GTCR
     Subordinated Notes within six business days after the date of the
     indenture; and

          (8) so long as no Default has occurred and is continuing or would be
     caused thereby, other Restricted Payments not otherwise permitted pursuant
     to this covenant in an aggregate amount not to exceed $10.0 million since
     the date of the indenture.

     The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Synagro or such Restricted Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market value of
any assets or securities that are required to be valued by this covenant will be
determined by the Board of Directors whose resolution with respect thereto will
be delivered to the trustee. The Board of Directors' determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $5.0 million.
Not later than the date of making any Restricted Payment, Synagro will deliver
to the trustee an officers' certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.

  INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and Synagro
will not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided, however, that
Synagro and any Guarantor may incur Indebtedness (including Acquired Debt) or
issue Disqualified Stock and any Guarantor may issue preferred stock, if the
Fixed Charge Coverage Ratio for Synagro's most recently ended four full fiscal
quarters for which internal financial

                                        87


statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
would have been at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the preferred stock or Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.

     The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness, or collectively, Permitted Debt:

          (1) the incurrence by Synagro and any Restricted Subsidiary of
     Indebtedness and letters of credit under Credit Facilities in an aggregate
     principal amount at any one time outstanding under this clause (1)(with
     letters of credit being deemed to have a principal amount equal to the
     maximum potential liability of Synagro and its Restricted Subsidiaries
     thereunder) not to exceed the greater of (A) $150.0 million less the
     aggregate amount of all Net Proceeds of Asset Sales applied by Synagro or
     any of its Restricted Subsidiaries since the date of the indenture to repay
     any term Indebtedness under a Credit Facility or to repay any revolving
     credit Indebtedness under a Credit Facility and effect a corresponding
     permanent commitment reduction thereunder pursuant to the covenant
     described above under the caption "-- Repurchase at the Option of
     Holders -- Asset Sales" (provided that such amount shall be reduced to the
     extent of any reduction or elimination of any commitment under any Credit
     Facility resulting from or relating to the formation of any Receivables
     Subsidiary or the consummation of any Qualified Receivables Transaction)
     and (B) 80% of the book value of Eligible Accounts Receivable of Synagro
     and its Restricted Subsidiaries;

          (2) the incurrence by Synagro and its Restricted Subsidiaries of the
     Existing Indebtedness;

          (3) the incurrence by Synagro or any of its Restricted Subsidiaries
     that is a Guarantor of Indebtedness represented by the notes and the
     related Subsidiary Guarantees to be issued on the date of the indenture and
     the Exchange Notes and the related Subsidiary Guarantees to be issued
     pursuant to the registration rights agreement;

          (4) the incurrence by Synagro or any of its Restricted Subsidiaries of
     Indebtedness represented by Capital Lease Obligations, mortgage financings
     or purchase money obligations, in each case, incurred for the purpose of
     financing all or any part of the purchase price or cost of construction or
     improvement of property (real or personal), plant or equipment used in the
     business of Synagro or such Restricted Subsidiary, in an aggregate
     principal amount, including all Permitted Refinancing Indebtedness incurred
     to refund, refinance or replace any Indebtedness incurred pursuant to this
     clause (4), not to exceed $10.0 million at any time outstanding;

          (5) the incurrence by Synagro or any of its Restricted Subsidiaries of
     Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
     which are used to refund, refinance or replace Indebtedness (other than
     intercompany Indebtedness) that was permitted by the indenture to be
     incurred under the first paragraph of this covenant or clauses (2), (3),
     (4), (5), (10), (11) or (14) of this paragraph;

          (6) the incurrence by Synagro or any of its Restricted Subsidiaries of
     intercompany Indebtedness between or among Synagro and any of its
     Restricted Subsidiaries; provided, however, that:

             (a) if Synagro or any Guarantor is the obligor on such
        Indebtedness, such Indebtedness must be expressly subordinated to the
        prior payment in full in cash of all Obligations with respect to the
        notes, in the case of Synagro, or the Subsidiary Guarantee, in the case
        of a Guarantor; and

             (b) (i) any subsequent issuance or transfer of Equity Interests
        that results in any such Indebtedness being held by a Person other than
        Synagro or a Restricted Subsidiary of Synagro and (ii) any sale or other
        transfer of any such Indebtedness to a Person that is not either Synagro
        or a Restricted Subsidiary of Synagro; will be deemed, in each case, to
        constitute an incurrence of such Indebtedness by Synagro or such
        Restricted Subsidiary, as the case may be, that was not permitted by
        this clause (6);

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          (7) the incurrence by Synagro or any of its Restricted Subsidiaries of
     Hedging Obligations that are incurred for the purpose of fixing or hedging
     interest rate risk with respect to any floating rate or fixed Indebtedness
     that is permitted by the terms of the indenture to be outstanding or for
     the purpose of fixing or hedging currency exchange rate risk or commodity
     price risk arising in the ordinary course of business;

          (8) the guarantee by Synagro or any of the Guarantors of Indebtedness
     of Synagro or a Guarantor of Synagro that was permitted to be incurred by
     another provision of this covenant;

          (9) the accrual of interest, the accretion or amortization of original
     issue discount, the payment of interest on any Indebtedness in the form of
     additional Indebtedness with the same terms, and the payment of dividends
     on Disqualified Stock in the form of additional shares of the same class of
     Disqualified Stock will not be deemed to be an incurrence of Indebtedness
     or an issuance of Disqualified Stock for purposes of this covenant;
     provided, in each such case, that the amount thereof is included in Fixed
     Charges of Synagro as accrued;

          (10) the incurrence by Synagro or any of its Restricted Subsidiaries
     of Indebtedness constituting reimbursement obligations with respect to
     letters of credit issued in the ordinary course of business, including,
     without limitation, letters of credit in respect of workers' compensation
     claims or self-insurance, or other Indebtedness with respect to
     reimbursement type obligations regarding workers' compensation claims or
     self insurance; provided, however, that, in each case, upon the drawing of
     such letters of credit or the incurrence of such Indebtedness, such
     obligations are reimbursed within 30 days following such drawing or
     incurrence;

          (11) the incurrence by Synagro or any of its Restricted Subsidiaries
     of Indebtedness arising from agreements of Synagro or such Restricted
     Subsidiary providing for indemnification, adjustment of purchase price or
     similar obligations, in each case, incurred or assumed in connection with
     the disposition of any business, assets or Capital Stock by Synagro or a
     Restricted Subsidiary, other than guarantees of Indebtedness incurred by
     any Person acquiring all or any portion of such business, assets or Capital
     Stock for the purpose of financing such acquisition; provided that:

             (a) such Indebtedness is not reflected on the balance sheet of
        Synagro or any Restricted Subsidiary (contingent obligations referred to
        in a footnote or footnotes to financial statements and not otherwise
        reflected on the balance sheet will not be deemed to be reflected on
        that balance sheet for purposes of this clause (a)); and

             (b) the maximum assumable liability in respect of that Indebtedness
        shall at no time exceed the gross proceeds including noncash proceeds,
        (the fair market value of those noncash proceeds being measured at the
        time received and without giving effect to any subsequent changes in
        value), actually received by Synagro and/or that Restricted Subsidiary
        in connection with that disposition;

          (12) the incurrence by Synagro or any of its Guarantors of obligations
     in respect of performance and surety bonds and completion guarantees
     provided by Synagro or such Guarantors in the ordinary course of business
     (including Surety Obligations);

          (13) the incurrence by Synagro or any of its Restricted Subsidiaries
     of subordinated Indebtedness issued to former employees to repurchase stock
     from such former employees in an aggregate principal amount at any time
     outstanding not to exceed $2.5 million;

          (14) the incurrence by Synagro or any of its Restricted Subsidiaries
     of additional Indebtedness in an aggregate principal amount (or accreted
     value, as applicable) at any time outstanding, including all Permitted
     Refinancing Indebtedness incurred to refund, refinance or replace any
     Indebtedness incurred pursuant to this clause (14), not to exceed $25.0
     million;

          (15) the incurrence by Foreign Subsidiaries of Indebtedness in an
     aggregate principal amount at any one time outstanding not to exceed the
     greater of (a) $15.0 million and (b) 80% of the book value of Eligible
     Accounts Receivable of all such Foreign Subsidiaries; and

                                        89


          (16) the incurrence by a Receivables Subsidiary of Indebtedness in a
     Qualified Receivables Transaction that is without recourse to Synagro or to
     any other Restricted Subsidiary of Synagro or their assets (other than such
     Receivables Subsidiary and its assets and, as to Synagro or any Restricted
     Subsidiary of Synagro, other than pursuant to representations, warranties,
     performance guarantees (so long as such guarantees are not guarantees of
     payment obligations), covenants and indemnities customary for such
     transactions) and the payment of which is not guaranteed by any such
     Person.

     For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Synagro will be permitted to classify such item of Indebtedness on the date of
its incurrence, or later reclassify such item of Indebtedness, in any manner
that complies with this covenant. Indebtedness under Credit Facilities
outstanding on the date on which notes are first issued and authenticated under
the indenture will be deemed to have been incurred on such date in reliance on
the exception provided by clause (1) of the definition of Permitted Debt.

  NO SENIOR SUBORDINATED DEBT

     Synagro will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate in right of payment to
any Senior Debt of Synagro and senior in right of payment to the notes. No
Guarantor will incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate in right of payment to the
Senior Debt of such Guarantor and senior in right of payment to such Guarantor's
Guarantee.

  LIENS

     Synagro will not, and will not permit any of its Subsidiaries to create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien
of any kind securing Indebtedness, Attributable Debt or trade payables (other
than Permitted Liens) upon any of their property or assets, now owned or
hereafter acquired, unless all payments due under the indenture and the notes
are secured on an equal and ratable basis with the obligations so secured until
such time as such obligations are no longer secured by a Lien.

  DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:

          (1) pay dividends or make any other distributions on its Capital Stock
     to Synagro or any of its Restricted Subsidiaries, or with respect to any
     other interest or participation in, or measured by, its profits, or pay any
     indebtedness owed to Synagro or any of its Restricted Subsidiaries;

          (2) make loans or advances to Synagro or any of its Restricted
     Subsidiaries; or

          (3) transfer any of its properties or assets to Synagro or any of its
     Restricted Subsidiaries.

     However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:

          (1) agreements governing Existing Indebtedness and Credit Facilities
     as in effect on the date of the indenture and any amendments,
     modifications, restatements, renewals, increases, supplements, refundings,
     replacements or refinancings of those agreements, provided that the
     amendments, modifications, restatements, renewals, increases, supplements,
     refundings, replacement or refinancings are no more restrictive, taken as a
     whole, with respect to such dividend and other payment restrictions than
     those contained in those agreements on the date of the indenture;

          (2) the indenture, the notes and the Guarantees;

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          (3) applicable law or rules and regulations promulgated thereunder;

          (4) any instrument governing Indebtedness or Capital Stock of a Person
     acquired by Synagro or any of its Restricted Subsidiaries as in effect at
     the time of such acquisition (except to the extent such Indebtedness or
     Capital Stock was incurred in connection with or in contemplation of such
     acquisition), which encumbrance or restriction is not applicable to any
     Person, or the properties or assets of any Person, other than the Person,
     or the property or assets of the Person, so acquired, provided that, in the
     case of Indebtedness, such Indebtedness was permitted by the terms of the
     indenture to be incurred;

          (5) customary non-assignment provisions in leases, licenses and other
     similar agreements entered into in the ordinary course of business and
     consistent with past practices;

          (6) purchase money obligations for property acquired in the ordinary
     course of business that impose restrictions on that property of the nature
     described in clause (3) of the preceding paragraph;

          (7) any agreement for the sale or other disposition of Capital Stock
     or assets of a Restricted Subsidiary or an agreement entered into for the
     sale of specified assets that restricts distributions by that Restricted
     Subsidiary pending the sale or other disposition;

          (8) Permitted Refinancing Indebtedness, provided that the restrictions
     contained in the agreements governing such Permitted Refinancing
     Indebtedness are no more restrictive, taken as a whole, than those
     contained in the agreements governing the Indebtedness being refinanced;

          (9) Liens securing Indebtedness otherwise permitted to be incurred
     under the provisions of the covenant described above under the caption
     "-- Liens" that limit the right of the debtor to dispose of the assets
     subject to such Liens;

          (10) provisions with respect to the disposition or distribution of
     assets or property in joint venture agreements, asset sale agreements,
     stock sale agreements and other similar agreements entered into in the
     ordinary course of business;

          (11) restrictions on cash or other deposits or net worth imposed by
     customers under contracts entered into in the ordinary course of business;

          (12) restrictions on the transfer of assets subject to any Lien
     permitted under the Indenture imposed by the holder of such Lien;

          (13) Indebtedness incurred after the date of the indenture in
     accordance with the terms of the indenture; provided that the restrictions
     contained in the agreements governing the new Indebtedness are, in the good
     faith judgment of the Board of Directors of Synagro, not materially less
     favorable, taken as a whole, to the Holders of the notes than those
     contained in the agreements governing Indebtedness that were in effect on
     the date of the indenture;

          (14) Indebtedness or other contractual requirements of a Receivables
     Subsidiary in connection with a Qualified Receivables Transaction; provided
     that such restrictions apply only to such Receivables Subsidiary; and

          (15) any encumbrances or restrictions imposed by any amendments,
     modifications, restatements, renewals, increases, supplements, refundings,
     replacements or refinancings of the contracts, instruments or obligations
     referred to in clauses (1) through (14) above; provided that such
     amendments, modifications, restatements, renewals, increases, supplements,
     refundings, replacements or refinancings are, in the good faith judgment of
     the Board of Directors of Synagro, not materially less favorable, taken as
     a whole, to the Holders of notes than those contained in the applicable
     contracts, instruments or obligations prior to such amendment,
     modification, restatement, renewal, increase, supplement, refunding,
     replacement or refinancing.

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  MERGER, CONSOLIDATION OR SALE OF ASSETS

     Synagro may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not Synagro is the surviving corporation); or
(2) sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of Synagro and its Restricted Subsidiaries taken
as a whole, in one or more related transactions, to another Person; unless:

          (1) either: (a) Synagro is the surviving corporation; or (b) the
     Person formed by or surviving any such consolidation or merger (if other
     than Synagro) or to which such sale, assignment, transfer, conveyance or
     other disposition has been made is either (i) a corporation organized or
     existing under the laws of the United States, any state of the United
     States or the District of Columbia or (ii) is a partnership or limited
     liability company organized or existing under the laws of the United
     States, any state thereof or the District of Columbia that has at least one
     Restricted Subsidiary that is a corporation organized or existing under the
     laws of the United States, any state thereof or the District of Columbia
     which corporation becomes a co-issuer of the notes pursuant to a
     supplemental indenture duly and validly executed by the trustee;

          (2) the Person formed by or surviving any such consolidation or merger
     (if other than Synagro) or the Person to which such sale, assignment,
     transfer, conveyance or other disposition has been made assumes all the
     obligations of Synagro under the notes, the indenture and the registration
     rights agreement pursuant to agreements reasonably satisfactory to the
     trustee;

          (3) immediately after such transaction, no Default or Event of Default
     exists; and

          (4) Synagro or the Person formed by or surviving any such
     consolidation or merger (if other than Synagro), or to which such sale,
     assignment, transfer, conveyance or other disposition has been made will,
     on the date of such transaction after giving pro forma effect thereto and
     any related financing transactions as if the same had occurred at the
     beginning of the applicable four-quarter period, be permitted to incur at
     least $1.00 of additional Indebtedness pursuant to the Fixed Charge
     Coverage Ratio test set forth in the first paragraph of the covenant
     described above under the caption "-- Incurrence of Indebtedness and
     Issuance of Preferred Stock."

     In addition, Synagro may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Synagro and any of its Domestic
Subsidiaries.

  TRANSACTIONS WITH AFFILIATES

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate, or each
referred to as an Affiliate Transaction, unless:

          (1) the Affiliate Transaction is on terms that are no less favorable
     to Synagro or the relevant Restricted Subsidiary than those that would have
     been obtained in a comparable transaction by Synagro or such Restricted
     Subsidiary with an unrelated Person; and

          (2) Synagro delivers to the trustee:

             (a) with respect to any Affiliate Transaction or series of related
        Affiliate Transactions involving aggregate consideration in excess of
        $5.0 million, a resolution of the Board of Directors set forth in an
        officers' certificate certifying that such Affiliate Transaction
        complies with this covenant and that such Affiliate Transaction has been
        approved by a majority of the disinterested members of the Board of
        Directors; and

             (b) with respect to any Affiliate Transaction or series of related
        Affiliate Transactions involving aggregate consideration in excess of
        $10.0 million, an opinion as to the fairness to Synagro of such

                                        92


        Affiliate Transaction from a financial point of view issued by an
        accounting, appraisal or investment banking firm of national standing.

     The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:

          (1) any employment agreement or other compensation arrangements or
     agreements entered into by Synagro or any of its Restricted Subsidiaries in
     the ordinary course of business of Synagro or such Restricted Subsidiary;

          (2) transactions between or among Synagro and any of its Restricted
     Subsidiaries;

          (3) transactions between or among Synagro and/or any of its
     Unrestricted Subsidiary Guarantors in the ordinary course of business on
     terms that are no less favorable to Synagro than those that would have been
     obtained in a comparable transaction by Synagro or such Restricted
     Subsidiary with an unrelated Person (other than Asset Sales);

          (4) transactions with a Person that is an Affiliate of Synagro solely
     because Synagro or one or more of its Restricted Subsidiaries owns an
     Equity Interest in, or controls, such Person;

          (5) payment of reasonable directors fees to directors of Synagro or
     any of its Restricted Subsidiaries and the provision and payment of
     customary indemnification to directors and officers of Synagro;

          (6) issuances of Equity Interests (other than Disqualified Stock) to
     Affiliates of Synagro

          (7) Restricted Payments that are permitted by the provisions of the
     indenture described above under the caption "-- Restricted Payments;"

          (8) loans or advances by Synagro and its Restricted Subsidiaries to
     employees of Synagro and its Restricted Subsidiaries that are entered into
     in the ordinary course of business and that are approved by the Board of
     Directors of Synagro in good faith; provided that the aggregate principal
     amount of all such loans or advances do not exceed $2.5 million at any one
     time outstanding;

          (9) transactions effected pursuant to any agreement described in the
     section of this offering memorandum entitled "Certain Relationships and
     Related Transactions" as the same are in effect on the date of the
     indenture or any amendment, modification or replacement to such agreement
     (so long as the amendment, modification or replacement is not
     disadvantageous to the Holders of the notes in any respect);

          (10) transactions effected pursuant to the terms of Synagro's
     preferred stock, as the same are in effect on the date of the indenture or
     any amendment, modification or replacement to such terms (so long as the
     amendment, modification or replacement is not disadvantageous to the
     Holders of the notes in any respect); and

          (11) transactions between a Receivables Subsidiary and any Person in
     which the Receivables Subsidiary has an Investment.

  ADDITIONAL GUARANTEES

     If Synagro or any of its Restricted Subsidiaries acquires or creates
another Domestic Subsidiary that is not a Receivables Subsidiary after the date
of the indenture, then that newly acquired or created Domestic Subsidiary will
become a Guarantor and execute a supplemental indenture and deliver an opinion
of counsel satisfactory to the trustee within 20 Business Days of the date on
which it was acquired or created, except for Domestic Subsidiaries that have
been properly designated as Unrestricted Subsidiaries in accordance with the
indenture for so long as they continue to constitute Unrestricted Subsidiaries
and except that Synagro may, in its sole discretion, elect within 10 Business
Days of the date on which such Domestic Subsidiary was acquired or created, to
have such properly designated Unrestricted Subsidiary become an Unrestricted
Subsidiary Guarantor under the indenture, in which case such Unrestricted
Subsidiary Guarantor shall execute a

                                        93


supplemental indenture and deliver an opinion of counsel satisfactory to the
trustee within 20 Business Days of the date on which such Unrestricted
Subsidiary was acquired or created.

  DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES

     The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary or an Unrestricted Subsidiary Guarantor if that
designation would not cause a Default or Event of Default. If a Restricted
Subsidiary is designated as an Unrestricted Subsidiary or an Unrestricted
Subsidiary Guarantor, the aggregate fair market value of all outstanding
Investments owned by Synagro and its Restricted Subsidiaries in the Subsidiary
properly designated will be deemed to be an Investment made as of the time of
the designation and will reduce the amount available for Restricted Payments
under the first paragraph of the covenant described above under the caption
"-- Restricted Payments" or Permitted Investments, as determined by Synagro.
That designation will only be permitted if the Investment would be permitted at
that time and if the Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary or Unrestricted Subsidiary Guarantor. The Board of
Directors may redesignate any Unrestricted Subsidiary or any Unrestricted
Subsidiary Guarantor to be a Restricted Subsidiary if the redesignation would
not cause a Default.

  SALE AND LEASEBACK TRANSACTIONS

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that Synagro or any
Restricted Subsidiary may enter into a sale and leaseback transaction if:

          (1) Synagro or that Restricted Subsidiary, as applicable, could have
     (a) incurred Indebtedness in an amount equal to the Attributable Debt
     relating to such sale and leaseback transaction under the Fixed Charge
     Coverage Ratio test in the first paragraph of the covenant described above
     under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
     Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
     covenant described above under the caption "-- Liens;"

          (2) the gross cash proceeds of that sale and leaseback transaction are
     at least equal to the fair market value, as determined in good faith by the
     Board of Directors and set forth in an officers' certificate delivered to
     the trustee, of the property that is the subject of that sale and leaseback
     transaction; and

          (3) the transfer of assets in that sale and leaseback transaction is
     permitted by, and Synagro applies the proceeds of such transaction in
     compliance with, the covenant described above under the caption
     "-- Repurchase at the Option of Holders -- Asset Sales."

  LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
  RESTRICTED SUBSIDIARIES

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, transfer, convey, sell, lease or otherwise dispose of any Equity Interests
in any Wholly Owned Restricted Subsidiary that exists on the date of the
indenture (or any successor of any such Wholly Owned Restricted Subsidiary by
way of merger, consolidation or sale, assignment, transfer, conveyance or other
disposition of all or substantially all of the assets of such Restricted
Subsidiary) of Synagro to any Person (other than Synagro or a Wholly Owned
Restricted Subsidiary of Synagro), unless:

          (1) such transfer, conveyance, sale, lease or other disposition is of
     all the Equity Interests in such Wholly Owned Restricted Subsidiary; and

          (2) the cash Net Proceeds from such transfer, conveyance, sale, lease
     or other disposition are applied in accordance with the covenant described
     above under the caption "-- Repurchase at the Option of Holders -- Asset
     Sales."

     In addition, Synagro will not permit any such Wholly Owned Restricted
Subsidiary of Synagro to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to Synagro or to another such Wholly Owned
Restricted

                                        94


Subsidiary of Synagro. Nothing in this covenant will prevent any pledge of
equity interests of any Subsidiary pursuant to the Credit Agreement.

  BUSINESS ACTIVITIES

     Synagro will not, and will not permit any Restricted Subsidiary to, engage
in any business other than Permitted Businesses, except to such extent as would
not be material to Synagro and its Restricted Subsidiaries taken as a whole.

  PAYMENTS FOR CONSENT

     Synagro will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to or for
the benefit of any Holder of notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the indenture or the
notes unless such consideration is offered to be paid and is paid to all Holders
of the notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.

REPORTS

     Whether or not required by the Commission, so long as any notes are
outstanding, Synagro will furnish to the Holders of notes, within the time
periods specified in the Commission's rules and regulations:

          (1) all quarterly and annual financial information that would be
     required to be contained in a filing with the Commission on Forms 10-Q and
     10-K if Synagro were required to file such Forms, including a "Management's
     Discussion and Analysis of Financial Condition and Results of Operations"
     and, with respect to the annual information only, a report on the annual
     financial statements by Synagro's certified independent accountants; and

          (2) all current reports that would be required to be filed with the
     Commission on Form 8-K if Synagro were required to file such reports.

     In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the Commission,
Synagro will file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, Synagro
and the Guarantors have agreed that, for so long as any notes remain outstanding
(but not the Exchange Notes), they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, if any
such information is required to be delivered.

     If Synagro has designated any of its Subsidiaries as Unrestricted
Subsidiaries that are not Guarantors, then the quarterly and annual financial
information required by the preceding paragraph will include a reasonably
detailed presentation, either on the face of the financial statements or in the
footnotes thereto, and in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," of the financial condition and results of
operations of Synagro and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of Synagro.

EVENTS OF DEFAULT AND REMEDIES

     Each of the following is an Event of Default:

          (1) default for 30 days in the payment when due of interest on, or
     Liquidated Damages with respect to, the notes, whether or not prohibited by
     the subordination provisions of the indenture;

          (2) default in payment when due of the principal of, or premium, if
     any, on the notes, whether or not prohibited by the subordination
     provisions of the indenture;

                                        95


          (3) failure by Synagro or any of its Restricted Subsidiaries to comply
     with the provisions described under the captions "-- Repurchase at the
     Option of Holders -- Change of Control," "-- Repurchase at the Option of
     Holders -- Asset Sales," or "-- Certain Covenants -- Merger, Consolidation
     or Sale of Assets;"

          (4) failure by Synagro or any of its Restricted Subsidiaries for 60
     days after notice by the trustee or by Holders of at least 25% in aggregate
     principal amount of notes then outstanding to comply with any of the other
     agreements in the indenture;

          (5) default under any mortgage, indenture or instrument under which
     there may be issued or by which there may be secured or evidenced any
     Indebtedness for money borrowed by Synagro or any of its Restricted
     Subsidiaries (or the payment of which is guaranteed by Synagro or any of
     its Restricted Subsidiaries) whether such Indebtedness or guarantee now
     exists, or is created after the date of the indenture, if that default:

             (a) is caused by a failure to pay principal on such Indebtedness at
        the Stated Maturity thereof, or a Payment Default; or

             (b) results in the acceleration of such Indebtedness prior to its
        express maturity,

     and, in each case, the principal amount of any such Indebtedness, which has
     not been paid or has been so accelerated as to which there was a failure to
     pay, together with the principal amount of any other such Indebtedness
     which has not been paid or the maturity of which has been so accelerated,
     aggregates $10.0 million or more;

          (6) failure by Synagro or any of its Restricted Subsidiaries to pay
     for 60 days from the date on which such obligation first arose
     reimbursement, indemnification or similar obligations aggregating more than
     $15.0 million relating to Surety Obligations as to which to the issuing or
     providing party or parties have made payments under the documentation
     relating thereto;

          (7) failure by Synagro or any of its Restricted Subsidiaries to pay
     final judgments aggregating in excess of $10.0 million, which judgments are
     not paid, discharged or stayed for a period of 60 days after such judgment
     becomes final and non-appealable;

          (8) except as permitted by the indenture, any Subsidiary Guarantee
     (other than a Guarantee issued by a Subsidiary that is not a Significant
     Subsidiary or any group of Subsidiaries that, taken together, would
     constitute a Significant Subsidiary) shall be held in any judicial
     proceeding to be unenforceable or invalid or shall cease for any reason to
     be in full force and effect or any Guarantor, or any Person acting on
     behalf of any Guarantor, shall deny or disaffirm its obligations under its
     Guarantee (other than a Guarantee issued by a Subsidiary that is not a
     Significant Subsidiary or any group of Subsidiaries that, taken together,
     would constitute a Significant Subsidiary); and

          (9) certain events of bankruptcy or insolvency described in the
     indenture with respect to Synagro or any of its Significant Subsidiaries or
     any group of Restricted Subsidiaries that, taken together, would constitute
     a Significant Subsidiary.

     In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Synagro, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the Holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately.

     Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from Holders of the
notes notice of any continuing Default or Event of Default if it determines that
withholding notice is in their interest, except a Default or Event of Default
relating to the payment of principal or interest or Liquidated Damages.

                                        96


     The Holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the Holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, the notes.

     In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of Synagro with the
intention of avoiding payment of the premium that Synagro would have had to pay
if Synagro then had elected to redeem the notes pursuant to the optional
redemption provisions of the indenture, an equivalent premium will also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the notes. If an Event of Default occurs prior to April 1, 2006,
by reason of any willful action (or inaction), taken (or not taken), by or on
behalf of Synagro with the intention of avoiding the prohibition on redemption
of the notes prior to April 1, 2006, then the premium specified in the indenture
will also become immediately due and payable to the extent permitted by law upon
the acceleration of the notes.

     Synagro is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Synagro is required to deliver to the trustee a statement
specifying such Default or Event of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND EQUITYHOLDERS

     No director, officer, employee, incorporator, stockholder, member or
managing member of Synagro or any Guarantor, as such, will have any liability
for any obligations of Synagro or the Guarantors under the notes, the indenture,
the Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

     Synagro may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees, or
Legal Defeasance, except for:

          (1) the rights of Holders of outstanding notes to receive payments in
     respect of the principal of, or interest or premium and Liquidated Damages,
     if any, on such notes when such payments are due from the trust referred to
     below;

          (2) Synagro's obligations with respect to the notes concerning issuing
     temporary notes, registration of notes, mutilated, destroyed, lost or
     stolen notes and the maintenance of an office or agency for payment and
     money for security payments held in trust;

          (3) the rights, powers, trusts, duties and immunities of the trustee,
     and Synagro's and the Guarantor's obligations in connection therewith; and

          (4) the Legal Defeasance provisions of the indenture.

     In addition, Synagro may, at its option and at any time, elect to have the
obligations of Synagro and the Guarantors released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants will not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "-- Events
of Default and Remedies" will no longer constitute an Event of Default with
respect to the notes.

     In order to exercise either Legal Defeasance or Covenant Defeasance:

          (1) Synagro must irrevocably deposit with the trustee, in trust, for
     the benefit of the Holders of the notes, cash in U.S. dollars, non-callable
     Government Securities, or a combination of cash in U.S. dollars

                                        97


     and non-callable Government Securities, in amounts as will be sufficient,
     in the opinion of a nationally recognized firm of independent public
     accountants, to pay the principal of, or interest and premium and
     Liquidated Damages, if any, on the outstanding notes on the stated maturity
     or on the applicable redemption date, as the case may be, and Synagro must
     specify whether the notes are being defeased to maturity or to a particular
     redemption date;

          (2) in the case of Legal Defeasance, Synagro has delivered to the
     trustee an opinion of counsel reasonably acceptable to the trustee
     confirming that (a) Synagro has received from, or there has been published
     by, the Internal Revenue Service a ruling or (b) since the date of the
     indenture, there has been a change in the applicable federal income tax
     law, in either case to the effect that, and based thereon such opinion of
     counsel will confirm that, the Holders of the outstanding notes will not
     recognize income, gain or loss for federal income tax purposes as a result
     of such Legal Defeasance and will be subject to federal income tax on the
     same amounts, in the same manner and at the same times as would have been
     the case if such Legal Defeasance had not occurred;

          (3) in the case of Covenant Defeasance, Synagro has delivered to the
     trustee an opinion of counsel reasonably acceptable to the trustee
     confirming that the Holders of the outstanding notes will not recognize
     income, gain or loss for federal income tax purposes as a result of such
     Covenant Defeasance and will be subject to federal income tax on the same
     amounts, in the same manner and at the same times as would have been the
     case if such Covenant Defeasance had not occurred;

          (4) no Default or Event of Default has occurred and is continuing on
     the date of such deposit (other than a Default or Event of Default
     resulting from the borrowing of funds to be applied to such deposit);

          (5) such Legal Defeasance or Covenant Defeasance will not result in a
     breach or violation of, or constitute a default under any material
     agreement or instrument (other than the indenture) to which Synagro or any
     of its Subsidiaries is a party or by which Synagro or any of its
     Subsidiaries is bound;

          (6) Synagro must deliver to the trustee an officers' certificate
     stating that the deposit was not made by Synagro with the intent of
     preferring the Holders of notes over the other creditors of Synagro with
     the intent of defeating, hindering, delaying or defrauding creditors of
     Synagro or others; and

          (7) Synagro must deliver to the trustee an officers' certificate and
     an opinion of counsel, each stating that all conditions precedent relating
     to the Legal Defeasance or the Covenant Defeasance have been complied with.

AMENDMENT, SUPPLEMENT AND WAIVER

     Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).

     Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting Holder):

          (1) reduce the principal amount of notes whose Holders must consent to
     an amendment, supplement or waiver;

          (2) reduce the principal of or change the fixed maturity of any note
     or alter the provisions with respect to the redemption of the notes (other
     than provisions relating to the covenants described above under the caption
     "-- Repurchase at the Option of Holders");

          (3) reduce the rate of or change the time for payment of interest on
     any note;

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          (4) waive a Default or Event of Default in the payment of principal
     of, or interest or premium, or Liquidated Damages, if any, on the notes
     (except a rescission of acceleration of the notes by the Holders of at
     least a majority in aggregate principal amount of the notes and a waiver of
     the payment default that resulted from such acceleration);

          (5) make any note payable in money other than that stated in the
     notes;

          (6) make any change in the provisions of the indenture relating to
     waivers of past Defaults or the rights of Holders of notes to receive
     payments of principal of, or interest or premium or Liquidated Damages, if
     any, on the notes;

          (7) waive a redemption payment with respect to any note (other than a
     payment required by one of the covenants described above under the caption
     "-- Repurchase at the Option of Holders");

          (8) release any Guarantor from any of its obligations under its
     Guarantee or the indenture, except in accordance with the terms of the
     indenture; or

          (9) make any change in the preceding amendment and waiver provisions.

     In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
Holders of the notes will require the consent of Holders of at least 75% in
aggregate principal amount of notes then outstanding.

     Notwithstanding the preceding, without the consent of any Holder of notes,
Synagro, the Guarantors and the trustee may amend or supplement the indenture or
the notes:

          (1) to cure any ambiguity, defect or inconsistency;

          (2) to provide for uncertificated notes in addition to or in place of
     certificated notes;

          (3) to provide for the assumption of Synagro's obligations to Holders
     of notes in the case of a merger or consolidation or sale of all or
     substantially all of Synagro's assets;

          (4) to make any change that would provide any additional rights or
     benefits to the Holders of notes or that does not adversely affect the
     legal rights under the indenture of any such Holder;

          (5) to comply with requirements of the Commission in order to effect
     or maintain the qualification of the indenture under the Trust Indenture
     Act; or

          (6) to provide for the issuance of additional notes in accordance with
     the limitations set forth herein.

SATISFACTION AND DISCHARGE

     The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:

          (1) either:

             (a) all notes that have been authenticated, except lost, stolen or
        destroyed notes that have been replaced or paid and notes for whose
        payment money has been deposited in trust and thereafter repaid to
        Synagro, have been delivered to the trustee for cancellation; or

             (b) all notes that have not been delivered to the trustee for
        cancellation have become due and payable by reason of the mailing of a
        notice of redemption or otherwise or will become due and payable within
        one year and Synagro or any Guarantor has irrevocably deposited or
        caused to be deposited with the trustee as trust funds in trust solely
        for the benefit of the Holders, cash in U.S. dollars, non-callable
        Government Securities, or a combination of cash in U.S. dollars and non-
        callable Government Securities, in amounts as will be sufficient without
        consideration of any reinvestment of interest, to pay and discharge the
        entire indebtedness on the notes not delivered to

                                        99


        the trustee for cancellation for principal, premium and Liquidated
        Damages, if any, and accrued interest to the date of maturity or
        redemption;

          (2) no Default or Event of Default has occurred and is continuing on
     the date of the deposit or will occur as a result of the deposit and the
     deposit will not result in a breach or violation of, or constitute a
     default under, any other instrument to which Synagro or any Guarantor is a
     party or by which Synagro or any Guarantor is bound;

          (3) Synagro or any Guarantor has paid or caused to be paid all sums
     payable by it under the indenture; and

          (4) Synagro has delivered irrevocable instructions to the trustee
     under the indenture to apply the deposited money toward the payment of the
     notes at maturity or the redemption date, as the case may be.

In addition, Synagro must deliver an officers' certificate and an opinion of
counsel to the trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.

CONCERNING THE TRUSTEE

     If the trustee becomes a creditor of Synagro or any Guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.

     The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of notes, unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.

ADDITIONAL INFORMATION

     Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to Synagro Technologies,
Inc., 1800 Bering Drive, Suite 1000, Houston, Texas 77057, Attention: Alvin
Thomas, Esq., General Counsel.

BOOK-ENTRY, DELIVERY AND FORM

     The old notes were, and the new notes will initially be, represented by one
or more permanent global notes in definitive, fully registered book-entry form,
or the Global Notes, and registered in the name of Cede & Co., as nominee of
DTC. The Global Notes will be deposited on behalf of the acquirors of the new
notes with a custodian for DTC for credit to the respective accounts of
acquirors or such other accounts as they direct DTC. See "The Exchange
Offer -- Procedures for Tendering -- Book-Entry Transfer."

THE GLOBAL NOTES

     We expect that under procedures established by DTC:

     - upon deposit of the Global Notes with DTC or its custodian, DTC will
       credit on its internal system a portion of the Global Notes that shall be
       composed of the corresponding respective amounts of the Global Notes to
       the respective accounts of persons who have accounts with the depository,
       and

     - ownership of beneficial interests in each Global Note will be shown on,
       and the transfer or ownership of those interests will be effected only
       through, records maintained by DTC or its nominee (with respect

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       to interests of DTC participants) and the records of DTC participants
       (with respect to other owners of beneficial interests in the Global
       Note).

     So long as DTC or its nominee is the registered owner of the Global Notes,
DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the new notes represented by the Global Notes for all purposes under
the Indenture and under the new notes represented thereby. Except as provided
below, owners of beneficial interests in Global Notes will not:

     - be entitled to have new notes represented by Global Notes registered in
       their names,

     - receive or be entitled to receive physical delivery of certificated new
       notes, or

     - be considered the owners or holders of the Global Notes under the
       indenture for any purpose, including with respect to the giving of any
       direction, instruction or approval to the trustee.

     Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof. None
of the Company, any Guarantor, the trustee or any paying agent under the
Indenture will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.

     We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a Global Note, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note as shown on the records of DTC or its
nominee. We also expect that payments by participants to owners of beneficial
interests in a Global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for accounts of customers registered in the names of nominees
for such customers. Such payments will be the responsibility of such
participants.

     Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Clearstream will be effected in the
ordinary way in accordance with their respective rules and operating procedures.

     We expect that DTC will take any action permitted to be taken by a holder
of new notes, including the presentation of new notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate principal amount of notes as to which such participant or
participants has or have given such direction. However, if there is an event of
default under the Indenture or the new notes, DTC will exchange the applicable
Global Notes for certificated notes, which it will distribute to its
participants.

     Although DTC, Euroclear and Clearstream are expected to follow the
foregoing procedures in order to facilitate transfers of interests in a Global
Note among participants of DTC, Euroclear and Clearstream, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither we nor the trustee will have
any responsibility for the performance by DTC, Euroclear or Clearstream or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.

DESCRIPTION OF DTC

     The description of the operations and procedures of DTC set forth below is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to change from time to time. We
do not take any responsibility for these operations or procedures, and investors
are urged to contact DTC or its participants directly to discuss these matters.

     DTC has advised us that it is

     - a limited purpose trust company organized under the laws of the State of
       New York;

     - a "banking organization" within the meaning of New York Banking Law;

                                       101


     - a member of the Federal Reserve System;

     - a "clearing corporation" within the meaning of the Uniform Commercial
       Code; and

     - a "Clearing Agency" registered pursuant to the provisions of Section 17A
       of the Exchange Act.

     DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. DTC is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc.

     DTC's direct participants include:

     - securities brokers and dealers;

     - banks and trust companies; and

     - clearing corporations and other organizations.

     Indirect access to the DTC system is available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Investors who are not participants may beneficially own securities held by or on
behalf of DTC only through participants or indirect participants.

     The rules applicable to DTC and its participants are on file with the
Commission.

CERTIFICATED NOTES

     Interest in the Global Notes may be exchanged for definitive notes in
registered certificated form, or Certificated Notes, if:

     - DTC (a) notifies us that it is unwilling or unable to continue as
       depositary for the Global Notes or (b) has ceased to be a clearing agency
       registered under the Exchange Act and, in either case we fail to appoint
       a successor depositary;

     - we, at our option, notify the trustee in writing that we elect to cause
       the issuance of the Certificated Notes; or

     - there has occurred and is continuing a Default or Event of Default with
       respect to the notes.

     In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures).

     None of Synagro, any Guarantor or the trustee shall be liable for any delay
by DTC or any participant or indirect participant in identifying the beneficial
owners of the related new notes, and each person may conclusively rely on, and
shall be protected in relying on, instructions from DTC for all purposes,
including with respect to the registration and delivery, and the respective
principal amounts, of the new notes to be issued.

SAME DAY SETTLEMENT AND PAYMENT

     Synagro will make payments in respect of the notes represented by the
Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. Synagro will make all payments of
principal, interest and premium and Liquidated Damages, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the Holders of the Certificated Notes or, if no such
account is specified, by mailing a check to each such Holder's registered
address.
                                       102


     Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Clearstream participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised
Synagro that cash received in Euroclear or Clearstream as a result of sales of
interests in a Global Note by or through a Euroclear or Clearstream participant
to a Participant in DTC will be received with value on the settlement date of
DTC but will be available in the relevant Euroclear or Clearstream cash account
only as of the business day for Euroclear or Clearstream following DTC's
settlement date.

REGISTRATION RIGHTS; LIQUIDATED DAMAGES

     The following description is a summary of the material provisions of the
exchange and registration rights agreement. It does not restate that agreement
in its entirety. We urge you to read the proposed form of exchange and
registration rights agreement in its entirety because it, and not this
description, defines your registration rights as Holders of these notes. See
"-- Additional Information."

     Synagro, the Guarantors and the initial purchasers entered into an exchange
and registration rights agreement on the Issue Date. Pursuant to the exchange
and registration rights agreement, Synagro and the Guarantors agreed to file
with the Commission an exchange offer registration statement on the appropriate
form under the Securities Act with respect to the notes. Upon the effectiveness
of such registration statement, Synagro and the Guarantors will offer to the
Holders of Transfer Restricted Securities pursuant to the exchange offer who are
able to make certain representations the opportunity to exchange their Transfer
Restricted Securities for new notes.

     If:

          (1) Synagro and the Guarantors are not

             (a) required to file the registration statement; or

             (b) permitted to consummate the exchange offer because the exchange
        offer is not permitted by applicable law or Commission policy; or

          (2) any Holder of Transfer Restricted Securities notifies Synagro
     prior to the 20th day following consummation of the exchange offer that:

             (a) it is prohibited by law or Commission policy from participating
        in the exchange offer; or

             (b) that it may not resell the new notes to the public without
        delivering a prospectus and this prospectus is not appropriate or
        available for such resales by it; or

             (c) that it is a broker-dealer and owns notes acquired directly
        from Synagro or an affiliate of Synagro,

Synagro and the Guarantors will use all commercially reasonable efforts to file
with the Commission a shelf registration statement within 30 days after the
filing obligation arises to cover resales of the old notes by the Holders of the
notes who satisfy certain conditions relating to the provision of information in
connection with the shelf registration statement.

     Synagro and the Guarantors will use all commercially reasonable efforts to
cause the applicable registration statement to be declared effective as promptly
as possible by the Commission.

     For purposes of the preceding, "Transfer Restricted Securities" means each
note until:

          (1) the date on which such note has been exchanged by a Person other
     than a broker-dealer for new note in the exchange offer;

                                       103


          (2) following the exchange by a broker-dealer in the exchange offer of
     an old note for a new note, the date on which such new note is sold to a
     purchaser who receives from such broker-dealer on or prior to the date of
     such sale a copy of this prospectus;

          (3) the date on which a new note has been effectively registered under
     the Securities Act and disposed of in accordance with the shelf
     registration statement; or

          (4) the date on which a new note is distributed to the public pursuant
     to Rule 144 under the Securities Act.

     The exchange and registration rights agreement provides that:

          (1) Synagro and the Guarantors will use all commercially reasonable
     efforts to file an exchange offer registration statement with the
     Commission on or prior to 90 days after the Issue Date;

          (2) Synagro and the Guarantors will use all commercially reasonable
     efforts to have the exchange offer registration statement declared
     effective by the Commission on or prior to 180 days after the Issue Date;

          (3) unless the exchange offer would not be permitted by applicable law
     or Commission policy, Synagro and the Guarantors will

             (a) commence the exchange offer; and

             (b) use all commercially reasonable efforts to issue on or prior to
        45 business days, or longer, if required by the federal securities laws,
        after the date on which the exchange offer registration statement was
        declared effective by the Commission, new notes in exchange for all old
        notes tendered prior thereto in the exchange offer; and

          (4) if obligated to file the shelf registration statement, synagro and
     the Guarantors will use all commercially reasonable efforts to file the
     shelf registration statement with the Commission on or prior to 30 days
     after such filing obligation arises and to cause the Shelf Registration to
     be declared effective by the Commission on or prior to 90 days after such
     obligation arises.

     If:

          (1) Synagro and the Guarantors fail to file any of the registration
     statements required by the exchange and registration rights agreement on or
     before the date specified for such filing (the "Filing Target Date"); or

          (2) any of such registration statements is not declared effective by
     the Commission on or prior to the date specified for such effectiveness
     (the "Effectiveness Target Date"); or

          (3) Synagro and the Guarantors fail to consummate the exchange offer
     within 30 business days of the Effectiveness Target Date with respect to
     the exchange offer registration statement; or

          (4) the shelf registration statement or the exchange offer
     registration statement is declared effective but thereafter ceases to be
     effective or usable in connection with resales of Transfer Restricted
     Securities during the periods specified in the registration rights
     agreement (each such event referred to in clauses (1) through (4) above, a
     "Registration Default"),

then Synagro and the Guarantors will pay Liquidated Damages to each Holder of
notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default in an amount equal to $.05 per week
per $1,000 principal amount of notes held by such Holder; provided that if
Securities Act Rule 437a or a substantially similar rule is not then available,
and, despite all reasonable efforts on the part of Synagro and the Guarantors,
(A) Synagro and the Guarantors' failure to file any such registration statements
on or before the Filing Target Date has resulted solely from, or (B) any such
registration statements has not been declared effective on or prior to the
Effectiveness Target Date solely because of, in each case, the inability or
refusal of their auditor to issue a consent to the use of its audit report
relating to the consolidated financial statements required in connection with
any such registration statements, then the occurrence of a

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Registration Default shall be determined as set forth in the next succeeding
paragraph, but shall only be determined with respect to either clause (A) or
clause (B) but not both.

     For purposes of determining the occurrence of a Registration Default under
the proviso in the immediately preceding paragraph: (1) with respect to clause
(A) immediately above, if, prior to the earlier of the filing of any such
registration statements and the otherwise applicable Filing Target Date, Synagro
receives notice or has reasonable grounds to conclude and in good faith
concludes that its auditor is unable or unwilling to issue such consent, then
the Filing Target Date would be 90 days, and the Effectiveness Target Date would
be 180 days, in each case, from the date on which Synagro first receives such
notice or reaches such conclusion; and (2) with respect to clause (B)
immediately above, if, subsequent to the filing of any such registration
statements but prior to the otherwise applicable Effectiveness Target Date,
Synagro first receives notice or has reasonable grounds to conclude and in good
faith concludes that its auditor is unable or unwilling to issue such consent,
then the Effectiveness Target Date would be 90 days from the date on which
Synagro first receives such notice or reaches such conclusion, unless the
otherwise applicable Effectiveness Target Date would have been more than 90 days
from the date of such notice or such conclusion.

     Promptly upon receiving such notice or reaching such conclusion, Synagro
shall deliver an officers' certificate to the trustee certifying as to the date
of the receipt of such notice or the date of the reaching of such conclusion, in
which case the officers' certificate shall also set forth in reasonable detail
the basis of such conclusion, and setting forth the resultant Filing Target Date
and/or Effectiveness Target Date, as the case may be, and the trustee shall
notify the Holders of such resultant date or dates.

     The amount of the Liquidated Damages will increase by an additional $.05
per week per $1,000 principal amount of notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages for all Registration Defaults of $.50 per week per
$1,000 principal amount of notes.

     All accrued Liquidated Damages will be paid by Synagro and the Guarantors
on each interest payment date to the Global Note Holder by wire transfer of
immediately available funds or by federal funds check and to Holders of
Certificated Notes by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified.

     Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.

     Holders of notes will be required to make certain representations to
Synagro (as described in the registration rights agreement) in order to
participate in the exchange offer and will be required to deliver certain
information to be used in connection with the shelf registration statement and
to provide comments on the shelf registration statement within the time periods
set forth in the exchange and registration rights agreement in order to have
their notes included in the shelf registration statement and benefit from the
provisions regarding Liquidated Damages set forth above. By acquiring Transfer
Restricted Securities, a Holder will be deemed to have agreed to indemnify
Synagro and the Guarantors against certain losses arising out of information
furnished by such Holder in writing for inclusion in any shelf registration
statement. Holders of notes will also be required to suspend their use of the
prospectus included in the shelf registration statement under certain
circumstances upon receipt of written notice to that effect from Synagro.

CERTAIN DEFINITIONS

     Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.

     "ACQUIRED DEBT" means, with respect to any specified Person:

          (1) Indebtedness of any other Person existing at the time such other
     Person is merged with or into or became a Subsidiary of such specified
     Person, whether or not such Indebtedness is incurred in connection with, or
     in contemplation of, such other Person merging with or into, or becoming a
     Subsidiary of, such specified Person; and

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          (2) Indebtedness secured by a Lien encumbering any asset acquired by
     such specified Person.

     "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" have correlative meanings. No Person (other than Synagro or any Restricted
Subsidiary of Synagro) in whom a Receivables Subsidiary makes an Investment in
connection with a Qualified Receivables Transaction will be deemed to be an
Affiliate of Synagro or any of its Restricted Subsidiaries solely by reason of
such Investment.

     "ASSET SALE" means:

          (1) the sale, lease, conveyance or other disposition of any assets or
     rights, other than sales of inventory in the ordinary course of business
     consistent with past practices by Synagro or any of its Restricted
     Subsidiaries; provided that the sale, conveyance or other disposition of
     all or substantially all of the assets of Synagro and its Restricted
     Subsidiaries taken as a whole will be governed by the provisions of the
     indenture described above under the caption "-- Repurchase at the Option of
     Holders -- Change of Control" and/or the provisions described above under
     the caption "-- Certain Covenants -- Merger, Consolidation or Sale of
     Assets" and not by the provisions of the Asset Sale covenant; and

          (2) the issuance of Equity Interests in any of Synagro's Restricted
     Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.

     Notwithstanding the preceding, none of the following items will be deemed
to be an Asset Sale:

          (1) any single transaction or series of related transactions that
     involves assets having a fair market value of less than $5.0 million;

          (2) a transfer of assets between or among Synagro and its Restricted
     Subsidiaries,

          (3) an issuance of Equity Interests by a Restricted Subsidiary to
     Synagro or to another Restricted Subsidiary;

          (4) the sale or lease of equipment, inventory, accounts receivable or
     other assets in the ordinary course of business;

          (5) the sale or other disposition of cash or Cash Equivalents;

          (6) a Restricted Payment or Permitted Investment that is permitted by
     the covenant described above under the caption "-- Certain
     Covenants -- Restricted Payments;"

          (7) the licensing of intellectual property to third Persons on
     customary terms as determined by the Board of Directors in good faith; and

          (8) the sale of accounts receivable and related assets of the type
     specified in the definition of "Qualified Receivables Transaction" to a
     Receivables Subsidiary for the fair market value thereof, including cash in
     an amount at least equal to 80% of the book value thereof as determined in
     accordance with GAAP, it being understood that, for the purposes of this
     clause (8), notes received in exchange for the transfer of accounts
     receivable and related assets will be deemed cash if the Receivables
     Subsidiary or other payor is required to repay said notes as soon as
     practicable from available cash collections less amounts required to be
     established as reserves pursuant to contractual agreements with entities
     that are not Affiliates of Synagro entered into as part of a Qualified
     Receivables Transaction; and

          (9) a transfer of accounts receivable and related assets of the type
     specified in the definition of "Qualified Receivables Transaction" (or a
     fractional undivided interest therein) by a Receivables Subsidiary in a
     Qualified Receivables Transaction.

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     "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.

     "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

     "BOARD OF DIRECTORS" means:

          (1) with respect to a corporation, the board of directors of the
     corporation;

          (2) with respect to a partnership, the Board of Directors of the
     general partner of the partnership; and

          (3) with respect to any other Person, the board or committee of such
     Person serving a similar function.

     "CAPITAL LEASE OBLIGATION" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.

     "CAPITAL STOCK" means:

          (1) in the case of a corporation, corporate stock;

          (2) in the case of an association or business entity, any and all
     shares, interests, participations, rights or other equivalents (however
     designated) of corporate stock;

          (3) in the case of a partnership or limited liability company,
     partnership or membership interests (whether general or limited); and

          (4) any other interest or participation that confers on a Person the
     right to receive a share of the profits and losses of, or distributions of
     assets of, the issuing Person.

     "CASH EQUIVALENTS" means:

          (1) United States dollars;

          (2) securities issued or directly and fully guaranteed or insured by
     the United States government or any agency or instrumentality of the United
     States government (provided that the full faith and credit of the United
     States is pledged in support of those securities) having maturities of not
     more than 12 months from the date of acquisition;

          (3) certificates of deposit, eurodollar time deposits or bankers'
     acceptances, with maturities of not more than one year after the date of
     acquisition, overnight bank deposits and overnight Federal Funds
     transactions that are issued or sold by any lender party to the Credit
     Agreement or with any commercial banking institution that is a member of
     the Federal Reserve System and having combined capital and surplus in
     excess of $500.0 million;

          (4) marketable direct obligations issued by any state of the United
     States of America or any political subdivision of any such state or any
     public instrumentality thereof maturing within one year from the date of
     acquisition thereof and, at the time of acquisition, having one of the two
     highest ratings obtainable from either Standard & Poor's Rating Services or
     Moody's Investors Services, Inc.;

                                       107


          (5) repurchase obligations with any financial institution meeting the
     qualifications specified in clause (3) or (4) above which is secured by a
     fully perfected security interest in any obligation of the type described
     in any of clauses (1) through (4) above or (6) below and which has a market
     value at the time such repurchase agreement is entered into of not less
     than 100% of the repurchase obligation of such financial institution
     hereunder;

          (6) commercial paper, maturing within 12 months after the date of
     acquisition, or corporate demand notes, in each case (unless issued by a
     bank or its holding company) having the highest rating obtainable from
     Moody's Investors Service, Inc. or Standard & Poor's Rating Services; and

          (7) investments in short-term asset management accounts offered by any
     financial institution for the purpose of investing in loans to any
     corporation (other than Synagro or any Affiliate of Synagro), state or
     municipality, in each case organized under the laws of any state of the
     United States or the District of Columbia.

     "CHANGE OF CONTROL" means the occurrence of any of the following:

          (1) the direct or indirect sale, transfer, conveyance or other
     disposition (other than by way of merger or consolidation), in one or a
     series of related transactions, of all or substantially all of the
     properties or assets of Synagro and its Restricted Subsidiaries taken as a
     whole to any "person" (as that term is used in Section 13(d)(3) of the
     Exchange Act);

          (2) the adoption of a plan relating to the liquidation or dissolution
     of Synagro;

          (3) the consummation of any transaction (including, without
     limitation, any merger or consolidation) the result of which is that any
     "person" (as defined above), other than the Principals and their Related
     Parties, becomes the Beneficial Owner, directly or indirectly, of more than
     50% of the Voting Stock of Synagro, measured by voting power rather than
     number of shares; or

          (4) the first day on which a majority of the members of the Board of
     Directors of Synagro are not Continuing Directors.

     "CONSOLIDATED CASH FLOW" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:

          (1) provision for taxes based on income or profits of such Person and
     its Restricted Subsidiaries for such period, to the extent that such
     provision for taxes was deducted in computing such Consolidated Net Income;
     plus

          (2) consolidated interest expense of such Person and its Restricted
     Subsidiaries for such period, whether paid or accrued and whether or not
     capitalized (including, without limitation, amortization of debt issuance
     costs and original issue discount, non-cash interest payments, the interest
     component of any deferred payment obligations, the interest component of
     all payments associated with Capital Lease Obligations, imputed interest
     with respect to Attributable Debt, commissions, discounts and other fees
     and charges incurred in respect of letter of credit or bankers' acceptance
     financings, and net of the effect of all payments made or received pursuant
     to Hedging Obligations or changes in fair market value of any Hedging
     Obligation), to the extent that any such expense was deducted in computing
     such Consolidated Net Income; plus

          (3) depreciation, amortization (including amortization of goodwill and
     other intangibles but excluding amortization of prepaid cash expenses that
     were paid in a prior period) and other non-cash items (excluding any such
     non-cash items to the extent that it represents an accrual of or reserve
     for cash expenses in any future period or amortization of a prepaid cash
     expense that was paid in a prior period) of such Person and its Restricted
     Subsidiaries for such period to the extent that such depreciation,
     amortization and other non-cash items were deducted in computing such
     Consolidated Net Income; plus

          (4) all non-cash items increasing such Consolidated Net Income for
     such period, other than the accrual of revenue in the ordinary course of
     business,

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in each case, on a consolidated basis and determined in accordance with GAAP.

     "CONSOLIDATED NET INCOME" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:

          (1) the Net Income of any Person that is not a Restricted Subsidiary
     or that is accounted for by the equity method of accounting will be
     included only to the extent of the amount of dividends or distributions
     paid in cash to the specified Person or a Restricted Subsidiary of the
     Person;

          (2) the Net Income of any Restricted Subsidiary will be excluded to
     the extent that the declaration or payment of dividends or similar
     distributions by that Restricted Subsidiary of that Net Income is not at
     the date of determination permitted without any prior governmental approval
     (that has not been obtained) or, directly or indirectly, by operation of
     the terms of its charter or any agreement, instrument, judgment, decree,
     order, statute, rule or governmental regulation applicable to that
     Restricted Subsidiary or its stockholders (except to the extent of the
     amount of dividends or distributions that have actually been paid in cash
     to Synagro or one or more of its Restricted Subsidiaries that is not
     subject to any such restrictions);

          (3) the Net Income (or loss) of any Person acquired in a pooling of
     interests transaction for any period prior to the date of such acquisition
     will be excluded;

          (4) the cumulative effect of a change in accounting principles will be
     excluded;

          (5) the net loss of any Person, other than a Restricted Subsidiary of
     Synagro, will be excluded;

          (6) items classified as extraordinary, unusual or nonrecurring losses
     or charges (including, without limitation, severance, relocation and other
     restructuring costs), and related tax effects according to GAAP, will be
     excluded;

          (7) the amount of dividends or distributions paid in cash by any
     Unrestricted Subsidiary Guarantor to any Person or its Restricted
     Subsidiary in excess of such Unrestricted Subsidiary's Net Income (computed
     in accordance with clause (1) of this defined term) will be included; and

          (8) non-cash charges relating to employee benefit or other management
     compensation plans of Synagro or any of its Restricted Subsidiaries or any
     non-cash compensation charge arising from any grant of stock, stock options
     or other equity-based awards of Synagro or any of its Restricted
     Subsidiaries (excluding in each case any non-cash charge to the extent that
     it represents an accrual of or reserve for cash expenses in any future
     period or amortization of a prepaid cash expense incurred in a prior
     period) in each case, to the extent that such non-cash charges are deducted
     in computing such Consolidated Net Income will be excluded

     "CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of Synagro who:

          (1) was a member of such Board of Directors on the date of the
     indenture; or

          (2) was nominated for election or elected to such Board of Directors
     with the approval of a majority of the Continuing Directors who were
     members of such Board at the time of such nomination or election.

     "CREDIT AGREEMENT" means that certain Second Amended and Restated Credit
Agreement, dated as of August 14, 2000 by and among Synagro, as lead arranger,
Bank of America, N.A., as administrative agent, and the other lenders party
thereto, providing for up to $150.0 million of borrowings, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.

     "CREDIT FACILITIES" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of
                                       109


credit, in each case as amended, restated, modified, renewed, refunded, replaced
or refinanced in whole or in part from time to time.

     "DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

     "DESIGNATED NONCASH CONSIDERATION" means any noncash consideration received
by Synagro or any of its Restricted Subsidiaries in connection with an Asset
Sale that is designated as Designated Noncash Consideration pursuant to an
officers' certificate setting forth the fair market value of such noncash
consideration and the basis of the valuation.

     "DESIGNATED SENIOR DEBT" means:

          (1) any Indebtedness or other amounts outstanding under the Credit
     Agreement; and

          (2) after payment in full of all Obligations under the Credit
     Agreement and termination of all commitments to extend credit thereunder,
     any other Senior Debt permitted under the indenture the principal amount of
     which is $25.0 million or more.

     "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that
is 91 days after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders of the Capital Stock have the right to require
Synagro to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale will not constitute Disqualified Stock if the terms of
such Capital Stock provide that Synagro may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."

     "DOMESTIC SUBSIDIARY" means any Restricted Subsidiary of Synagro that was
formed under the laws of the United States or any state of the United States or
the District of Columbia or any Foreign Subsidiary that guarantees or otherwise
provides direct credit support for any Indebtedness of Synagro.

     "ELIGIBLE ACCOUNTS RECEIVABLE" means the face amount of all accounts
receivable owned by Synagro and its Restricted Subsidiaries as of the end of the
most recent fiscal quarter preceding such date that were not more than 90 days
past due.

     "EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

     "EQUITY OFFERING" means (1) a public offering of common equity securities
or (2) a private placement of common equity securities yielding gross proceeds
to the issuer of at least $25.0 million.

     "EXISTING INDEBTEDNESS" means the aggregate principal amount of
Indebtedness of Synagro and its Subsidiaries (other than Indebtedness under the
Credit Agreement), in existence on the date of the indenture, until such amounts
are repaid.

     "FIXED CHARGES" means, with respect to any specified Person for any period,
the sum, without duplication, of:

          (1) the consolidated interest expense of such Person and its
     Restricted Subsidiaries for such period, whether paid or accrued,
     including, without limitation, amortization of debt issuance costs and
     original issue discount, non-cash interest payments, the interest component
     of any deferred payment obligations, the interest component of all payments
     associated with Capital Lease Obligations, imputed interest with respect to
     Attributable Debt, commissions, discounts and other fees and charges
     incurred in respect of letter of credit or bankers' acceptance financings,
     and net of the effect of all payments made or received pursuant to Hedging
     Obligations; plus

                                       110


          (2) the consolidated interest of such Person and its Restricted
     Subsidiaries that was capitalized during such period; plus

          (3) any interest expense on Indebtedness of another Person that is
     Guaranteed by such Person or one of its Restricted Subsidiaries or secured
     by a Lien on assets of such Person or one of its Restricted Subsidiaries,
     whether or not such Guarantee or Lien is called upon; plus

          (4) the product of (a) all dividends, whether paid or accrued and
     whether or not in cash, on any series of preferred stock of such Person or
     any of its Restricted Subsidiaries, other than dividends on Equity
     Interests paid solely in Equity Interests of Synagro (other than
     Disqualified Stock), or to Synagro or a Restricted Subsidiary of Synagro,
     times (b) a fraction, the numerator of which is one and the denominator of
     which is one minus the then current combined effective tax rate of such
     Person, expressed as a decimal, in each case, on a consolidated basis and
     in accordance with GAAP.

     "FIXED CHARGE COVERAGE RATIO" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the specified
Person or any of its Restricted Subsidiaries incurs, assumes, guarantees,
repays, repurchases or redeems any Indebtedness (other than ordinary working
capital borrowings) or issues, repurchases or redeems preferred stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made, or the Calculation Date,
then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect
to such incurrence, assumption, guarantee, repayment, repurchase or redemption
of Indebtedness, or such issuance, repurchase or redemption of preferred stock,
and the use of the proceeds therefrom as if the same had occurred at the
beginning of the applicable four-quarter reference period.

     In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

          (1) acquisitions that have been made by the specified Person or any of
     its Restricted Subsidiaries, including through mergers or consolidations
     and including any related financing transactions, during the four-quarter
     reference period or subsequent to such reference period and on or prior to
     the Calculation Date will be given pro forma effect as if they had occurred
     on the first day of the four-quarter reference period and Consolidated Cash
     Flow for such reference period will be calculated on a pro forma basis in
     accordance with Regulation S-X under the Securities Act, but including Pro
     Forma Cost Savings, but without giving effect to clause (3) of the proviso
     set forth in the definition of Consolidated Net Income;

          (2) the Consolidated Cash Flow attributable to discontinued
     operations, as determined in accordance with GAAP, and operations or
     businesses disposed of prior to the Calculation Date, will be excluded from
     the four quarter reference period on a pro forma basis (as provided above);
     and

          (3) the Fixed Charges attributable to discontinued operations, as
     determined in accordance with GAAP, and operations or businesses disposed
     of prior to the Calculation Date, will be excluded from the four quarter
     reference period on a pro forma basis (as provided above), but only to the
     extent that the obligations giving rise to such Fixed Charges will not be
     obligations of the specified Person or any of its Restricted Subsidiaries
     following the Calculation Date.

     "FOREIGN SUBSIDIARY" means any Restricted Subsidiary of Synagro that was
formed under laws other than those of the United States or any state of the
United States or the District of Columbia.

     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.

     "GTCR SUBORDINATED NOTES" means Synagro's 12% Subordinated Notes due 2008,
issued in January 2000 to GTCR Golder Rauner, LLC.

                                       111


     "GUARANTEE" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.

     "GUARANTORS" means each of:

          (1) Synagro's Domestic Subsidiaries existing on the date hereof and
     party to the indenture; and

          (2) any other subsidiary that executes a Guarantee in accordance with
     the provisions of the indenture, including any Unrestricted Subsidiary
     Guarantor;

and their respective successors and assigns.

     "HEDGING OBLIGATIONS" means, with respect to any specified Person, the
obligations of such Person under:

          (1) interest rate swap agreements, interest rate cap agreements and
     interest rate collar agreements, including fixed to floating and floating
     to fixed; and

          (2) other agreements or arrangements designed to protect such Person
     against fluctuations in interest rates or currency exchange rates or
     commodity prices.

     "INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:

          (1) in respect of borrowed money;

          (2) evidenced by bonds, notes, debentures or similar instruments or
     letters of credit (or reimbursement agreements in respect thereof);

          (3) in respect of banker's acceptances;

          (4) representing Capital Lease Obligations;

          (5) representing the balance deferred and unpaid of the purchase price
     of any property, except any such balance that constitutes an accrued
     expense or trade payable; or

          (6) representing any Hedging Obligations.

     The amount of any Indebtedness outstanding as of any date will be:

          (1) the accreted value of the Indebtedness, in the case of any
     Indebtedness issued with original issue discount; and

          (2) the principal amount of the Indebtedness, together with any
     interest on the Indebtedness that is more than 30 days past due, in the
     case of any other Indebtedness.

     "INVESTMENTS" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Synagro or
any Restricted Subsidiary of Synagro sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of Synagro such that,
after giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of Synagro, Synagro will be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of Synagro's Investments in such Restricted Subsidiary that were not sold
or disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "-- Certain Covenants -- Restricted
Payments." The acquisition by Synagro or any Restricted Subsidiary of Synagro of
a Person that holds an Investment in a third Person will be deemed to be an
Investment by Synagro or such Restricted Subsidiary in such third Person in an
amount equal to the fair market value of the Investments held by the acquired
Person in such third Person in an amount determined as
                                       112


provided in the final paragraph of the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments."

     "ISSUE DATE" means April 17, 2002, the date on which the old notes were
originally issued.

     "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

     "NET INCOME" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:

          (1) any gain (or loss), together with any related provision for taxes
     on such gain (or loss), realized in connection with: (a) any Asset Sale; or
     (b) the disposition of any securities by such Person or any of its
     Restricted Subsidiaries or the extinguishment of any Indebtedness of such
     Person or any of its Restricted Subsidiaries; and

          (2) any extraordinary gain (or loss), together with any related
     provision for taxes on such extraordinary gain (or loss).

     "NET PROCEEDS" means the aggregate cash proceeds received by Synagro or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales commissions, and any relocation expenses incurred as a
result of the Asset Sale, taxes paid or payable as a result of the Asset Sale,
in each case, after taking into account any available tax credits or deductions
and any tax sharing arrangements, and amounts required to be applied to the
repayment of Indebtedness, other than Senior Debt, secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.

     "NON-RECOURSE DEBT" means Indebtedness:

          (1) as to which neither Synagro nor any of its Restricted Subsidiaries
     (a) provides credit support of any kind (including any undertaking,
     agreement or instrument that would constitute Indebtedness), (b) is
     directly or indirectly liable as a guarantor or otherwise, or (c)
     constitutes the lender;

          (2) no default with respect to which (including any rights that the
     holders of the Indebtedness may have to take enforcement action against an
     Unrestricted Subsidiary) would permit upon notice, lapse of time or both
     any holder of any other Indebtedness of Synagro or any of its Restricted
     Subsidiaries to declare a default on such other Indebtedness or cause the
     payment of the Indebtedness to be accelerated or payable prior to its
     stated maturity; and

          (3) as to which the lenders have been notified in writing that they
     will not have any recourse to the stock or assets of Synagro or any of its
     Restricted Subsidiaries.

     "OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

     "PERMITTED BUSINESS" means the lines of business conducted by Synagro and
its Subsidiaries on the date of the indenture and any businesses reasonably
related, incidental or ancillary thereto.

     "PERMITTED INVESTMENTS" means:

          (1) any Investment in Synagro or in a Restricted Subsidiary of
     Synagro, provided, however, that Investments in Foreign Subsidiaries shall
     not exceed 10% of Total Assets in the aggregate;

                                       113


          (2) any Investment in Cash Equivalents;

          (3) any Investment by Synagro or any Restricted Subsidiary of Synagro
     in a Person, if as a result of such Investment:

             (a) such Person becomes a Restricted Subsidiary of Synagro; or

             (b) such Person is merged, consolidated or amalgamated with or
        into, or transfers or conveys substantially all of its assets to, or is
        liquidated into, Synagro or a Restricted Subsidiary;

          (4) any Investment made as a result of the receipt of non-cash
     consideration from an Asset Sale that was made pursuant to and in
     compliance with the covenant described above under the caption
     "-- Repurchase at the Option of Holders -- Asset Sales";

          (5) any acquisition of assets solely in exchange for the issuance of
     Equity Interests (other than Disqualified Stock) of Synagro;

          (6) any Investments received in compromise of obligations of such
     Persons incurred in the ordinary course of trade creditors or customers
     that were incurred in the ordinary course of business, including pursuant
     to any plan of reorganization or similar arrangement upon the bankruptcy or
     insolvency of any trade creditor or customer;

          (7) Hedging Obligations;

          (8) any Investment existing on the date of the indenture;

          (9) loans and advances to employees and officers of Synagro and its
     Restricted Subsidiaries in the ordinary course of business having an
     aggregate principal amount not to exceed $2.0 million at any one time
     outstanding;

          (10) loans to management employees of Synagro and its Restricted
     Subsidiaries for the purchase of Equity Interests having an aggregate
     principal amount not to exceed $3.0 million at any one time outstanding;

          (11) accounts receivable created or acquired in the ordinary course of
     business;

          (12) Guarantees by Synagro of Indebtedness otherwise permitted to be
     incurred by Restricted Subsidiaries of Synagro under the indenture;

          (13) the acquisition by a Receivables Subsidiary in connection with a
     Qualified Receivables Transaction of Equity Interests of a trust or other
     Person established by such Receivables Subsidiary to effect such Qualified
     Receivables Transaction; and any other Investment by Synagro or a
     Restricted Subsidiary of Synagro in a Receivables Subsidiary or any
     Investment by a Receivables Subsidiary in any other Person in connection
     with a Qualified Receivables Transaction; provided that such other
     Investment is in the form of a note or other instrument that the
     Receivables Subsidiary or other Person is required to repay as soon as
     practicable from available cash collections less amounts required to be
     established as reserves pursuant to contractual agreements with entities
     that are not Affiliates of Synagro entered into as part of a Qualified
     Receivables Transaction; and

          (14) other Investments in any Person having an aggregate fair market
     value (measured on the date each such Investment was made and without
     giving effect to subsequent changes in value), when taken together with all
     other Investments made pursuant to this clause (14) that are at any time
     outstanding, not to exceed $15.0 million, without giving effect to any
     reduction for any writedown or writeoff of such Investment or reduction to
     the extent credit has already been given under paragraph 3(c)(i) of the
     covenant described above under the caption "-- Restricted Payments."

                                       114


     "PERMITTED JUNIOR SECURITIES" means:

          (1) common Equity Interests in Synagro or any Guarantor (other than
     Disqualified Stock); or

          (2) debt or preferred equity securities of Synagro or any Guarantor
     issued pursuant to a plan of reorganization consented to by each class of
     Senior Debt; provided that all such securities are subordinated to all
     Senior Debt and any debt securities issued in exchange for Senior Debt to
     substantially the same extent as, or to a greater extent than, the notes
     and the Guarantees are subordinated to Senior Debt under the indenture.

     "PERMITTED LIENS" means:

          (1) Liens securing Senior Debt and other Obligations with respect
     thereto;

          (2) Liens in favor of Synagro or the Guarantors;

          (3) Liens on property of a Person existing at the time such Person is
     merged with or into or consolidated with Synagro or any Subsidiary of
     Synagro; provided that such Liens were in existence prior to the
     contemplation of such merger or consolidation and do not extend to any
     assets other than those of the Person merged into or consolidated with
     Synagro or the Subsidiary;

          (4) Liens on property existing at the time of acquisition of the
     property by Synagro or any Subsidiary of Synagro, provided that such Liens
     were in existence prior to the contemplation of such acquisition;

          (5) Liens incurred or deposits made to secure the performance of
     statutory obligations, surety or appeal bonds, performance bonds or other
     obligations of a like nature incurred in the ordinary course of business;

          (6) Liens existing on the date of the indenture;

          (7) Liens for taxes, assessments or governmental charges or claims
     that are not yet delinquent or that are being contested in good faith by
     appropriate proceedings promptly instituted and diligently concluded,
     provided that any reserve or other appropriate provision as is required in
     conformity with GAAP has been made therefor;

          (8) Liens incurred in connection with the business of Synagro or any
     Subsidiary of Synagro with respect to obligations that do not exceed $10.0
     million at any one time outstanding;

          (9) Liens on assets of Unrestricted Subsidiaries or Unrestricted
     Subsidiary Guarantors that secure Non-Recourse Debt of Unrestricted
     Subsidiaries or of Unrestricted Subsidiary Guarantors, respectively;

          (10) Liens incurred or deposits made in the ordinary course of
     business in connection with worker's compensation, unemployment insurance
     and other types of social security, including any Lien securing letters of
     credit issued in the ordinary course of business consistent with past
     practice in connection therewith, or to secure the performance of tenders,
     statutory obligations, surety and appeal bonds, bids, leases, government
     contracts, performance and return-of-money bonds and other similar
     obligations (exclusive of obligations for the payment of borrowed money)
     incurred in the ordinary course of business;

          (11) judgment Liens not giving rise to an Event of Default;

          (12) Liens upon specific items of inventory or other goods and
     proceeds of any Person securing such Person's obligations in respect of
     banker's acceptances issued or created for the account of such Person to
     facilitate the purchase, shipment, or storage of such inventory or other
     goods;

          (13) Liens securing reimbursement obligations with respect to
     commercial letters of credit which encumber documents and other property
     relating to such letters of credit and products and proceeds thereof;

                                       115


          (14) Liens encumbering deposits made to secure obligations arising
     from statutory, regulatory, contractual, or warranty requirements of
     Synagro or any of its Restricted Subsidiaries, including rights of offset
     and set-off;

          (15) Liens securing Indebtedness incurred in reliance on clause (4) of
     the second paragraph of the covenant described above under the caption
     "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
     Preferred Stock" so long as such Lien extends to no assets other than the
     assets acquired;

          (16) Leases or subleases granted to others that do not materially
     interfere with the ordinary course of business of Synagro and its
     Restricted Subsidiaries;

          (17) Liens arising from filing Uniform Commercial Code financing
     statements regarding leases;

          (18) Liens securing the notes and the Guarantees;

          (19) Liens securing Hedging Obligations that are permitted by the
     indenture to be incurred;

          (20) Liens on assets of Synagro or a Receivables Subsidiary incurred
     in connection with a Qualified Receivables Transaction; and

          (21) banker's Liens and rights of set-off.

     "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Synagro or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Synagro or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:

          (1) the principal amount (or accreted value, if applicable) of such
     Permitted Refinancing Indebtedness does not exceed the principal amount (or
     accreted value, if applicable) of the Indebtedness extended, refinanced,
     renewed, replaced, defeased or refunded (plus all accrued interest on the
     Indebtedness and the amount of all expenses and premiums incurred in
     connection therewith);

          (2) such Permitted Refinancing Indebtedness has a final maturity date
     later than the final maturity date of, and has a Weighted Average Life to
     Maturity equal to or greater than the Weighted Average Life to Maturity of,
     the Indebtedness being extended, refinanced, renewed, replaced, defeased or
     refunded;

          (3) if the Indebtedness being extended, refinanced, renewed, replaced,
     defeased or refunded is subordinated in right of payment to the notes, such
     Permitted Refinancing Indebtedness has a final maturity date later than the
     final maturity date of, and is subordinated in right of payment to, the
     notes on terms at least as favorable to the Holders of notes as those
     contained in the documentation governing the Indebtedness being extended,
     refinanced, renewed, replaced, defeased or refunded; and

          (4) such Indebtedness is incurred either by Synagro or by the
     Restricted Subsidiary who is the obligor on the Indebtedness being
     extended, refinanced, renewed, replaced, defeased or refunded.

     "PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.

     "PRINCIPAL" means GTCR Golder Rauner, LLC and TCW/Crescent Mezzanine,
L.L.C.

     "PRO FORMA COST SAVINGS" means, with respect to any period, the reduction
in costs and related adjustments associated with the acquisition of a business
that are attributable to that period and that (i) are calculated on a basis that
is consistent with Regulation S-X under the Securities Act as in effect and
applied as of the date of the indenture or (ii) have actually been implemented
by the business that was the subject of the acquisition within three months of
the date of the acquisition and prior to the Calculation Date and that are
supportable and quantifiable by the underlying accounting records of such
business and are described, as provided below, in an officers' certificate, as
if, in the case of each of clause (i) and (ii), all such reductions in costs and
related adjustments had been effected as of the beginning of such period.

     "PROVIDENCE SOILS" means Providence Soils, LLC, and any successor thereto.

                                       116


     "QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions entered into by Synagro or any of its Restricted Subsidiaries
pursuant to which Synagro or any of its Restricted Subsidiaries sells, conveys
or otherwise transfers to (1) a Receivables Subsidiary (in the case of a
transfer by Synagro or any of its Restricted Subsidiaries) and (2) any other
Person (in the case of a transfer by a Receivables Subsidiary), or grants a
security interest in, any accounts receivable (whether now existing or arising
in the future) of Synagro or any of its Restricted Subsidiaries, and any assets
related thereto including, without limitation, all collateral securing such
accounts receivable, all contracts and all guarantees or other obligations in
respect of such accounts receivable, proceeds of such accounts receivable and
other assets which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable.

     "RECEIVABLES SUBSIDIARY" means a Subsidiary of Synagro that engages in no
activities other than in connection with the financing of accounts receivable
and that is designated by the Board of Directors of Synagro (as provided below)
as a Receivables Subsidiary (a) no portion of the Indebtedness or any other
Obligations (contingent or otherwise) of which (1) is guaranteed by Synagro or
any Restricted Subsidiary of Synagro (excluding guarantees of Obligations (other
than the principal of, and interest on, Indebtedness) pursuant to
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction), (2) is recourse to or obligates Synagro or any Restricted
Subsidiary of Synagro in any way other than pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with a Qualified Receivables Transaction or (3) subjects
any property or asset of Synagro or any Restricted Subsidiary of Synagro (other
than accounts receivable and related assets as provided in the definition of
"Qualified Receivables Transaction"), directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with a Qualified Receivables Transaction, (b) with which
neither Synagro nor any Restricted Subsidiary of Synagro has any material
contract, agreement, arrangement or understanding other than on terms no less
favorable to Synagro or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of Synagro, other than
fees payable in the ordinary course of business in connection with servicing
accounts receivable and (c) with which neither Synagro nor any Restricted
Subsidiary of Synagro has any obligation to maintain or preserve such
Subsidiary's financial condition or cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors of
Synagro will be evidenced to the trustee by filing with the trustee a certified
copy of the resolution of the Board of Directors of Synagro giving effect to
such designation and an officers' certificate certifying that such designation
complied with the foregoing conditions.

     "RELATED PARTY" means:

          (1) any direct or indirect controlling stockholder or controlling
     general partner, 50% (or more) owned Subsidiary, or immediate family member
     (in the case of an individual) of any Principal; or

          (2) any trust, corporation, partnership or other entity, the
     beneficiaries, stockholders, partners, owners or Persons beneficially
     holding an 50% or more controlling interest of which consist of any one or
     more Principals and/or such other Persons referred to in the immediately
     preceding clause (1).

     "RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.

     "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.

     "SENIOR DEBT" means:

          (1) all Indebtedness of Synagro or any Guarantor outstanding under
     Credit Facilities;

          (2) all Surety Obligations of Synagro or any Guarantor;

          (3) any other Indebtedness of Synagro or any Guarantor permitted to be
     incurred under the terms of the indenture, unless the instrument under
     which such Indebtedness is incurred expressly provides that it is on a
     parity with or subordinated in right of payment to the notes or any
     Guarantee; and
                                       117


          (4) all Obligations with respect to the items listed in the preceding
     clauses (1) and (3) (and, with respect to clause (1) and any Hedging
     Obligations, it being understood that such Obligations (i) include all
     interest on such Indebtedness accruing after the filing of a petition
     initiating any proceeding under any state, federal or foreign bankruptcy
     law, whether or not such interest is allowed or allowable in such
     proceeding and (ii) shall be determined without giving effect to any
     reduction in the amount of any Indebtedness necessary to render the
     obligation of any guarantor with respect thereto not voidable or avoidable
     under applicable law).

     Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:

          (1) any liability for federal, state, local or other taxes owed or
     owing by Synagro;

          (2) any intercompany Indebtedness of Synagro or any of the
     Subsidiaries of Synagro;

          (3) any trade payables; or

          (4) the portion of any Indebtedness that is incurred in violation of
     the indenture; provided that Indebtedness under a Credit Facility will not
     cease to be Senior Debt under this clause (4) if the lenders obtained a
     certificate from an executive officer of Synagro as of the date of the
     incurrence of such Indebtedness to the effect that such Indebtedness was
     permitted to be incurred by the indenture.

     "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.

     "STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

     "SUBSIDIARY" means, with respect to any specified Person:

          (1) any corporation, association or other business entity of which
     more than 50% of the total voting power of shares of Capital Stock entitled
     (without regard to the occurrence of any contingency) to vote in the
     election of directors, managers or trustees of the corporation, association
     or other business entity is at the time owned or controlled, directly or
     indirectly, by that Person or one or more of the other Subsidiaries of that
     Person (or a combination thereof); and

          (2) any partnership (a) the sole general partner or the managing
     general partner of which is such Person or a Subsidiary of such Person or
     (b) the only general partners of which are that Person or one or more
     Subsidiaries of that Person (or any combination thereof).

     "SURETY OBLIGATIONS" means the incurrence by Synagro or any of its
Guarantors of obligations in respect of performance and surety bonds and
completion guarantees obtained by Synagro or such Guarantor in the ordinary
course of business.

     "SYNAGRO-BALTIMORE" means Synagro-Baltimore, L.L.C., and any successor
thereto.

     "TOTAL ASSETS" means, as of any date, the consolidated assets of Synagro
and its Guarantors as of such date calculated in accordance with GAAP.

     "UNRESTRICTED SUBSIDIARY" means Synagro-Baltimore, Providence Soils and any
Subsidiary of Synagro that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent
that such Subsidiary:

          (1) has no Indebtedness other than Non-Recourse Debt;

          (2) is not party to any agreement, contract, arrangement or
     understanding with Synagro or any Restricted Subsidiary of Synagro unless
     the terms of any such agreement, contract, arrangement or understanding are
     no less favorable to Synagro or such Restricted Subsidiary than those that
     might be obtained at the time from Persons who are not Affiliates of
     Synagro;
                                       118


          (3) is a Person with respect to which neither Synagro nor any of its
     Restricted Subsidiaries has any direct or indirect obligation (a) to
     subscribe for additional Equity Interests or (b) to maintain or preserve
     such Person's financial condition or to cause such Person to achieve any
     specified levels of operating results;

          (4) has not guaranteed or otherwise directly or indirectly provided
     credit support for any Indebtedness of Synagro or any of its Restricted
     Subsidiaries (other than the notes); and

          (5) has at least one director on its Board of Directors that is not a
     director or executive officer of Synagro or any of its Restricted
     Subsidiaries and has at least one executive officer that is not a director
     or executive officer of Synagro or any of its Restricted Subsidiaries.

     Any designation of a Subsidiary of Synagro as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary will be deemed
to be incurred by a Restricted Subsidiary of Synagro as of such date and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," Synagro will be in default of
such covenant. The Board of Directors of Synagro may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Synagro of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.

     "UNRESTRICTED SUBSIDIARY GUARANTOR" means Synagro-Baltimore, Providence
Soils and any other Domestic Subsidiary the Board of Directors elects to become
an Unrestricted Subsidiary Guarantor as permitted under the caption "-- Certain
Covenants -- Additional Guarantees and "-- Certain Covenants -- Designation of
Restricted and Unrestricted Subsidiaries."

     "VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

     "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:

          (1) the sum of the products obtained by multiplying (a) the amount of
     each then remaining installment, sinking fund, serial maturity or other
     required payments of principal, including payment at final maturity, in
     respect of the Indebtedness, by (b) the number of years (calculated to the
     nearest one-twelfth) that will elapse between such date and the making of
     such payment; by

          (2) the then outstanding principal amount of such Indebtedness.

     "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares),
will at the time be owned by such Person or by one or more Wholly-Owned
Restricted Subsidiaries of such Person and one or more Wholly-Owned Restricted
Subsidiaries of such Person.

                                       119



                MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS


     THIS SUMMARY IS OF A GENERAL NATURE AND IS INCLUDED HEREIN SOLELY FOR
INFORMATIONAL PURPOSES. THIS SUMMARY IS NOT INTENDED TO BE AND SHOULD NOT BE
CONSTRUED TO BE LEGAL OR TAX ADVICE. NO REPRESENTATION WITH RESPECT TO THE
CONSEQUENCES TO ANY PARTICULAR HOLDER OF THE NOTES IS MADE. HOLDERS OF THE NOTES
SHOULD CONSULT THEIR OWN ADVISORS WITH RESPECT TO THEIR PARTICULAR
CIRCUMSTANCES.


     The following general discussion is a summary of the material United States
federal income tax considerations relevant to the exchange offer, based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury regulations promulgated thereunder
("Treasury Regulations"), rulings, pronouncements, judicial decisions, and
administrative interpretations, all as of the date hereof, and all of which are
subject to change (possibly on a retroactive basis) at any time by legislative,
judicial or administrative action. Any such changes may be applied retroactively
in a manner that could affect adversely a holder of the notes. No assurances are
provided that the Internal Revenue Service (the "IRS") will not challenge the
conclusions stated below, and no ruling from the IRS has been or will be sought
on any of the matters discussed below.


     The following summary does not purport to be a complete analysis of all the
potential U.S. federal income tax effects relating to the exchange offer.
Without limiting the generality of the foregoing, the summary does not address
the effect of any special rules applicable to certain types of holders,
including, without limitation, dealers in securities, insurance companies,
financial institutions, thrifts, tax-exempt entities, persons who hold notes as
part of a straddle, hedge, conversion transaction, or other integrated
investment, investors in securities that elect to use a market-to-market method
of accounting for their securities holdings, or investors in pass through
entities. In addition, the summary is limited to holders who hold their notes as
capital assets within the meaning of Section 1221 of the Code. This summary
applies only to U.S. Holders and Non-U.S. Holders that receive the new notes in
the exchange offer for old notes that were purchased for cash on original issue
for their issue price of 100% of their face amount. This discussion does not
address the effect of any U.S. state or local income or other tax laws, any U.S.
federal estate and gift tax laws, any foreign tax laws, or any tax treaties. If
a partnership holds the new notes, the tax treatment of a partner will generally
depend upon the status of the partner and the activities of the partnership. A
partner in a partnership holding the new notes is urged to consult its own tax
advisor.

EXCHANGE OFFER

     The exchange of an old note for a new note in the exchange offer described
in "The Exchange Offer" will not constitute a taxable exchange of the old note.
Consequently, no gain or loss will be recognized by a holder upon receipt of a
new note, the holding period of the new note will include the holding period of
the old note and the basis of the new note will be the same as the basis of the
old note immediately before the exchange. The old note and the new note will be
treated as the same security for federal income tax purposes.

U.S. HOLDERS

     In general, a "U.S. Holder" is a beneficial owner of a new note that is any
one of the following: (i) an individual who is a citizen or resident of the
United States, (ii) a corporation or other entity taxable as a corporation for
U.S. federal income tax purposes created or organized in or under the laws of
the United States or any political subdivision thereof, (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source, or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust.

                                       120


  TAXATION OF INTEREST

     Any stated interest on a new note held by a U.S. Holder generally is
required to be included in the holder's gross income and is taxable as ordinary
income for federal income tax purposes at the time that the interest is paid or
accrued, in accordance with the holder's regular method of tax accounting.

  GAIN ON DISPOSITION

     In the case of a sale, exchange, redemption or other disposition of a new
note the holder will recognize gain or loss equal to the difference, if any,
between the amount realized upon the sale, exchange, redemption or other
distribution (less an amount equal to any accrued interest not previously
included in income which will be taxable as interest income) and the adjusted
tax basis in a new note. The holder's tax basis in the new note generally will
equal the amount the holder originally paid for the old note in exchange for
which the holder received the new note. Any gain or loss recognized will be
treated as a capital gain or loss. Such capital gain or loss will be treated as
a long-term capital gain or loss if, at the time of the sale or exchange, the
note has been held by the holder for more than one year; otherwise, the capital
gain or loss will be short-term. Non-corporate taxpayers are generally subject
to a maximum federal tax rate of 20% on their long-term capital gains. All
taxpayers are subject to certain limitations on the deductibility of their
capital losses.

     A U.S. Holder should recognize no gain or loss on the exchange of a note
for a publicly-registered exchange note pursuant to the exchange offer. The
holding period of the exchange note should include the holding period of the
note exchanged therefor, and the adjusted tax basis of the exchange note should
be the same as the adjusted tax basis of the note exchanged therefor.

  REDEMPTION

     We intend to take the position that the likelihood of payment of a premium
pursuant to the change of control provisions described under "Description of
Notes -- Repurchase at the Option of Holders" is remote under applicable
Treasury Regulations. We, therefore, do not intend to treat that possibility as
affecting the yield to maturity of the new notes.

     Additionally, we have an option to redeem the notes at any time on or after
a certain date, and an option to redeem or repurchase all or a portion of the
notes at certain times prior to the maturity date, as described under
"Description of Notes -- Optional Redemption." Under the applicable Treasury
Regulations, we will be deemed to have exercised an option if the exercise of
that option would lower the yield of the notes. We believe that we will not be
treated as having exercised an option under these regulations, and therefore, we
do not intend to treat either of the options as affecting the yield to maturity
of the notes.

  INFORMATION REPORTING AND BACKUP WITHHOLDING

     U.S. Holders of new notes may be subject, under certain circumstances, to
information reporting and backup withholding at a rate up to 30% on payments of
interest, principal, and premium, if any, on new notes and to certain proceeds
upon the sale of new notes made to U.S. Holders other than exempt residents
(such as corporations). The backup withholding rate currently is 30% for 2002
and 2003, 29% for 2004 and 2005, and 28% for 2006 and thereafter. Backup
withholding applies only if the U.S. Holder:

     - fails to furnish its social security or other taxpayer identification
       number ("TIN"), certified under penalties of perjury, within a reasonable
       time after a request for such information;

     - furnishes an incorrect TIN;

     - fails to report interest or dividends properly; or

     - fails, under certain circumstances, to provide a certified statement,
       signed under penalties of perjury, that the TIN provided is its correct
       number and that the U.S. Holder is not subject to backup withholding.

                                       121


     Backup withholding is not an additional tax. Any amount withheld from a
payment to a U.S. Holder under the backup withholding rules is allowable as a
credit against such U.S. Holder's U.S. federal income tax liability, and may
entitle such holder to a refund, provided that the required information is
furnished to the IRS. Certain persons are exempt from backup withholding,
including corporations and certain other entities, provided their exemptions
from backup withholding are properly established. U.S. Holders of notes should
consult their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such exemption.

     We will furnish annually to the IRS, and to record holders of the new notes
to whom we are required to furnish such information, information relating to the
amount of reportable payments made and the amount of tax withheld, if any, with
respect to such payments.

NON-U.S. HOLDERS

     The following summary is limited to certain U.S. federal income tax
consequences relevant to a holder of a new note that is not a U.S. Holder (a
"Non-U.S. Holder").

  TAXATION OF INTEREST

     Subject to the summary of backup withholding rules below, payments of
interest on a new note to any Non-U.S. Holder generally will not be subject to
U.S. federal income or withholding tax if such interest payments are not
effectively connected with such Non-U.S. Holder's conduct of a trade or business
in the United States, and the holder:

     - is not an actual or constructive owner of 10% or more of the total voting
       power of all our voting stock;

     - is not a controlled foreign corporation related (directly or indirectly)
       to us through stock ownership; and

     - is not a bank receiving interest described in Section 881(c)(3)(A) of the
       Code

     and we or our paying agent receive certification that the holder is a
Non-U.S. Holder. Such certification requires that the Non-U.S. Holder provide us
or our paying agent with a properly completed IRS Form W-8BEN (or substitute
Form W-8BEN or the appropriate successor form) under penalties of perjury which
provides the Non-U.S. Holder's name and address and certifies that the Non-U.S.
Holder is a Non-U.S. Holder. Alternatively, in a case where a security clearing
organization, bank or other financial institution holds the new notes in the
ordinary course of its trade or business (a "financial institution") on behalf
of the Non-U.S. Holder, certification requires that we or our paying agent
receive from the financial institution a certification under penalties of
perjury that a properly completed IRS Form W-8BEN (or substitute IRS Form W-8BEN
or the appropriate successor form) has been received by it, or by another such
financial institution, from the Non-U.S. Holder, and a copy of such form is
furnished to the payor. Special rules apply to payments made through a qualified
intermediary.

     A Non-U.S. Holder that does not qualify for exemption from withholding
under the preceding paragraph generally will be subject to withholding of U.S.
federal income tax at the rate of 30% (or lower applicable treaty rate) on
payments of interest on the new notes.

     If the payments of interest on a new note are effectively connected with
the conduct by a Non-U.S. Holder of a trade or business in the United States
(and, if required by an applicable tax treaty, are attributable to a U.S.
permanent establishment maintained by the Non-U.S. Holder), such payments will
be subject to U.S. federal income tax on a net basis at the rates applicable to
U.S. persons generally (and, if the Non-U.S. Holder is a corporation for U.S.
federal income tax purposes, may be subject also to a 30% (or such lower rate
provided by an applicable treaty) branch profits tax on the "dividend equivalent
amount"). If payments are subject to U.S. federal income tax on a net basis in
accordance with the rules described in the preceding sentence, such payments
will not be subject to U.S. withholding tax so long as the holder provides us or
the paying agent with appropriate certification.

                                       122


     Non-U.S. Holders should consult their tax advisors regarding any applicable
income tax treaties, which may provide for a lower rate of withholding tax,
exemption from or reduction of branch profits tax, or other rules different from
those described above.

  GAIN ON DISPOSITION

     Subject to the summary of backup withholding rules below, any gain realized
by a Non-U.S. Holder on the sale, redemption or other disposition of a new note
generally will not be subject to U.S. federal income tax, unless:

     - such gain is effectively connected with the conduct by such Non-U.S.
       Holder of a trade or business within the United States and, if required
       by an applicable tax treaty, is attributable to a U.S. permanent
       establishment maintained by the Non-U.S. Holder;

     - the Non-U.S. Holder is an individual who is present in the United States
       for 183 days or more in the taxable year of the disposition and certain
       other conditions are satisfied; or

     - the Non-U.S. Holder is subject to tax under provisions of the code
       applicable to certain U.S. expatriates (including certain former citizens
       or residents of the United States).

     However, to the extent that disposition proceeds represent interest
accuracy between interest payment dates, a Non-U.S. Holder may be required to
establish an exemption from U.S. federal income tax. (see "-- Taxation of
Interest" above).

  REDEMPTIONS

     See above "Certain U.S. Federal Income Tax Considerations-U.S.
Holders-Redemption."

  FEDERAL ESTATE TAXES

     A new note held by an individual who at the time of death is not a citizen
or resident of the United States will not be subject to United States federal
estate tax as a result of such individual's death, provided that:

     - the individual does not actually or constructively own 10% or more of the
       total combined voting power of all classes of our voting stock within the
       meaning of the Code and applicable U.S. Treasury regulations; and

     - the interest accrued on the new note was not effectively connected with a
       United States trade or business of the individual at the individual's
       death.

  INFORMATION REPORTING AND BACKUP WITHHOLDING

     Generally, we must report annually to the IRS and to each Non-U.S. Holder
any interest that is paid to the Non-U.S. Holder. Copies of these information
returns also may be made available under the provisions of a specific treaty or
other agreement to the tax authorities of the country in which the Non-U.S.
Holder resides.

     Treasury Regulations provide that the backup withholding tax and certain
information reporting will not apply to such payments of interest with respect
to which either the requisite certification, as described above under
"-- Taxation of Interest", has been received or an exemption otherwise has been
established, provided that neither we nor our paying agent have actual knowledge
or, in certain circumstances, reason to know that the Non-U.S. Holder is, in
fact, a United States person or that the conditions of any other exemption are
not, in fact, satisfied.

     Payment made on, and proceeds from the sale of, a new note to or through
the United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
as to its non-U.S. status under penalties of perjury, in certain circumstances,
or otherwise establishes an exemption, provided that the broker does not have
actual knowledge or reason to know that the holder is a United States person or
that the conditions of any other exemption are not, in fact, satisfied. Payments
made on, and proceeds from the sale of a new note to or through a non-U.S.
office of a
                                       123


non-U.S. broker will not be subject to information reporting or backup
withholding unless the non-U.S. broker has certain types of relationships with
the United States (a "U.S. related person"). In the case of payments made on, or
of the proceeds from the sale of a new note to or through a non-U.S. office of a
broker that is either a U.S. person or a U.S. related person, the Treasury
Regulations require information reporting (but not back-up withholding) on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no knowledge or reason to know to the
contrary.

     Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-U.S.
Holder's United States federal income tax liability, provided that the required
information is provided to the IRS.


THE PRECEDING SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT LEGAL OR TAX ADVICE. ACCORDINGLY, HOLDERS OF
THE NOTES SHOULD CONSULT THEIR OWN ADVISORS ON THE U.S. FEDERAL, STATE, AND
LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE OFFER AND THE OWNERSHIP AND
DISPOSITION OF THE NEW NOTES, AND ON THE CONSEQUENCES OF ANY CHANGES IN THE
APPLICABLE LAW.


                                       124


                              PLAN OF DISTRIBUTION


     Based on interpretations by the staff of the Commission in "no action
letters" issued to third parties in unrelated transactions, we believe that you
may transfer new notes issued under the exchange offer in exchange for the old
notes if:


     - you acquire the new notes in the ordinary course of your business; and

     - you are not engaged in, and do not intend to engage in, and have no
       arrangement or understanding with any person to participate in, a
       distribution of new notes.

     Broker-dealers receiving new notes in the exchange offer will be subject to
a prospectus delivery requirement with respect to resales of the new notes.

     We believe that you may not transfer new notes issued under the exchange
offer in exchange for the old notes if you are:

     - our "affiliate" within the meaning of Rule 405 under the Securities Act;

     - a broker-dealer that acquired old notes directly from us; or

     - a broker-dealer that acquired old notes as a result of market-making or
       other trading activities without compliance with the registration and
       prospectus delivery provisions of the Securities Act.

     To date, the Commission staff has taken the position that participating
broker-dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as this exchange offer,
other than a resale of an unsold allotment from the original sale of the old
notes, with the prospectus contained in the exchange offer registration
statement. In the exchange and registration rights agreement, we have agreed to
permit participating broker-dealers use of this prospectus in connection with
the resale of new notes. We have agreed that, for a period of up to 180 days
after the expiration of the exchange offer, we will make this prospectus, and
any amendment or supplement to this prospectus, available to any broker-dealer
that requests these documents in the letter of transmittal.

     If you wish to exchange your old notes for new notes in the exchange offer,
you will be required to make representations to us as described in "The Exchange
Offer -- Purpose and Effect of the Exchange Offer" and "The Exchange
Offer -- Your Representations to Us" of this prospectus and in the letter of
transmittal. In addition, if you are a broker-dealer who receives new notes for
your own account in exchange for old notes that were acquired by you as a result
of market-making activities or other trading activities, you will be required to
acknowledge that you will deliver a prospectus in connection with any resale by
you of new notes.

     We will not receive any proceeds from any sale of new notes by
broker-dealers. Broker-dealers who receive new notes for their own account in
the exchange offer may sell them from time to time in one or more transactions
either:

     - in the over-the-counter market;

     - in negotiated transactions;

     - through the writing of options on the new notes or a combination of

     - methods of resale; or

     - at prices related to prevailing market prices or negotiated prices.

     Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any broker-dealer or the purchasers of any new notes. Any broker-dealer
that resells new notes it received for its own account in the exchange offer and
any broker or dealer that participates in a distribution of new notes may be
deemed to be an "underwriter" within the meaning of the Securities Act. Any
profit on any resale of new notes and any commissions or concessions or received
by any persons may be deemed to be underwriting compensation under the
Securities Act. The

                                       125


letter of transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.

     We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any broker or dealers. We will indemnify
holders of the old notes, including any broker-dealers, against some
liabilities, including liabilities under the Securities Act, as provided in the
exchange and registration rights agreement.

                                 LEGAL MATTERS

     The validity of the notes offered by this prospectus will be passed upon
for us by Locke Liddell & Sapp LLP, Houston, Texas.

                            INDEPENDENT ACCOUNTANTS

     Our consolidated financial statements as of December 31, 2001 and 2000, and
for each of the three years in the period ended December 31, 2001, included
elsewhere in this prospectus have been audited by Arthur Andersen LLP,
independent accountants, as stated in their report appearing herein.

                      WHERE YOU CAN FIND MORE INFORMATION

     We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. Our Commission filings are also
available to the public at the SEC's web site at http://www.sec.gov. Our common
stock is listed on the Nasdaq National Market. Our reports, proxy statements and
other information can also be inspected at the offices of the Nasdaq National
Market, Reports Section, at 1735 K Street, Washington, D.C. 2000. Our SEC
filings are also available on our website or at www.synagro.com. Information
contained on our website or any other website is not incorporated into this
prospectus and does not constitute a part of this prospectus.

     You may request a copy of those filings, at no cost, by writing or
telephoning us at the following:

        Synagro Technologies, Inc.
        1800 Bering Drive, Suite 1000
        Houston, Texas 77057
        Attention: Corporate Secretary
        (713) 369-1700

                                       126


                         INDEX TO FINANCIAL STATEMENTS




                                                              PAGE
                                                              ----
                                                           
SYNAGRO TECHNOLOGIES, INC. FINANCIAL STATEMENTS (AUDITED)
  Report of Independent Public Accountants..................   F-2
  Consolidated Balance Sheets as of December 31, 2001 and
     2000...................................................   F-3
  Consolidated Statements of Operations for the Years Ended
     December 31, 2001, 2000 and 1999.......................   F-4
  Consolidated Statements of Stockholders' Equity for the
     Years Ended December 31, 2001, 2000 and 1999...........   F-5
  Consolidated Statements of Cash Flows for the Years Ended
     December 31, 2001, 2000 and 1999.......................   F-6
  Notes to Consolidated Financial Statements................   F-8

SYNAGRO TECHNOLOGIES, INC. FINANCIAL STATEMENTS (UNAUDITED)
  Condensed Consolidated Balance Sheet as of March 31, 2002
     and 2001...............................................  F-32
  Condensed Consolidated Statements of Operations for the
     Three Months Ended March 31, 2002 and 2001.............  F-33
  Condensed Consolidated Statements of Stockholders' Equity
     for the Three Months Ended March 31, 2002 and 2001.....  F-34
  Condensed Consolidated Statements of Cash Flows for the
     Three Months Ended March 31, 2002 and 2001.............  F-35
  Notes to Condensed Consolidated Financial Statements......  F-37

BIO GRO DIVISION OF WASTE MANAGEMENT, INC. FINANCIAL
  STATEMENTS
  Report of Independent Public Accountants..................  F-50
  Combined Balance Sheets as of December 31, 1999 and
     1998...................................................  F-51
  Combined Statements of Operations for the Years Ended
     December 31, 1999, 1998 and 1997.......................  F-52
  Combined Statements of Changes in Division Equity for the
     Years Ended December 31, 1999, 1998 and 1997...........  F-53
  Combined Statements of Cash Flows for the Years Ended
     December 31, 1999, 1998 and 1997.......................  F-54
  Notes to Combined Financial Statements....................  F-55



                                       F-1


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Synagro Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Synagro
Technologies, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Synagro
Technologies, Inc., and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

As discussed in Note 1, the Company changed its method of accounting for
derivatives on January 1, 2001.

ARTHUR ANDERSEN LLP

Houston, Texas
March 13, 2002 (except for
the matters discussed in Note 15,
for which the date is April 17, 2002)

                                       F-2


                           SYNAGRO TECHNOLOGIES, INC.

                          CONSOLIDATED BALANCE SHEETS



                                                                     DECEMBER 31,
                                                              ---------------------------
                                                                  2001           2000
                                                              ------------   ------------
                                                                       
                                         ASSETS
Current Assets:
  Cash and cash equivalents.................................  $    251,821   $  4,597,420
  Restricted cash...........................................     3,281,045      2,085,039
  Accounts receivable, net..................................    49,531,654     50,073,651
  Note receivable, current portion..........................       201,000        188,903
  Prepaid expenses and other current assets.................    10,181,030      8,553,695
                                                              ------------   ------------
          Total current assets..............................    63,446,550     65,498,708
Property, machinery & equipment, net........................   206,114,267    198,466,357
Other Assets:
  Goodwill, net of accumulated amortization of $11,126,235
     and $6,667,566, respectively...........................   163,739,059    166,698,921
  Other, net................................................    12,867,901     13,156,606
                                                              ------------   ------------
          Total assets......................................  $446,167,777   $443,820,592
                                                              ============   ============

                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Current portion of long-term debt.........................  $ 12,880,693   $  9,265,380
  Current portion of nonrecourse project revenue bonds......     2,300,000      2,185,000
  Accounts payable and accrued expenses.....................    40,951,059     36,313,941
                                                              ------------   ------------
          Total current liabilities.........................    56,131,752     47,764,321
Long-term Liabilities:
  Long-term debt obligations, net...........................   202,650,523    230,358,453
  Nonrecourse project revenue bonds, net....................    40,584,848     43,123,771
  Fair value of interest rate swap..........................     5,150,502             --
  Other long-term liabilities...............................     9,328,065      5,642,737
                                                              ------------   ------------
          Total long-term liabilities.......................   257,713,938    279,124,961

Commitments and Contingencies

Redeemable Preferred Stock, 69,792.29 shares issued and
  outstanding, redeemable at $1,000 per share...............    70,431,063     63,367,178
Stockholders' Equity:
  Preferred stock, $.002 par value, 10,000,000 shares
     authorized, none issued or outstanding.................            --             --
  Common stock, $.002 par value, 100,000,000 shares
     authorized, 19,476,781 shares and 19,435,781 issued and
     outstanding, respectively..............................        38,954         38,872
  Additional paid-in capital................................   109,167,460    109,085,542
  Accumulated deficit.......................................   (45,004,998)   (55,560,282)
  Accumulated other comprehensive loss......................    (2,310,392)            --
                                                              ------------   ------------
          Total stockholders' equity........................    61,891,024     53,564,132
                                                              ------------   ------------
Total liabilities and stockholders' equity..................  $446,167,777   $443,820,592
                                                              ============   ============


  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-3


                           SYNAGRO TECHNOLOGIES, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31,




                                                          2001           2000          1999
                                                      ------------   ------------   -----------
                                                                           
Revenue.............................................  $260,195,667   $163,097,783   $56,462,757
Cost of services....................................   192,918,525    119,899,924    42,470,937
                                                      ------------   ------------   -----------
Gross profit........................................    67,277,142     43,197,859    13,991,820
Selling, general and administrative expenses........    20,785,734     14,336,948     6,875,928
Special (credits) charges, net......................    (4,981,584)            --     1,499,501
Amortization of goodwill............................     4,488,667      3,515,931     1,526,717
                                                      ------------   ------------   -----------
  Income from operations............................    46,984,325     25,344,980     4,089,674
                                                      ------------   ------------   -----------
Other (income) expense:
  Other income, net.................................      (221,383)      (114,024)     (294,438)
  Interest expense, net.............................    26,968,733     18,907,891     3,236,099
                                                      ------------   ------------   -----------
     Total other expense, net.......................    26,747,350     18,793,867     2,941,661
                                                      ------------   ------------   -----------
Income before provision for income taxes............    20,236,975      6,551,113     1,148,013
  Provision for income taxes........................       573,247             --            --
                                                      ------------   ------------   -----------
Net income before cumulative effect of change in
  accounting for derivatives, preferred stock
  dividends and noncash beneficial conversion
  charge............................................  $ 19,663,728   $  6,551,113   $ 1,148,013
Cumulative effect of change in accounting for
  derivatives.......................................     1,860,685             --            --
                                                      ------------   ------------   -----------
Net income before preferred stock dividends and
  noncash beneficial conversion charge..............  $ 17,803,043   $  6,551,113   $ 1,148,013
                                                      ------------   ------------   -----------
Preferred stock dividends...........................     7,247,759      3,938,499            --
Noncash beneficial conversion charge................            --     37,045,268            --
                                                      ------------   ------------   -----------
Net income (loss) applicable to common stock........  $ 10,555,284   $(34,432,654)  $ 1,148,013
                                                      ============   ============   ===========
Earnings per share:
  Basic --
     Net income (loss) per share before cumulative
       effect of change in accounting for
       derivatives..................................  $        .64   $      (1.78)  $       .07
     Cumulative effect of change in accounting for
       derivatives..................................          (.10)            --            --
                                                      ------------   ------------   -----------
  Net income (loss) per common share, basic.........  $        .54   $      (1.78)  $       .07
                                                      ============   ============   ===========
  Diluted --
     Net income (loss) per share before cumulative
       effect of change in accounting for
       derivatives..................................  $        .40   $      (1.78)  $       .07
     Cumulative effect of change in accounting for
       derivatives..................................          (.04)            --            --
                                                      ------------   ------------   -----------
  Net income (loss) per common share, diluted.......  $        .36   $      (1.78)  $       .07
                                                      ============   ============   ===========
Weighted average shares outstanding, basic..........    19,457,389     19,289,720    16,481,399
Weighted average shares outstanding, diluted........    49,648,094     19,289,720    17,479,376



  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-4


                           SYNAGRO TECHNOLOGIES, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999




                                                                             ACCUMULATED
                           COMMON STOCK        ADDITIONAL                       OTHER
                       --------------------     PAID-IN      ACCUMULATED    COMPREHENSIVE                  COMPREHENSIVE
                         SHARES     AMOUNT      CAPITAL        DEFICIT          LOSS           TOTAL       INCOME (LOSS)
                       ----------   -------   ------------   ------------   -------------   ------------   -------------
                                                                                      
BALANCE, December 31,
  1998...............  14,251,706   $28,503   $ 56,495,873   $(22,275,641)   $        --    $ 34,248,735   $         --
  Shares issued in
    acquisitions.....   3,044,784     6,090      9,018,123             --             --       9,024,213             --
  Exercise of options
    and warrants.....     396,999       795        892,735             --             --         893,530             --
  Net income
    applicable to
    common stock.....          --        --             --      1,148,013             --       1,148,013      1,148,013
                       ----------   -------   ------------   ------------    -----------    ------------   ------------
BALANCE, December 31,
  1999...............  17,693,489    35,388     66,406,731    (21,127,628)            --      45,314,491      1,148,013
                       ----------   -------   ------------   ------------    -----------    ------------   ------------
  Shares issued in
    acquisition......   1,325,000     2,650      5,468,010             --             --       5,470,660             --
  Exercise of options
    and warrants.....     417,292       834        165,533             --             --         166,367             --
  Noncash beneficial
    conversion
    charge...........          --        --     37,045,268             --             --      37,045,268             --
  Net loss applicable
    to common stock..          --        --             --    (34,432,654)            --     (34,432,654)   (34,432,654)
                       ----------   -------   ------------   ------------    -----------    ------------   ------------
BALANCE, December 31,
  2000...............  19,435,781    38,872    109,085,542    (55,560,282)            --      53,564,132    (34,432,654)
                       ----------   -------   ------------   ------------    -----------    ------------   ------------
  Change in other
    comprehensive
    loss.............          --        --             --             --     (2,310,392)     (2,310,392)    (2,310,392)
  Exercise of options
    and warrants.....      41,000        82         81,918             --             --          82,000             --
  Net income
    applicable to
    common stock.....          --        --             --     10,555,284             --      10,555,284     10,555,284
                       ----------   -------   ------------   ------------    -----------    ------------   ------------
BALANCE, December 31,
  2001...............  19,476,781   $38,954   $109,167,460   $(45,004,998)   $(2,310,392)   $ 61,891,024   $  8,244,892
                       ==========   =======   ============   ============    ===========    ============   ============



  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-5


                           SYNAGRO TECHNOLOGIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999




                                                           2001           2000            1999
                                                       ------------   -------------   ------------
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) applicable to common stock.......  $ 10,555,284   $ (34,432,654)  $  1,148,013
     Adjustments to reconcile to net cash provided by
       operating activities:
       Preferred stock dividends.....................     7,247,759       3,938,499             --
       Noncash beneficial conversion change..........            --      37,045,268             --
       Cumulative effect of change in accounting for
          derivatives................................     1,860,685              --             --
       Depreciation..................................    13,578,618       7,557,599      2,913,260
       Amortization..................................     6,454,110       4,694,710      1,748,982
       Gain on sale of property, machinery and
          equipment..................................      (221,239)        (30,192)      (151,426)
     Increase in the following, excluding the effects
       of acquisitions:
       Accounts receivable...........................      (405,573)       (768,558)    (3,674,251)
       Prepaid expenses and other assets.............    (3,211,420)     (2,351,607)    (3,234,281)
       Accounts payable, accrued expenses, and other
          liabilities................................     2,350,103       3,967,204      3,339,810
                                                       ------------   -------------   ------------
     Net cash provided by operating activities.......    38,208,327      19,620,269      2,090,107
                                                       ------------   -------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of businesses including contingent
     consideration, net of cash acquired.............    (1,708,757)   (245,385,665)   (13,802,090)
  Purchases of property, machinery and equipment.....   (13,312,534)     (5,805,151)    (4,043,026)
  Proceeds from sale of property, machinery and
     equipment.......................................       967,628         176,723      1,103,463
  Proceeds from notes receivable.....................         4,430          68,097        425,627
                                                       ------------   -------------   ------------
     Net cash used in investing activities...........   (14,049,233)   (250,945,996)   (16,316,026)
                                                       ------------   -------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from debt.................................            --     285,456,070     19,274,802
  Payments on debt...................................   (27,079,475)   (100,722,093)    (5,964,907)
  Debt issuance costs................................       (72,289)    (10,406,439)      (892,241)
  (Increase) decrease in restricted cash.............    (1,434,929)      1,819,930        680,656
  Issuance of preferred stock, net of offering
     costs...........................................            --      59,428,679             --
  Exercise of options and warrants...................        82,000         166,367        893,530
                                                       ------------   -------------   ------------
     Net cash provided by (used in) financing
       activities....................................   (28,504,693)    235,742,514     13,991,840
                                                       ------------   -------------   ------------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS...................................    (4,345,599)      4,416,787       (234,079)
CASH AND CASH EQUIVALENTS, beginning of year.........     4,597,420         180,633        414,712
                                                       ------------   -------------   ------------
CASH AND CASH EQUIVALENTS, end of year...............  $    251,821   $   4,597,420   $    180,633
                                                       ============   =============   ============
SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid......................................  $ 25,576,646   $  15,913,071   $  3,293,798
  Taxes paid.........................................  $    276,426   $     419,218   $      9,898



                                       F-6

                           SYNAGRO TECHNOLOGIES, INC.

              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

NONCASH INVESTING AND FINANCING ACTIVITIES

     On July 9, 1999, the Company entered into a capital lease agreement to
purchase ten trucks with a purchase price of approximately $660,000.

     During 2000, the Company issued an aggregate of 57,746.93 shares of Series
C, Series D, and Series E Preferred Stock ("Preferred Stock") with an eight
percent dividend and beneficial conversion feature. The Company recognized the
value of the beneficial conversion feature of approximately $37,045,000 as a
noncash beneficial conversion charge. Dividends totaled approximately $3,938,000
in 2000, of which approximately $3,419,000 represents the accrued eight percent
dividend on the Company's Preferred Stock, and approximately $519,000 represents
accretion and amortization of issuance costs.

     During 2000, the Company issued an aggregate of 220,898 shares relating to
cashless exercises of certain warrants and options pursuant to an exemption from
registration under Rule 144 of the Securities Act.

     During 2001, dividends totaled approximately $7,248,000, of which
approximately $6,097,000 represents the accrued eight percent dividend on the
Company's Preferred Stock, and approximately $1,151,000 represents accretion and
amortization of issuance costs.

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-7


                           SYNAGRO TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BUSINESS AND ORGANIZATION

     Synagro Technologies, Inc., a Delaware corporation ("Synagro"), and
collectively with its subsidiaries (the "Company") is a national wastewater
residuals management company serving more than 1,000 municipal and industrial
wastewater treatment plants and has operations in 35 states and the District of
Columbia. Synagro offers many services that focus on the beneficial reuse of
organic nonhazardous residuals resulting from the wastewater treatment process.
Synagro provides its customers with complete, vertically-integrated services and
capabilities, including facility operations, facility cleanout services,
regulatory compliance, dewatering, collection and transportation, composting,
drying and pelletization, product marketing, incineration, alkaline
stabilization, and land application.

  PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Synagro and
its wholly owned subsidiaries. All intercompany accounts and transactions have
been eliminated. As discussed further in Note 2, the Company acquired National
Resource Recovery, Inc., on March 1, 1999, in a transaction accounted for as a
pooling-of-interests. The historical consolidated financial statements of the
Company have been presented for the effect of the pooling-of-interests
transaction.

  CASH EQUIVALENTS

     The Company considers all investments with an original maturity of three
months or less when purchased to be cash equivalents.

  PROPERTY, MACHINERY AND EQUIPMENT

     Property, machinery and equipment are stated at cost. Depreciation is being
provided using the straight-line method over estimated useful lives of three to
twenty-five years, net of estimated salvage values. Leasehold improvements are
capitalized and amortized over the lesser of the life of the lease or the
estimated useful life of the asset.

     Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property, machinery and equipment, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in the statements of operations.

  GOODWILL

     Goodwill represents the aggregate purchase price paid by the Company in
acquisitions accounted for as a purchase over the fair value of the net assets
acquired. Goodwill is amortized on a straight-line basis over the estimated
period of benefit ranging from 20 to 40 years.

     In the event that facts and circumstances indicate that goodwill may be
impaired, an evaluation of recoverability would be performed. If an evaluation
was required, the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine if a
write-down to market value or discounted cash flow value was necessary. The
Company believes the goodwill remaining as of December 31, 2001, is fully
realizable.

     Through December 31, 2001, goodwill of approximately $2,196,000 has been
amortized over a 20-year life. The Company's remaining goodwill has been
amortized over a 40-year life. Goodwill amortization expense was approximately
$4,489,000, $3,516,000 and $1,527,000 for 2001, 2000 and 1999, respectively. In
                                       F-8

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,
amortization of goodwill will cease on January 1, 2002. See discussion of New
Accounting Pronouncements below.

  NONCOMPETE AGREEMENTS

     Included in other assets are noncompete agreements. These agreements are
valued at fair value and amortized on a straight-line basis over the term of the
agreement, which is generally for two to ten years. Noncompete agreements, net
of accumulated amortization at December 31, 2001 and 2000, totaled approximately
$421,000 and $544,000, respectively. Amortization expense was approximately
$124,000 in 2001, $72,000 in 2000, and $76,000 in 1999.

  DEFERRED FINANCING COSTS

     Deferred financing costs, net of accumulated amortization at December 31,
2001 and 2000, totaled approximately $7,012,000 and $9,450,000, respectively,
and are included in other assets. Deferred financing costs are amortized over
the life of the underlying instruments.

  REVENUE RECOGNITION

     Revenues under facilities operations and maintenance contracts are
recognized either when wastewater residuals enter the facilities or when the
residuals have been processed, depending on the contract terms. All other
revenues under service contracts are recognized when the service is performed.

     The Company provides for losses in connection with long-term contracts
where an obligation exists to perform services and when it becomes evident the
projected contract costs exceed the related revenues.

  RECLASSIFICATIONS

     Certain reclassifications have been made to the prior years' financial
statements to conform to the 2001 presentation.

  USE OF ESTIMATES

     In preparing financial statements in conformity with accounting principles
generally accepted in the United States, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
following are the Company's significant estimates and assumptions made in
preparation of its financial statements:

          Allowance for Doubtful Accounts. The Company estimates losses for
     uncollectible accounts based on the aging of the accounts receivable and
     the evaluation and the likelihood of success in collecting the receivable.

          Loss Contracts. The Company evaluates its revenue producing contracts
     to determine whether the projected revenues of such contracts exceed the
     direct cost to service such contracts. These evaluations include estimates
     of the future revenues and expenses. Accruals for loss contracts are
     adjusted based on these evaluations.

          Purchase Accounting. The Company estimates the fair value of assets,
     including property, machinery and equipment and its related useful lives
     and salvage values, and liabilities when allocating the purchase price of
     an acquisition.

                                       F-9

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

          Income Taxes. The Company assumes the deductibility of certain costs
     in its income tax filings and estimates the recovery of deferred income tax
     assets.

          Legal and Contingency Accruals. The Company estimates and accrues the
     amount of probable exposure it may have with respect to litigation, claims
     and assessments.

          Self Insurance Reserves. Through the use of actuarial calculations,
     the Company estimates the amounts required to settle insurance claims.

     Actual results could differ materially from the estimates and assumptions
that the Company uses in the preparation of its financial statements.

  CONCENTRATION OF CREDIT RISK

     The Company provides services to a broad range of geographical regions. The
Company's credit risk primarily consists of receivables from a variety of
customers including state and local agencies, municipalities and private
industries. The Company had one customer that accounted for approximately 14%
and 11% of total revenue for the years ended December 31, 2001 and 2000,
respectively. No other customers accounted for more than 10% of revenues. The
Company reviews its accounts receivable and provides allowances as deemed
necessary.

  INCOME TAXES

     The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." This standard provides the method for determining
the appropriate asset and liability for deferred income taxes, which are
computed by applying applicable tax rates to temporary differences. Therefore,
expenses recorded for financial statement purposes before they are deducted for
income tax purposes create temporary differences, which give rise to deferred
income tax assets. Expenses deductible for income tax purposes before they are
recognized in the financial statements create temporary differences which give
rise to deferred income tax liabilities.

  NEW ACCOUNTING PRONOUNCEMENTS

     Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,"
which requires that the Company recognize all derivative instruments as assets
or liabilities in its balance sheet and measure them at their fair value.
Changes in the fair value of a derivative are recorded in income or directly to
equity, depending on the instrument's designated use. For derivative instruments
that are designated and qualify as a cash flow hedge, the effective portion of
the gain or loss on the derivative instrument is reported as a component of
other comprehensive income and reclassified into income when the hedged
transaction affects income, while the ineffective portion of the gain or loss on
the derivative instrument is recognized currently in earnings. For derivative
instruments that are designated and qualify as a fair value hedge, the gain or
loss on the derivative instrument as well as the offsetting loss or gain on the
hedged item attributable to the hedged risk are recognized in current income
during the period of the change in fair values. The noncash transition
adjustment related to the adoption of this statement has been reflected as a
"cumulative effect of change in accounting for derivatives" of approximately
$1,861,000 charged to net income and approximately $2,058,000 charged to other
comprehensive income included in stockholders' equity as of January 1, 2001. See
Note (5) for discussion of the Company's current derivative contracts and
hedging activities.

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires all business combinations initiated after June 30,
2001, to be accounted for using the purchase method. Under SFAS 142,
                                       F-10

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

goodwill and intangible assets with indefinite lives are no longer amortized but
are reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives will be amortized over their useful lives. Management has completed the
initial impairment test required by the provisions of SFAS 142 as of January 1,
2002, and determined that there has not been an impairment of the Company's
goodwill. Beginning January 1, 2002, the Company will no longer amortize
goodwill. During 2001, the Company recorded goodwill amortization of
approximately $4.5 million.


     Effective January 1, 2002, the Company discontinued the amortization of
goodwill in accordance with our adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets." The following shows the effect on the twelve months ended
December 31, 2001, 2000 and 1999, as if SFAS No. 142 had been adopted January 1,
1999:





                                                        YEAR ENDED DECEMBER 31,
                                                ---------------------------------------
                                                   2001          2000          1999
                                                ----------   ------------   -----------
                                                                   
Net income (loss) applicable to common
  stock --
  Reported net loss applicable to common
     stock....................................  $1,148,013   $(34,432,654)  $10,555,284
  Addback: Goodwill amortization..............   1,526,717      3,515,931     4,488,667
                                                ----------   ------------   -----------
  Adjusted net income (loss)..................  $2,674,730   $(30,916,723)  $15,043,951
Earnings Per Share --
  Reported basic..............................  $      .07   $      (1.78)  $       .54
  Goodwill amortization.......................         .09            .18           .23
                                                ----------   ------------   -----------
  Adjusted basic..............................  $      .16   $      (1.60)  $       .77
                                                ==========   ============   ===========
  Reported diluted............................  $      .07   $      (1.78)  $       .36
  Goodwill amortization.......................         .08            .18           .09
                                                ----------   ------------   -----------
  Adjusted diluted............................  $      .15   $      (1.60)  $       .45
                                                ==========   ============   ===========



     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 covers all legally enforceable obligations
associated with the retirement of tangible long-lived assets and provides the
accounting and reporting requirements for such obligations. SFAS No. 143 is
effective for the Company beginning January 1, 2003. Management has yet to
determine the impact that the adoption of SFAS No. 143 will have on the
Company's consolidated financial statements.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." SFAS No. 144 establishes a single accounting method for long-
lived assets to be disposed of by sale, whether previously held and used or
newly acquired, and extends the presentation of discontinued operations to
include more disposal transactions. SFAS No. 144 also requires that an
impairment loss be recognized for assets held-for-use when the carrying amount
of an asset (group) is not recoverable. The carrying amount of an asset (group)
is not recoverable if it exceeds the sum of the undiscounted cash flows expected
to result from the use and eventual disposition of the asset (group), excluding
interest charges. Estimates of future cash flows used to test the recoverability
of a long-lived asset (group) must incorporate the entity's own assumptions
about its use of the asset (group) and must factor in all available evidence.
SFAS No. 144 is effective for the Company for the quarter ending March 31, 2002.
Management believes the impact of the adoption of SFAS No. 144 is not material
to the Company's results of operations and financial position.

                                       F-11

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2)  ACQUISITIONS

  2000 ACQUISITIONS

     During 2000, the Company purchased Residual Technologies, Limited
Partnership and its affiliates (collectively "RESTEC"), Ecosystematics, Inc.,
Davis Water Analysis, Inc., AKH Water Management, Inc., Rehbein, Inc, certain
assets and contracts of Whiteford Construction Company, Environmental Protection
& Improvement Company, Inc. ("EPIC"), and the Bio Gro Division of Waste
Management, Inc. ("Bio Gro") (collectively, the "2000 Acquisitions"). In
connection with the purchase of RESTEC, the former owners are entitled to
receive up to an additional $12.0 million over the eight years following the
acquisition if certain performance targets are met. In connection with the
purchase of Rehbein, Inc., the former owners are entitled to receive up to an
additional $2.0 million over the three years following the acquisition if
certain performance targets are met. In connection with the purchase of EPIC,
the former owners are entitled to receive up to an additional $5.4 million over
the three years following the acquisition if certain performance targets are
met. Additionally, the Company assumed approximately $13.4 million, net of
restricted cash reserves of approximately $3,076,000, of municipal bonds in
connection with the acquisition of RESTEC. The bonds contained a provision
whereby RESTEC could defease the bonds and be released from all future
obligations by placing an equivalent amount of U.S. Securities with the bonds
trustee. On July 21, 2000, the Company defeased the bonds utilizing the $13.5
million available under its amended Senior Credit Agreement reserved for
defeasance. The 2000 Acquisitions were accounted for using the purchase method
of accounting. The allocation of the purchase prices resulted in approximately
$107,632,000 of goodwill that has been amortized over 40 years. The assets
acquired and liabilities assumed relating to the 2000 Acquisitions are
summarized as follows:

                                                            
Common stock shares issued..................................      1,325,000
                                                               ============
Fair value of common stock issued...........................   $  5,471,000
Cash paid including transaction costs, net of cash
  acquired..................................................    247,092,000
Less: Fair value of net tangible assets acquired............    144,931,000
                                                               ------------
Goodwill....................................................   $107,632,000
                                                               ============



  1999 ACQUISITIONS

     In 1999, the Company purchased Anti-Pollution Associates, Inc., D&D
Pumping, Inc., Vital Cycle, Inc. and AMSCO, Inc. (collectively, the "1999
Acquisitions"). The 1999 Acquisitions were recorded using the purchase method of
accounting. The 1999 Acquisitions resulted in approximately $19,790,000 of
goodwill that has been amortized over 40 years. The assets acquired and
liabilities assumed relating to the 1999 Acquisitions are summarized as follows:

                                                            
Common stock shares issued..................................     3,044,784
                                                               ===========
Fair value of common stock issued...........................   $ 9,024,000
Cash paid including transaction costs, net of cash
  acquired..................................................    13,802,000
Less: Fair value of net tangible assets acquired............     3,036,000
                                                               -----------
Goodwill....................................................   $19,790,000
                                                               ===========



  ACQUISITION OF NATIONAL RESOURCE RECOVERY, INC.

     In March 1999, Synagro Technologies completed the acquisition of all the
common stock of National Resource Recovery, Inc. ("NRR"), in a business
combination accounted for as a "pooling-of-interests" transaction. NRR,
headquartered in Michigan, provides biosolids management services. Synagro
issued

                                       F-12

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1,000,001 shares of common stock in exchange for all of the common stock of NRR.
There were no transactions between Synagro and NRR during the periods prior to
the business combination.


     The following unaudited pro forma information for the periods 2000 and 1999
set forth below gives effect to the 2000 Acquisitions and the 1999 Acquisitions
as if they had occurred at the beginning of 1999. The unaudited pro forma
information is presented for information purposes only and is not necessarily
indicative of actual results, which might have occurred if the acquisitions had
been made at the beginning of the periods presented. Unaudited pro forma results
for 1999 include the noncash beneficial conversion charge of $37,045,000 related
to the issuance of preferred stock (see note 10).





                                                             YEAR ENDED DECEMBER 31,
                                                           ---------------------------
                                                               2000           1999
                                                           ------------   ------------
                                                                   (UNAUDITED)
                                                                    
Revenue..................................................  $248,700,000   $235,783,000
Net income before preferred stock dividends and noncash
  beneficial conversion charge...........................    10,635,000      4,858,000
Net income (loss) applicable to common stock.............     3,541,000    (38,266,000)
Net earnings (loss) per share
  Basic..................................................  $        .18   $      (2.00)
  Diluted................................................  $        .18   $      (2.00)



(3)  PROPERTY, MACHINERY AND EQUIPMENT

     Property, machinery and equipment consist of the following:



                                                                      DECEMBER 31,
                                            ESTIMATED USEFUL   ---------------------------
                                             LIFE-IN YEARS         2001           2000
                                            ----------------   ------------   ------------
                                                                     
Land......................................         N/A         $  3,546,730   $  3,276,806
Buildings and improvements................        7-25           32,071,873     31,297,999
Machinery and equipment...................        3-25          193,752,690    174,900,163
Office furniture and equipment............        3-10            2,437,223      1,671,660
Construction in process...................          --            3,571,510      3,346,001
                                                               ------------   ------------
                                                                235,380,026    214,492,629
Less -- Accumulated depreciation..........                       29,265,759     16,026,272
                                                               ------------   ------------
                                                               $206,114,267   $198,466,357
                                                               ============   ============


(4)  DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

     Activity of the Company's allowance for doubtful accounts consists of the
following:



                                                               DECEMBER 31,
                                                    ----------------------------------
                                                       2001         2000        1999
                                                    ----------   ----------   --------
                                                                     
Balance at beginning of year......................  $1,701,475   $  522,896   $196,770
Uncollectible receivables written off.............          --      (45,000)    (2,874)
Allowance for doubtful accounts established
  through purchase accounting and charged through
  expense.........................................     463,391    1,223,579    329,000
                                                    ----------   ----------   --------
Balance at end of year............................  $2,164,866   $1,701,475   $522,896
                                                    ==========   ==========   ========


                                       F-13

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Accounts payable and accrued expenses consist of the following:



                                                                   DECEMBER 31,
                                                             -------------------------
                                                                2001          2000
                                                             -----------   -----------
                                                                     
Accounts payable...........................................  $25,447,341   $23,213,781
Accrued legal and other claims costs.......................    2,238,540     1,906,194
Accrued interest...........................................    2,711,473     2,139,110
Accrued salaries and benefits..............................    3,618,286     1,991,814
Accrued taxes..............................................      274,694       673,674
Other accrued expenses.....................................    6,660,725     6,389,368
                                                             -----------   -----------
Total......................................................  $40,951,059   $36,313,941
                                                             ===========   ===========



(5)  LONG-TERM DEBT OBLIGATIONS


     Long-term debt obligations consist of the following:



                                                                  DECEMBER 31,
                                                           ---------------------------
                                                               2001           2000
                                                           ------------   ------------
                                                                    
Credit facility -- revolving loan........................  $         --   $         --
Credit facility -- acquisition and term loans............   161,936,292    185,499,999
Subordinated debt........................................    52,760,393     52,760,393
Fair value adjustment related to subordinated debt.......       801,857             --
Capital lease obligations................................            --        626,819
Other notes payable......................................        32,674        736,622
                                                           ------------   ------------
          Total debt.....................................  $215,531,216   $239,623,833
Less:
Current maturities.......................................   (12,880,693)    (9,265,380)
                                                           ------------   ------------
          Long-term debt, net of current maturities......  $202,650,523   $230,358,453
                                                           ============   ============


  CREDIT FACILITY

     On January 27, 2000, the Company entered into a $110 million amended and
restated Senior Credit Agreement (the "Senior Credit Agreement") by and among
the Company, Bank of America, N.A., and certain other lenders to fund working
capital for acquisitions, to refinance existing debt, to provide working capital
for operations, to fund capital expenditures and other general corporate
purposes. The Senior Credit Agreement bears interest at LIBOR or prime plus a
margin based on a pricing schedule as set out in the Senior Credit Agreement.
The Senior Credit Agreement was subsequently syndicated on March 15, 2000, to
lenders, and the capacity was increased to $120 million. The Senior Credit
Agreement was amended and resyndicated on August 14, 2000, to lenders, and the
capacity was increased to $230 million. On February 25, 2002, the Senior Credit
Agreement was amended to, among other items, increase the revolving loan from

                                       F-14

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$30 million to approximately $51.3 million, increase sublimits for letters of
credit from $20 million to $50 million, provide limitations for restricted
payments and investments, and increase the permitted amounts of nonrecourse
financing and operating lease obligations.

     As of February 25, 2002, the loan commitments under the Senior Credit
Agreement, as amended, are as follows:

          (i) Revolving Loan up to $51,330,000 outstanding at any one time;

          (ii) Term A Loans (which, once repaid, may not be reborrowed) of
     $50,000,000;

          (iii) Term B Loans (which, once repaid, may not be reborrowed) of
     $100,000,000;

          (iv) Acquisition Term Loans up to $50,000,000 outstanding at any one
     time available on a revolving basis prior to February 14, 2002, provided
     that certain approvals are obtained and certain financial ratios are met;
     and

          (v) Letters of credit issuable by the Company up to $50,000,000 as a
     subset of the Revolving Loan. At December 31, 2001, the Company had
     approximately $10,250,000 of letters of credit outstanding.

     The amounts borrowed under the Senior Credit Agreement are subject to
repayment as follows:



                                                 REVOLVING   TERM A   TERM B   ACQUISITION
PERIOD ENDING DECEMBER 31,                         LOANS     LOANS    LOANS       LOANS
- --------------------------                       ---------   ------   ------   -----------
                                                                   
2000...........................................       --       5.00%     .50%         0%
2001...........................................       --      15.00%    1.00%         0%
2002...........................................       --      22.50%    1.00%      5.00%
2003...........................................       --      17.50%    1.00%      6.67%
2004...........................................       --      20.00%    1.00%     11.67%
2005...........................................   100.00%     20.00%    1.00%     76.66%
2006...........................................       --         --    94.50%        --
                                                  ------     ------   ------     ------
                                                  100.00%    100.00%  100.00%    100.00%
                                                  ======     ======   ======     ======


     The Senior Credit Agreement includes mandatory repayment provisions related
to excess cash flows, proceeds from certain asset sales, debt issuances and
equity issuances, all as defined in the Senior Credit Agreement. These mandatory
repayment provisions may also reduce the available commitment for Revolving
Loans and Acquisition Loans. The Senior Credit Agreement contains standard
covenants including compliance with laws, limitations on capital expenditures,
restrictions on dividend payments, limitations on mergers and compliance with
certain financial covenants. The Company believes that it is in compliance with
those covenants as of December 31, 2001. The Senior Credit Agreement is secured
by all the assets of the Company and expires on July 27, 2006. As of December
31, 2001, the Company has borrowed approximately $161,936,000 ($35,886,000 of
Term A Loans, $88,370,000 of Term B Loans, and $37,680,000 of Acquisition
Loans), which was primarily used to refinance existing debt and to partially
fund the 2000 and 1999 Acquisitions. As of December 31, 2001, the Company has
approximately $32,069,000 of unused borrowings under the Senior Credit
Agreement. The Company's Senior Credit Agreement contains various financial
covenants, including a senior debt-to-cash flow ratio, as defined, determined at
the end of each quarter. As of December 31, 2001, the maximum senior debt that
could have been outstanding while remaining in compliance with the covenant
ratios was approximately $194,006,000. As of March 13, 2002, the Company has
borrowed approximately $167,936,000 ($35,886,000 of Term A Loans, $88,370,000 of
Term B Loans, $37,680,000 of Acquisition Loans, and $6,000,000 of Revolving
Loans) with approximately $29,072,000 of unused borrowings remaining under the
Senior Credit Agreement.

                                       F-15

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  SUBORDINATED DEBT

     On January 27, 2000, the Company entered into an agreement with GTCR
Capital providing up to $125 million in subordinated debt financing to fund
acquisitions and for certain other uses, in each case as approved by the Board
of Directors of the Company and GTCR Capital. The agreement was amended on
August 14, 2000, allowing, among other things, for the syndication of 50% of the
commitment. The loans bear interest at an annual rate of 12% paid quarterly and
provide warrants that are convertible into Preferred Stock at $.01 per warrant.
The unpaid principal plus unpaid and accrued interest must be paid in full by
January 27, 2008. The agreement contains general and financial covenants. As of
December 31, 2001, the Company has borrowed approximately $52,760,000 of
indebtedness under the terms of the agreement, which was used to partially fund
the 2000 Acquisitions. Warrants to acquire 9,225.839 shares of Series C, D, and
E Preferred Stock were issued in connection with these borrowings. These
warrants were immediately exercised (See Note 10).

  DERIVATIVES AND HEDGING ACTIVITIES

     Prior to June 25, 2001, the Company's derivative contracts consisted of
interest rate swap agreements and option agreements related to hedging
requirements under the Company's Senior Credit Agreement. The option agreements
did not qualify for hedge accounting under SFAS 133. Changes in the fair value
of these derivatives were recognized in earnings as interest expense of
$226,000. The Company's interest rate swap agreements qualified for hedge
accounting as cash flow hedges of the Company's exposure to changes in variable
interest rates.


     On June 25, 2001, the Company entered into a reverse swap on its
subordinated debt, and terminated the previously existing interest rate swap and
option agreements noted above. The balance included in accumulated other
comprehensive loss included in stockholders' equity is being recognized in
future periods' income over the remaining term of the original swap agreement.
The amount to be recognized into income over the next twelve months is
approximately $813,000. The Company has designated the reverse swap agreement on
its subordinated debt as a fair value hedge of changes in the value of the
underlying debt as a result of changes in the benchmark interest rate. Under the
terms of the reverse swap, we receive 12% per annum on $52.8 million notional
and we pay a spread over a floating rate on $52.8 million notional. The
liability related to the reverse swap agreement totaling approximately
$5,151,000 is reflected in other long-term liabilities at December 31, 2001;
additionally, a fair value adjustment on the Company's subordinated debt of
approximately $802,000 is reflected in long-term debt at December 31, 2001. The
amount of the ineffectiveness of the reverse swap agreement credited to interest
expense, net for the twelve months ended December 31, 2001, totaled
approximately $267,000.


     On July 3, 2001, the Company entered into an interest rate cap agreement
establishing a maximum fixed LIBOR rate on $125,000,000 of its floating rate
debt at an interest rate of 6.50% in order to meet the hedging requirements of
its Senior Credit Agreement. Changes in the fair value of the agreement charged
to interest expense, net and totaled $66,000 during 2001.

                                       F-16

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  FUTURE PAYMENTS

     At December 31, 2001, future minimum principal payments of long-term debt
and Nonrecourse Project Revenue Bonds (see Note 6) are as follows:



                                                             NONRECOURSE
                                              LONG-TERM        PROJECT
YEAR ENDING DECEMBER 31,                         DEBT       REVENUE BONDS      TOTAL
- ------------------------                     ------------   -------------   ------------
                                                                   
2002.......................................  $ 12,880,693    $ 2,300,000    $ 15,180,693
2003.......................................    11,267,073      2,430,000      13,697,073
2004.......................................    14,272,541      2,570,000      16,842,541
2005.......................................    38,761,075      2,710,000      41,471,075
2006.......................................    84,787,584             --      84,787,584
2007-2010..................................    53,562,250     16,295,000      69,857,250
2011-2016..................................            --     16,579,848      16,579,848
                                             ------------    -----------    ------------
Total......................................  $215,531,216    $42,884,848    $258,416,064
                                             ============    ===========    ============


     The Company had total debt of approximately $258,416,000 at December 31,
2001, including total long-term debt of approximately $215,531,000 and
Nonrecourse Project Revenue Bonds of approximately $42,885,000 net of restricted
cash of approximately $5,780,000. The Company had current maturities on long-
term debt of approximately $12,881,000 and current maturities of approximately
$2,300,000 on Nonrecourse Project Revenue Bonds at December 31, 2001. The
Company estimates the fair value of long-term debt as of December 31, 2001 and
2000, to be approximately the same as the recorded value.

(6)  NONRECOURSE PROJECT REVENUE BONDS



                                                             DECEMBER 31,   DECEMBER 31,
                                                                 2001           2000
                                                             ------------   ------------
                                                                      
Maryland Energy Financing Administration Limited Obligation
  Solid Waste Disposal Revenue Bonds, 1996 series --
     Revenue bonds due 2001 to 2005 at stated interest
       rates of 5.45% to 5.85%.............................  $10,010,000    $12,195,000
     Term revenue bond due 2010 at stated interest rate of
       6.30%...............................................   16,295,000     16,295,000
     Term revenue bond due 2016 at stated interest rate of
       6.45%...............................................   22,360,000     22,360,000
     Less: Restricted cash.................................   (5,780,152)    (5,541,229)
                                                             -----------    -----------
                                                              42,884,848     45,308,771
     Less: Current maturities..............................   (2,300,000)    (2,185,000)
                                                             -----------    -----------
     Nonrecourse project revenue bonds, net of current
       maturities..........................................  $40,584,848    $43,123,771
                                                             ===========    ===========


     In 1996, the Maryland Energy Financing Administration (the
"Administration") issued nonrecourse tax-exempt project revenue bonds (the
"Nonrecourse Project Revenue Bonds") in the aggregate amount of $58,550,000. The
Administration loaned the proceeds of the Nonrecourse Project Revenue Bonds to
Wheelabrator Water Technologies Baltimore L.L.C., now Synagro's wholly owned
subsidiary known as Synagro-Baltimore, L.L.C., pursuant to a June 1996 loan
agreement, and the terms of the loan mirror the terms of the Nonrecourse Project
Revenue Bonds. The loan financed a portion of the costs of constructing thermal
facilities located in Baltimore County, Maryland, at the site of its Back River
Wastewater Treatment Plant, and in the City of Baltimore, Maryland, at the site
of its Patapsco Wastewater Treatment Plant. The Company assumed all obligations
associated with the Nonrecourse Project Revenue Bonds in connection with its
acquisition of Bio Gro in 2000.

                                       F-17

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Nonrecourse Project Revenue Bonds are primarily secured by the pledge
of revenues and assets related to our Back River and Patapsco thermal
facilities. The underlying service contracts between us and the City of
Baltimore obligated us to design, construct and operate the thermal facilities
and obligated the City to deliver biosolids for processing at the thermal
facilities. The City makes all payments under the service contracts directly
with a trustee for the purpose of paying the Nonrecourse Project Revenue Bonds.

     At our option, we may cause the redemption of the Nonrecourse Project
Revenue Bonds at any time on or after December 1, 2006, subject to redemption
prices specified in the loan agreement. The Nonrecourse Project Revenue Bonds
will be redeemed at any time upon the occurrence of certain extraordinary
conditions, as defined in the loan agreement.

     Synagro-Baltimore, L.L.C., one of our wholly owned subsidiaries, guarantees
the performance of services under the underlying service agreements with the
City of Baltimore. Under the terms of the Bio Gro acquisition purchase
agreement, Waste Management, Inc. also guarantees the performance of services
under those service agreements. We have agreed to pay Waste Management $500,000
per year beginning in 2007 until the Nonrecourse Project Revenue Bonds are paid
or its guarantee is removed. Neither Synagro-Baltimore, L.L.C. nor Waste
Management has guaranteed payment of the Nonrecourse Project Revenue Bonds or
the loan funded by the Nonrecourse Project Revenue Bonds.

     The loan agreement, based on the terms of the related indenture, requires
that we place certain monies in restricted fund accounts and that those funds be
used for various designated purposes (e.g., debt service reserve funds, bond
funds, etc.). Monies in these funds will remain restricted until the Nonrecourse
Project Revenue Bonds are paid.

     At December 31, 2001, the Nonrecourse Project Revenue Bonds were secured by
property, machinery and equipment with a net book value of approximately
$60,083,000 and restricted cash of approximately $8,557,000, of which
approximately $5,780,000 was netted against long-term debt and the difference
was shown as restricted cash.

     These Nonrecourse Project Revenue Bonds, totaling $42,900,000 of debt (net
of restricted cash) as of December 31, 2001, and $3,100,000 of related interest
expense paid in 2001, are excluded from the financial covenant calculations
required by our Senior Credit Facility.

  CAPITAL LEASES

     The Company operated under lease agreements at December 31, 2000, which
were accounted for as capital leases and were repaid during 2001. As of December
31, 2000, the capitalized costs and accumulated depreciation of equipment under
capital leases were as follows:

                                                            
Equipment...................................................   $1,054,825
  Less: Accumulated depreciation............................      274,388
                                                               ----------
                                                               $  780,437
                                                               ==========



                                       F-18

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(7)  INCOME TAXES

     Federal and state income tax provisions are as follows:



                                                         YEAR ENDED DECEMBER 31,
                                                     --------------------------------
                                                       2001       2000        1999
                                                     --------   ---------   ---------
                                                                   
Federal:
  Current..........................................  $     --   $      --   $      --
  Deferred.........................................   390,000    (350,000)   (200,000)
State:
  Current..........................................   175,000     350,000     200,000
  Deferred.........................................     8,000          --          --
                                                     --------   ---------   ---------
                                                     $573,000   $      --   $      --
                                                     ========   =========   =========


     Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 35% to income before
provision for income taxes as follows:



                                                             YEAR ENDED DECEMBER 31,
                                                            -------------------------
                                                            2001      2000      1999
                                                            -----     -----     -----
                                                                       
Provision (benefit) at the statutory rate.................   35.0%     35.0%     35.0%
Increase (decrease) resulting from:
  Goodwill, net...........................................    0.0%     (5.0)%    42.0%
  State income taxes, net of benefit for federal
     deduction............................................    0.6%      5.0%      9.0%
  Other items, net........................................  (11.4)%     0.0%     (3.0)%
  Change in accounting for derivatives....................   (3.2)%      --%       --%
  Special credits, net....................................   (9.8)%     0.0%      0.0%
  Change in valuation allowance...........................   (8.4)%   (35.0)%   (83.0)%
                                                            -----     -----     -----
                                                              2.8%      0.0%      0.0%
                                                            =====     =====     =====


                                       F-19

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Significant components of the Company's deferred tax assets and liabilities
for federal income taxes consist of the following:



                                                                   DECEMBER 31,
                                                             -------------------------
                                                                2001          2000
                                                             -----------   -----------
                                                                     
Deferred tax assets --
  Net operating loss carryforwards.........................  $25,540,000   $12,140,000
  Alternative minimum tax credit...........................       40,000        40,000
  Accrual not currently deductible for tax purposes........    6,025,000     3,614,000
  Allowance for bad debts..................................      744,000       558,000
  Other....................................................    1,783,000       417,000
                                                             -----------   -----------
     Total deferred tax assets.............................   34,132,000    16,769,000
Valuation allowance for deferred tax assets................   (1,297,000)   (2,993,000)
Deferred tax liability --
  Differences between book and tax bases of fixed assets...  (26,577,000)  (10,921,000)
  Differences between book and tax bases of goodwill.......   (4,681,000)   (2,305,000)
                                                             -----------   -----------
     Total deferred tax liabilities........................  (31,258,000)  (13,226,000)
                                                             -----------   -----------
     Net deferred tax asset................................  $ 1,577,000   $   550,000
                                                             ===========   ===========


     As of December 31, 2001, the Company generated net operating loss ("NOL")
carryforwards of approximately $67,209,000 available to reduce future income
taxes. These carryforwards begin to expire in 2008. A change in ownership, as
defined by federal income tax regulations, could significantly limit the
Company's ability to utilize its carryforwards. Accordingly, the Company's
ability to utilize its NOLs to reduce future taxable income and tax liabilities
may be limited. Additionally, because federal tax laws limit the time during
which these carryforwards may be applied against future taxes, the Company may
not be able to take full advantage of these attributes for federal income tax
purposes. As the Company has incurred losses in recent years and the utilization
of these carryforwards could be limited as discussed above, a valuation
allowance has been established to partially offset the net deferred tax asset at
December 31, 2001 and 2000. The valuation allowance decreased by $1,696,000 for
the year ended December 31, 2001, due to basis differences in fixed assets and
goodwill reduced by deferred tax assets related to increases in tax NOL
carryforwards. The valuation allowance decreased by $333,000 for the year ended
December 31, 2000, due to basis differences in fixed assets and goodwill reduced
by net deferred tax assets related to increases in tax NOL carryforwards.

(8)  COMMITMENTS AND CONTINGENCIES

  LEASES

     The Company leases certain facilities and equipment for its corporate and
operations offices under noncancelable long-term lease agreements. Rental
expense was approximately $4,794,000, $3,861,000 and

                                       F-20

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$1,368,000 for 2001, 2000 and 1999, respectively. Minimum annual rental
commitments under these leases are as follows:



YEAR ENDING DECEMBER 31,
- ------------------------
                                                            
2002........................................................   $ 4,768,418
2003........................................................     4,384,249
2004........................................................     4,254,919
2005........................................................     3,687,492
2006........................................................     3,035,267
Thereafter..................................................    18,366,326
                                                               -----------
                                                               $38,496,671
                                                               ===========


  CUSTOMER CONTRACTS

     A substantial portion of the Company's revenue is derived from services
provided under contracts and written agreements with the Company's customers.
Some of these contracts, especially those contracts with large municipalities
(including our largest contract and four of the Company's other top 10
contracts), provide for termination of the contract by the customer after giving
relatively short notice (in some cases as little as 10 days). In addition, these
contracts contain liquidated damages clauses which may or may not be enforceable
in the case of early termination of the contracts. If one or more of these
contracts are terminated prior to the expiration of its term, and the Company is
not able to replace revenues from the terminated contracts or receive liquidated
damages pursuant to the terms of the contract, the lost revenue could have a
material and adverse effect the Company's business, financial condition and
results of operations.

  LITIGATION

     The Company's business activities are subject to environmental regulation
under federal, state and local laws and regulations. In the ordinary course of
conducting its business activities, the Company becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. The Company believes that these matters will not have a
material adverse effect on its business, financial condition and results of
operations. However, the outcome of any particular proceeding cannot be
predicted with certainty. The Company is required, under various regulations, to
procure licenses and permits to conduct its operations. These licenses and
permits are subject to periodic renewal without which the Company's operations
could be adversely affected. There can be no assurance that regulatory
requirements will not change to the extent that it would materially affect the
Company's consolidated financial statements.

  Marshall Case

     In January 2002, the Company settled a lawsuit that was filed in Rockingham
County Superior Court, New Hampshire, in November 1998. The plaintiff claimed
that the death of an individual was allegedly caused by exposure to certain
biosolids disposed of by one of the Company's wholly owned subsidiaries. The
plaintiff in the settlement represented that there was no scientific support to
the allegations as previously alleged. See Note 12.

  Riverside County

     The Company leases and operates a composting facility in Riverside County,
California, under a conditional use permit ("CUP") that expires January 1, 2010.
The CUP allows for a reduction in material intake and CUP term in the event of
noncompliance with the CUP's terms and conditions. In response to alleged
noncompliance due to excessive odor, on or about June 22, 1999, the Riverside
County Board of

                                       F-21

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Supervisors attempted to reduce the Company's intake of biosolids from 500 tons
per day to 250 tons per day. The Company believes that this was not an
authorized action by the Board of Supervisors. On September 15, 1999, the
Company was granted a preliminary injunction restraining and enjoining the
County of Riverside ("County") from restricting the Company's intake of
biosolids at its Riverside composting facility.

     In the lawsuit that the Company filed in the Superior Court of California,
County of Riverside, the Company has also complained that the County's treatment
of the Company is in violation of our civil rights under U.S.C. Section 1983 and
that its due process rights were being affected because the County was
improperly administering the odor protocol in the CUP. The County alleges that
the odor "violations," as well as the Company's actions in not reducing intake,
could reduce the term of the CUP to January 2002. The Company disagrees and has
challenged the County's position in the lawsuit.

     No trial date has been set at this time. The case is currently subject to
an agreed stay and we continue to operate under the existing CUP while the
parties explore settlement. The parties have executed a Memorandum of
Understanding signed by the Board of Supervisors of the County which provides
for a plan to relocate the compost facility to a piece of land owned by the
County.

     Whether or not the parties reach settlement based on the terms of the
Memorandum of Understanding, the site may be closed, we may incur additional
costs related to contractual agreements, relocation and site closure, as well as
the need to obtain new permits (including some from the County) at a new site.
If the Company is unsuccessful in its efforts, goodwill and certain assets may
be impaired. Total goodwill associated with the operations is approximately
$13,843,000 at December 31, 2001. The financial impact associated with a site
closure cannot be reasonably estimated at this time. Although we feel that our
case is meritorious, the ultimate outcome cannot be determined at this time.

  Reliance Insurance

     For the 24 months ended October 31, 2000 (the "Reliance Coverage Period"),
the Company insured certain risks, including automobile, general liability, and
worker's compensation, with Reliance National Indemnity Company ("Reliance")
through policies totaling $26 million in annual coverage. On May 29, 2001, the
Commonwealth Court of Pennsylvania entered an order appointing the Pennsylvania
Insurance Commissioner as Rehabilitator and directing the Rehabilitator to take
immediate possession of Reliance's assets and business. On June 11, 2001,
Reliance's ultimate parent, Reliance Group Holdings, Inc., filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code of 1978, as amended. On
October 3, 2001, the Pennsylvania Insurance Commissioner removed Reliance from
rehabilitation and placed it into liquidation.

     On January 21, 2000, several plaintiffs filed suit in the District Court of
Jackson County, Texas, (the "Lopez Suit") against a wholly owned subsidiary of
the Company, Synagro of Texas-CDR, Inc. The Lopez Suit was later amended to name
the Company as an additional defendant. The suit arises out of an automobile
accident involving a vehicle operated by Synagro of Texas-CDR, Inc., in which
one person was killed and two others were injured. The Lopez Suit was set for
trial in November 2001; however, on October 16, 2001, as a result of the Texas
Insurance Commissioner's finding that Reliance was impaired, a notice of an
automatic 180-day stay was filed in the Lopez Suit. The stay will expire April
5, 2002, and the Lopez Suit is set for trial on May 13, 2002, with a backup
trial setting of June 17, 2002. The Lopez plaintiffs are seeking unspecified
damages from the Company and its affiliates. On November 13, 2001, the Company
filed a petition for intervention in the Pennsylvania Court requesting that the
Court approve and order Reliance to fund an $11.9 million settlement that
Reliance had proposed regarding the Lopez Suit (the "Intervention Action").

     The Company is vigorously defending itself against this lawsuit. In
addition, other third parties have asserted claims and/or brought suit against
the Company and its affiliates related to alleged acts or omissions occurring
during the Reliance Coverage Period. It is possible, depending on the outcome of
the AON Suit (discussed below) and the Intervention Action, and possible claims
made with the Texas Property and

                                       F-22

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Casualty Insurance Guaranty Association, that the Company will have no, or
insufficient, insurance funds available to pay any potential losses. There are
uncertainties relating to (1) the Company's ultimate liability, if any, for
damages in the Lopez Suit or the other cases arising during the covered period;
(2) the availability of the insurance coverage; (3) the potential for recovery
from the AON Suit; (4) the Intervention Action; and (5) possible recovery from
the Texas Property and Casualty Insurance Guaranty Association. Based upon
information currently available, the Company has estimated that its net probable
exposure for unpaid insurance claims and other costs for which coverage may not
be available due to the pending liquidation of Reliance is $1.9 million and,
accordingly, have recorded a special charge of $2.2 million in its December 31,
2001, financial statements to record the estimated exposure for this matter and
related legal expenses. Although the Company believes $1.9 million of the charge
represents its current probable exposure related to the Reliance matter, the
final resolution could be substantially different from the amount recorded.

  AON

     On October 4, 2001, the Company filed suit in the 24th Judicial District
Court of Jackson County, Texas, against its insurance broker, AON Risk Services
of Texas, Inc. ("AON"), and the several insurance companies that reinsured the
policies issued by Reliance (the "Reinsurers") (the "AON Suit"). In the AON
Suit, the Company is seeking a judgment against AON for any and all sums that
the Company may become liable for as a result of any settlement of, or the entry
of any judgment in, the Lopez Suit, and any and all costs associated with
defense thereof, as a result of the Company's assertion of negligence by AON in
placing the entirety of the Company's insurance coverage with Reliance and AON's
failure to obtain "cut through endorsements" to the Reliance policies which
would enable the Company to proceed directly against the Reinsurers. The Company
is also seeking a declaratory judgment against the Reinsurers declaring that the
Reinsurers owe the Company a duty of defense and indemnity in the Lopez Suit as
a result of the Reinsurers' participation in the investigation, evaluation, and
handling of the Lopez Suit, as a result of any "cut through endorsements" that
may have been obtained by AON, and by virtue of a "fronting arrangement" whereby
most or all of certain Reliance policies were reinsured. The AON Suit is at an
early stage, and the ultimate outcome of this litigation, including amounts, if
any, that may be recovered by the Company, cannot be determined at this time.

  Other

     There are various other lawsuits and claims pending against Synagro that
have arisen in the normal course of Synagro's business and relate mainly to
matters of environmental, personal injury and property damage. The outcome of
these matters is not presently determinable but, in the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the consolidated financial condition or results of operations of Synagro.

     As of March 13, 2002, Synagro has issued performance bonds of approximately
$115,000,000 and other guarantees. Such financial instruments are given in the
ordinary course of business. Synagro insures the majority of its contractual
obligations through performance bonds.

                                       F-23

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9)  OTHER COMPREHENSIVE LOSS

     The Company's accumulated comprehensive loss for the twelve months ended
December 31, 2001, is summarized as follows:




                                                            
  Cumulative effect of change in accounting for
     derivatives............................................   $(2,058,208)
  Change in fair value of derivatives.......................    (2,200,696)
  Reclassification adjustment to earnings...................       532,466
  Tax benefit of changes in fair value......................     1,416,046
                                                               -----------
                                                               $(2,310,392)
                                                               ===========


     There is no difference between net income (loss) and comprehensive income
(loss) for 2000 and 1999.

(10)  STOCKHOLDERS' EQUITY

  COMMON STOCK AND WARRANTS

     On October 7, 1998, the Company issued warrants to purchase 170,000 shares
of Common Stock, in connection with the Senior Credit Agreement (see Note 5).
The warrants are exercisable at $6.00 and expire October 2002. The Company
estimated the fair value of the warrants to be approximately $200,000, which was
recorded as deferred financing costs and additional paid-in capital. These
deferred loan costs are being amortized over the term of the Senior Credit
Agreement.

  PREFERRED STOCK

     The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, which may be issued in one or more series or classes by the Board of
Directors of the Company. Each such series or class shall have such powers,
preferences, rights and restrictions as determined by resolution of the Board of
Directors. Series A Junior Participating Preferred Stock will be issued upon
exercise of the Stockholder Rights described below.

  SERIES C REDEEMABLE PREFERRED STOCK

     On January 26, 2000, the Company authorized 30,000 shares of Series C
Preferred Stock, par value $.002 per share. Upon approval by a majority of the
Company's shareholders and certain other conditions in March 2000, the Series C
Preferred Stock became convertible into Series D Preferred Stock at a rate of
1:1. The Series C Preferred Stock is senior to the Common Stock or any other
equity securities of the Company. The liquidation value of each share of Series
C Preferred Stock is $1,000 per share ("Liquidation Value") plus accrued and
unpaid dividends. Dividends on each share of Series C Preferred Stock shall
accrue on a daily basis at the rate of eight percent per annum on aggregate
Liquidation Value plus accrued and unpaid dividends. The Series C Preferred
Stock has no voting rights. Shares of Series C Preferred Stock are subject to
mandatory redemption by the Company on January 26, 2010, at a price per share
equal to the Liquidation Value plus accrued and unpaid dividends.

     On January 27, 2000, the Company issued 17,358.824 shares of Series C
Preferred Stock, par value $.002 per share, to GTCR Fund VII, L.P. and its
affiliates for $17,358,824. On February 4, 2000, the Company issued 419.400
shares of Series C Preferred Stock to GTCR Fund VII, L.P. and its affiliates for
$419,400. On March 24, 2000, the Company issued 225.000 shares of Series C
Preferred Stock to GTCR Fund VII, L.P. and its affiliates for $225,000. On March
27, 2000, the Company issued 1,260.000 shares of Series C Preferred Stock to
GTCR Fund VII, L.P. and its affiliates for $1,260,000. The proceeds were used
primarily to fund the 2000 Acquisitions. The Company also issued warrants to
GTCR Fund VII, L.P. for a

                                       F-24

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

nominal price in connection with the issuance of subordinated debt, which were
immediately converted into 272.058 shares of Series C Preferred Stock. During
April 2000, all Series C Preferred Stock was converted to Series D Preferred
Stock.

  SERIES D REDEEMABLE PREFERRED STOCK

     On January 26, 2000, the Company authorized 32,000 shares of Series D
Preferred Stock, par value $.002 per share. The Series D Preferred Stock is
convertible by the holders into a number of shares of Common Stock computed by
(i) the sum of (a) the number of shares to be converted multiplied by the
Liquidation Value and (b) the amount of accrued and unpaid dividends by (ii) the
conversion price then in effect. The initial conversion price is $2.50 per
share, provided that in order to prevent dilution, the conversion price may be
adjusted. The Series D Preferred Stock is senior to the Common Stock or any
other equity securities of the Company. The liquidation value of each share of
Series D Preferred Stock is $1,000 per share ("Liquidation Value") plus accrued
and unpaid dividends. Dividends on each share of Series D Preferred Stock shall
accrue on a daily basis at the rate of eight percent per annum on the aggregate
Liquidation Value and may be paid in cash or effectively in kind, at our option.
The Series D Preferred Stock is entitled to one vote per share. Shares of Series
D Preferred Stock are subject to mandatory redemption by the Company on January
26, 2010, at a price per share equal to the Liquidation Value plus accrued and
unpaid dividends.

     On January 27, 2000, the Company issued 2,641.176 shares of Series D
Preferred Stock to GTCR Fund VII, L.P. and its affiliates for $2,641,176. The
proceeds were used primarily to fund the 2000 Acquisitions. The Company also
issued warrants to GTCR Fund VII, L.P. for a nominal price in connection with
the issuance of subordinated debt, which were immediately converted into
2,857.143 shares of Series D Preferred Stock.

  SERIES E REDEEMABLE PREFERRED STOCK

     On June 14, 2000, the Company authorized 55,000 shares of Series E
Preferred Stock, par value $.002 per share. The Series E Preferred Stock is
convertible by the holders into a number of shares of Common Stock computed by
(i) the sum of (a) the number of shares to be converted multiplied by the
Liquidation Value and (b) the amount of accrued and unpaid dividends by (ii) the
conversion price then in effect. The initial conversion price is $2.50 per
share, provided that in order to prevent dilution, the conversion price may be
adjusted. The Series E Preferred Stock is senior to the Common Stock or any
other equity securities of the Company. The liquidation value of each share of
Series E Preferred Stock is $1,000 per share ("Liquidation Value") plus accrued
and unpaid dividends. Dividends on each share of Series E Preferred Stock shall
accrue on a daily basis at the rate of eight percent per annum on the aggregate
Liquidation Value and may be paid in cash or effectively in kind, at our option.
The Series E Preferred Stock is entitled to one vote per share. Shares of Series
E Preferred Stock are subject to mandatory redemption by the Company on January
26, 2010, at a price per share equal to the Liquidation Value plus accrued and
unpaid dividends.

     On June 15, 2000, the Company issued 6,840 shares of Series E Preferred
Stock to GTCR Fund VII, L.P. and its affiliates for $6,840,000. The proceeds
were used primarily to fund the acquisition of EPIC. The Company also issued
warrants to GTCR for a nominal price in connection with the issuance of
subordinated debt, which were immediately converted into 1,400.00 shares of
Series E Preferred Stock.

     On August 14, 2000, the Company issued 25,768.744 shares of Series E
Preferred Stock to GTCR Fund VII, L.P. and its affiliates, and 3,233.788 shares
to TCW/Crescent Lenders. Additionally, the Company issued 2,589.635 and 229.88
warrants to GTCR Fund VII, L.P. and Affiliates, and TCW/Crescent Lenders,
respectively, in connection with the issuance of the preferred stock; these were
immediately converted into Series E Preferred Stock. The proceeds of
approximately $29,003,000 were used to partially fund the Bio Gro acquisition.

                                       F-25

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  NONCASH BENEFICIAL CONVERSION

     The Series D and Series E Preferred Stock, including Series C Preferred
Stock that were converted into Series D Preferred Stock (see above), the
warrants issued in connection with the subordinated debt (see Note 5) and
warrants issued in connection with the issuance of Preferred Stock, which were
converted into Series C Preferred Stock, Series D Preferred Stock, and Series E
Preferred Stock, are convertible into shares of the Company's common stock at
$2.50 per share. This conversion feature was below the market price at the dates
of issuance. During 2000, the Company recognized the value of this beneficial
conversion feature of approximately $37,045,000 as a noncash beneficial
conversion charge at the dates of issuance. The value of such preferred stock
dividend has no impact on the Company's cash flows, but reduces basic and
diluted earnings applicable to holders of Common Stock. Additionally, future
issuances of Series C, D and E Preferred Stock and warrants related to
subordinated debt may result in future noncash beneficial conversion charges.

  EARNINGS PER SHARE

     Basic earnings per share (EPS) exclude dilution and are computed by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted EPS is computed by dividing net income before preferred
stock dividends by the total of the weighted average number of common shares
outstanding for the period, the weighted average number of shares of common
stock that would be issued assuming conversion of the Company's preferred stock,
and other common stock equivalents for options and warrants outstanding
determined using the treasury stock method. The difference between basic and
diluted shares for the year ended December 31, 1999, relates to stock options.
Additionally, the Company had 600,824 options that were excluded from the
computation of diluted earnings per share because the options' exercise prices
were greater than the average market price of the Company's common stock.

     Basic and diluted EPS are the same for the year ended December 31, 2000,
because diluted earnings per share was less dilutive than basic earning per
share ("antidilutive"); however, the adjusted number of shares that would be
increased was 17,849,145, of which 17,432,617 related to preferred stock and
approximately 416,528 related to stock options and warrants. The adjusted number
of shares for diluted EPS for the year ended December 31, 2001, includes
30,190,705 shares, of which 30,180,610 related to preferred stock and 10,095
related to stock options and warrants.

     The following table summarizes the net income and weighted average shares
to reconcile basic EPS and diluted EPS for the fiscal years 2001, 2000 and 1999:



                                                       YEAR ENDED DECEMBER 31,
                                               ----------------------------------------
                                                  2001           2000          1999
                                               -----------   ------------   -----------
                                                                   
NET INCOME:
  Net income (loss) applicable to common
     stock...................................  $10,555,284   $(34,432,654)  $ 1,148,013
  Preferred stock dividends..................    7,247,759             --            --
                                               -----------   ------------   -----------
  Net income (loss) for basic and diluted
     earnings per share......................  $17,803,043   $(34,432,654)  $ 1,148,013
                                               ===========   ============   ===========
WEIGHTED AVERAGE SHARES:
  Weighted average shares outstanding for
     basic earnings per share................  $19,457,389   $ 19,289,720   $16,481,399
  Effect of dilutive stock options...........       10,095             --       997,977
  Effect of convertible preferred stock under
     the "if converted" method...............   30,180,610             --            --
                                               -----------   ------------   -----------
  Weighted average shares outstanding for
     diluted earnings per share..............   49,648,094     19,289,720    17,479,376
                                               ===========   ============   ===========


                                       F-26

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  STOCKHOLDERS' RIGHTS PLAN

     In December 1996, the Company adopted a stockholders' rights plan (the
"Rights Plan"). The Rights Plan provides for a dividend distribution of one
preferred stock purchase right ("Right") for each outstanding share of the
Company's Common Stock, to stockholders of record at the close of business on
January 10, 1997. The Rights Plan is designed to deter coercive takeover tactics
and to prevent an acquirer from gaining control of the Company without offering
a fair price to all of the Company's stockholders. The Rights will expire on
December 31, 2006.

     Each Right entitles stockholders to buy one one-thousandth of a newly
issued share of Series A Junior Participating Preferred Stock of the Company at
an exercise price of $10. The Rights are exercisable only if a person or group
acquires beneficial ownership of 15% or more of the Company's Common Stock or
commences a tender or exchange offer which, if consummated, would result in that
person or group owning 15% or more of the Common Stock of the Company. However,
the Rights will not become exercisable if Common Stock is acquired pursuant to
an offer for all shares which a majority of the Board of Directors determines to
be fair to and otherwise in the best interests of the Company and its
stockholders. If, following an acquisition of 15% or more of the Company's
Common Stock, the Company is acquired by that person or group in a merger or
other business combination transaction, each Right would then entitle its holder
to purchase common stock of the acquiring company having a value of twice the
exercise price. The effect will be to entitle the Company stockholders to buy
stock in the acquiring company at 50% of its market price.

     The Company may redeem the Rights at $.001 per Right at any time on or
prior to the tenth business day following the acquisition of 15% or more of its
Common Stock by a person or group or commencement of a tender offer for such 15%
ownership.

     In connection with the issuance of the Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock to GTCR Funds VII, L.P. and its
affiliates, and TCW/Crescent Lenders, the Board of Directors waived the
application of the Rights Plan.

(11) STOCK OPTION PLANS

     At December 31, 2001, the Company had outstanding stock options granted
under the 2000 Stock Option Plan ("The 2000 Plan") and the Amended and Restated
1993 Stock Option Plan ("the Plan") for officers, directors and key employees of
the Company (collectively, the "Option Plans").

     At December 31, 2001, there were $3,087,000 options for shares of common
stock reserved under the 2000 Plan for future grants. Effective with the
approval of the 2000 Plan, no further grants will be made under the 1993 Plan.
The exercise price of options granted shall be at least 100% (110% for 10% or
greater stockholders) of the fair value of Common Stock on the date of grant.
Options must be granted within ten years from the date of the Plan and become
exercisable at such times as determined by the Plan committee. Options are
exercisable for no longer than five years for certain 10% or greater
stockholders and for no longer than 10 years for others.

                                       F-27

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A summary of the Company's stock option plans as of December 31, 2001,
2000, and 1999, and changes during those years is presented below:

  2000 Plan



                                                                                          WEIGHTED
                                                                                          AVERAGE
                                                             SHARES UNDER    EXERCISE     EXERCISE
                                                                OPTION      PRICE RANGE    PRICE
                                                             ------------   -----------   --------
                                                                                 
Options outstanding at December 31, 1999...................          --     $       --     $  --
  Granted..................................................     925,000           2.50      2.50
                                                              ---------     ----------     -----
Options outstanding at December 31, 2000...................     925,000           2.50      2.50
  Granted..................................................   4,239,489      2.50-6.31      2.79
  Canceled.................................................    (666,500)          2.50      2.50
                                                              ---------     ----------     -----
Options outstanding at December 31, 2001...................   4,497,989      2.50-6.31      2.77
  Exercisable at December 31, 2001.........................     185,000     $     2.50     $2.50
                                                              =========     ==========     =====


  1993 Plan



                                                                                          WEIGHTED
                                                                                          AVERAGE
                                                             SHARES UNDER    EXERCISE     EXERCISE
                                                                OPTION      PRICE RANGE    PRICE
                                                             ------------   -----------   --------
                                                                                 
Options outstanding at December 31, 1998...................   1,082,773      2.00-8.25      2.86
  Granted..................................................     279,000      3.13-6.31      4.40
  Canceled/expired.........................................     (66,778)     2.00-6.94      2.68
  Exercised................................................    (150,333)     2.00-6.31      2.20
                                                              ---------     ----------     -----
Options outstanding at December 31, 1999...................   1,144,662      2.00-8.25      3.33
  Granted..................................................     240,000      2.75-4.50      3.68
  Canceled/expired.........................................     (12,600)     3.00-3.25      3.20
  Exercised................................................     (61,789)     2.00-3.00      2.69
                                                              ---------     ----------     -----
Options outstanding at December 31, 2000...................   1,310,273      2.00-8.25      3.34
  Canceled/expired.........................................    (173,600)     2.75-8.25      3.48
  Exercised................................................     (41,000)          2.00      2.00
                                                              ---------     ----------     -----
Options outstanding at December 31, 2001...................   1,095,673      2.00-6.31      3.47
Exercisable at December 31, 2001...........................   1,042,392     $2.00-6.31     $3.42
                                                              =========     ==========     =====


  OTHER OPTIONS

     In addition to options issuable under the above plans, the Company has
other options outstanding to employees and directors of the Company. The options
were issued at exercise prices equal to the fair market value at the grant date
of the options.

                                       F-28

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following summarizes the stock option transactions of the "other"
options:



                                                                      WEIGHTED
                                                                      AVERAGE
                                                     SHARES UNDER     EXERCISE     EXERCISE
                                                        OPTION      PRICE RANGE     PRICE
                                                     ------------   ------------   --------
                                                                          
Options outstanding at December 31, 1998...........   2,692,887     $2.00 - 6.94    $4.08
  Granted..........................................     351,728      3.13 - 6.31     5.62
  Exercised........................................    (141,666)     2.00 - 6.31     2.51
  Canceled.........................................    (178,668)            6.94     6.94
                                                      ---------     ------------    -----
Options outstanding at December 31, 1999...........   2,724,281      2.00 - 6.31     4.18
  Granted..........................................       1,332             4.50     4.50
  Exercised........................................    (200,000)            2.00     2.00
                                                      ---------     ------------    -----
Options outstanding at December 31, 2000...........   2,525,613      2.00 - 6.31     4.35
  Canceled.........................................    (488,659)     2.75 - 6.31     5.01
                                                      ---------     ------------    -----
Options outstanding at December 31, 2001...........   2,036,954      2.00 - 6.31     4.19
  Exercisable at December 31, 2001.................   2,036,954     $2.00 - 6.31    $4.19
                                                      =========     ============    =====


     During 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123, which is effective for fiscal years beginning after
December 15, 1995, establishes financial accounting and reporting standards for
stock-based employee compensation plans and for transactions in which an entity
issues its equity instruments to acquire goods and services from nonemployees.
SFAS No. 123 requires, among other things, that compensation cost be calculated
for fixed stock options at the grant date by determining fair value using an
option-pricing model. The Company has the option of recognizing the compensation
cost over the vesting period as an expense in the income statement or making pro
forma disclosures in the notes to the financial statements for employee
stock-based compensation.

     The Company continues to apply APB Opinion 25 and related interpretations
in accounting for its plans. Accordingly, no compensation cost has been
recognized in the accompanying consolidated financial statements for its stock
option plans. Had the Company elected to apply SFAS No. 123, the Company's net
loss and loss per share would have approximated the pro forma amounts indicated
below:



                                                  2001           2000          1999
                                               -----------   ------------   -----------
                                                                   
Net income (loss)
  As reported................................  $10,555,284   $(34,432,654)  $ 1,148,013
Pro forma for SFAS No. 123...................  $ 6,432,514   $(38,297,625)  $(1,979,002)
Diluted earnings (loss) per share-
  As reported................................  $      0.36   $      (1.78)  $       .07
Pro forma for SFAS No. 123...................  $      0.13   $      (1.99)  $      (.11)


     The following ranges of options were outstanding as of December 31, 2001:



                                                                    WEIGHTED AVERAGE
OUTSTANDING SHARES              EXERCISE PRICE   WEIGHTED AVERAGE   CONTRACTUAL LIFE
UNDER OPTION                        RANGE         EXERCISE PRICE       (IN YEARS)      EXERCISABLE
- ------------------              --------------   ----------------   ----------------   -----------
                                                                           
5,213,970.....................   $2.00 - 2.99         $2.49               8.29          1,231,636
1,568,326.....................    3.00 - 3.99          3.23               6.66          1,561,666
 251,988......................    4.00 - 5.99          4.55               8.41            149,712
 596,332......................    6.00 - 6.94          6.54               8.28            321,332


                                       F-29

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model resulting in a weighted average fair
value of $1.49, $2.29 and $4.57 for grants made during the years ended December
31, 2001, 2000 and 1999, respectively. The following assumptions were used for
option grants in 2001, 2000 and 1999, respectively: expected volatility of 82%,
88% and 86%; risk-free interest rates of 4.97%, 6.42% and 5.88%; expected lives
of up to ten years and no expected dividends to be paid. The compensation
expense included in the above pro forma net income data may not be indicative of
amounts to be included in future periods as the fair value of options granted
prior to 1995 was not determined and the Company expects future grants.

(12)  SPECIAL CHARGES (CREDITS) TO OPERATIONS

     In 1999, the Company incurred approximately $1.5 million of charges for
legal, accounting, and financing costs related to the proposed preferred stock
investment and the merger discussion with Azurix Corp., both of which were
terminated by Azurix Corp. in October 1999, and several other legal matters
related to events occurring in prior years.

     In 2001, the Company recognized $5.0 million of net special credits, which
includes the $6.1 million nonrecurring special credit from litigation settlement
related to claims between the Company and Azurix Corp. arising from financing
and merger discussions between the companies that were terminated in October
1999 and settled in September 2001, partially offset by the $1.1 million of net
special charges recognized in December 2001. The $1.1 million of net special
charges includes a $2.2 million charge for the Company's estimated net exposure
for unpaid insurance claims and other costs related to the Company's 1998 and
1999 policy periods for which coverage may not be available due to the pending
liquidation status of the Company's previous insurance underwriter, Reliance
Insurance Company, partially offset by a $1.1 million special credit resulting
from the settlement of the Marshall litigation as such matter was settled in an
amount favorable to prior estimates. See Note 8.

(13)  EMPLOYEE BENEFIT PLANS

     Certain of the Company's subsidiaries sponsor various defined contribution
retirement plans for full-time and some part-time employees. The plans cover
employees at all of the Company's operating locations. The defined contribution
plans provide for contributions ranging from one percent to 15% of covered
employees' salaries or wages. The Company may make a matching contribution as a
percentage set at the end of each plan year. For 2001, 2000 and 1999, the
matching contributions totaled approximately $1,033,000, $223,000 and $34,000,
respectively.

(14)  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     Quarterly financial information for the years ended December 31, 2001 and
2000, is summarized as follows (in thousands, except per share data).



                                                      QUARTER ENDED                                 QUARTER ENDED
                                       -------------------------------------------   -------------------------------------------
                                       MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                         2001        2001       2001        2001       2000        2000       2000        2000
                                       ---------   --------   ---------   --------   ---------   --------   ---------   --------
                                                                                                
Revenues.............................   $58,795    $65,800     $70,067    $65,534     $18,666    $27,768     $53,513    $63,150
Gross profit.........................    13,219     18,460      18,847     16,751       3,574      8,258      14,734     16,632
Operating income.....................     6,984     12,333      18,218      9,449         472      4,905       9,612     10,356
Net income (loss) applicable to
  common stock.......................    (3,973)     3,443      10,151        934     (24,112)    (2,138)     (8,977)       795
Earnings per share
  Basic..............................     (0.21)      0.18        0.52       0.05       (1.28)     (0.11)      (0.46)      0.04
  Diluted............................     (0.21)      0.11        0.24       0.05       (1.28)     (0.11)      (0.46)      0.04


                                       F-30

                           SYNAGRO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The sum of the individual quarterly earnings per share amounts do not agree
with year-to-date earnings per share as each quarter's computation is based on
the weighted average number of shares outstanding during the quarter, the
weighted average stock price during the quarter, and the dilutive effects of the
redeemable preferred stock and stock options, if applicable, in each quarter.

(15)  SUBSEQUENT EVENTS


     On April 17, 2002, the Company issued and sold $150 million in aggregate
principal amount of its 9 1/2% senior subordinated notes (the "Notes") due in
2009 in a private offering (the "Subordinated Offering"). The Company used the
proceeds from the Subordinated Offering to repay existing indebtedness under the
Company's Senior Credit Agreement and other existing subordinated debt. In
connection with the repayment of the existing subordinated debt, the Company
will expense in the second quarter of 2002 approximately $2.1 million, net of
taxes, of previously recorded deferred loan costs. As a result of the repayment
of the subordinated debt, the reverse swap discussed in note 5 will no longer
receive hedge accounting treatment and subsequent changes in its fair value will
be recorded in earnings currently. All payments, including interest and
principal, of the Notes have been fully, unconditionally and jointly and
severally guaranteed by Synagro's subsidiaries and all such guarantor
subsidiaries are wholly-owned by Synagro. As defined by the Securities and
Exchange Commission Regulation S-X, Article 3, Rule 3-10(h), the parent company
has no independent assets or operations and any non-guarantor subsidiaries are
minor. Synagro-Baltimore, L.L.C., a subsidiary of Synagro, pursuant to a loan
agreement in connection with the Nonrecourse Project Revenue Bonds, is required
to place certain monies in restricted fund accounts to be used for various
designated purposes. Monies in these fund accounts will remain restricted until
the Nonrecourse Project Revenue Bonds are paid. At December 31, 2001, there was
approximately $8,557,000 of restricted cash in these fund accounts. See Note 6.


                                       F-31



                           SYNAGRO TECHNOLOGIES, INC.



                     CONDENSED CONSOLIDATED BALANCE SHEETS





                                                               MARCH 31,     DECEMBER 31,
                                                                  2002           2001
                                                              ------------   ------------
                                                              (UNAUDITED)
                                                                       
                           ASSETS
Current assets:
  Cash and cash equivalents.................................  $    255,590   $    251,821
  Restricted cash...........................................     3,096,942      3,281,045
  Accounts receivable, net..................................    46,229,153     49,531,654
  Note receivable, current portion..........................       301,000        201,000
  Prepaid expenses and other current assets.................    11,249,196     10,181,030
                                                              ------------   ------------
     Total current assets...................................    61,131,881     63,446,550
Property, machinery & equipment, net........................   206,009,913    206,114,267
Other assets:
  Goodwill, net.............................................   164,149,974    163,739,059
     Other, net.............................................    12,955,729     12,867,901
                                                              ------------   ------------
Total assets................................................  $444,247,497   $446,167,777
                                                              ============   ============
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.........................  $ 13,101,219   $ 12,880,693
  Current portion of tax-exempt project revenue bonds.......     2,300,000      2,300,000
  Accounts payable and accrued expenses.....................    38,913,007     40,951,059
                                                              ------------   ------------
     Total current liabilities..............................    54,314,226     56,131,752
Long-term liabilities:
  Long-term debt obligations, net...........................   201,117,960    202,650,523
  Nonrecourse tax-exempt project revenue bonds, net.........    40,216,558     40,584,848
  Other long-term liabilities...............................     9,029,373      9,328,065
  Fair value of interest rate swap..........................     5,689,666      5,150,502
                                                              ------------   ------------
     Total long-term liabilities............................   256,053,557    257,713,938
               COMMITMENTS AND CONTINGENCIES
Redeemable Preferred Stock, 69,792.29 shares issued and
  outstanding, redeemable at $1,000 per share...............    72,274,490     70,431,063
Stockholders' equity:
  Preferred stock, $.002 par value, 10,000,000 shares
     authorized, none issued and outstanding................            --             --
  Common stock, $.002 par value, 100,000,000 shares
     authorized, 19,476,781 shares outstanding..............        38,954         38,954
  Additional paid in capital................................   109,167,460    109,167,460
  Accumulated deficit.......................................   (45,416,819)   (45,004,998)
  Accumulated other comprehensive income....................    (2,184,371)    (2,310,392)
                                                              ------------   ------------
     Total stockholders' equity.............................    61,605,224     61,891,024
                                                              ------------   ------------
Total liabilities and stockholders' equity..................  $444,247,497   $446,167,777
                                                              ============   ============




  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-32



                           SYNAGRO TECHNOLOGIES, INC.



                     CONSOLIDATED STATEMENTS OF OPERATIONS





                                                                 THREE MONTHS ENDED
                                                                      MARCH 31,
                                                              -------------------------
                                                                 2002          2001
                                                              -----------   -----------
                                                                     (UNAUDITED)
                                                                      
Revenue.....................................................  $56,816,527   $58,795,142
Cost of services............................................   43,257,392    45,326,466
                                                              -----------   -----------
Gross profit................................................   13,559,135    13,468,676
Selling, general and administrative expenses................    5,768,468     5,351,789
Amortization of intangibles.................................       27,417     1,132,648
                                                              -----------   -----------
  Income from operations....................................    7,763,250     6,984,239
                                                              -----------   -----------
Other (income) expense:
  Other income, net.........................................      (38,006)       (6,270)
  Interest expense, net.....................................    5,493,244     7,359,564
                                                              -----------   -----------
     Total other expense, net...............................    5,455,238     7,353,294
                                                              -----------   -----------
Income (loss) before provision for income taxes.............    2,308,012      (369,055)
  Provision for income taxes................................      876,406            --
                                                              -----------   -----------
Net income (loss) before cumulative effect of change in
  accounting for derivatives and preferred stock
  dividends.................................................    1,431,606      (369,055)
Cumulative effect of change in accounting for derivatives...           --     1,860,685
                                                              -----------   -----------
Net income before preferred stock dividends.................    1,431,606    (2,229,740)
Preferred stock dividends...................................    1,843,427     1,742,921
                                                              -----------   -----------
Net loss applicable to common stock.........................  $  (411,821)  $(3,972,661)
                                                              ===========   ===========
Basic and diluted earnings (loss) per share:
  Net income (loss) per share before cumulative effect of
     change in accounting for derivatives...................  $      (.02)  $      (.11)
  Cumulative effect of change in accounting for
     derivatives............................................           --          (.10)
                                                              -----------   -----------
  Net loss per common share, basic and diluted..............  $      (.02)  $      (.21)
                                                              ===========   ===========
Weighted average shares outstanding, basic..................   19,476,781    19,435,781
Weighted average shares outstanding, diluted................   19,476,781    19,435,781




  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-33



                           SYNAGRO TECHNOLOGIES, INC.



           CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY





                                                                                       ACCUMULATED
                                     COMMON STOCK        ADDITIONAL                       OTHER
                                 --------------------     PAID-IN      ACCUMULATED    COMPREHENSIVE
                                   SHARES     AMOUNT      CAPITAL        DEFICIT         INCOME          TOTAL
                                 ----------   -------   ------------   ------------   -------------   -----------
                                                                   (UNAUDITED)
                                                                                    
BALANCE, DECEMBER 31, 2001.....  19,476,781   $38,954   $109,167,460   $(45,004,998)   $(2,310,392)   $61,891,024
  Change in comprehensive
    income.....................                                                            126,021        126,021
  Net income applicable to
    common stock...............          --        --             --       (411,821)            --       (411,821)
                                 ----------   -------   ------------   ------------    -----------    -----------
BALANCE, MARCH 31, 2002........  19,476,781   $38,954   $109,167,460   $(45,416,819)   $(2,184,371)   $61,605,224
                                 ==========   =======   ============   ============    ===========    ===========




              The accompanying notes are an integral part of these


                  condensed consolidated financial statements.

                                       F-34



                           SYNAGRO TECHNOLOGIES, INC.



                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS





                                                                 THREE MONTHS ENDED
                                                                      MARCH 31,
                                                              -------------------------
                                                                 2002          2001
                                                              -----------   -----------
                                                                     (UNAUDITED)
                                                                      
Cash flows from operating activities:
  Net loss applicable to common stock.......................  $  (411,821)  $(3,972,661)
  Adjustment to reconcile net loss applicable to common
     stock:
     Cumulative effect of change in accounting for
      derivatives...........................................           --     1,860,685
     Preferred stock dividend...............................    1,843,427     1,742,921
     Depreciation...........................................    3,541,018     3,289,132
     Amortization...........................................      410,558     1,539,235
     Gain on sale of property, machinery and equipment......      (38,006)       (6,270)
     (Increase) decrease in the following:
       Accounts receivable..................................    3,302,501       185,241
       Prepaid expenses and other assets....................   (1,018,125)      100,449
     Increase (decrease) in the following:
       Accounts payable and accrued expenses................   (2,131,285)    1,665,316
                                                              -----------   -----------
  Net cash provided by operating activities.................    5,498,267     6,404,048
                                                              -----------   -----------
Cash flows from investing activities:
  Purchase of businesses including contingent consideration,
     net of cash acquired...................................     (410,915)     (836,283)
  Purchases of property, machinery and equipment............   (3,609,412)   (3,389,611)
  Proceeds from sale of property, machinery and equipment...      210,754        60,050
                                                              -----------   -----------
Net cash used in investing activities.......................   (3,809,573)   (4,165,844)
                                                              -----------   -----------
Cash flows from financing activities:
  Payments on debt..........................................     (852,311)   (3,115,623)
  Debt issuance costs.......................................     (548,427)      (34,464)
  Increase in notes receivable..............................     (100,000)           --
  Increase in restricted cash...............................     (184,187)   (1,393,409)
                                                              -----------   -----------
  Net cash used in financing activities.....................   (1,684,925)   (4,543,496)
                                                              -----------   -----------
Net increase (decrease) in cash and cash equivalents........        3,769    (2,305,292)
Cash and cash equivalents, beginning of period..............      251,821     4,597,420
                                                              -----------   -----------
Cash and cash equivalents, end of period....................  $   255,590   $ 2,292,128
                                                              ===========   ===========
Supplemental Cash Flow Information
  Interest paid during the period...........................  $ 3,399,465   $ 5,013,426
  Taxes paid during the period..............................  $   241,450   $   123,868



                                       F-35


                           SYNAGRO TECHNOLOGIES, INC.



         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)



                   NONCASH INVESTING AND FINANCING ACTIVITIES



     During the three months ended March 31, 2001, dividends totaled
approximately $1,743,000, of which approximately $1,458,000 represents the
accrued eight percent dividend on the Company's Preferred Stock and
approximately $285,000 represents accretion and amortization of issuance costs.



     During the three months ended March 31, 2002, dividends totaled
approximately $1,843,000, of which approximately $1,580,000 represents the
accrued eight percent dividend on the Company's Preferred Stock and
approximately $263,000 represents accretion and amortization of issuance costs.



  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       F-36



                           SYNAGRO TECHNOLOGIES, INC.



              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                  (UNAUDITED)



(1) BASIS OF PRESENTATION



 GENERAL



     The accompanying unaudited, condensed consolidated financial statements
have been prepared by Synagro Technologies, Inc. ("Synagro" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission.
These condensed consolidated financial statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for the fair
presentation of such financial statements for the periods indicated. Certain
information relating to the Company's organization and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted in this Form 10-Q
pursuant to Rule 10-01 of Regulation S-X for interim financial statements
required to be filed with the Securities and Exchange Commission. However, the
Company believes that the disclosures herein are adequate to make the
information presented not misleading. The results for the three months ended
March 31, 2002, are not necessarily indicative of future operating results. It
is suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2001.



     The accounting policies followed by the Company in preparing interim
consolidated financial statements are consistent with those described in the
"Notes to Consolidated Financial Statements" in the Company's Form 10-K for the
year ended December 31, 2001.



     Synagro Technologies, Inc., a Delaware corporation ("Synagro"), and
collectively with its subsidiaries (the "Company") is a national wastewater
residuals management company serving more than 1,000 municipal and industrial
wastewater treatment plants and has operations in 35 states and the District of
Columbia. Synagro offers many services that focus on the beneficial reuse of
organic nonhazardous residuals resulting from the wastewater treatment process.
Synagro provides its customers with complete, vertically-integrated services and
capabilities, including facility operations, facility cleanout services,
regulatory compliance, dewatering, collection and transportation, composting,
drying and pelletization, product marketing, incineration, alkaline
stabilization, and land application.



 ACCOUNTING PRONOUNCEMENTS



     Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,"
which requires that the Company recognize all derivative instruments as assets
or liabilities on its balance sheet and measure them at their fair value.
Changes in the fair value of a derivative are recorded in income or directly to
equity, depending on the instrument's designated use. For derivative instruments
that are designated and qualify as a cash flow hedge, the effective portion of
the gain or loss on the derivative instrument is reported as a component of
other comprehensive income and reclassified into income when the hedged
transaction affects income, while the ineffective portion of the gain or loss on
the derivative instrument is recognized currently in earnings. For derivative
instruments that are designated and qualify as a fair value hedge, the gain or
loss on the derivative instrument as well as the offsetting loss or gain on the
hedged item attributable to the hedged risk are recognized in current income
during the period of the change in fair values. The noncash transition
adjustment related to the adoption of this statement has been reflected as a
"cumulative effect of change in accounting for derivatives" of approximately
$1,861,000 charged to net income and approximately $2,058,000 charged to other
comprehensive income included in stockholders' equity as of January 1, 2001. See
Note (4) for discussion of the Company's current derivative contracts and
hedging activities.


                                       F-37


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," and No. 142, "Goodwill and Other Intangible
Assets." SFAS 141 requires all business combinations initiated after June 30,
2001, to be accounted for using the purchase method. Under SFAS 142, goodwill
and intangible assets with indefinite lives are no longer amortized but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives will be amortized over their useful lives. Management has completed the
initial impairment test required by the provisions of SFAS 142 as of January 1,
2002, and determined that there has not been an impairment of the Company's
goodwill. Beginning January 1, 2002, the Company discontinued amortizing
goodwill in accordance with the provisions of the standard.



     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 covers all legally enforceable obligations
associated with the retirement of tangible long-lived assets and provides the
accounting and reporting requirements for such obligations. SFAS No. 143 is
effective for the Company beginning January 1, 2003. Management has yet to
determine the impact that the adoption of SFAS No. 143 will have on the
Company's consolidated financial statements.



     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." SFAS No. 144 establishes a single accounting method for long-
lived assets to be disposed of by sale, whether previously held and used or
newly acquired, and extends the presentation of discontinued operations to
include more disposal transactions. SFAS No. 144 also requires that an
impairment loss be recognized for assets held-for-use when the carrying amount
of an asset (group) is not recoverable. The carrying amount of an asset (group)
is not recoverable if it exceeds the sum of the undiscounted cash flows expected
to result from the use and eventual disposition of the asset (group), excluding
interest charges. Estimates of future cash flows used to test the recoverability
of a long-lived asset (group) must incorporate the entity's own assumptions
about its use of the asset (group) and must factor in all available evidence.
Management adopted SFAS No. 144 and there was no effect during the three months
ended March 31, 2002, to the Company's results of operations and financial
position.



     In April 2002, the Financial Accounting Standards Board issued SFAS No.
145, Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections ("SFAS No. 145"). SFAS No. 145 requires that
gains and losses from extinguishment of debt be classified as extraordinary
items only if they meet the criteria in Accounting Principles Board Opinion No.
30 ("Opinion No. 30"). Applying the provisions of Opinion No. 30 will
distinguish transactions that are part of an entity's recurring operations from
those that are unusual and infrequent that meet criteria for classification as
an extraordinary item. SFAS No. 145 is effective for the Company beginning
January 1, 2003. The Company is currently assessing the impact, if any, of this
statement on the Company's financial position.



  RECLASSIFICATIONS



     Certain reclassifications have been made to the prior year's financial
statements to conform to the 2002 presentation.



  USE OF ESTIMATES



     In preparing financial statements in conformity with accounting principles
generally accepted in the United States, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from


                                       F-38


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



those estimates. The following are the Company's significant estimates and
assumptions made in preparation of its financial statements:



          Allowance for Doubtful Accounts -- The Company estimates losses for
     uncollectible accounts based on the aging of the accounts receivable and
     the evaluation and the likelihood of success in collecting the receivable.



          Loss Contracts -- The Company evaluates its revenue producing
     contracts to determine whether the projected revenues of such contracts
     exceed the direct cost to service such contracts. These evaluations include
     estimates of the future revenues and expenses. Accruals for loss contracts
     are adjusted based on these evaluations.



          Purchase Accounting -- The Company estimates the fair value of assets,
     including property, machinery and equipment and its related useful lives
     and salvage values, and liabilities when allocating the purchase price of
     an acquisition.



          Income Taxes -- The Company assumes the deductibility of certain costs
     in its income tax filings and estimates the recovery of deferred income tax
     assets.



          Legal and Contingency Accruals -- The Company estimates and accrues
     the amount of probable exposure it may have with respect to litigation,
     claims and assessments.



          Self-Insurance Reserves -- Through the use of actuarial calculations,
     the Company estimates the amounts required to settle insurance claims.



     Actual results could differ materially from the estimates and assumptions
that the Company uses in the preparation of its financial statements.



(2) PREFERRED STOCK



  PREFERRED STOCK



     The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, which may be issued in one or more series or classes by the Board of
Directors of the Company. Each such series or class shall have such powers,
preferences, rights and restrictions as determined by resolution of the Board of
Directors. Series A Juniors Participating Preferred Stock will be issued upon
exercise of the Stockholders' Rights described below.



  SERIES D REDEEMABLE PREFERRED STOCK



     We have authorized 32,000 shares of Series D Preferred Stock, par value
$.002 per share. In 2000, we issued a total of 25,033.601 shares of the Series D
Preferred Stock to GTCR Fund VII, L.P. and its affiliates which is convertible
by the holders into a number of shares of our common stock computed by dividing
(i) the sum of (a) the number of shares to be converted multiplied by the
liquidation value and (b) the amount of accrued and unpaid dividends by (ii) the
conversion price then in effect. The initial conversion price is $2.50 per
share, provided that in order to prevent dilution, the conversion price may be
adjusted. The Series D Preferred Stock is senior to our common stock or any
other of our equity securities. The liquidation value of each share of Series D
Preferred Stock is $1,000 per share. Dividends on each share of Series D
Preferred Stock accrue daily at the rate of eight percent per annum on the
aggregate liquidation value and may be paid in cash or in kind, at our option.
The Series D Preferred Stock is entitled to one vote per share. Shares of Series
D Preferred Stock are subject to mandatory redemption by us on January 26, 2010,
at a price per share equal to the liquidation value plus accrued and unpaid
dividends. If the Series D Preferred Stock were converted, they would represent
10,013,441 shares of common stock.


                                       F-39


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



  SERIES E REDEEMABLE PREFERRED STOCK



     We have authorized 55,000 shares of Series E Preferred Stock, par value
$.002 per share. GTCR Fund VII, L.P. and its affiliates own 37,504.229 shares of
Series E Preferred Stock and certain affiliates of The TCW Group, Inc. own
7,024.58 shares. The Series E Preferred Stock is convertible by the holders into
a number of shares of our common stock computed by dividing (i) the sum of (a)
the number of shares to be converted multiplied by the liquidation value and (b)
the amount of accrued and unpaid dividends by (ii) the conversion price then in
effect. The initial conversion price is $2.50 per share, provided that in order
to prevent dilution, the conversion price may be adjusted. The Series E
Preferred Stock is senior to our common stock or any other of our equity
securities. The liquidation value of each share of Series E Preferred Stock is
$1,000 per share. Dividends on each share of Series E Preferred Stock accrue
daily at the rate of eight percent per annum on the aggregate liquidation value
and may be paid in cash or in kind, at our option. The Series E Preferred Stock
is entitled to one vote per share. Shares of Series E Preferred Stock are
subject to mandatory redemption by us on January 26, 2010, at a price per share
equal to the liquidation value plus accrued and unpaid dividends. If the Series
E Preferred Stock were converted, they would represent 17,903,475 shares of
common stock.



     The Series D and Series E Preferred Stock may result in noncash beneficial
conversions valued in future periods recognized as preferred stock dividends if
the market value is higher than the conversion price.



(3) STOCKHOLDERS' RIGHTS PLAN



     In December 1996, the Company adopted a stockholders' rights plan (the
"Rights Plan"). The Rights Plan provides for a dividend distribution of one
preferred stock purchase right ("Right") for each outstanding share of the
Company's Common Stock, to stockholders of record at the close of business on
January 10, 1997. The Rights Plan is designed to deter coercive takeover tactics
and to prevent an acquirer from gaining control of the Company without offering
a fair price to all of the Company's stockholders. The Rights will expire on
December 31, 2006.



     Each Right entitles stockholders to buy one one-thousandth of a newly
issued share of Series A Junior Participating Preferred Stock of the Company at
an exercise price of $10. The Rights are exercisable only if a person or group
acquires beneficial ownership of 15 percent or more of the Company's Common
Stock or commences a tender or exchange offer which, if consummated, would
result in that person or group owning 15 percent or more of the Common Stock of
the Company. However, the Rights will not become exercisable if Common Stock is
acquired pursuant to an offer for all shares which a majority of the Board of
Directors determines to be fair to and otherwise in the best interests of the
Company and its stockholders. If, following an acquisition of 15 percent or more
of the Company's Common Stock, the Company is acquired by that person or group
in a merger or other business combination transaction, each Right would then
entitle its holder to purchase common stock of the acquiring company having a
value of twice the exercise price. The effect will be to entitle the Company
stockholders to buy stock in the acquiring company at 50 percent of its market
price.



     The Company may redeem the Rights at $.001 per Right at any time on or
prior to the tenth business day following the acquisition of 15 percent or more
of its Common Stock by a person or group or commencement of a tender offer for
such 15 percent ownership.


                                       F-40


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



(4) DEBT



     Long-term debt obligations consist of the following:





                                                            MARCH 31,     DECEMBER 31,
                                                               2002           2001
                                                           ------------   ------------
                                                                    
Credit facility -- revolving loan........................  $         --   $         --
Credit facility -- acquisition and term loans............   161,083,981    161,936,292
Subordinated debt........................................    52,760,393     52,760,393
Fair value adjustment related to subordinated debt.......       342,131        801,857
Other notes payable......................................        32,674         32,674
                                                           ------------   ------------
     Total debt..........................................  $214,219,179   $215,531,216
Less:
Current maturities.......................................   (13,101,219)   (12,880,693)
                                                           ------------   ------------
     Long-term debt, net of current maturities...........  $201,117,960   $202,650,523
                                                           ============   ============




  CREDIT FACILITY



     On January 27, 2000, the Company entered into a $110 million amended and
restated Senior Credit Agreement (the "Senior Credit Agreement") by and among
the Company, Bank of America, N.A., and certain other lenders to fund working
capital for acquisitions, to refinance existing debt, to provide working capital
for operations, to fund capital expenditures and other general corporate
purposes. The Senior Credit Agreement bears interest at LIBOR or prime plus a
margin based on a pricing schedule as set out in the Senior Credit Agreement.
The Senior Credit Agreement was subsequently syndicated on March 15, 2000, to
lenders, and the capacity was increased to $120 million. The Senior Credit
Agreement was amended and resyndicated on August 14, 2000, to lenders, and the
capacity was increased to $230 million. On February 25, 2002, the Senior Credit
Agreement was amended to, among other items, increase the revolving loan from
$30 million to approximately $51.3 million, increase sublimits for letters of
credit from $20 million to $50 million, provide limitations for restricted
payments and investments, and increase the permitted amounts of nonrecourse
financing and operating lease obligations.



     As of March 31, 2002, the loan commitments under the Senior Credit
Agreement, as amended, are as follows:



          (i)  Revolving Loan up to $51,330,000 outstanding at any one time;



          (ii) Term A Loans (which, once repaid, may not be reborrowed) of
     $50,000,000;



          (iii) Term B Loans (which, once repaid, may not be reborrowed) of
     $100,000,000;



          (iv) Acquisition Term Loans up to $50,000,000 outstanding at any one
     time available on a revolving basis prior to February 14, 2002, provided
     that certain approvals are obtained and certain financial ratios are met;
     and



          (v) Letters of credit issuable by the Company up to $50,000,000 as a
     subset of the Revolving Loan. At March 31, 2002, the Company had
     approximately $21,750,000 of letters of credit outstanding.


                                       F-41


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



     The amounts borrowed under the Senior Credit Agreement are subject to
repayment as follows:





                                                 REVOLVING   TERM A   TERM B   ACQUISITION
          PERIOD ENDING DECEMBER 31,               LOANS     LOANS    LOANS       LOANS
          --------------------------             ---------   ------   ------   -----------
                                                                   
2000...........................................       --       5.00%     .50%         0%
2001...........................................       --      15.00%    1.00%         0%
2002...........................................       --      22.50%    1.00%      5.00%
2003...........................................       --      17.50%    1.00%      6.67%
2004...........................................       --      20.00%    1.00%     11.67%
2005...........................................   100.00%     20.00%    1.00%     76.66%
2006...........................................       --         --    94.50%        --
                                                  ------     ------   ------     ------
                                                  100.00%    100.00%  100.00%    100.00%
                                                  ======     ======   ======     ======




     The Senior Credit Agreement includes mandatory repayment provisions related
to excess cash flows, proceeds from certain asset sales, debt issuances and
equity issuances, all as defined in the Senior Credit Agreement. These mandatory
repayment provisions may also reduce the available commitment for Revolving
Loans and Acquisition Loans. The Senior Credit Agreement contains standard
covenants including compliance with laws, limitations on capital expenditures,
restrictions on dividend payments, limitations on mergers and compliance with
certain financial covenants. The Company believes that it is in compliance with
those covenants as of March 31, 2002. The Senior Credit Agreement is secured by
all the assets of the Company and expires on July 27, 2006. As of March 31,
2002, the Company has borrowed approximately $161,084,000 ($35,886,000 of Term A
Loans, $88,145,000 of Term B Loans, and $37,053,000 of Acquisition Loans), which
was primarily used to refinance existing debt and to partially fund certain
acquisitions during 2000 and 1999. As of March 31, 2002, the Company has
approximately $34,739,000 of unused borrowings under the Senior Credit
Agreement. The Company's Senior Credit Agreement contains various financial
covenants, including a senior debt-to-cash flow ratio, as defined, determined at
the end of each quarter. As of March 31, 2002, the maximum senior debt that
could have been outstanding while remaining in compliance with the covenant
ratios was approximately $195,823,000. On April 8, 2002, the Company issued $150
million of 9 1/2 percent Senior Subordinated Notes of which a portion of the
proceeds was used to pay down the above Senior Credit Agreement. On May 8, 2002,
the Company entered into a new $150 million credit facility of which the
proceeds were used to retire the remaining portion of the above Senior Credit
Agreement. (See Note 9)



  SUBORDINATED DEBT



     On January 27, 2000, the Company entered into an agreement with GTCR
Capital providing up to $125 million in subordinated debt financing to fund
acquisitions and for certain other uses, in each case as approved by the Board
of Directors of the Company and GTCR Capital. The agreement was amended on
August 14, 2000, allowing, among other things, for the syndication of 50 percent
of the commitment. The loans bear interest at an annual rate of 12 percent paid
quarterly and provide warrants that are convertible into Preferred Stock at $.01
per warrant. The unpaid principal plus unpaid and accrued interest must be paid
in full by January 27, 2008. The agreement contains general and financial
covenants. As of March 31, 2002, the Company has borrowed approximately
$52,760,000 of indebtedness under the terms of the agreement, which was used to
partially fund the Company's acquisitions in 2000. Warrants to acquire 9,225.839
shares of Series C, D, and E Preferred Stock were issued in connection with
these borrowings. These warrants were immediately exercised.



     On April 8, 2002, the Company issued $150 million of 9 1/2 percent Senior
Subordinated Notes of which a portion of the proceeds was used to retire all the
subordinated debt and related accrued interest. (See Note 9)


                                       F-42

                           SYNAGRO TECHNOLOGIES, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)


  DERIVATIVES AND HEDGING ACTIVITIES



     Prior to June 25, 2001, the Company's derivative contracts consisted of
interest rate swap agreements and option agreements related to hedging
requirements under the Company's Senior Credit Agreement. The option agreements
did not qualify for hedge accounting under SFAS 133. Changes in the fair value
of these derivatives were recognized in earnings as interest expense of $226,000
in 2001. The Company's interest rate swap agreements qualified for hedge
accounting as cash flow hedges of the Company's exposure to changes in variable
interest rates.



     On June 25, 2001, the Company entered into a reverse swap on its
subordinated debt, and terminated the previously existing interest rate swap and
option agreements noted above. The balance included in accumulated other
comprehensive loss included in stockholders' equity is being recognized in
future periods' income over the remaining term of the original swap agreement.
The amount to be recognized as a noncash expense during 2002 is approximately
$813,000 of which approximately $203,000 was recognized in the three month
period ending March 31, 2002. The Company has designated the reverse swap
agreement on its subordinated debt as a fair value hedge of changes in the value
of the underlying debt as a result of changes in the benchmark interest rate.
Under the terms of the reverse swap, we receive 12% per annum on $52.8 million
notional and we pay a spread over a floating rate on $52.8 million notional. The
liability related to the reverse swap agreement totaling approximately
$5,690,000 is reflected in other long-term liabilities at March 31, 2002;
additionally, a fair value adjustment on the Company's subordinated debt of
approximately $342,000 is reflected in long-term debt at March 31, 2002. The
amount of the ineffectiveness of the reverse swap agreement debited to interest
expense, net for the three months ended March 31, 2002, totaled approximately
$79,000.



     On July 3, 2001, the Company entered into an interest rate cap agreement
establishing a maximum fixed LIBOR rate on $125,000,000 of its floating rate
debt at an interest rate of 6.50 percent in order to meet the hedging
requirements of its Senior Credit Agreement. Changes in the fair value of the
agreement charged to interest expense, net for the three months ended March 31,
2002, totaled approximately $30,000.



  INTEREST RATE RISK



     Total debt at March 31, 2001 included approximately $161,084,000 in
floating rate debt attributed to the Senior Credit Agreement at an average
interest rate of 4.66%. Total debt at May 10, 2002 included approximately
$70,000,000 in floating rate debt attributed to the new $150 million senior
credit facility entered into in May 2002 at an average interest rate of 4.9%.
See note (9). As a result, the Company's interest cost in 2002 will fluctuate
based on short-term interest rates. The impact on annual cash flow of a ten
percent change in the floating rate would be approximately $122,000.


                                       F-43


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



(5) NONRECOURSE TAX-EXEMPT REVENUE BONDS





                                                              MARCH 31,    DECEMBER 31,
                                                                2002           2001
                                                             -----------   ------------
                                                                     
Maryland Energy Financing Administration Limited Obligation
  Solid Waste Disposal Revenue Bonds, 1996 series --
  Revenue bonds due 2001 to 2005 at stated interest rates
     of 5.45% to 5.85%.....................................  $10,010,000   $10,010,000
  Term revenue bond due 2010 at stated interest rate of
     6.30%.................................................   16,295,000    16,295,000
  Term revenue bond due 2016 at stated interest rate of
     6.45%.................................................   22,360,000    22,360,000
  Less: Restricted cash....................................   (6,148,442)   (5,780,152)
                                                             -----------   -----------
                                                              42,516,558    42,884,848
  Less: Current maturities.................................   (2,300,000)   (2,300,000)
                                                             -----------   -----------
  Nonrecourse project revenue bonds, net of current
     maturities............................................  $40,216,558   $40,584,848
                                                             ===========   ===========




     In 1996, the Maryland Energy Financing Administration (the
"Administration") issued nonrecourse tax-exempt project revenue bonds (the
"Nonrecourse Project Revenue Bonds") in the aggregate amount of $58,550,000. The
Administration loaned the proceeds of the Nonrecourse Project Revenue Bonds to
Wheelabrator Water Technologies Baltimore L.L.C., now Synagro's wholly owned
subsidiary and known as Synagro-Baltimore, L.L.C., pursuant to a June 1996 loan
agreement, and the terms of the loan mirror the terms of the Nonrecourse Project
Revenue Bonds. The loan financed a portion of the costs of constructing thermal
facilities located in Baltimore County, Maryland, at the site of its Back River
Wastewater Treatment Plant, and in the City of Baltimore, Maryland, at the site
of its Patapsco Wastewater Treatment Plant. The Company assumed all obligations
associated with the Nonrecourse Project Revenue Bonds in connection with its
acquisition of Bio Gro in 2000.



     The Nonrecourse Project Revenue Bonds are primarily secured by the pledge
of revenues and assets related to our Back River and Patapsco thermal
facilities. The underlying service contracts between us and the City of
Baltimore obligated us to design, construct and operate the thermal facilities
and obligated the City to deliver biosolids for processing at the thermal
facilities. The City makes all payments under the service contracts directly
with a trustee for the purpose of paying the Nonrecourse Project Revenue Bonds.



     At our option, we may cause the redemption of the Nonrecourse Project
Revenue Bonds at any time on or after December 1, 2006, subject to redemption
prices specified in the loan agreement. The Nonrecourse Project Revenue Bonds
will be redeemed at any time upon the occurrence of certain extraordinary
conditions, as defined in the loan agreement.



     Synagro-Baltimore, L.L.C., one of our wholly owned subsidiaries, guarantees
the performance of services under the underlying service agreements with the
City of Baltimore. Under the terms of the Bio Gro acquisition purchase
agreement, Waste Management, Inc. also guarantees the performance of services
under those service agreements. We have agreed to pay Waste Management $500,000
per year beginning in 2007 until the Nonrecourse Project Revenue Bonds are paid
or its guarantee is removed. Neither Synagro-Baltimore, L.L.C nor Waste
Management has guaranteed payment of the Nonrecourse Project Revenue Bonds or
the loan funded by the Nonrecourse Project Revenue Bonds.



     The loan agreement, based on the terms of the related indenture, requires
that we place certain monies in restricted fund accounts and that those funds be
used for various designated purposes (e.g., debt service reserve funds, bond
funds, etc.). Monies in these funds will remain restricted until the Nonrecourse
Project Revenue Bonds are paid.


                                       F-44


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



     At March 31, 2002, the Nonrecourse Project Revenue Bonds were secured by
property, machinery and equipment with a net book value of approximately
$59,546,000 and restricted cash of approximately $8,741,000, of which
approximately $6,148,000 was netted against long-term debt and the difference
was shown as restricted cash.



     These Nonrecourse Project Revenue Bonds, totaling $42,517,000 of debt (net
of restricted cash) as of March 31, 2002, and $760,000 of related interest
expense accrued in the three months ended March 31, 2002, are excluded from the
financial covenant calculations required by our Senior Credit Facility.



(6) COMMITMENTS AND CONTINGENCIES



  REGULATORY MATTERS



     Synagro's business activities are subject to environmental regulation under
federal, state and local laws and regulations. In the ordinary course of
conducting its business activities, Synagro becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. Synagro is required under various regulations to procure
licenses and permits to conduct its operations. These licenses and permits are
subject to periodic renewal without which the Company's operations could be
adversely affected. There can be no assurance that regulatory requirements will
not change to the extent that it would materially affect Synagro's consolidated
financial statements.



  LITIGATION



     The Company's business activities are subject to environmental regulation
under federal, state and local laws and regulations. In the ordinary course of
conducting its business activities, the Company becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. The Company believes that these matters will not have a
material adverse effect on its business, financial condition and results of
operations. However, the outcome of any particular proceeding cannot be
predicted with certainty. The Company is required, under various regulations, to
procure licenses and permits to conduct its operations. These licenses and
permits are subject to periodic renewal without which the Company's operations
could be adversely affected. There can be no assurance that regulatory
requirements will not change to the extent that it would materially affect the
Company's consolidated financial statements.



  MARSHALL CASE



     In January 2002, the Company settled a lawsuit that was filed in Rockingham
County Superior Court, New Hampshire, in November 1998. The plaintiff claimed
that the death of an individual was allegedly caused by exposure to certain
biosolids disposed of by one of the Company's wholly owned subsidiaries. The
plaintiff in the settlement represented that there was no scientific support to
the allegations as previously alleged.



  RIVERSIDE COUNTY



     The Company leases and operates a composting facility in Riverside County,
California, under a conditional use permit ("CUP") that expires January 1, 2010.
The CUP allows for a reduction in material intake and CUP term in the event of
noncompliance with the CUP's terms and conditions. In response to alleged
noncompliance due to excessive odor, on or about June 22, 1999, the Riverside
County Board of Supervisors attempted to reduce the Company's intake of
biosolids from 500 tons per day to 250 tons per day. The Company believes that
this was not an authorized action by the Board of Supervisors. On September 15,
1999, the Company was granted a preliminary injunction restraining and enjoining
the County of Riverside ("County") from restricting the Company's intake of
biosolids at its Riverside composting facility.


                                       F-45


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



     In the lawsuit that the Company filed in the Superior Court of California,
County of Riverside, the Company has also complained that the County's treatment
of the Company is in violation of our civil rights under U.S.C. Section 1983 and
that its due process rights were being affected because the County was
improperly administering the odor protocol in the CUP. The County alleges that
the odor "violations," as well as the Company's actions in not reducing intake,
could reduce the term of the CUP to January 2002. The Company disagrees and has
challenged the County's position in the lawsuit.



     No trial date has been set at this time. The case is currently subject to
an agreed stay and we continue to operate under the existing CUP while the
parties explore settlement. The parties have executed a Memorandum of
Understanding signed by the Board of Supervisors of the County which provides
for a plan to relocate the compost facility to a piece of land owned by the
County.



     Whether or not the parties reach settlement based on the terms of the
Memorandum of Understanding, the site may be closed; we may incur additional
costs related to contractual agreements, relocation and site closure, as well as
the need to obtain new permits (including some from the County) at a new site.
If the Company is unsuccessful in its efforts, goodwill and certain assets may
be impaired. Total goodwill associated with the operations is approximately
$13,843,000 at March 31, 2002. The financial impact associated with a site
closure cannot be reasonably estimated at this time. Although we feel that our
case is meritorious, the ultimate outcome cannot be determined at this time.



  RELIANCE INSURANCE



     For the 24 months ended October 31, 2000 (the "Reliance Coverage Period"),
the Company insured certain risks, including automobile, general liability, and
worker's compensation, with Reliance National Indemnity Company ("Reliance")
through policies totaling $26 million in annual coverage. On May 29, 2001, the
Commonwealth Court of Pennsylvania entered an order appointing the Pennsylvania
Insurance Commissioner as Rehabilitator and directing the Rehabilitator to take
immediate possession of Reliance's assets and business. On June 11, 2001,
Reliance's ultimate parent, Reliance Group Holdings, Inc., filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code of 1978, as amended. On
October 3, 2001, the Pennsylvania Insurance Commissioner removed Reliance from
rehabilitation and placed it into liquidation.



     On January 21, 2000, several plaintiffs filed suit in the District Court of
Jackson County, Texas, (the "Lopez Suit") against a wholly owned subsidiary of
the Company, Synagro of Texas-CDR, Inc. The Lopez Suit was later amended to name
the Company as an additional defendant. The suit arises out of an automobile
accident involving a vehicle operated by Synagro of Texas-CDR, Inc., in which
one person was killed and two others were injured. The Lopez Suit was set for
trial in November 2001; however, on October 16, 2001, as a result of the Texas
Insurance Commissioner's finding that Reliance was impaired, a notice of an
automatic 180-day stay was filed in the Lopez Suit. The stay expired April 5,
2002. Although the Lopez Suit was set for trial on May 13, 2002, the parties
have agreed to postpone trial pending settlement discussions. There is a backup
trial setting of June 17, 2002 that is still in place. The Lopez plaintiffs are
seeking unspecified damages from the Company and its affiliates. On November 13,
2001, the Company filed a petition for intervention in the Pennsylvania Court
requesting that the Court approve and order Reliance to fund an $11.9 million
settlement that Reliance had proposed regarding the Lopez Suit (the
"Intervention Action").



     The Company is vigorously defending itself against this lawsuit. In
addition, other third parties have asserted claims and/or brought suit against
the Company and its affiliates related to alleged acts or omissions occurring
during the Reliance Coverage Period. It is possible, depending on the outcome of
the AON Suit (discussed below) and the Intervention Action, and possible claims
made with the Texas Property and Casualty Insurance Guaranty Association, that
the Company will have no, or insufficient, insurance funds available to pay any
potential losses. There are uncertainties relating to (1) the Company's ultimate
liability, if any, for damages in the Lopez Suit or the other cases arising
during the covered period; (2) the availability of

                                       F-46


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



the insurance coverage; (3) the potential for recovery from the AON Suit; (4)
the Intervention Action; and (5) possible recovery from the Texas Property and
Casualty Insurance Guaranty Association. Based upon information currently
available, the Company has estimated that its net probable exposure for unpaid
insurance claims and other costs for which coverage may not be available due to
the pending liquidation of Reliance is $1.9 million and, accordingly, recorded a
special charge of $2.2 million in its December 31, 2001, financial statements to
record the estimated exposure for this matter and related legal expenses.
Although the Company believes $1.9 million of the charge represents its current
probable exposure related to the Reliance matter, the final resolution could be
substantially different from the amount recorded.



  AON



     On October 4, 2001, the Company filed suit in the 24th Judicial District
Court of Jackson County, Texas, against its former insurance broker, AON Risk
Services of Texas, Inc. ("AON"), and the several insurance companies that
reinsured the policies issued by Reliance (the "Reinsurers") (the "AON Suit").
In the AON Suit, the Company is seeking a judgment against AON for any and all
sums that the Company may become liable for as a result of any settlement of, or
the entry of any judgment in, the Lopez Suit, and any and all costs associated
with defense thereof, as a result of the Company's assertion of negligence by
AON in placing the entirety of the Company's insurance coverage with Reliance
and AON's failure to obtain "cut through endorsements" to the Reliance policies
which would enable the Company to proceed directly against the Reinsurers. The
Company is also seeking a declaratory judgment against the Reinsurers declaring
that the Reinsurers owe the Company a duty of defense and indemnity in the Lopez
Suit as a result of the Reinsurers' participation in the investigation,
evaluation, and handling of the Lopez Suit, as a result of any "cut through
endorsements" that may have been obtained by AON, and by virtue of a "fronting
arrangement" whereby most or all of certain Reliance policies were reinsured.
The AON Suit is at an early stage, and the ultimate outcome of this litigation,
including amounts, if any, that may be recovered by the Company, cannot be
determined at this time.



  OTHER



     There are various other lawsuits and claims pending against Synagro that
have arisen in the normal course of Synagro's business and relate mainly to
matters of environmental, personal injury and property damage. The outcome of
these matters is not presently determinable but, in the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the consolidated financial condition or results of operations of Synagro.


                                       F-47


                           SYNAGRO TECHNOLOGIES, INC.



      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


                                  (UNAUDITED)



(7) COMPREHENSIVE INCOME



     The Company's comprehensive income for the three months ended March 31,
2002 and 2001, is summarized as follows:





                                                                THREE MONTHS ENDED
                                                                     MARCH 31,
                                                              -----------------------
                                                                2002         2001
                                                              ---------   -----------
                                                                    
Net income (loss) applicable to common stock................  $(411,821)  $(3,972,661)
Other comprehensive income (loss)
  Cumulative effect of change in accounting for
     derivatives............................................         --    (2,058,208)
  Change in fair value of derivatives.......................         --    (1,170,526)
  Reclassification adjustment to earnings...................   (203,260)      (76,814)
  Tax benefit of changes in fair value......................     77,239            --
                                                              ---------   -----------
     Subtotal...............................................   (126,021)   (3,305,548)
                                                              ---------   -----------
Comprehensive income (loss).................................  $(537,842)  $(7,278,209)
                                                              =========   ===========




(8) EARNINGS (LOSS) PER COMMON SHARE





                                                                THREE MONTHS ENDED
                                                                     MARCH 31,
                                                             -------------------------
                                                                2002          2001
                                                             -----------   -----------
                                                                     
Earnings (loss) per share:
  Net loss per common share, basic.........................  $      (.02)  $      (.21)
                                                             ===========   ===========
  Net loss per common share, diluted.......................  $      (.02)  $      (.21)
                                                             ===========   ===========
Weighted average shares outstanding, basic.................   19,476,781    19,435,781
Weighted average shares outstanding, diluted...............   19,476,781    19,435,781




     Basic earnings per share (EPS) is computed by dividing net income
applicable to common stock by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed by dividing net income
before preferred stock dividends by the total of the weighted average number of
common shares outstanding for the period, the weighted average number of shares
of common stock that would be issued assuming conversion of the Company's
preferred stock, and other common stock equivalents for options and warrants
outstanding determined using the treasury stock method. Diluted EPS for the
three months ended March 31, 2002 and 2001, is the same as basic earnings per
share and the diluted shares used in computing diluted EPS in 2002 and 2001
excludes shares assuming conversion of the Company's preferred stock and certain
other common stock equivalents for options and warrants outstanding determined
using the treasury stock method totaling 31,763,044 and 29,135,136,
respectively, because during loss periods diluted earnings per share is less
dilutive than basic earnings per share ("antidilutive").


                                       F-48

                           SYNAGRO TECHNOLOGIES, INC.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)


     Effective January 1, 2002, the Company discontinued the amortization of
goodwill in accordance with our adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets." The following shows the effect on the three months ended
March 31, 2001 as if SFAS No. 142 had been adopted January 1, 2001:





                                                                THREE MONTHS ENDED
                                                                     MARCH 31,
                                                              -----------------------
                                                                2002         2001
                                                              ---------   -----------
                                                                    
Net income (loss) applicable to common stock --
Reported net loss applicable to common stock................  $(411,821)  $(3,972,661)
Add back: Goodwill amortization.............................         --     1,105,231
                                                              ---------   -----------
Adjusted net loss...........................................  $(411,821)  $(2,867,430)
Basic and diluted income (loss) per share --
  Reported net loss per share...............................  $    (.02)  $      (.21)
  Goodwill amortization.....................................         --           .06
                                                              ---------   -----------
  Adjusted loss per share...................................  $    (.02)  $      (.15)
                                                              =========   ===========




(9) SUBSEQUENT EVENTS



     On April 17, 2002, the Company issued and sold $150 million in aggregate
principal amount of its 9 1/2 percent Senior Subordinated Notes (the "Notes")
due in 2009 in a private offering (the "Subordinated Offering"). The Company
used the proceeds from the Subordinated Offering to repay existing indebtedness
under the Company's Senior Credit Agreement and other existing subordinated
debt. In connection with the repayment of the existing subordinated debt, the
Company will expense in the second quarter of 2002 approximately $2.1 million,
net of taxes, of previously recorded deferred loan costs. As a result of the
repayment of the subordinated debt, the reverse swap discussed in Note 4 will no
longer receive hedge accounting treatment and subsequent changes in its fair
value will be recorded in earnings currently. All payments, including interest
and principal, of the Notes have been fully, unconditionally and jointly and
severally guaranteed by Synagro's subsidiaries and all such guarantor
subsidiaries are wholly-owned by Synagro. As defined by the Securities and
Exchange Commission Regulations S-X, Article 3, Rule 3-10(h), the parent company
has no independent assets or operations and any non-guarantor subsidiaries are
minor. Synagro Baltimore, L.L.C., a subsidiary of Synagro, pursuant to a loan
agreement in connection with the Nonrecourse Project Revenue Bonds, is required
to place certain monies in restricted fund accounts to be used for various
designated purposes. Monies in these fund accounts will remain restricted until
the Nonrecourse Project Revenue Bonds are paid. At March 31, 2002, there was
approximately $8,741,000 of restricted cash in these fund accounts. See Note 5.



     In May 2002, the Company entered into a new $150 million senior credit
facility that provides for a $70 million funded term loan and up to a $50
million revolver, with the ability to increase the total commitment to $150
million. The term loan proceeds were used to pay off the existing senior debt
that remained unpaid after the $150 million Senior Subordinated Notes offering.
This new facility is secured by substantially all of our assets and those of our
subsidiaries (other than assets securing nonrecourse debt) and includes
covenants restricting the incurrence of additional indebtedness, liens, certain
payments and sale of assets. During the three months ended June 30, 2002, the
Company expects to record a noncash extraordinary charge, net of tax, of
approximately $3.0 million, which represents the unamortized deferred debt costs
related to the debt that was repaid with the net proceeds received from the new
senior credit facility.


                                       F-49


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Bio Gro Division
of Waste Management, Inc.:

We have audited the accompanying combined balance sheets of the Bio Gro division
of Waste Management, Inc. (as defined in Note 1), as of December 31, 1999 and
1998, and the related combined statements of operations, changes in division
equity and cash flows for the three years in the period ended December 31, 1999.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Bio Gro
division of Waste Management, Inc., as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas
October 27, 2000

                                       F-50


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             COMBINED BALANCE SHEETS -- DECEMBER 31, 1999 AND 1998
                                 (IN THOUSANDS)



                                                                1999       1998
                                                              --------   --------
                                                                   
                                     ASSETS

CURRENT ASSETS:
  Cash......................................................  $     41   $     46
  Restricted cash...........................................       925      1,834
  Accounts receivable, net of allowance for doubtful
     accounts of $262 and $726, respectively................    31,387     26,546
  Prepaids and other........................................     1,820      2,004
  Deferred tax asset........................................     1,901      1,054
                                                              --------   --------
     Total current assets...................................    36,074     31,484
PROPERTY, PLANT AND EQUIPMENT, net..........................   101,107    106,684
OTHER ASSETS:
  Goodwill, net of accumulated amortization of $13,015 and
     $10,611, respectively..................................    83,057     85,461
  Deferred debt issuance costs and other, net...............     2,350      2,423
                                                              --------   --------
     Total assets...........................................  $222,588   $226,052
                                                              ========   ========

                         LIABILITIES AND DIVISION EQUITY
CURRENT LIABILITIES:
  Current portion of long-term debt.........................  $  2,075   $  1,975
  Current portion of related-party notes payable............       264        243
  Accounts payable and accrued liabilities..................    13,535     13,274
  Unearned revenue..........................................        --        268
                                                              --------   --------
     Total current liabilities..............................    15,874     15,760
LONG-TERM DEBT..............................................    45,309     47,563
RELATED-PARTY NOTES PAYABLE.................................     7,021      7,288
DEFERRED INCOME TAXES.......................................    17,701     14,015
COMMITMENTS AND CONTINGENCIES DIVISION EQUITY...............   136,683    141,426
                                                              --------   --------
     Total liabilities and division equity..................  $222,588   $226,052
                                                              ========   ========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-51


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

                       COMBINED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)



                                                                1999       1998       1997
                                                              --------   --------   --------
                                                                           
OPERATING REVENUES..........................................  $117,677   $145,656   $198,583
COST AND EXPENSES:
  Operating (exclusive of depreciation and amortization)....    70,013     81,477    112,194
  General and administrative................................    19,439     16,881     18,861
  Depreciation and amortization.............................    12,698     12,869     31,432
  Asset impairments.........................................        --         --     11,179
                                                              --------   --------   --------
          Income from operations............................    15,527     34,429     24,917
INTEREST EXPENSE............................................     3,838      4,249      4,907
MANAGEMENT ALLOCATION.......................................       819      2,417      4,646
OTHER (INCOME) EXPENSE, net.................................       (11)      (138)      (968)
                                                              --------   --------   --------
          Income before income taxes and cumulative effect
            of change in accounting principle...............    10,881     27,901     16,332
INCOME TAX PROVISION........................................     5,046     11,894      6,987
                                                              --------   --------   --------
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE.................................................     5,835     16,007      9,345
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, net of
  income tax benefit........................................        --        566         --
                                                              --------   --------   --------
NET INCOME..................................................  $  5,835   $ 15,441   $  9,345
                                                              ========   ========   ========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-52


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

               COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
                                 (IN THOUSANDS)

                                                            
BALANCE, December 31, 1996..................................   $144,752
NET INCOME..................................................      9,345
NET DISTRIBUTIONS TO WASTE MANAGEMENT, INC., AND
  AFFILIATES................................................    (24,174)
                                                               --------
BALANCE, December 31, 1997..................................    129,923
NET INCOME..................................................     15,441
NET DISTRIBUTIONS TO WASTE MANAGEMENT, INC., AND
  AFFILIATES................................................     (3,938)
                                                               --------
BALANCE, December 31, 1998..................................    141,426
NET INCOME..................................................      5,835
NET DISTRIBUTIONS TO WASTE MANAGEMENT, INC., AND
  AFFILIATES................................................    (10,578)
                                                               --------
BALANCE, December 31, 1999..................................   $136,683
                                                               ========



    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-53


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

                       COMBINED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)



                                                               1999       1998       1997
                                                              -------   --------   --------
                                                                          
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................  $ 5,835   $ 15,441   $  9,345
  Adjustments to reconcile net income to net cash provided
     by operating activities --
     Impairment charge......................................       --         --     11,179
     Cumulative effect of change in accounting principle....       --        943         --
     Depreciation and amortization..........................   12,698     12,869     31,432
     Deferred income tax provision (benefit)................    2,839      4,986     (2,471)
     Changes in assets and liabilities --
       Accounts receivable, net.............................   (4,841)    17,659      5,317
       Prepaids and other current assets....................     (663)       561      1,540
       Accounts payable and accrued liabilities.............      261     (1,419)     1,867
       Unearned revenue.....................................     (268)    (2,709)    (9,652)
     Other, net.............................................        7      1,500      1,163
                                                              -------   --------   --------
          Net cash provided by operating activities.........   15,868     49,831     49,720
                                                              -------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures......................................   (6,291)    (2,359)    (7,692)
                                                              -------   --------   --------
          Net cash used in investing activities.............   (6,291)    (2,359)    (7,692)
                                                              -------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net change in restricted cash.............................      909      1,300      2,635
  Repayments of long-term debt..............................   (2,154)    (1,885)      (900)
  Repayments of related-party notes payable.................     (246)   (16,491)   (20,248)
  Net cash distributions to Waste Management, Inc., and
     affiliates.............................................   (8,091)   (30,738)   (24,174)
                                                              -------   --------   --------
          Net cash used in financing activities.............   (9,582)   (47,814)   (42,687)
                                                              -------   --------   --------
DECREASE IN CASH............................................       (5)      (342)      (659)
CASH AT BEGINNING OF YEAR...................................       46        388      1,047
                                                              -------   --------   --------
CASH AT END OF YEAR.........................................  $    41   $     46   $    388
                                                              =======   ========   ========
CASH PAID FOR INTEREST -- NONAFFILIATE......................  $ 3,370   $  3,460   $  3,500
                                                              =======   ========   ========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-54


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS DESCRIPTION:

     The Bio Gro division of Waste Management, Inc. (Bio Gro or the Company),
consists of the accounts of Wheelabrator Water Technologies Inc. (a Maryland
corporation) and its consolidated subsidiaries (collectively, WWTI) and
Residuals Processing Inc. (RPI) (a California corporation). WWTI is wholly owned
by Resco Holdings, Inc., which is wholly owned by Wheelabrator Technologies,
Inc. (WTI). WTI and RPI are both wholly owned by Waste Management Holdings, Inc.
Waste Management Holdings, Inc., is wholly owned by Waste Management, Inc.
(Waste Management). Bio Gro, operating as a division of Waste Management, offers
municipalities and various industrial customers (commonly referred to as waste
"generators") a range of management services for nonhazardous sludges resulting
from treatment of municipal and industrial wastewater (biosolids). All of Bio
Gro's operations are located in the United States. Services are typically
provided to customers pursuant to multiyear contracts under which Bio Gro
handles, processes and disposes biosolids. The Company's primary means of
disposing of biosolids are primarily through land application and thermal
facilities.

     Land application involves the application of nonhazardous biosolids as a
natural fertilizer on farmland pursuant to site-specific permits issued by
applicable state authorities. Land-applied biosolids are often stabilized prior
to application using proprietary technology. Biosolids are also disposed of at
composting sites and landfills. Principal areas of operation include Maryland,
New Jersey, Illinois, Ohio, Michigan and California.

     Bio Gro also develops and operates facilities at which biosolids are dried
and pelletized or composted. Development of dryer and composting facilities
generally involves various contractual arrangements with a variety of private
and public entities, including municipalities which generate the biosolids,
lenders, contractors and subcontractors which build the facilities, and
end-users of the fertilizer, pellets or compost generated from the treatment
process. These facilities incorporate a variety of biosolids drying and emission
control technologies, some proprietary and some licensed to Bio Gro. Biosolids
which have been dried and pelletized or composted are generally used as
fertilizer by farmers, commercial landscapers and nurseries and as a bulking
agent by fertilizer manufacturers. Principal areas of operation include
Maryland, New York and New Jersey.

2. SIGNIFICANT ACCOUNTING POLICIES:

  PRINCIPLES OF COMBINATION

     WWTI is comprised of Enviroland Incorporated, New York Organic Fertilizer
Company Holdings Inc., Wheelabrator Clean Water New Jersey Inc., Vista
Properties Inc., New York Organic Fertilizer Inc. (NYOFCO), Wheelabrator Water
Technologies Baltimore LLC and a 40 percent interest in JABB II LLC. RPI
includes Future-Tech Environmental Services Inc. All intercompany accounts and
transactions have been eliminated in combination.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses and disclosures of contingencies. Actual
results could differ from those estimates.

  CONCENTRATION OF CREDIT RISK

     Bio Gro provides services to various geographical regions in the U.S. Bio
Gro's credit risk primarily consists of receivables from a variety of customers,
including state and local agencies, municipalities and private industries. Bio
Gro reviews its accounts receivable and provides allowances as deemed necessary.
                                       F-55

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Bio Gro's financial instruments consist primarily of cash, receivables,
restricted cash, accounts payable and debt instruments. The book values of cash,
receivables, restricted cash and accounts payable are considered to be
representative of their respective fair values. See Note 6 for the terms,
carrying values and fair values of Bio Gro's various debt instruments.

  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment (including major improvements) is stated at
cost. Expenditures which increase the utility or extend the lives of assets in
service are capitalized and depreciated. Expenditures of an ordinary maintenance
or repair nature are charged directly to operating expense. Upon retirement or
disposition of property, plant and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the combined statement of income.

     The cost of Bio Gro's buildings, building improvements, machinery and
equipment utilized in Bio Gro's thermal operations is depreciated on a
straight-line basis over the shorter of the estimated useful lives of the
individual assets or the lives of the initial service contracts related to each
thermal facility. When evidence (such as service contract renegotiations or
extensions) supports longer useful lives for thermal assets depreciated based on
service contract lives, depreciation is adjusted and accounted for on a
prospective basis. Except for land, the cost of all other property, plant and
equipment is depreciated on a straight-line basis over the estimated useful
lives of the asset. See Note 4 for further information regarding amounts
recorded in the combined financial statements and estimated useful lives.

  CAPITALIZED INTEREST

     Bio Gro capitalizes interest on significant projects under construction in
accordance with Statement of Financial Accounting Standards (SFAS) No. 34,
"Capitalization of Interest Cost." There were no amounts capitalized for the
years ended December 31, 1999, 1998 and 1997.

  GOODWILL

     Goodwill represents the aggregate purchase price paid by Bio Gro in
acquisitions accounted for as a purchase over the fair value of the net tangible
assets acquired. Goodwill is amortized on a straight-line basis over a period
not exceeding 40 years. Goodwill amortization expense was $2,405,000, $2,209,000
and $1,670,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.

     In the event that facts and circumstances indicate that goodwill may be
impaired, an evaluation of recoverability would be performed on the basis of the
estimated future undiscounted cash flows associated with the asset. Any
impairment would be recognized in the period identified. Bio Gro believes the
goodwill remaining as of December 31, 1999, is fully realizable.

     In 1998, Waste Management purchased certain shareholding interests in WTI
not previously held by Waste Management. As a result of such purchase,
approximately $26,800,000 in goodwill was allocated to Bio Gro in the
accompanying combined financial statements.

  DEFERRED DEBT ISSUANCE COSTS

     Deferred debt issuance costs, net of accumulated amortization at December
31, 1999 and 1998, totaled approximately $1,097,000 and $1,166,000,
respectively, and is included in other assets. Deferred debt issuance costs are
amortized over the life of the underlying debt.

                                       F-56

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  ENVIRONMENTAL COSTS AND LIABILITIES

     Bio Gro has instituted procedures to periodically evaluate potential
environmental exposures. When Bio Gro concludes it is probable that a liability
has been incurred, provision is made in the financial statements, based upon
management's judgment and prior experience, for Bio Gro's best estimate of the
liability. Such estimates are subsequently revised as deemed necessary when
additional information becomes available.

     While Bio Gro does not presently anticipate that any such adjustment would
be material to its financial statements in the near term, it is reasonably
possible that technological, regulatory or enforcement developments, results of
environmental studies or other factors could alter this expectation and
necessitate the recording of additional liabilities, which could be material.

     Estimates of the extent of the Company's degree of responsibility for
remediation and the method and ultimate cost of remediation require a number of
assumptions and are inherently difficult, and the ultimate outcome may differ
from current estimates. As part of its ongoing operations, the Company reviews
its reserve requirements for remediation and other environmental matters based
on an analysis of the regulatory environment. Revisions to reserve requirements
may result in adjustments to income from operations in any given period.

  REVENUES

     Revenues under land application contracts are recognized when the service
is performed. Revenues under thermal operations are recognized either when cake
sludge enters the facilities or when the sludge has been pelletized, depending
on the contract terms.

     During 1997, Bio Gro entered into a long-term engineering and construction
contract to design, build and operate a composting facility for which Bio Gro
did not take title. Bio Gro recognized revenue on the percentage-of-completion
basis. Under this method, Bio Gro recognized as revenue that portion of the
total contract price which the cost of work completed bears to the estimated
total cost of the work included in the contract. Because the contract extended
over more than one fiscal period, revisions of cost and profit estimates were
made periodically and were reflected in the accounting period in which they were
determined (see Note 3).

  IMPAIRMENT CHARGE

     In accordance with the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
Bio Gro reviews long-lived assets held for use for impairment whenever events or
changes in circumstances indicate that the carrying value of the asset may not
be recoverable. During 1997, Bio Gro determined that the carrying amount of
certain assets held for use exceeded an estimate of its future undiscounted net
cash flows or estimated net realizable value. Accordingly, Bio Gro recorded an
impairment loss of approximately $11,179,000 during 1997 to reduce the carrying
value of these assets to an amount equal to their estimated fair value.

  INCOME TAXES

     Bio Gro accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." Under the asset and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

     Bio Gro is considered a part of the consolidated results of WTI for income
tax purposes. Effective April 1, 1998, in conjunction with the acquisition of
the remaining outstanding shares of WTI by Waste Management, WTI joined in
filing a consolidated federal income tax return with Waste Management. Income
taxes in Bio

                                       F-57

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Gro's combined financial statements reflect Waste Management's and WTI's payment
of taxes related to income generated by Bio Gro. Amounts related to income taxes
have been allocated as if Bio Gro had prepared a stand-alone federal income tax
filing. Reference is made to Note 5 for further financial information related to
income tax amounts.

  ACCOUNTING PRONOUNCEMENTS

     In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This SOP provides
guidance with respect to accounting for the various types of costs incurred for
computer software developed or obtained for Bio Gro's use. Bio Gro was required
to and adopted SOP 98-1 in the first quarter of fiscal 1999. The adoption did
not have a material effect on Bio Gro's combined financial position or results
of operations.

     In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires costs of start-up activities to be expensed
as incurred. This statement is effective for fiscal years beginning after
December 15, 1998. The statement requires previously capitalized costs related
to start-up activities to be expensed as a cumulative effect of a change in
accounting principle when the statement is adopted. Bio Gro capitalized certain
costs related primarily to start-up activities in connection with a thermal
facility. Bio Gro recorded an after-tax charge in 1998 of approximately $566,000
for the cumulative effect of this change in accounting principle upon adoption.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires a company to recognize all derivative instruments (including certain
derivative instruments embedded in other contracts) as assets or liabilities in
its balance sheet and measure them at fair value. The statement requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. SFAS No. 133, as amended by
SFAS No. 137, is effective for the Company in its first fiscal quarter of 2001.
Management is currently assessing the impact on existing accounting policies and
financial reporting disclosures. However, Bio Gro has not historically engaged
in activities or entered into arrangements normally associated with derivative
instruments.

3. SIGNIFICANT SERVICE CONTRACTS:

     A significant portion of Bio Gro's revenues are derived from service
contracts with a limited number of customers. For the years ended December 31,
1999, 1998 and 1997, two customers accounted for 20 percent and 15 percent; 34
percent and 12 percent; and 37 percent and 6 percent, respectively, of the
Company's revenues. In addition, 15 percent of revenues recognized during 1997
was derived from a construction contract with a county.

  MUNICIPAL SERVICE CONTRACTS

     During 1998, due to the expiration of the initial five-year service
contract with a municipality, which commenced in 1992 upon completion of
construction of a thermal facility, a new 15-year service contract was awarded
and became effective July 1, 1998. Bio Gro owns the property, plant and
equipment utilized in the operations. The service contract is subject to a
termination option exercisable by the municipality at any time upon giving a
10-day notice of termination to Bio Gro. The site lease covers five years from
July 1, 1998, to June 30, 2003, with two five-year renewal options to Bio Gro.
Upon expiration of the site lease, Bio Gro is to remove all trade fixtures,
machinery and equipment from the facility, at which time unlimited title to all
building and improvements will pass to the third-party lessor. The land at the
site is leased from a third party under a separate site lease agreement.

                                       F-58

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     Bio Gro owns the property, plant and equipment utilized in the operations
of two other thermal facilities. The land at each site is leased from a
municipality under separate long-term site lease agreements expiring January 1,
2020, and August 31, 2022, respectively, or five years after expiration of the
service agreement, whichever is later. Both leases can be extended with two
mutually agreeable five-year options. Title to the facilities remains with Bio
Gro, or with a trustee, so long as the bonds used to finance the facilities
remain outstanding. Upon expiration of the site leases, the municipality may
request that Bio Gro dismantle and remove the facilities and restore the land,
all at Bio Gro's expense, or should the municipality not request removal, Bio
Gro may elect to not remove the facilities and, instead, transfer title to the
municipality.

     The service agreements with the municipality are subject to a termination
option exercisable by the municipality, in the case of one facility, in years
2005, 2010 or 2015 and, in the case of the other facility, in years 2007, 2012
or 2017. Under both contracts, the municipality must provide a notice of
termination one year prior to termination. If the municipality elects to
terminate either or both service contracts, the municipality must redeem a
portion of the outstanding Project Revenue Bonds (as defined in Note 6) and make
certain payments to Bio Gro generally based on a portion of lost profits for the
remaining term of the service contract and undepreciated or otherwise
unamortized project costs. Both contracts contain an option, based on mutual
consent, to renew the contract for additional terms aggregating five years.

  COMPOSTING FACILITY

     On May 10, 1996, the Company entered into a co-composting facility
construction and operating agreement with a county providing for the design,
construction, operation and maintenance of a composting facility. The price to
construct the facility was fixed and was based on completion of certain
milestones throughout the contract period. Construction of the facility began in
March 1997 and was completed in October 1998. The Company accounted for this
contract under the percentage-of-completion method, using costs incurred to date
in relation to estimated total costs of the contract to measure the stage of
completion. The cumulative effect of revisions of estimated total costs and
revenues was recorded in the period in which the facts requiring the revision
became known. Commercial operations of the facility began in 1998. Under the
agreement, Bio Gro to operate the facility for a period of five years, with a
mutual option for an additional five-year renewal period.

4.  PROPERTY, PLANT AND EQUIPMENT:

     The following is a summary of capitalized costs of property, plant and
equipment and useful lives (in years) at December 31, 1999 and 1998 (in
thousands):



                                                     APPROXIMATE
                                                     USEFUL LIFE     1999        1998
                                                     -----------   ---------   ---------
                                                     (IN YEARS)
                                                                      
Land...............................................      N/A       $   2,419   $   2,491
Buildings and improvements.........................     5-20          52,863      53,353
Machinery and equipment............................     3-20         184,919     183,983
Vehicles...........................................     3-10          22,321      20,885
Other..............................................     3-25           3,837       3,560
Construction in progress...........................      N/A             515         286
Less -- Accumulated depreciation...................                 (165,767)   (157,874)
                                                                   ---------   ---------
  Net property, plant and equipment................                $ 101,107   $ 106,684
                                                                   =========   =========


     Depreciation of property, plant and equipment included for the years ended
December 31, 1999, 1998 and 1997, was $10,170,000, $9,958,000 and $28,512,000,
respectively.

                                       F-59

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5.  INCOME TAXES:

     A summary of Bio Gro's income tax provision (benefit) for the years ended
December 31, 1999 and 1998, is as follows (in thousands):



                                                               1999     1998
                                                              ------   -------
                                                                 
Current tax expense --
  U.S. federal..............................................  $1,782   $ 5,275
  State and local...........................................     425     1,256
                                                              ------   -------
          Total current.....................................   2,207     6,531
                                                              ------   -------
Deferred tax expense --
  U.S. federal..............................................   2,293     4,027
  State and local...........................................     546       959
                                                              ------   -------
          Total deferred....................................   2,839     4,986
                                                              ------   -------
          Total provision...................................  $5,046   $11,517
                                                              ======   =======


     The principal items accounting for the difference in income taxes computed
at the U.S. statutory rates compared to amounts recorded for the years ended
December 31, 1999 and 1998, are as follows (in thousands):



                                                               1999     1998
                                                              AMOUNT   AMOUNT
                                                              ------   -------
                                                                 
Statutory federal income tax................................  $3,808   $ 9,435
State income taxes after federal income tax benefit.........     631     1,440
Other, net..................................................     607       642
                                                              ------   -------
          Effective tax rate................................  $5,046   $11,517
                                                              ======   =======


     The principal items that comprise deferred tax assets (liabilities) are as
follows as of December 31, 1999 and 1998 (in thousands):



                                                                1999       1998
                                                              --------   --------
                                                                   
Reserves not deductible until paid..........................  $  1,479   $    323
Accruals not deductible until paid..........................     1,375        721
Other.......................................................     1,668      1,054
                                                              --------   --------
          Subtotal..........................................     4,522      2,098
                                                              --------   --------
Property, plant and equipment...............................   (17,931)   (12,305)
Intangibles.................................................    (2,391)    (2,651)
Other.......................................................        --       (103)
                                                              --------   --------
          Subtotal..........................................   (20,322)   (15,059)
                                                              --------   --------
          Net deferred tax asset (liability)................  $(15,800)  $(12,961)
                                                              ========   ========


                                       F-60

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6.  DEBT:

     Long-term debt and related-party notes payable at December 31, 1999 and
1998, are as follows (in thousands):



                                                               1999      1998
                                                              -------   -------
                                                                  
Long-term debt --
  Maryland Energy Financing Administration Limited
     Obligation Solid Waste Disposal Revenue Bonds, 1996
     series --
     Revenue bonds due 1999 to 2005 at stated interest rates
      of 5.10% to 5.85%.....................................  $14,270   $16,245
     Term revenue bond due 2010 at stated interest rate of
      6.30%.................................................   16,295    16,295
     Term revenue bond due 2016 at stated interest rate of
      6.45%.................................................   22,360    22,360
     Less -- Restricted cash................................   (5,541)   (5,362)
                                                              -------   -------
          Total debt, net of restricted cash................   47,384    49,538
Less -- Current portion.....................................   (2,075)   (1,975)
                                                              -------   -------
          Total long-term debt..............................  $45,309   $47,563
                                                              =======   =======
Related-party notes payable --
  WTI related-party notes payable --
     Note payable monthly through 2014 at interest rate of
      7%....................................................  $ 4,539   $ 4,707
     Note payable monthly through 2017 at interest rate of
      7%....................................................    2,746     2,824
                                                              -------   -------
                                                                7,285     7,531
Less -- Current portion.....................................     (264)     (243)
                                                              -------   -------
          Total long-term related-party notes payable.......  $ 7,021   $ 7,288
                                                              =======   =======


     The aggregate fair value of Bio Gro's debt, excluding restricted cash, was
approximately $60,209,000 and $62,431,000 at December 31, 1999 and 1998,
respectively. The fair value of Bio Gro's long-term debt was determined using
market quotes of similar debt with similar maturities and stated interest rates.

     Restricted cash represents monies held by First Union National Bank (the
Trustee) for the loan agreement between the Maryland Energy Financing
Administration and Wheelabrator Water Technologies Baltimore LLC (WWTB). As a
requirement of the loan agreement, WWTB must meet the requirements stipulated
per the agreement dated June 1, 1996. The loan, based on the terms of the
related indenture, requires that certain monies be placed in restricted fund
accounts to be used for various designated purposes (i.e., debt service reserve
funds, bond funds, etc.). The debt service reserve fund has been presented net
of debt in the accompanying balance sheets. Monies in the funds will remain
restricted until such time as the related loan matures or is paid off, whichever
occurs first. WWTB was in compliance with the reserve requirements as of
December 31, 1999 and 1998.

     The revenue bonds (the Revenue Bonds) and the term revenue bonds (the Term
Revenue Bonds) (collectively, the Project Revenue Bonds) were issued in 1996 by
the Maryland Energy Financing Administration pursuant to the Maryland Energy
Financing Act. The proceeds of the Project Revenue Bonds were loaned to Bio Gro
pursuant to a June 1996 financing agreement for the purposes of financing the
costs of the construction of Bio Gro's thermal operations located in Baltimore
County, Maryland, at the site of Baltimore's Back River Wastewater Treatment
Plant and in Baltimore City, Maryland, at the site of Baltimore's Patapsco
Wastewater Treatment Plant. Both facilities were in operation prior to 1998.

                                       F-61

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

     The Project Revenue Bonds are primarily secured by the pledge of revenues
and assets related to Bio Gro's Back River and Patapsco thermal facilities. The
underlying service contracts between Bio Gro and Baltimore obligated Bio Gro to
design, construct and operate the thermal facilities and obligated Baltimore to
deliver biosolids for processing at the thermal facilities. Bio Gro and
Baltimore have agreed that Baltimore will deposit all payments made by Baltimore
to Bio Gro under the service contracts directly with a trustee for the purpose
of maintaining a reserve fund to service debt requirements.

     At December 31, 1999 and 1998, the Project Revenue Bonds were
collateralized by property, plant and equipment with a net book value of
$56,556,000 and $59,371,000, respectively, and restricted cash of $6,466,000 and
$7,196,000, respectively.

     The Project Revenue Bonds can be redeemed at the option of Bio Gro at any
time on or after December 1, 2006, subject to redemption prices specified in the
financing agreement. The Project Revenue Bonds can be redeemed at the option of
Bio Gro under certain extraordinary conditions, as defined in the financing
agreement. Additionally, the Term Revenue Bonds are subject to mandatory sinking
fund requirements prior to final maturity beginning on December 1, 2006.

     WWTI has guaranteed the performance of services under the underlying
service agreements. WTI has also guaranteed the performance of services under
the underlying service agreements. In July 1998, the WTI guarantee was assigned
to Waste Management. Neither WWTI nor Waste Management has guaranteed payment of
debt service on the Project Revenue Bonds.

     Principal payments on debt at December 31, 1999, are due as follows (in
thousands):



                                                                            RELATED-PARTY
                                                           LONG-TERM DEBT   NOTES PAYABLE
                                                           --------------   -------------
                                                                      
2000.....................................................     $ 2,075          $  264
2001.....................................................       2,185             283
2002.....................................................       2,300             303
2003.....................................................       2,430             325
2004.....................................................       2,570             349
Thereafter...............................................      41,365           5,761
                                                              -------          ------
  Total..................................................     $52,925          $7,285
                                                              =======          ======


     For the years ended December 31, 1999, 1998 and 1997, Bio Gro incurred
$519,000, $829,000 and $2,315,000, respectively, of interest expense on the
related-party notes payable to WTI.

7. COMMITMENTS AND CONTINGENCIES:

     Bio Gro's business activities are subject to environmental regulation under
federal, state and local laws and regulations. In the ordinary course of
conducting its business activities, Bio Gro becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. Bio Gro believes that these matters will not have a
material adverse effect on its results of operations or financial condition.
However, the outcome of any particular proceeding cannot be predicted with
certainty. Bio Gro is under various regulations to procure licenses and permits
to conduct its operations. These licenses and permits are subject to periodic
renewal without which the Company's operations could be adversely affected.
Also, there can be no assurance that regulatory requirements will not change to
the extent that it would materially affect Bio Gro's combined financial
statements.

     The Company is a defendant in a lawsuit in which the plaintiff claims that
the death of an individual was allegedly caused by certain biosolids disposed of
by the Company. The litigation is currently in the discovery phase, and the
Company is waiting for plaintiff's production of a court-ordered expert on
causation. The

                                       F-62

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Company is vigorously defending itself in the litigation. Bio Gro cannot predict
the ultimate outcome of the matter at this time.

     There are various other lawsuits and claims pending against Bio Gro that
have arisen in the normal course of Bio Gro's business and relate mainly to
matters of environmental, personal injury and property damage. The outcome of
these matters is not presently determinable but, in the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the combined financial condition or results of operations of Bio Gro. It is
reasonably possible, however, that a change in Bio Gro's estimate of its
probable liability with respect to these matters could occur.

     Bio Gro has issued or is a party to bank letters of credit, performance
bonds and other guarantees. Such financial instruments are given in the ordinary
course of business. Bio Gro insures the majority of its contractual obligations
through performance bonds.

     Noncancelable operating lease payments for operating and office facilities
at December 31, 1999, are due as follows (in thousands):

                                                            
2000........................................................   $1,872
2001........................................................    1,723
2002........................................................    1,662
2003........................................................    1,038
2004........................................................      440
Thereafter..................................................      975
                                                               ------
          Total.............................................   $7,710
                                                               ======



     Total rent expense was $1,800,000, $1,794,000 and $2,239,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.

8. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

     Activity of Bio Gro's allowance for doubtful accounts at December 31, 1999
and 1998, consists of the following (in thousands):



                                                              1999    1998
                                                              -----   -----
                                                                
Balance at beginning of year................................  $ 726   $ 479
Deductions for recoveries and for uncollectible receivables
  written off...............................................   (548)   (184)
Charged to cost of services.................................     84     431
                                                              -----   -----
Balance at end of year......................................  $ 262   $ 726
                                                              =====   =====


     Accrued liabilities at December 31, 1999 and 1998, consist of the following
(in thousands):



                                                               1999      1998
                                                              -------   -------
                                                                  
Accounts payable............................................  $ 5,158   $ 3,412
Salaries and benefits.......................................    2,614     2,070
Other.......................................................    5,763     7,792
                                                              -------   -------
          Total.............................................  $13,535   $13,274
                                                              =======   =======


                                       F-63

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

9. RELATED-PARTY TRANSACTIONS:

  MANAGEMENT ALLOCATION

     Bio Gro receives services from WTI and other Waste Management affiliates
relating to various corporate general and administrative functions such as legal
services, tax, accounting and reporting, treasury, information systems,
insurance and loss control and employee benefits administration. For the years
ended December 31, 1999, 1998 and 1997, Bio Gro was allocated $819,000,
$2,417,000 and $4,646,000, respectively, from WTI and other Waste Management
affiliates for these services. The allocation of affiliated corporate general
and administrative expenses is based on estimated levels of effort devoted to
the Bio Gro operations. Bio Gro's management believes the method for allocating
corporate general and administrative expenses is reasonable.

  INSURANCE ALLOCATIONS

     Bio Gro participates in consolidated insurance programs administrated by
Waste Management on behalf of certain of its subsidiaries. Under these programs,
a broad range of coverages are provided, including general liability, automobile
liability, workers' compensation, property, health and medical and such other
coverages as deemed necessary. Some of these coverages are subject to varying
retentions of risk. Pursuant to such insurance programs, Bio Gro was allocated
insurance premiums based on various factors, including payroll costs, employee
elections and other available information. Additionally, Bio Gro was also
allocated a charge for certain claims directly related to its operations. For
the years ended December 31, 1999, 1998 and 1997, Bio Gro incurred charges of
approximately $5,100,000, $4,900,000 and $5,300,000, respectively. It was not
practical to determine the amount of insurance cost of Bio Gro if it had
operated on a stand-alone basis. However, management believes the method of
allocation applied is reasonable.

  DIVISION EQUITY AND RELATED-PARTY TRANSACTIONS

     The division equity of Bio Gro includes the common stock of WWTI and RPI.
The authorized capital stock of WWTI consists of 1,000 shares of common stock,
par value $1.00 per share, all of which shares are issued and outstanding. The
authorized capital stock of RPI consists of 1,000 shares of stock, all of which
shares are issued and outstanding.

     Net distributions to Waste Management affiliates in the combined statement
of changes in division equity consist of net cash and noncash changes in
receivables and payables with WTI and other Waste Management affiliates which
have been included in combined division equity. Historically, WTI and other
Waste Management affiliates have transferred cash funds to and from Bio Gro
under a central cash management program, transferred net assets of acquired
businesses to Bio Gro, transferred assets from Bio Gro to other WTI or other
Waste Management affiliates, allocated tax-related assets, liabilities and
provisions and charged expenses to Bio Gro for various services and other
benefits provided, as discussed further herein.

     In 1998, the remaining net book value of $2,500,000 related to a facility
that was written down in 1997 was transferred to Waste Management.

  RELATED-PARTY TRANSACTION ON COMPOSTING SITE

     In January 1999, Bio Gro entered into a verbal agreement with Waste
Management of New York (WMNY), a wholly owned subsidiary of Waste Management, to
construct and operate a composting facility for the county of Rockland, New
York. The verbal agreement provided that all assets and liabilities related to
construction of the facility would remain on the books of WMNY and Bio Gro would
be paid a fee, from WMNY, of cost plus 10 percent. During 1999, revenues related
to this contract totaled $323,000 and are included in 1999 revenues in the
accompanying combined statement of income. During August 2000, the

                                       F-64

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

contract and all associated assets and liabilities between Rockland and WMNY
were sold to Synagro Technologies, Inc. (Synagro).

     Bio Gro is a party to certain arrangements with Waste Management affiliates
which primarily provide for the use by Bio Gro in disposing of biosolids at
certain facilities of Waste Management affiliates. The charges incurred by Bio
Gro pursuant to such arrangements for the years ended December 31, 1999, 1998
and 1997, were approximately $4,732,000, $3,377,000 and $3,926,000,
respectively.

10.  COMPENSATION AND BENEFIT PLANS:

  SAVINGS AND RETIREMENT PLAN

     During 1998 and 1997, substantially all employees participated in the
Wheelabrator-Rust Savings and Retirement Plan (the Plan), which was a qualified
defined contribution plan consisting of a savings account component (the Savings
Account) and a retirement account component (the Retirement Account). Under the
terms of the Savings Account, eligible employees of Bio Gro could elect to
contribute a portion of their annual compensation not to exceed 16 percent. Bio
Gro was required to match a minimum of 30 percent of the first 6 percent of
eligible compensation contributed by an employee. At the discretion of WTI
management, supplemental savings account contributions could be made to each
employee. Under the terms of the Retirement Account, eligible employees of Bio
Gro received an annual contribution equal to a minimum of 3 percent of their
eligible earnings. Employees vested in Bio Gro contributions and the associated
earnings in the Savings Account at 20 percent per year and in the Retirement
Account after five years. Bio Gro's contributions to the Plan for the years
ended December 31, 1998 and 1997, amounted to approximately $922,000 and
$819,000, respectively. The Plan was terminated at December 31, 1998, as a
result of the merger of Waste Management with USA Waste Services, Inc., in July
1998 at which time vesting was accelerated.

     Effective January 1, 1999, the Waste Management Retirement Savings Plan and
the Plan were merged into the USA Waste Services, Inc. Employee Savings Plan,
which was then renamed the Waste Management Retirement Savings Plan (the Savings
Plan). The Savings Plan covers employees (except those working subject to
collective bargaining agreements which do not provide for coverage under such
plans) following a 90-day waiting period after hire and allows eligible
employees to contribute up to 15 percent of their annual compensation, as
limited by IRS regulations. Under the Savings Plan, the Company matches employee
contributions up to 3 percent of eligible compensation and matches 50 percent of
employee contributions in excess of 3 percent but no more than 6 percent of
eligible compensation. Both employee and Company contributions vest immediately.
Charges to operations for the Company's defined contribution plan was $645,000
for the year ended December 31, 1999.

  OTHER

     Certain Bio Gro employees participate in a Waste Management stock option
plan for which Accounting Principles Board Opinion No. 25 is followed for
accounting purposes. Exercise prices on options granted are equivalent to the
market value of Waste Management shares on the date of grant. As such, no
compensation expense is recognized or allocated to Bio Gro for options granted.

11.  SUBSEQUENT EVENT:

     On August 14, 2000, Synagro Technologies, Inc. (Synagro), closed the
acquisition of Bio Gro. The acquisition will be accounted for as a purchase;
accordingly, the purchase price will be allocated to the underlying assets and
liabilities based on their respective estimated fair values at the date of
acquisition.

                                       F-65


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

                            COMBINED BALANCE SHEETS
                                 (IN THOUSANDS)



                                                               JUNE 30,     DECEMBER 31,
                                                                 2000           1999
                                                              -----------   ------------
                                                              (UNAUDITED)
                                                                      
                                         ASSETS

CURRENT ASSETS:
  Cash......................................................   $     42       $     41
  Restricted cash...........................................      2,802            925
  Accounts receivable, net of allowance for doubtful
     accounts of $479 and $262, respectively................     31,803         31,387
  Prepaids and other........................................      2,137          1,820
  Deferred tax asset........................................      2,324          1,901
                                                               --------       --------
          Total current assets..............................     39,108         36,074
PROPERTY, PLANT AND EQUIPMENT, net..........................     98,646        101,107
OTHER ASSETS:
  Goodwill, net of accumulated amortization of $14,224 and
     $13,015, respectively..................................     81,848         83,057
  Deferred debt issuance costs and other....................      2,189          2,350
                                                               --------       --------
          Total assets......................................   $221,791       $222,588
                                                               ========       ========

                            LIABILITIES AND DIVISION EQUITY
CURRENT LIABILITIES:
  Current portion of long-term debt.........................   $  2,075       $  2,075
  Current portion of related-party notes payable............        338            264
  Accounts payable and accrued liabilities..................     12,298         13,535
                                                               --------       --------
          Total current liabilities.........................     14,711         15,874
LONG-TERM DEBT..............................................     45,309         45,309
RELATED-PARTY NOTES PAYABLE.................................      6,817          7,021
DEFERRED INCOME TAXES.......................................     19,543         17,701
COMMITMENTS AND CONTINGENCIES
DIVISION EQUITY.............................................    135,411        136,683
                                                               --------       --------
          Total liabilities and division equity.............   $221,791       $222,588
                                                               ========       ========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-66


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

                       COMBINED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)



                                                              SIX MONTHS ENDED
                                                                   JUNE 30
                                                              -----------------
                                                               2000      1999
                                                              -------   -------
                                                                 (UNAUDITED)
                                                                  
OPERATING REVENUES..........................................  $64,828   $53,227
COST AND EXPENSES:
  Operating (exclusive of depreciation and amortization)....   38,774    33,054
  General and administrative................................    9,218     4,981
  Depreciation and amortization.............................    6,027     5,653
                                                              -------   -------
          Income from operations............................   10,809     9,539
INTEREST EXPENSE............................................    1,888     1,895
MANAGEMENT ALLOCATION.......................................      394       263
OTHER (INCOME) EXPENSE, net.................................     (127)      (66)
                                                              -------   -------
          Income before income taxes........................    8,654     7,447
INCOME TAX PROVISION........................................    3,808     3,625
                                                              -------   -------
NET INCOME..................................................  $ 4,846   $ 3,822
                                                              =======   =======


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-67


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

                       COMBINED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



                                                              SIX MONTHS ENDED
                                                                   JUNE 30
                                                              -----------------
                                                               2000      1999
                                                              ------   --------
                                                                 (UNAUDITED)
                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................  $4,846   $  3,822
  Adjustments to reconcile net income to net cash provided
     by operating activities --
     Depreciation and amortization..........................   6,027      5,653
     Deferred income taxes..................................   2,655      4,873
     Changes in assets and liabilities --
       Accounts receivable, net.............................    (416)     1,289
       Prepaids and other current assets....................    (317)      (792)
       Accounts payable and accrued liabilities.............  (1,508)    (1,089)
       Unearned revenue.....................................     271          1
     Other, net.............................................    (107)      (647)
                                                              ------   --------
          Net cash provided by operating activities.........  11,451     13,110
                                                              ------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures......................................  (2,359)    (2,261)
                                                              ------   --------
          Net cash used in investing activities.............  (2,359)    (2,261)
                                                              ------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net change in restricted cash.............................  (1,877)      (526)
  Repayments of related-party notes payable.................    (130)      (300)
  Net cash distributions to Waste Management, Inc., and
     affiliates.............................................  (7,084)    (9,983)
                                                              ------   --------
          Net cash used in financing activities.............  (9,091)   (10,809)
                                                              ------   --------
INCREASE IN CASH............................................       1         40
CASH AT BEGINNING OF YEAR...................................      41         46
                                                              ------   --------
CASH AT END OF YEAR.........................................  $   42   $     86
                                                              ======   ========
CASH PAID FOR INTEREST -- NON AFFILIATE.....................  $1,725   $  1,685
                                                              ======   ========


    The accompanying notes are an integral part of these combined financial
                                  statements.
                                       F-68


                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

                NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS

1. BUSINESS DESCRIPTION:

     The Bio Gro division of Waste Management, Inc. (Bio Gro or the Company),
consists of the accounts of Wheelabrator Water Technologies Inc. (a Maryland
corporation) and its consolidated subsidiaries (collectively, WWTI) and
Residuals Processing Inc. (RPI) (a California corporation). WWTI is wholly owned
by Resco Holdings, Inc., which is wholly owned by Wheelabrator Technologies,
Inc. (WTI). WTI and RPI are both wholly owned by Waste Management Holdings, Inc.
Waste Management Holdings, Inc., is wholly owned by Waste Management, Inc.
(Waste Management). Bio Gro, operating as a division of Waste Management, offers
municipalities and various industrial customers (commonly referred to as waste
"generators") a range of management services for nonhazardous sludges resulting
from treatment of municipal and industrial wastewater (biosolids). All of Bio
Gro's operations are located in the United States. Services are typically
provided to customers pursuant to multiyear contracts under which Bio Gro
handles, processes and disposes biosolids. The Company's primary means of
disposing of biosolids are primarily through land application and thermal
facilities.

     Land application involves the application of nonhazardous biosolids as a
natural fertilizer on farmland pursuant to site-specific permits issued by
applicable state authorities. Land-applied biosolids are often stabilized prior
to application using proprietary technology. Biosolids are also disposed of at
composting sites and landfills. Principal areas of operation include Maryland,
New Jersey, Illinois, Ohio, Michigan and California.

     Bio Gro also develops and operates facilities at which biosolids are dried
and pelletized or composted. Development of dryer and composting facilities
generally involves various contractual arrangements with a variety of private
and public entities, including municipalities which generate the biosolids,
lenders, contractors and subcontractors which build the facilities, and
end-users of the fertilizer, pellets or compost generated from the treatment
process. These facilities incorporate a variety of biosolids drying and emission
control technologies, some proprietary and some licensed to Bio Gro. Biosolids
which have been dried and pelletized or composted are generally used as
fertilizer by farmers, commercial landscapers and nurseries and as a bulking
agent by fertilizer manufacturers. Principal areas of operation include
Maryland, New York and New Jersey.

2. SIGNIFICANT ACCOUNTING POLICIES:

  PRINCIPLES OF COMBINATION

     WWTI is comprised of Enviroland Incorporated, New York Organic Fertilizer
Company Holdings Inc., Wheelabrator Clean Water New Jersey Inc., Vista
Properties Inc., New York Organic Fertilizer Inc. (NYOFCO), Wheelabrator Water
Technologies Baltimore LLC and a 40 percent interest in JABB II LLC. RPI
includes Future-Tech Environmental Services Inc. All intercompany accounts and
transactions have been eliminated in combination.

  INTERIM FINANCIAL STATEMENTS

     The interim financial statements as of June 30, 1999, and for the six
months ended June 30, 2000 and 1999, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States,
have been omitted. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements, have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.

                                       F-69

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

        NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses and disclosures of contingencies. Actual
results could differ from those estimates.

  CONCENTRATION OF CREDIT RISK

     Bio Gro provides services to various geographical regions in the U.S. Bio
Gro's credit risk primarily consists of receivables from a variety of customers,
including state and local agencies, municipalities and private industries. Bio
Gro reviews its accounts receivable and provides allowances as deemed necessary.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Bio Gro's financial instruments consist primarily of cash, receivables,
restricted cash, accounts payable and debt instruments. The book values of cash,
receivables, restricted cash and accounts payable are considered to be
representative of their respective fair values.

  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment (including major improvements) is stated at
cost. Expenditures which increase the utility or extend the lives of assets in
service are capitalized and depreciated. Expenditures of an ordinary maintenance
or repair nature are charged directly to operating expense. Upon retirement or
disposition of property, plant and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the combined statement of income.

     The cost of Bio Gro's buildings, building improvements, machinery and
equipment utilized in Bio Gro's thermal operations is depreciated on a
straight-line basis over the shorter of the estimated useful lives of the
individual assets or the lives of the initial service contracts related to each
thermal facility. When evidence (such as service contract renegotiations or
extensions) supports longer useful lives for thermal assets depreciated based on
service contract lives, depreciation is adjusted and accounted for on a
prospective basis. Except for land, the cost of all other property, plant and
equipment is depreciated on a straight-line basis over the estimated useful
lives of the asset.

  CAPITALIZED INTEREST

     Bio Gro capitalizes interest on significant projects under construction in
accordance with Statement of Financial Accounting Standards (SFAS) No. 34,
"Capitalization of Interest Cost." There were no amounts capitalized during the
six months ended June 30, 2000 and June 30, 1999.

  GOODWILL

     Goodwill represents the aggregate purchase price paid by Bio Gro in
acquisitions accounted for as a purchase over the fair value of the net tangible
assets acquired. Goodwill is amortized on a straight-line basis over a period
not exceeding 40 years.

     In the event that facts and circumstances indicate that goodwill may be
impaired, an evaluation of recoverability would be performed on the basis of the
estimated future undiscounted cash flows associated with the asset. Any
impairment would be recognized in the period identified. Bio Gro believes the
goodwill remaining as of June 30, 2000, is fully realizable.

                                       F-70

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

        NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  DEFERRED DEBT ISSUANCE COSTS

     Deferred debt issuance costs are amortized on the straight-line method over
the life of the underlying debt.

  ENVIRONMENTAL COSTS AND LIABILITIES

     Bio Gro has instituted procedures to periodically evaluate potential
environmental exposures. When Bio Gro concludes it is probable that a liability
has been incurred, provision is made in the financial statements, based upon
management's judgment and prior experience, for Bio Gro's best estimate of the
liability. Such estimates are subsequently revised as deemed necessary when
additional information becomes available.

     While Bio Gro does not presently anticipate that any such adjustment would
be material to its financial statements in the near term, it is reasonably
possible that technological, regulatory or enforcement developments, results of
environmental studies or other factors could alter this expectation and
necessitate the recording of additional liabilities, which could be material.

     Estimates of the extent of the Company's degree of responsibility for
remediation and the method and ultimate cost of remediation require a number of
assumptions and are inherently difficult, and the ultimate outcome may differ
from current estimates. As part of its ongoing operations, the Company reviews
its reserve requirements for remediation and other environmental matters based
on an analysis of the regulatory environment. Revisions to reserve requirements
may result in adjustments to income from operations in any given period.

  REVENUES

     Revenues under land application contracts are recognized when the service
is performed. Revenues under thermal operations are recognized either when cake
sludge enters the facilities or when the sludge has been pelletized, depending
on the contract terms.

  LONG-LIVED ASSETS

     In accordance with the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
Bio Gro reviews long-lived assets held for use for impairment whenever events or
changes in circumstances indicate that the carrying value of the asset may not
be recoverable.

  INCOME TAXES

     Bio Gro accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." Under the asset and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

     Bio Gro is considered a part of the consolidated results of WTI for income
tax purposes. Effective April 1, 1998, in conjunction with the acquisition of
the remaining outstanding shares of WTI by Waste Management, WTI joined in
filing a consolidated federal income tax return with Waste Management. Income
taxes in Bio Gro's combined financial statements reflect Waste Management's and
WTI's payment of taxes related to income generated by Bio Gro. Amounts related
to income taxes have been allocated as if Bio Gro had prepared a stand-alone
federal income tax filing.

                                       F-71

                 THE BIO GRO DIVISION OF WASTE MANAGEMENT, INC.

        NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

  ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires a company to recognize all derivative instruments (including certain
derivative instruments embedded in other contracts) as assets or liabilities in
its balance sheet and measure them at fair value. The statement requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. SFAS No. 133, as amended by
SFAS No. 137, is effective for the Company in its first fiscal quarter of 2001.
Management is currently assessing the impact on existing accounting policies and
financial reporting disclosures. However, Bio Gro has not historically engaged
in activities or entered into arrangements normally associated with derivative
instruments.

3.  COMMITMENTS AND CONTINGENCIES:

     Bio Gro's business activities are subject to environmental regulation under
federal, state and local laws and regulations. In the ordinary course of
conducting its business activities, Bio Gro becomes involved in judicial and
administrative proceedings involving governmental authorities at the federal,
state and local levels. Bio Gro believes that these matters will not have a
material adverse effect on its results of operations or financial condition.
However, the outcome of any particular proceeding cannot be predicted with
certainty. Bio Gro is under various regulations to procure licenses and permits
to conduct its operations. These licenses and permits are subject to periodic
renewal without which the Company's operations could be adversely affected.
Also, there can be no assurance that regulatory requirements will not change to
the extent that it would materially affect Bio Gro's combined financial
statements.

     The Company is a defendant in a lawsuit in which the plaintiff claims that
the death of an individual was allegedly caused by certain biosolids disposed of
by the Company. The litigation is currently in the discovery phase, and the
Company is waiting for plaintiff's production of a court-ordered expert on
causation. The Company is vigorously defending itself in the litigation. Bio Gro
cannot predict the ultimate outcome of the matter at this time.

     There are various other lawsuits and claims pending against Bio Gro that
have arisen in the normal course of Bio Gro's business and relate mainly to
matters of environmental, personal injury and property damage. The outcome of
these matters is not presently determinable but, in the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the combined financial condition or results of operations of Bio Gro. It is
reasonably possible, however, that a change in Bio Gro's estimate of its
probable liability with respect to these matters could occur.

     Bio Gro has issued or is a party to bank letters of credit, performance
bonds and other guarantees. Such financial instruments are given in the ordinary
course of business. Bio Gro insures the majority of its contractual obligations
through performance bonds.

4.  RELATED-PARTY TRANSACTIONS:

     Bio Gro is party to certain arrangements with WTI and other Waste
Management affiliates. Reference is made to the audited financial statements for
further discussions of these transactions.

5.  SUBSEQUENT EVENT:

     On August 14, 2000, Synagro Technologies, Inc. (Synagro), closed the
acquisition of Bio Gro. The acquisition will be accounted for as a purchase;
accordingly, the purchase price will be allocated to the underlying assets and
liabilities based on their respective estimated fair values at the date of
acquisition.

                                       F-72


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


PROSPECTUS DATED JUNE 6, 2002


                                  $150,000,000

                           SYNAGRO TECHNOLOGIES, INC.

                               OFFER TO EXCHANGE
                                   REGISTERED
                   9 1/2% SENIOR SUBORDINATED NOTES DUE 2009
                                      FOR
                                ALL OUTSTANDING
                   9 1/2% SENIOR SUBORDINATED NOTES DUE 2009

     You should not rely only on the information contained by reference in this
prospectus. We have not authorized anyone to provide you with different
information. We are not offering to exchange notes in any jurisdiction where the
offer is not permitted. We do not claim the accuracy of the information in this
prospectus as of any date other than the date stated on the cover.

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


                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

  DELAWARE REGISTRANTS

     The following registrants are corporations incorporated in the state of
Delaware: Fairhaven Residual Systems, Inc.; NETCO-Residuals Management Systems,
Inc.; NETCO-Waterbury Systems, Inc., f/k/a NETCO-Waterbury, Inc.; New Haven
Residuals Systems, Inc.; NYOFCO Holdings Inc.; Residual Technologies Systems,
Inc.; ST Interco, Inc.; Synagro Delaware, Inc.; Synagro Mid-Atlantic, Inc.;
Synagro Midwest, Inc.; Synagro Northeast, Inc.; Synagro Southeast, Inc.; Synagro
Southwest, Inc.; Synagro West, Inc.; and Synagro WCWNJ, Inc., f/k/a Wheelabrator
Clean Water New Jersey, Inc.

     Section 145 of the Delaware General Corporation Law, inter alia, empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Similar indemnity is authorized for such persons against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of any such threatened, pending or completed action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and provided
further that (unless a court of competent jurisdiction otherwise provides) such
person shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the shareholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.

     Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145. Synagro
Technologies, Inc. maintains policies insuring its and its subsidiaries'
officers and directors against certain liabilities for actions taken in such
capacities, including liabilities under the Securities Act of 1933, as amended.

     Synagro Technologies, Inc.'s Restated Certificate of Incorporation
eliminates in certain circumstances the monetary liability of directors of
Synagro Technologies Inc. for a breach of their fiduciary duty as directors.
These provisions do not eliminate the liability of a director (1) for a breach
of the director's duty of loyalty to the corporation or its stockholders; (2)
for acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of law; (3) under Section 174 of the Delaware General
Corporation Law (relating to the declaration of dividends and purchase or
redemption of shares in violation of the Delaware General Corporation Law); or
(4) for transactions from which the director derived an improper personal
benefit.

     Article V of the Amended and Restated By-Laws of Synagro Technologies, Inc.
provides for indemnification of any person who is, or is threatened to be made,
a witness in or a party to any proceeding by reason of the fact that he is or
was an Agent, as defined in the Amended and Restated By-laws. Article V provides
that the corporation will indemnify its present and former directors, officers,
employees and agents against expenses and liabilities incurred by them in
connection with any suit to which they are, or are threatened to be made, a
party by reason of their serving in such positions so long as they acted in good
faith and in a manner they

                                       II-1


reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action,they had no reasonable
cause to believe their conduct was unlawful. With respect to suits by or in the
right of a corporation, however, indemnification is not available if such person
is adjudged to be liable to the corporation unless the court determines that
indemnification is appropriate. In addition, Article V of the Amended and
Restated By-laws authorizes the corporation to purchase and maintain insurance
for such persons. Article V of the Amended and Restated By-laws also expressly
provides that the power to indemnify authorized thereby is not exclusive of any
rights granted to present and former Agents, under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.


     The certificates of incorporation and/or bylaws of each of the other
Delaware corporate registrants provide that such registrant indemnify its
officers and directors as currently provided by Delaware law.


  ARIZONA REGISTRANT

     Synagro of California, Inc. is a corporation incorporated in the state of
Arizona. Sections 10-850 - 10-858 of the Arizona Revised Statutes grant Synagro
of California, Inc. broad powers to indemnify any person in connection with
legal proceedings brought against him by reason of his present or past status as
an officer or director of Synagro of California, Inc., provided that the person
acted in good faith and in a manner he reasonably believed to be in (when acting
in an official capacity) or not opposed to (when acting in all other
circumstances) the best interests of Synagro of California, Inc., and with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The statute also gives Synagro of California, Inc.
powers to indemnify any such person against reasonable expenses in connection
with any action by or in the right of Synagro of California, Inc., provided the
person acted in good faith and in a manner he reasonably believed to be in (when
acting in an official capacity) or not opposed to (when acting in all other
circumstances) the best interests of Synagro of California, Inc., except that no
indemnification may be made if such person is adjudged to be liable to Synagro
of California, Inc., or in connection with any proceeding charging improper
personal benefit to the director whether or not involving action in the
director's official capacity, in which the director was held liable on the basis
that the personal benefit was improperly received by the director. In addition,
to the extent that any such person is successful in the defense of any such
legal proceeding, Synagro of California, Inc. is required by the statute to
indemnify him against expenses, including attorneys' fees, that are actually and
reasonably incurred by him in connection therewith.

     The Bylaws of Synagro of California, Inc. provide that Synagro of
California, Inc. shall, to the full extent permitted by the laws of the state of
Arizona, indemnify all directors whom it has the power to indemnify pursuant
thereto.

  ARKANSAS REGISTRANTS

     Composting Corporation of America and Organi-Gro, Inc. are corporations
incorporated in the state of Arkansas. Section 4-27-850 of the Arkansas Business
Corporation Act permits an Arkansas corporation to indemnify directors,
officers, employees and agents under some circumstances, and mandates
indemnification under certain limited circumstances. The Arkansas Business
Corporation Act permits a corporation to indemnify a director, officer,
employee, or agent for expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification against
expenses incurred by a director, officer, employee or agent in connection with
his defense of a proceeding against such person for actions in such capacity is
mandatory to the extent that such person has been successful on the merits. If a
director, officer, employee, or agent is determined to be liable to the
corporation, indemnification for expenses is not allowable, subject to limited
exceptions where a court deems the award of expenses appropriate. The Arkansas
Business Corporation Act grants express power to an Arkansas corporation to
purchase liability insurance for its directors, officers, employees and agents
regardless of whether any such person is otherwise eligible for indemnification
by the corporation. Advancement of expenses is permitted, but a person receiving
such advances must repay those expenses if it is ultimately determined that he
is not entitled to indemnifications.

                                       II-2


     The articles of incorporation and/or bylaws of each of the Arkansas
registrants provide that such registrant indemnify its directors to the maximum
extent allowed by Arkansas law.

  CALIFORNIA REGISTRANTS

     The following registrants are corporations incorporated in the state of
California: Future -- Tech Environmental Services, Inc.; Residuals Processing,
Inc.; Synagro Composting Company of California, Inc.; and Synagro Digestions,
Inc. Section 204 of the California Corporations Code provides that a corporation
may set forth in its articles of incorporation provisions (i) eliminating or
limiting the personal liability of a director for monetary damages in an action
brought by or in the right o the corporation for breach of a director's duties
to the corporation and its shareholders, as set forth in Section 309 of the
California Corporations Code, so long as such indemnification is subject to
certain limitations and conditions as provided therein and (ii) authorizing,
whether by bylaw, agreement or otherwise, the indemnification of agents (as
defined in Section 317 of the California Corporations Code) in excess of that
expressly permitted by Section 317 for those agents of the corporation for
breach of duty to the corporation and its stockholders, so long as such
indemnification is subject to certain limitations and conditions as provided
therein.

     Section 317 of the California Corporations Code provides that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or in
the right of the corporation to procure a judgment in its favor) by reason of
the fact that the person is or was an agent of the corporation, against
expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interest of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of the person was unlawful. This section
also provides that a corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action by or in the right of the corporation to procure a
judgment in its power by reason of the fact that the person is or was an agent
of the corporation, against expenses actually and reasonably incurred by that
person in connection with the defense or settlement of the actions if that
person acted in good faith, in a manner the person believed to be in the best
interests of the corporation and its shareholders, where such indemnification is
subject to certain limitations and conditions as provided therein.

     The articles of incorporation and/or bylaws of each of the California
registrants provide that such registrant may indemnify its officers and
directors to the maximum extent allowed by California law.

  CONNECTICUT REGISTRANT

     NETCO-Connecticut, Inc. is a corporation incorporated in the state of
Connecticut. Section 33-772 of the Connecticut Business Corporation Act provides
that a corporation must indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which he was a party
because he was a director of the corporation against reasonable expenses
incurred by him in connection with the proceeding. In addition, Section 33-771
of the Connecticut Business Corporation Act permits Connecticut corporations to
indemnify an individual who is a party to a proceeding because he is a director
against liability incurred in the proceeding if: (A) he conducted himself in
good faith; (B) he reasonably believed (i) in the case of conduct in his
official capacity, that his conduct was in the best interests of the
corporation: and (ii) in all other cases, that his conduct was at least not
opposed to the best interests of the corporation; and (C) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Section 33-776 of the Connecticut Business Corporation Act provides
that a Connecticut corporation may indemnify an officer, employee or agent of
the corporation who is a party to a proceeding because he is an officer,
employee or agent of the corporation to the same extent that a director may be
indemnified under Section 33-771 of the Connecticut Business Corporation Act,as
described above. An officer, employee or agent of a Connecticut corporation who
is not a director is entitled to mandatory indemnification under Section 33-772
to the same extent to which a director may be entitled to indemnification under
such Section, as described above.

                                       II-3


     NETCO-Connecticut, Inc.'s articles of incorporation and bylaws provide that
such registrant shall have the power to indemnify its officers and directors as
provided by Connecticut law.

  FLORIDA REGISTRANTS

     The following corporations are incorporated in the state of Florida:
Synagro of Florida-A&J, Inc.; Synagro of Florida-Anti-Pollutions, Inc., Synagro
of Florida-Davis Water, Inc.; and Synagro of Florida-Ecosystems, Inc. Section
607.0850(1) of the Florida Business Corporation Act permits the indemnification
of directors, employees, officers and agents of a Florida corporation.

     The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies including injunctive or other forms
of non-monetary relief will remain available. In addition, each director will
continue to be subject to liability for: (i) violations of criminal laws, unless
the director has reasonable cause to believe that his conduct was lawful or had
no reasonable cause to believe his conduct was unlawful; (ii) deriving an
improper personal benefit from a transaction; (iii) voting for or assenting to
an unlawful distribution; and (v) willful misconduct or conscious disregard for
our best interests in a proceeding by or in our right to procure a judgment in
its favor or in a proceeding by or in the right of a shareholder.

     The effect of the Florida Business Corporation Act, the articles of
incorporation and/or bylaws of the Florida registrants is to require such
corporations to indemnify its officers and directors for any claim arising
against those persons in their official capacities if the person acted in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.

     The articles of incorporation and/or bylaws of each of the Florida
registrants provide that such registrant indemnify its officers and directors to
the maximum extent allowed by Florida law.

  MARYLAND REGISTRANTS

     Soaring Vista Properties, Inc. and Synagro WCWNJ, Inc., f/k/a Wheelabrator
Clean Water New Jersey, Inc. are corporations incorporated in the state of
Maryland. Section 2-418 of the Maryland General Corporation law provides for the
indemnification of directors and officers of a Maryland corporation. In general,
indemnification is permitted against judgments, penalties, fines, settlements,
and reasonable expenses actually incurred in connection with a proceeding if a
director acted in good faith, reasonably believed his conduct to be in the best
interests of the corporation, and, in the case of a criminal proceeding, had no
reasonable cause to believe that his conduct was unlawful. In addition,
indemnification may, unless limited by the corporation's charter, include
reasonable expenses incurred by a director in connection with a proceeding in
which the director's defense was successful, on the merits or otherwise.
Indemnification may be required under certain other circumstances as well, upon
application to a court of appropriate jurisdiction. Unless limited by a
corporation's charter, officers are required to be indemnified to the same
extent that directors are required to be indemnified.

     The articles of incorporation and/or bylaws of each of the Maryland
registrants provide that such registrant indemnify its officers and directors to
the maximum extent allowed by Maryland law.

     Synagro-Baltimore L.L.C. is a limited liability company formed in the state
of Maryland. Section 4A-203 of the Maryland Limited Liability Company Act
provides that unless otherwise provided by law or its articles of organization,
a limited liability company has the general powers, whether or not set forth in
its articles of organization, to indemnify and hold harmless any member, agent
or employee from and against any and all claims and demands, except in the case
of action or failure to act by the member, agent or employee which constitutes
willful misconduct or recklessness, and subject to the standards and
restrictions, if any, set froth in the articles of organization or operating
agreement. The limited liability company agreement of Synagro-Baltimore L.L.C.
provides that Synagro-Baltimore L.L.C. indemnify its managers to the maximum
extent allowed by Maryland law.

                                       II-4


  MICHIGAN REGISTRANTS

     Synagro Midwest -- Enviroland, Inc., f/k/a/ Enviroland, inc. and Synagro of
Michigan, Inc. are corporations incorporated in the state of Michigan. Under
Sections 561-571 of the Michigan Business Corporation Act, directors and
officers of a Michigan corporation may be entitled to indemnification by the
corporation against judgments, expenses, fines and amounts paid by the director
or officer in settlement of claims brought against them by third persons or by
or in the right of the corporation if those directors and officers acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation or its shareholders.

     The articles of incorporation and/or bylaws of each of the Michigan
registrants provide that such registrant indemnify its officers and directors as
allowed by Michigan law.

  MINNESOTA REGISTRANT

     Synagro of Minnesota -- Rehbein, Inc. is a corporation incorporated in the
state of Minnesota. Unless prohibited in a corporation's articles or bylaws,
Minnesota Statutes sec.302A.521 requires indemnification of officers, directors,
employees and agents, under certain circumstances, against judgments, penalties,
fines, settlements and reasonable expenses (including attorney's fees and
disbursements) incurred by such person in connection with a threatened or
pending proceeding with respect to the acts or omissions of such person in his
official capacity. The general effect of Minnesota Statutes sec.302A.521 is to
require Synagro of Minnesota -- Rehbein, Inc. to reimburse (or pay on behalf of)
directors and officers of Synagro of Minnesota -- Rehbein, Inc. any personal
liability that may be imposed for certain acts performed in their capacity as
directors and officers of Synagro of Minnesota -- Rehbein, Inc., except where
such persons have not acted in good faith.

     The Articles of Incorporation and/or Bylaws of Synagro of
Minnesota -- Rehbein, Inc. provide for such indemnification to the maximum
extent permitted by Minnesota law.

  NEW JERSEY REGISTRANT

     Environmental Protection & Improvement Company, Inc. is a corporation
incorporated in the state of New Jersey. The New Jersey Business Corporation Act
provides that a New Jersey corporation has the power to indemnify a director or
officer against his expenses and liabilities in connection with any proceeding
involving the director or officer by reason of his being or having been such a
director or officer, other than a proceeding by or in the right of the
corporation, if such a director or officer acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation; and with respect to any criminal proceeding, such director or
officer had no reasonable cause to believe his conduct was unlawful.

     The New Jersey Business Corporation Act further provides that
indemnification and advancement of expenses shall not exclude any other rights,
including the right to be indemnified against liabilities and expenses incurred
in proceedings by or in the right of the corporation, to which a director or
officer may be entitled under a certificate of incorporation, by-law, agreement,
vote of shareholders, or otherwise; provided that no indemnification shall be
made to or on behalf of a director or officer if a judgment or other final
adjudication adverse to the director or officer establishes that his acts or
omissions (a) were in breach of his duty of loyalty to the corporation or its
shareholders, (b) were not in good faith or involved a knowing violation of law
or (c) resulted in receipt by the director or officer of an improper personal
benefit.

     Environmental Protection & Improvement Company, Inc.'s articles of
incorporation and bylaws provide that such registrant indemnify its officers and
directors to the maximum extent allowed by New Jersey law.

  NORTH CAROLINA REGISTRANTS

     Synagro of North Carolina -- Amsco, Inc. and Synagro of North
Carolina -- EWR, Inc. are corporations incorporated in the state of North
Carolina. Sections 55-8-50 through 55-8-58 of the revised North Carolina
Business Corporation Act contain specific provisions relating to indemnification
of directors and officers of North Carolina corporations. In general, the
statutes provide that (i) a corporation must indemnify a director or officer who
is wholly successful in his defense of a proceeding to which he is a party
because of his
                                       II-5


status as such, unless limited by the articles of incorporation and (ii) a
corporation may indemnify a director or officer if he is not wholly successful
in such defense, if it is determined as provided by statute that the director or
officer meets a certain standard of conduct, provided when a director or officer
is liable to the corporation or is adjudged liable on the basis that personal
benefit was improperly received by him, the corporation may not indemnify him. A
director or officer of a corporation who is a party to a proceeding also may
apply to the courts for indemnification, unless the articles of incorporation
provide otherwise, and the court may order indemnification under certain
circumstances set forth in the statute. A corporation may, in its articles of
incorporation or bylaws or by contract or resolution, provide indemnification in
addition to that provided by statute, subject to certain conditions.

     The Bylaws of each of the North Carolina registrants provide that such
registrants indemnify its officers and directors to the maximum extent allowed
by North Carolina law. The articles of incorporation of each of the North
Carolina registrants provide for the elimination of the personal liability of
each director of the company to the fullest extent permitted by North Carolina
law.

  RHODE ISLAND REGISTRANTS

     New England Treatment Company, Inc. is a corporation incorporated in the
state of Rhode Island. The Rhode Island Business Corporation Law requires Rhode
Island corporations to indemnify directors, officers, employees or agents
against judgments, fines, reasonable costs, expenses and counsel fees paid or
incurred in connection with any proceeding to which such director, officer,
employee or agent or his legal representative may be a party (or for testifying
when not a party) by reason of his being a director, officer, employee or agent,
provided that such director, officer, employee or agent shall have acted in good
faith and shall have reasonably believed (a) if he was acting in his official
capacity that his conduct was in the New England Treatment Company, Inc.'s best
interest, (b) in all other cases that his conduct was at least not opposed to
its best interest, and (c) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.

     The New England Treatment Company, Inc.'s bylaws provide that the New
England Treatment Company may indemnify its officers and directors to the
maximum extent allowed by Rhode Island law.

     Providence Soils LLC is a limited liability company formed in the state of
Rhode Island. Section 7-16-4 of the Rhode Island Limited Liability Company Act
provides that a limited liability company has the power to indemnify and advance
expenses to any member, manager, agent or employee, past or present, to the same
extent as a corporation formed under the Rhode Island Business Corporations Act
may indemnify any of its directors, officers, employees or agents and subject to
the standards and restrictions, if any , set forth in the articles of
organization or operating agreement, against any liability asserted against him
and incurred by the member, manager, agent or employee in that capacity or
arising out of the member's, manager's, agent's or employee's status, whether or
not the limited liability company would have the power to indemnify under the
provisions of the Rhode Island Limited Liability company Act, the articles of
organization or operating agreement. The limited liability company agreement of
Providence Soils LLC provides that Providence Soils LLC indemnify its managers
to the maximum extent allowed by Rhode Island law.

  TEXAS REGISTRANTS

     Synagro of Texas-CDR, Inc. and Synagro Texas, Inc. are corporations
incorporated in the state of Texas. Article 2.02-1 of the Texas Business
Corporation Act provides that a corporation may indemnify any director or
officer who was, is or is threatened to be made a named defendant or respondent
in a proceeding because he is or was a director or officer, provided that the
director or officer (i) conducted himself in good faith, (ii) reasonably
believed (a) in the case of conduct in his official capacity, that his conduct
was in the corporation's best interests, and/or (b) in other cases, that his
conduct was at least not opposed to the corporation's best interests, and (iii)
in the case of any criminal proceeding, has no reasonable cause to believe his
conduct was unlawful.

     Subject to certain exceptions, a director or officer may not be indemnified
if he is found liable to the corporation or if he is found liable on the basis
that he improperly received a personal benefit. Under Texas
                                       II-6


law, reasonable expenses incurred by a director or officer may be paid or
reimbursed by the corporation in advance of a final disposition of the
proceeding after the corporation receives a written affirmation by the director
or officer of his good faith belief that he has met the standard of conduct
necessary for indemnification and a written undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined that the
director or officer is not entitled to indemnification by the corporation. Texas
law requires a corporation to indemnify a director or officer against reasonable
expenses incurred in connection with the proceeding to which such director or
officer is named defendant or respondent because he is or was a director or
officer if he is wholly successful in defense of the proceeding.

     The bylaws of Synagro of Texas-CDR, Inc. provide for the indemnification of
its officers and directors to the maximum extent allowed by Texas law. The
articles of incorporation and bylaws of Synagro Texas, Inc. are silent as to
indemnification.

  WISCONSIN REGISTRANTS

     Synagro of Texas-Vital-Cycle, Inc. and Synagro of Wisconsin, Inc. are
corporations incorporated in the state of Wisconsin. Sections 180.0850 through
180.0859 of the Wisconsin Statutes require indemnification of directors,
officers, employees, and agents of a Wisconsin corporation, to the extent such
person is successful on the merits or otherwise in the defense of a proceeding,
for all reasonable expenses incurred in the proceeding if such person was a
party because he was a director or officer of the corporation. In general, such
indemnification is required unless it is determined that such person breached or
failed to perform a duty owed to the corporation and the breach or failure to
perform constitutes: (i) a willful failure to deal fairly with the corporation
or its shareholders in connection with a matter in which the director or officer
has a material conflict of interest; (ii) a violation of criminal law, unless
the director or officer had reasonable cause to believe his or her conduct was
lawful or no reasonable cause to believe his conduct was unlawful; (iii) a
transaction from which the director or officer derived an improper personal
profit; or (iv) willful misconduct. Subject to certain limitations, the
mandatory indemnification provisions do not preclude any additional right to
indemnification or allowance of expenses that a director or officer may have
under the corporations articles of incorporation, bylaws, any written agreement
or a resolution of the board of directors or shareholders.

     The bylaws of each of the Wisconsin registrants provide for the
indemnification of each director of the company to the fullest extent permitted
by Wisconsin law.

DIRECTORS AND OFFICERS LIABILITY INSURANCE

     Synagro Technologies, Inc. has purchased directors and officers liability
insurance that would indemnify the directors and officers of Synagro
Technologies, Inc. against damages arising out of certain kinds of claims that
might be made against them based on their negligent acts or omissions while
acting in their capacity as such.

GENERAL

     The above discussion of the organizational documents of the Registrants and
the laws of the jurisdictions of incorporation or organization of the
Registrants, as applicable, is not intended to be exhaustive and is respectively
qualified in its entirety by such organizational documents and laws.

     With respect to possible indemnification of directors, officers and
controlling persons of the Registrants for liabilities arising under the
Securities Act pursuant to such provisions, the Registrants are aware that the
Commission has publicly taken the position that such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.

                                       II-7


ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

     The following instruments and documents are included as Exhibits to this
Registration Statement.




EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
 1**           Purchase Agreement, dated as of April 8, 2002, among Synagro
               Technologies Inc., the guarantors signatory thereto, Lehman
               Brothers Inc. and Banc of America Securities LLC (filed as
               Exhibit 1 to the Current Report on Form 8-K of Synagro
               Technologies Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 3.1*          Restated Certificate of Incorporation of Synagro
               Technologies, Inc. (filed as Exhibit 3.1 to Post-Effective
               Amendment No. 1 to Registration Statement No. 33-95028 of
               Synagro Technologies, Inc. dated October 25, 1996 and
               incorporated herein by reference)
 3.2*          Amended and Restated Bylaws of Synagro Technologies, Inc. as
               of January 27, 2000 (filed as Exhibit 3.2 to the Annual
               Report on Form 10-K of Synagro Technologies Inc. for the
               Fiscal Year Ended December 31, 2001)
 3.3**         Certificate of Formation of Atlanta Residuals Company, LLC
               dated June 8, 2001
 3.4**         Limited Liability Company Agreement of Atlanta Residuals
               Company, LLC dated June 12, 2001
 3.5**         Composite Articles of Incorporation of Composting
               Corporation of America as of December 6, 2000
 3.6**         Amended and Restated Bylaws of Composting Corporation of
               America as of September 23, 1998
 3.7**         Composite Certificate of Incorporation of Environmental
               Protection & Improvement Company, Inc. as of June 12, 1998
 3.8**         Amended and Restated Bylaws of Environmental Protection &
               Improvement Company, Inc. as of June 15, 2000
 3.9**         Composite Certificate of Incorporation of Fairhaven Residual
               Systems, Inc. as of December 6, 2000
 3.10**        Bylaws of Fairhaven Residual Systems, Inc. as of March 15,
               1996
 3.11**        Composite Certificate of Limited Partnership of Fairhaven
               Residuals, Limited Partnership as of December 5, 2000
 3.12**        Restated Partnership Agreement of Fairhaven Residuals,
               Limited Partnership as of January 27, 2000
 3.13**        Articles of Incorporation of Future-Tech Environmental
               Services, Inc. dated August 11, 1992
 3.14**        Amended and Restated Bylaws of Future-Tech Environmental
               Services, Inc. as of May 1, 1999
 3.15**        Composite Certificate of Incorporation of NETCO-Connecticut,
               Inc. as of December 8, 2000
 3.16**        Amended and Restated Bylaws of NETCO-Connecticut, Inc. as of
               June 8, 1993
 3.17**        Composite Certificate of Incorporation of NETCO-Residuals
               Management Systems, Inc. as of December 6, 2000
 3.18**        Amended and Restated Bylaws of NETCO-Residuals Management
               Systems, Inc. as of June 13, 1995
 3.19**        Certificate of Limited Partnership of NETCO-Residuals
               Management, Limited Partnership dated December 5, 2000
 3.20**        Restated Partnership Agreement of NETCO-Residuals
               Management, Limited Partnership as of January 27, 2000
 3.21**        Composite Certificate of Incorporation of NETCO-Waterbury
               Systems, Inc. as of December 6, 2000
 3.22**        Amended and Restated Bylaws of NETCO-Waterbury Systems, Inc.
               as of June 13, 1995
 3.23**        Certificate of Limited Partnership of NETCO-Waterbury,
               Limited Partnership dated December 5, 2000
 3.24**        Restated Partnership Agreement of NETCO-Waterbury, Limited
               Partnership as of January 27, 2000



                                       II-8





EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
 3.25**        Composite Articles of Incorporation of New England Treatment
               Company, Inc. as of February 13, 1998
 3.26**        Amended and Restated Bylaws of New England Treatment
               Company, Inc. as of June 8, 1993
 3.27**        Composite Certificate of Incorporation of New Haven
               Residuals Systems, Inc. as of December 6, 2000
 3.28**        Bylaws of New Haven Residuals Systems, Inc. as of August 28,
               1995
 3.29**        Certificate of Limited Partnership of New Haven Residuals,
               Limited Partnership as of December 5, 2000
 3.30**        Restated Partnership Agreement of New Haven Residuals,
               Limited Partnership as of January 27, 2000
 3.31**        Amended Business Certificate New York Organic Fertilizer
               Company dated April 15, 2002
 3.32**        Composite General Partnership Agreement of New York Organic
               Fertilizer Company as of January 27, 2000
 3.33**        Composite Certificate of Incorporation of NYOFCO Holdings,
               Inc. as of December 6, 2000
 3.34**        Amended and Restated Bylaws of NYOFCO Holdings, Inc. as of
               May 1, 1999
 3.35**        Composite Articles of Incorporation of Organi-Gro, Inc. as
               of December 8, 2000
 3.36**        Amended and Restated Bylaws of Organi-Gro, Inc. as of May 1,
               2000
 3.37**        Composite Articles of Organization of Providence Soils, LLC
               dated October 4, 1999
 3.38**        Operating Agreement of Providence Soils, LLC dated January
               27, 2000
 3.39**        Composite Certificate of Incorporation of Residual
               Technologies Systems, Inc. as of December 6, 2000
 3.40**        Bylaws of Residual Technologies Systems, Inc. as of October
               23, 1995
 3.41**        Composite Certificate of Limited Partnership of Residual
               Technologies, Limited Partnership as of December 6, 2000
 3.42**        Restated Partnership Agreement of Residual Technologies,
               Limited Partnership as of January 27, 2000
 3.43**        Composite Articles of Incorporation of Residuals Processing,
               Inc. as of April 28, 1992
 3.44**        Bylaws of Residuals Processing, Inc. as of January 31, 1991
 3.45**        Composite Articles of Incorporation of Soaring Vista
               Properties, Inc. as of December 7, 2000
 3.46**        Restated Bylaws of Soaring Vista Properties, Inc. dated May
               1, 1999
 3.47**        Composite Certificate of Incorporation of ST Interco, Inc.
               as of December 6, 2000
 3.48**        Amended and Restated Bylaws of ST Interco, Inc. as of
               September 23, 1998
 3.49**        Composite Articles of Organization Synagro -- Baltimore
               L.L.C. as of December 8, 2000
 3.50**        Restated Limited Liability Company Agreement of
               Synagro -- Baltimore L.L.C. as of August 14, 2000
 3.51**        Composite Articles of Incorporation of Synagro Composting
               Company of California, Inc. as of April 14, 1999
 3.52**        Amended and Restated Bylaws of Synagro Composting Company of
               California, Inc. as of May 1, 2000
 3.53**        Corrected Certificate of Incorporation of Synagro Delaware,
               Inc. dated December 28, 2000
 3.54**        Bylaws of Synagro Delaware, Inc. dated December 14, 2000
 3.55**        Articles of Incorporation of Synagro Digestion, Inc. dated
               July 17, 2001
 3.56**        Bylaws of Synagro Digestion, Inc. dated July 17, 2001
 3.57**        Certificate of Limited Partnership of Synagro Management,
               L.P. dated December 20, 2000
 3.58**        Partnership Agreement of Synagro Management, L.P. as of
               December 20, 2000
 3.59**        Composite Certificate of Incorporation of Synagro
               Mid-Atlantic, Inc. as of December 6, 2000



                                       II-9





EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
 3.60**        Bylaws of Synagro Mid-Atlantic, Inc. as of June 29, 1999
 3.61**        Composite Certificate of Incorporation of Synagro
               Midwest -- Enviroland, Inc. as of December 15, 2000
 3.62**        Restated Bylaws of Synagro Midwest -- Enviroland, Inc. as of
               May 1, 1999
 3.63**        Composite Certificate of Incorporation of Synagro Midwest,
               Inc. as of December 7, 2000
 3.64**        Bylaws of Synagro Midwest, Inc. as of June 23, 1999
 3.65**        Composite Certificate of Incorporation of Synagro Northeast,
               Inc. as of December 7, 2000
 3.66**        Bylaws of Synagro Northeast, Inc. as of June 23, 1999
 3.67**        Composite Articles of Incorporation of Synagro of
               California, Inc. as of December 7. 2000
 3.68**        Amended and Restated Bylaws of Synagro of California, Inc.
               as of May 1, 2000
 3.69**        Composite Articles of Incorporation of Synagro of
               Florida-A&J, Inc. as of October 11, 1999
 3.70**        Amended and Restated Bylaws of Synagro of Florida-A&J, Inc.
               as of May 1, 2000
 3.71**        Composite Articles of Incorporation of Synagro of
               Florida-Anti Pollution, Inc. as of April 23, 1999
 3.72**        Amended and Restated Bylaws of Florida-Anti Pollution, Inc.
               as of May 1, 2000
 3.73**        Composite Articles of Incorporation of Synagro of
               Florida-Davis Water, Inc. as of March 3, 2000
 3.74**        Amended and Restated Bylaws of Synagro of Florida-Davis
               Water, Inc. as of February 29, 2000
 3.75**        Composite Articles of Incorporation of Synagro of
               Florida-Ecosystems, Inc. as of March 3, 2000
 3.76**        Amended and Restated Bylaws of Synagro of
               Florida-Ecosystems, Inc. as of February 29, 2000
 3.77**        Composite Articles of Incorporation of Synagro of Michigan,
               Inc. as of May 23, 2000
 3.78**        Amended and Restated Bylaws of Synagro of Michigan, Inc. as
               of May 1, 2000
 3.79**        Composite Articles of Incorporation of Synagro of
               Minnesota -- Rehbein, Inc. as of February 28, 2001
 3.80**        Amended and Restated Bylaws of Synagro of
               Minnesota -- Rehbein, Inc. as of April 5, 2000
 3.81**        Composite Articles of Incorporation of Synagro of North
               Carolina-Amsco, Inc. as of April 30, 1999
 3.82**        Amended and Restated Bylaws of Synagro of North
               Carolina-Amsco, Inc. as of May 1, 2000
 3.83**        Composite Articles of Incorporation of Synagro of North
               Carolina-EWR, Inc. as of June 3, 1999
 3.84**        Amended and Restated Bylaws of Synagro of North
               Carolina-EWR, Inc. as of May 1, 2000
 3.85**        Composite Restated Articles of Incorporation of Synagro of
               Texas-CDR, Inc. as of February 16, 2001
 3.86**        Amended and Restated Bylaws of Synagro of Texas-CDR, Inc. as
               of May 1, 2000
 3.87**        Composite Articles of Incorporation of Synagro of
               Texas-Vital Cycle, Inc. as of June 3, 1999
 3.88**        Amended and Restated Bylaws of Synagro of Texas-Vital Cycle,
               Inc. as of May 1, 2000
 3.89**        Composite Articles of Incorporation of Synagro of Wisconsin,
               Inc. as of June 3, 1999
 3.90**        Amended and Restated Bylaws of Synagro of Wisconsin, Inc. as
               of May 1, 2000
 3.91**        Composite Certificate of Incorporation of Synagro Southeast,
               Inc. as of December 7, 2000
 3.92**        Bylaws of Synagro Southeast, Inc. as of April 22, 1999
 3.93**        Composite Certificate of Incorporation of Synagro Southwest,
               Inc. as of December 7, 2000
 3.94**        Bylaws of Synagro Southwest, Inc. as of June 23, 1999
 3.95**        Articles of Incorporation of Synagro Texas, Inc. November 3,
               2000
 3.96**        Amended and Restated Bylaws of Synagro Texas, Inc. dated
               November 3, 2000
 3.97**        Composite Certificate of Incorporation of Synagro West, Inc.
               as of December 7, 2000
 3.98**        Bylaws of Synagro West, Inc. as of June 23, 1999
 3.99**        Composite Articles of Incorporation of Synagro-WWT, Inc. as
               of December 8, 2000



                                      II-10





EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
3.100**        Amended and Restated Bylaws of Synagro-WWT, Inc. as of May
               1, 1999
3.101**        Composite Certificate of Incorporation of Synagro WCWNJ,
               Inc. as of December 7, 2000
3.102**        Amended and Restated Bylaws of Synagro WCWNJ, Inc. as of May
               1, 1999
 4.1*          Indenture, dated as of April 17, 2002, among Synagro
               Technologies, Inc., the guarantors signatory thereto, and
               Wells Fargo Bank Minnesota, National Association, as
               trustee, relating to the 9 1/2% Senior Subordinated Notes
               due 2009 (filed as Exhibit 4.1 to the Current Report on Form
               8-K of Synagro Technologies, Inc. filed on April 18, 2002
               and incorporated herein by reference)
 4.2*          Exchange and Registration Rights Agreement, dated as of
               April 17, 2002, among Synagro Technologies, Inc., the
               guarantors signatory thereto, Lehman Brothers Inc. and Banc
               of America Securities LLC (filed as Exhibit 4.2 to the
               Current Report on Form 8-K of Synagro Technologies, Inc.
               filed on April 18, 2002 and incorporated herein by
               reference)
 4.3*          Synagro Technologies Inc.'s Note in permanent global form,
               registered in the name of Cede &Co., as nominee of The
               Depository Trust Company, in its capacity as depository,
               having an aggregate principal amount of $149,400,000 (filed
               as Exhibit 4.3 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 4.4*          Synagro Technologies Inc.'s Note in permanent global form,
               registered in the name of Cede &Co., as nominee of The
               Depository Trust Company, in its capacity as depository,
               having an aggregate principal amount of $600,000 (filed as
               Exhibit 4.4 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 4.5*          Synagro Technologies Inc.'s Note in permanent global form,
               registered in the name of Cede &Co., as nominee of The
               Depository Trust Company, in its capacity as depository,
               having an aggregate principal amount of $0 (filed as Exhibit
               4.5 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 4.6*          Notation of Guaranty dated as of April 17, 2002, by the
               guarantors signatory thereto (filed as Exhibit 4.6 to the
               Current Report on Form 8-K of Synagro Technologies, Inc.
               filed on April 18, 2002 and incorporated herein by
               reference)
 5.1           Opinion of Locke Liddell & Sapp LLP
10.1*          Employment Agreement dated February 19, 1999, by and between
               Synagro Technologies, Inc. and Ross M. Patten (filed as
               Exhibit 10.20 to the Annual Report on Form 10-K/A of Synagro
               Technologies, Inc. for the Fiscal Year Ended December 31,
               2000 (the "2000 Form 10-K/A") and incorporated herein by
               reference); Agreement Concerning Employment Rights dated
               January 27, 2000, by and between Synagro Technologies, Inc.
               and Ross M. Patten (filed as Exhibit 2.8 to the Current
               Report on Form 8-K of Synagro Technologies, Inc. filed on
               February 17, 2000 and incorporated herein by reference).(1)
10.2*          Employment Agreement dated February 19, 1999, by and between
               Synagro Technologies, Inc. and Mark A. Rome (filed as
               Exhibit 10.21 to the 2000 Form 10-K/A and incorporated
               herein by reference); Agreement Concerning Employment Rights
               dated January 27, 2000, by and between Synagro Technologies,
               Inc. and Mark A. Rome (filed as Exhibit 2.9 to the Current
               Report on Form 8-K of Synagro Technologies, Inc. filed on
               February 17, 2000 and incorporated herein by reference).(1)
10.3*          Employment Agreement dated February 19, 1999, by and between
               Synagro Technologies, Inc. and Alvin L. Thomas II (filed as
               Exhibit 10.22 to the 2000 Form 10-K/A and incorporated
               herein by reference); Agreement Concerning Employment Rights
               dated January 27, 2000, by and between Synagro Technologies,
               Inc. and Alvin L. Thomas, II (filed as Exhibit 2.10 to the
               Current Report on Form 8-K of Synagro Technologies, Inc.
               filed on February 17, 2000 and incorporated herein by
               reference).(1)



                                      II-11





EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
10.4*          Employment Agreement dated May 10, 1999, by and between
               Synagro Technologies, Inc. and J. Paul Withrow (filed as
               Exhibit 2.11 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on February 17, 2000 and
               incorporated herein by reference); Agreement Concerning
               Employment Rights dated January 27, 2000, by and between
               Synagro Technologies, Inc. and J. Paul Withrow (filed as
               Exhibit 2.12 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on February 17, 2000 and
               incorporated herein by reference).(1)
10.5*          Employment Agreement dated January 1, 2000, by and between
               Synagro Technologies, Inc. and Randall S. Tuttle (filed as
               Exhibit 10.24 to the Quarterly Report on Form 10-Q of
               Synagro Technologies, Inc. for the Fiscal Quarter ended
               September 30, 2001 and incorporated herein by reference).(1)
10.6*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and Ross M. Patten (filed as Exhibit 10.26 to the
               Annual Report on Form 10-K of Synagro Technologies, Inc. for
               the Fiscal Year Ended December 31, 2001 (the "2001 Form
               10-K") and incorporated herein by reference).(1)
10.7*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and Mark A. Rome (filed as Exhibit 10.27 to the 2001
               Form 10-K and incorporated herein by reference).(1)
10.8*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and Alvin L. Thomas, II (filed as Exhibit 10.28 to the
               2001 Form 10-K and incorporated herein by reference).(1)
10.9*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and J. Paul Withrow (filed as Exhibit 10.29 to the 2001
               Form 10-K and incorporated herein by reference).(1)
10.10*         2000 Stock Option Plan dated October 31, 2000 (filed as
               Exhibit A to the Proxy Statement on Schedule 14A for Annual
               Meeting of Stockholders of Synagro Technologies, Inc. filed
               on September 28, 2000 and incorporated herein by
               reference).(1)
10.11*         Employment Agreement dated September 1, 2001, by and between
               Synagro Technologies, Inc. and James P. Carmichael (filed as
               Exhibit 10.30 to the Quarterly Report on Form 10-Q of
               Synagro Technologies, Inc. for the Fiscal Quarter ended
               September 30, 2001 and incorporated herein by reference).(1)
10.12*         Employment Agreement dated March 1, 2002, by and between
               Synagro Technologies, Inc. and Robert Boucher (filed as
               Exhibit 10.32 to the 2001 Form 10-K and incorporated herein
               by reference).(1)
10.13*         Amendment No. 1 to Employment Agreement dated effective
               February 1, 2002, by and between Synagro Technologies, Inc.
               and Randall S. Tuttle (filed as Exhibit 10.33 to the 2001
               Form 10-K and incorporated herein by reference).(1)
12.1           Statement setting forth Detail for Computation of Ratio of
               Earnings to Fixed Charges
23.1           Consent of Arthur Andersen LLP (report on Synagro
               Technologies, Inc.)
23.2           Consent of Arthur Andersen LLP (report on Bio Gro Division
               of Waste Management, Inc.)
23.3**         Consent of Locke Liddell & Sapp LLP (included in Exhibit
               5.1)
24.1**         Power of Attorney -- Synagro Technologies, Inc.
24.2**         Power of Attorney -- Atlanta Residuals Company, LLC
24.3**         Power of Attorney -- Composting Corporation of America
24.4**         Power of Attorney -- Environmental Protection & Improvement
               Company, Inc.
24.5**         Power of Attorney -- Fairhaven Residuals, Limited
               Partnership
24.6**         Power of Attorney -- Fairhaven Residual Systems, Inc.
24.7**         Power of Attorney -- Future-Tech Environmental Services,
               Inc.
24.8**         Power of Attorney -- NETCO-Connecticut, Inc.
24.9**         Power of Attorney -- NETCO-Residuals Management, Limited
               Partnership



                                      II-12





EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
24.10**        Power of Attorney -- NETCO-Residuals Management Systems,
               Inc.
24.11**        Power of Attorney -- NETCO-Waterbury, Limited Partnership
24.12**        Power of Attorney -- NETCO-Waterbury Systems, Inc.
24.13**        Power of Attorney -- New England Treatment Company, Inc.
24.14**        Power of Attorney -- New Haven Residuals, Limited
               Partnership
24.15**        Power of Attorney -- New Haven Residuals Systems, Inc.
24.16**        Power of Attorney -- New York Organic Fertilizer Company
24.17**        Power of Attorney -- NYOFCO Holdings Inc.
24.18**        Power of Attorney -- Organi-Gro, Inc.
24.19**        Power of Attorney -- Providence Soils, LLC
24.20**        Power of Attorney -- Residuals Processing, Inc.
24.21**        Power of Attorney -- Residual Technologies, Limited
               Partnership
24.22**        Power of Attorney -- Residual Technologies Systems, Inc.
24.23**        Power of Attorney -- Soaring Vista Properties, Inc.
24.24**        Power of Attorney -- ST Interco, Inc.
24.25**        Power of Attorney -- Synagro-Baltimore, L.L.C.
24.26**        Power of Attorney -- Synagro Composting Company of
               California, Inc.
24.27**        Power of Attorney -- Synagro Delaware, Inc.
24.28**        Power of Attorney -- Synagro Digestions, Inc.
24.29**        Power of Attorney -- Synagro Management, L.P.
24.30**        Power of Attorney -- Synagro Mid-Atlantic, Inc.
24.31**        Power of Attorney -- Synagro Midwest -- Enviroland, Inc.
24.32**        Power of Attorney -- Synagro Midwest, Inc.
24.33**        Power of Attorney -- Synagro Northeast, Inc.
24.34**        Power of Attorney -- Synagro of California, Inc.
24.35**        Power of Attorney -- Synagro of Florida-A&J, Inc.
24.36**        Power of Attorney -- Synagro of Florida-Anti-Pollution, Inc.
24.37**        Power of Attorney -- Synagro of Florida-Davis Water, Inc.
24.38**        Power of Attorney -- Synagro of Florida-Ecosystems, Inc.
24.39**        Power of Attorney -- Synagro of Michigan, Inc.
24.40**        Power of Attorney -- Synagro of Minnesota -- Rehbein, Inc.
24.41**        Power of Attorney -- Synagro of North Carolina-Amsco, Inc.
24.42**        Power of Attorney -- Synagro of North Carolina-EWR, Inc.
24.43**        Power of Attorney -- Synagro of Texas-CDR, Inc.
24.44**        Power of Attorney -- Synagro of Texas-Vital-Cycle, Inc.
24.45**        Power of Attorney -- Synagro Wisconsin, Inc.
24.46**        Power of Attorney -- Synagro Southeast, Inc.
24.47**        Power of Attorney -- Synagro Southwest, Inc.
24.48**        Power of Attorney -- Synagro Texas, Inc.
24.49**        Power of Attorney -- Synagro West, Inc.
24.50**        Power of Attorney -- Synagro WCWNJ, Inc.
24.51**        Power of Attorney -- Synagro-WWT, Inc.
25.1**         Statement of Eligibility under the Trust Indenture Act of
               1933, as amended, of the Trustee for 9 1/2% Senior
               Subordinated Notes due 2009



                                      II-13





EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
25.2           Statement of Eligibility under the Trust Indenture Act of
               1933, as amended, of the Trustee for Guarantees for 9 1/2%
               Senior Subordinated Notes due 2009
99.1           Form of Letter of Transmittal for 9 1/2% Senior Subordinated
               Notes due 2009
99.2           Form of Notice of Guaranteed Delivery for 9 1/2% Senior
               Subordinated Notes due 2009
99.3**         Form of Letter to Depository Trust Company Participants for
               9 1/2% Senior Subordinated Notes due 2009
99.4**         Form of Letter to Clients for 9 1/2% Senior Subordinated
               Notes due 2009
99.5           Assurance Letter to Securities and Exchange Commission



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

 *  Incorporated by reference from the filing indicated.


**  Previously filed



(1) Management contract or compensatory plan or agreement.


ITEM 22.  UNDERTAKINGS

     The undersigned registrants hereby undertake:

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

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

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

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

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

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

          (4) Synagro Technologies, Inc. hereby undertakes that, for purposes of
     determining any liability under the Securities Act, each filing of Synagro
     Technologies, Inc.'s annual report pursuant to section 13(a) or section
     15(d) of the Exchange Act (and, where applicable, each filing of an
     employee benefit plan's annual report pursuant to section 15(d) of the
     Exchange Act) that is incorporated by reference in the Registration
     Statement shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-14


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

          (6) The undersigned registrants hereby undertake to respond to
     requests for information that is incorporated by reference into the
     Prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
     business day of receipt of such request, and to send the incorporated
     documents by first class mail or other equally prompt means. This includes
     information contained in documents filed subsequent to the effective date
     of the Registration Statement through the date of responding to the
     request.

          (7) The undersigned registrants hereby undertake to supply by means of
     a post-effective amendment all information concerning a transaction, and
     the company being acquired involved therein, that was not the subject of
     and included in the Registration Statement when it became effective.

                                      II-15


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, Synagro
Technologies, Inc. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, on this 6th day of
June, 2002.


                                          SYNAGRO TECHNOLOGIES, INC.

                                          By:      /s/ ROSS M. PATTEN
                                            ------------------------------------
                                                      Ross M. Patten
                                                 Chief Executive Officer


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on June 6, 2002, by the following persons
in the capacities indicated.





                    SIGNATURE                                             CAPACITY
                    ---------                                             --------
                                               

                /s/ ROSS M. PATTEN                   Chairman of the Board, Chief and Executive Officer
 ------------------------------------------------        and Director (Principal Executive Officer)
                  Ross M. Patten


               /s/ J. PAUL WITHROW                      Chief Financial Officer (Principal Financial
 ------------------------------------------------                         Officer)
                 J. Paul Withrow


                        *                                                 Director
 ------------------------------------------------
                  Gene Meredith


                        *                                                 Director
 ------------------------------------------------
            Kenneth Ch'uan-k'ai Leung


                        *                                                 Director
 ------------------------------------------------
                Alfred Tyler, 2nd


                        *                                                 Director
 ------------------------------------------------
                 David A. Donnini


                        *                                                 Director
 ------------------------------------------------
                Vincent J. Hemmer


  *                /s/ J. PAUL WITHROW
        ------------------------------------------
                     J. Paul Withrow
                     Attorney-in-fact



                                      II-16


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, each of
Composting Corporation of America, Environmental Protection & Improvement
Company, Inc., Fairhaven Residual Systems, Inc., Future-Tech Environmental
Services, Inc., NETCO-Connecticut, Inc., NETCO-Residuals Management Systems,
Inc., NETCO-Waterbury Systems, Inc., New England Treatment Company, Inc., New
Haven Residuals Systems, Inc., NYOFCO Holdings Inc., Organi-Gro, Inc., Residuals
Processing, Inc., Residual Technologies Systems, Inc., Soaring Vista Properties,
Inc., ST Interco, Inc., Synagro-Baltimore, L.L.C., Synagro Composting Company of
California, Inc., Synagro Digestions, Inc., Synagro Mid-Atlantic, Inc., Synagro
Midwest -- Enviroland, Inc., Synagro Midwest, Inc., Synagro Northeast, Inc.,
Synagro of California, Inc., Synagro of Florida-A&J, Inc., Synagro of
Florida-Anti-Pollution, Inc., Synagro of Florida-Davis Water, Inc., Synagro of
Florida-Ecosystems, Inc., Synagro of Michigan, Inc., Synagro of
Minnesota -- Rehbein, Inc., Synagro of North Carolina-Amsco, Inc., Synagro of
North Carolina-EWR, Inc., Synagro of Texas-CDR, Inc., Synagro of
Texas-Vital-Cycle, Inc., Synagro Wisconsin, Inc., Synagro Southwest, Inc.,
Synagro Southeast, Inc., Synagro Texas, Inc., Synagro West, Inc., Synagro WCWNJ,
Inc., and Synagro-WWT, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunder duly authorized on this 6th
day of June, 2002.



                                  COMPOSTING CORPORATION OF AMERICA

                                  ENVIRONMENTAL PROTECTION & IMPROVEMENT
                                  COMPANY, INC.

                                  FAIRHAVEN RESIDUAL SYSTEMS, INC.
                                  FUTURE-TECH ENVIRONMENTAL SERVICES, INC.,
                                  NETCO-CONNECTICUT, INC.
                                  NETCO-RESIDUALS MANAGEMENT SYSTEMS, INC.
                                  NETCO-WATERBURY SYSTEMS, INC.
                                  NEW ENGLAND TREATMENT COMPANY, INC.
                                  NEW HAVEN RESIDUALS SYSTEMS, INC.
                                  NYOFCO HOLDINGS INC.
                                  ORGANI-GRO, INC.
                                  RESIDUALS PROCESSING, INC.
                                  RESIDUAL TECHNOLOGIES SYSTEMS, INC.
                                  SOARING VISTA PROPERTIES, INC.
                                  ST INTERCO, INC.
                                  SYNAGRO-BALTIMORE, L.L.C.
                                  SYNAGRO COMPOSTING COMPANY OF CALIFORNIA,
                                  INC.

                                  SYNAGRO DIGESTION, INC.
                                  SYNAGRO MID-ATLANTIC, INC.
                                  SYNAGRO MIDWEST -- ENVIROLAND, INC.
                                  SYNAGRO MIDWEST, INC.
                                  SYNAGRO NORTHEAST, INC.
                                  SYNAGRO OF CALIFORNIA, INC.
                                  SYNAGRO OF FLORIDA-A&J, INC.

                                      II-17


                                  SYNAGRO OF FLORIDA-ANTI-POLLUTION, INC.
                                  SYNAGRO OF FLORIDA-DAVIS WATER, INC.
                                  SYNAGRO OF FLORIDA-ECOSYSTEMS, INC.
                                  SYNAGRO OF MICHIGAN, INC.
                                  SYNAGRO OF MINNESOTA -- REHBEIN, INC.
                                  SYNAGRO OF NORTH CAROLINA-AMSCO, INC.
                                  SYNAGRO OF NORTH CAROLINA-EWR, INC.
                                  SYNAGRO OF TEXAS-CDR, INC.
                                  SYNAGRO OF TEXAS-VITAL-CYCLE, INC.
                                  SYNAGRO WISCONSIN, INC.
                                  SYNAGRO SOUTHWEST, INC.
                                  SYNAGRO SOUTHEAST, INC.
                                  SYNAGRO TEXAS, INC.
                                  SYNAGRO WEST, INC.
                                  SYNAGRO WCWNJ, INC.
                                  SYNAGRO-WWT, INC.

                                  By:           /s/ ROSS M. PATTEN
                                     -------------------------------------------
                                                  Ross M. Patten
                                                    President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to each of Composting
Corporation of America, Environmental Protection & Improvement Company, Inc.,
Fairhaven Residual Systems, Inc., Future-Tech Environmental Services, Inc.,
NETCO-Connecticut, Inc., NETCO-Residuals Management Systems, Inc.,
NETCO-Waterbury Systems, Inc., New England Treatment Company, Inc., New Haven
Residuals Systems, Inc., NYOFCO Holdings Inc., Organi-Gro, Inc., Residuals
Processing, Inc., Residual Technologies Systems, Inc., Soaring Vista Properties,
Inc., ST Interco, Inc., Synagro-Baltimore, L.L.C., Synagro Composting Company of
California, Inc., Synagro Digestions, Inc., Synagro Mid-Atlantic, Inc., Synagro
Midwest -- Enviroland, Inc., Synagro Midwest, Inc., Synagro Northeast, Inc.,
Synagro of California, Inc., Synagro of Florida-A&J, Inc., Synagro of
Florida-Anti-Pollution, Inc., Synagro of Florida-Davis Water, Inc., Synagro of
Florida-Ecosystems, Inc., Synagro of Michigan, Inc., Synagro of
Minnesota -- Rehbein, Inc., Synagro of North Carolina-Amsco, Inc., Synagro of
North Carolina-EWR, Inc., Synagro of Texas-CDR, Inc., Synagro of
Texas-Vital-Cycle, Inc., Synagro Wisconsin, Inc., Synagro Southwest, Inc.,
Synagro Southeast, Inc., Synagro Texas, Inc., Synagro West, Inc., Synagro WCWNJ,
Inc., and Synagro-WWT, Inc. by the following persons in the capacities indicated
on June 6, 2002.




                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                                President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                                      II-18





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                           *                                            Vice President and Director
  ----------------------------------------------------
                      Mark A. Rome


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact



                                      II-19


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, Fairhaven
Residuals, Limited Partnership has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunder duly authorized on this 6th
day of June, 2002.


                                          FAIRHAVEN RESIDUALS, LIMITED
                                          PARTNERSHIP

                                          By: FAIRHAVEN RESIDUALS SYSTEMS, INC.,
                                            its general partner

                                              By:   /s/ ROSS M. PATTEN
                                              ----------------------------------
                                                        Ross M. Patten
                                                          President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to Fairhaven Residuals,
Limited Partnership by the following persons in the capacities indicated on June
6, 2002.





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                                President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                           *                                            Vice President and Director
  ----------------------------------------------------
                      Mark A. Rome


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact



                                      II-20


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, New Haven
Residuals, Limited Partnership has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunder duly authorized on this 6th
day of June, 2002.


                                          NEW HAVEN RESIDUALS, LIMITED
                                          PARTNERSHIP

                                          By: NEW HAVEN RESIDUALS SYSTEMS, INC.,
                                            its general partner

                                              By:   /s/ ROSS M. PATTEN
                                              ----------------------------------
                                                        Ross M. Patten
                                                          President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to New Haven Residuals,
Limited Partnership by the following persons in the capacities indicated on June
6, 2002.





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                                President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                           *                                            Vice President and Director
  ----------------------------------------------------
                      Mark A. Rome


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact







                                                           


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact



                                      II-21


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, NETCO-Residuals
Management, Limited Partnership, has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunder duly authorized on this
6th day of June, 2002.


                                          NETCO-RESIDUALS MANAGEMENT, LIMITED
                                          PARTNERSHIP

                                          By: NETCO-RESIDUALS MANAGEMENT
                                              SYSTEMS, INC.,
                                            its general partner

                                          By:      /s/ ROSS M. PATTEN
                                            ------------------------------------
                                                       Ross M. Patten
                                                         President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to NETCO-Residuals
Management, Limited Partnership by the following persons in the capacities
indicated on June 6, 2002.





                    SIGNATURE                                             CAPACITY
                    ---------                                             --------
                                               

                /s/ ROSS M. PATTEN                      President and Director (Principal Executive
 ------------------------------------------------                         Officer)
                  Ross M. Patten


               /s/ J. PAUL WITHROW                   Vice President and Treasurer (Principal Financial
 ------------------------------------------------                         Officer)
                 J. Paul Withrow


                        *                                       Vice President and Director
 ------------------------------------------------
                   Mark A. Rome


  *                /s/ J. PAUL WITHROW
        ------------------------------------------
                     J. Paul Withrow
                     Attorney-in-fact



                                      II-22


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933,
NETCO-Waterbury, Limited Partnership has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunder duly authorized on
this 6th day of June, 2002.


                                          NETCO-WATERBURY, LIMITED PARTNERSHIP

                                          By: NETCO-WATERBURY SYSTEMS, INC.,
                                            its general partner

                                              By:   /s/ ROSS M. PATTEN
                                              ----------------------------------
                                                        Ross M. Patten
                                                          President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to NETCO-Waterbury,
Limited Partnership by the following persons in the capacities indicated on June
6, 2002.





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                                President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                           *                                            Vice President and Director
  ----------------------------------------------------
                      Mark A. Rome


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact



                                      II-23


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, Residual
Technologies, Limited Partnership has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunder duly authorized on this
6th day of June, 2002.


                                          RESIDUAL TECHNOLOGIES, LIMITED
                                          PARTNERSHIP

                                          By: RESIDUALS TECHNOLOGIES SYSTEMS,
                                              INC.,
                                            its general partner

                                              By:   /s/ ROSS M. PATTEN
                                              ----------------------------------
                                                        Ross M. Patten
                                                          President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to Residual
Technologies, Limited Partnership by the following persons in the capacities
indicated on June 6, 2002.





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                                President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                           *                                            Vice President and Director
  ----------------------------------------------------
                      Mark A. Rome


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact



                                      II-24


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, Synagro
Management, L.P. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunder duly authorized on this 6th day of June,
2002.


                                          SYNAGRO MANAGEMENT, L.P.

                                          By: SYNAGRO TEXAS, INC.,
                                            its general partner

                                              By:   /s/ ROSS M. PATTEN
                                              ----------------------------------
                                                        Ross M. Patten
                                                          President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to Synagro Management,
L.P. by the following persons in the capacities indicated on June 6, 2002.





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                                President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                           *                                            Vice President and Director
  ----------------------------------------------------
                      Mark A. Rome


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact



                                      II-25


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, Synagro
Delaware, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunder duly authorized on this 6th day of June,
2002.


                                          SYNAGRO DELAWARE, INC.

                                          By:    /s/ JAMES P. CARMICHAEL
                                            ------------------------------------
                                                    James P. Carmichael
                                                         President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to Synagro Delaware,
Inc. by the following persons in the capacities indicated on June 6, 2002.





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                           *                                         President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                  James P. Carmichael


                           *                                     Vice President and Treasurer and Director
  ----------------------------------------------------                 (Principal Financial Officer)
                    Pamela K. Racey


                           *                                     Vice President and Secretary and Director
  ----------------------------------------------------
                   Mark B. McCormick


                           *                                                      Director
  ----------------------------------------------------
                   John P. Garniewski


  *                   /s/ J. PAUL WITHROW
        ------------------------------------------------
                        J. Paul Withrow
                        Attorney-in-fact



                                      II-26


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, Providence
Soils, LLC has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunder duly authorized on this 6th day of June,
2002.


                                          PROVIDENCE SOILS, LLC

                                          By:      /s/ ROSS M. PATTEN
                                            ------------------------------------
                                                       Ross M. Patten
                                                         President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to Providence Soils,
LLC by the following persons in the capacities indicated on June 6, 2002.




                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                             President (Principal Executive Officer)
  ----------------------------------------------------
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                                      II-27


                                   SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933, New York
Organic Fertilizer Company has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunder duly authorized on this 6th
day of June, 2002.


                                          NEW YORK ORGANIC FERTILIZER COMPANY

                                          By: SYNAGRO-WWT, INC.
                                            its general partner

                                              By:   /s/ ROSS M. PATTEN
                                              ----------------------------------
                                                        Ross M. Patten
                                                          President


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below in relation to New York Organic
Fertilizer Company by the following persons in the capacities indicated on June
6, 2002.





                       SIGNATURE                                                  CAPACITY
                       ---------                                                  --------
                                                           

                   /s/ ROSS M. PATTEN                                President and Director (Principal
  ----------------------------------------------------                       Executive Officer)
                     Ross M. Patten


                  /s/ J. PAUL WITHROW                             Vice President and Treasurer (Principal
  ----------------------------------------------------                       Financial Officer)
                    J. Paul Withrow


                           *                                            Vice President and Director
  ----------------------------------------------------
                      Mark A. Rome


                 /s/ * J. PAUL WITHROW
  ----------------------------------------------------
                    J. Paul Withrow
                    Attorney-in-fact



                                      II-28


                               INDEX TO EXHIBITS




EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
 1**           Purchase Agreement, dated as of April 8, 2002, among Synagro
               Technologies Inc., the guarantors signatory thereto, Lehman
               Brothers Inc. and Banc of America Securities LLC (filed as
               Exhibit 1 to the Current Report on Form 8-K of Synagro
               Technologies Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 3.1*          Restated Certificate of Incorporation of Synagro
               Technologies, Inc. (filed as Exhibit 3.1 to Post-Effective
               Amendment No. 1 to Registration Statement No. 33-95028 of
               Synagro Technologies, Inc. dated October 25, 1996 and
               incorporated herein by reference)
 3.2*          Amended and Restated Bylaws of Synagro Technologies, Inc. as
               of January 27, 2000 (filed as Exhibit 3.2 to the Annual
               Report on Form 10-K of Synagro Technologies Inc. for the
               Fiscal Year Ended December 31, 2001)
 3.3**         Certificate of Formation of Atlanta Residuals Company, LLC
               dated June 8, 2001
 3.4**         Limited Liability Company Agreement of Atlanta Residuals
               Company, LLC dated June 12, 2001
 3.5**         Composite Articles of Incorporation of Composting
               Corporation of America as of December 6, 2000
 3.6**         Amended and Restated Bylaws of Composting Corporation of
               America as of September 23, 1998
 3.7**         Composite Certificate of Incorporation of Environmental
               Protection & Improvement Company, Inc. as of June 12, 1998
 3.8**         Amended and Restated Bylaws of Environmental Protection &
               Improvement Company, Inc. as of June 15, 2000
 3.9**         Composite Certificate of Incorporation of Fairhaven Residual
               Systems, Inc. as of December 6, 2000
 3.10**        Bylaws of Fairhaven Residual Systems, Inc. as of March 15,
               1996
 3.11**        Composite Certificate of Limited Partnership of Fairhaven
               Residuals, Limited Partnership as of December 5, 2000
 3.12**        Restated Partnership Agreement of Fairhaven Residuals,
               Limited Partnership as of January 27, 2000
 3.13**        Articles of Incorporation of Future-Tech Environmental
               Services, Inc. dated August 11, 1992
 3.14**        Amended and Restated Bylaws of Future-Tech Environmental
               Services, Inc. as of May 1, 1999
 3.15**        Composite Certificate of Incorporation of NETCO-Connecticut,
               Inc. as of December 8, 2000
 3.16**        Amended and Restated Bylaws of NETCO-Connecticut, Inc. as of
               June 8, 1993
 3.17**        Composite Certificate of Incorporation of NETCO-Residuals
               Management Systems, Inc. as of December 6, 2000
 3.18**        Amended and Restated Bylaws of NETCO-Residuals Management
               Systems, Inc. as of June 13, 1995
 3.19**        Certificate of Limited Partnership of NETCO-Residuals
               Management, Limited Partnership dated December 5, 2000
 3.20**        Restated Partnership Agreement of NETCO-Residuals
               Management, Limited Partnership as of January 27, 2000
 3.21**        Composite Certificate of Incorporation of NETCO-Waterbury
               Systems, Inc. as of December 6, 2000
 3.22**        Amended and Restated Bylaws of NETCO-Waterbury Systems, Inc.
               as of June 13, 1995
 3.23**        Certificate of Limited Partnership of NETCO-Waterbury,
               Limited Partnership dated December 5, 2000
 3.24**        Restated Partnership Agreement of NETCO-Waterbury, Limited
               Partnership as of January 27, 2000
 3.25**        Composite Articles of Incorporation of New England Treatment
               Company, Inc. as of February 13, 1998
 3.26**        Amended and Restated Bylaws of New England Treatment
               Company, Inc. as of June 8, 1993







EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
 3.27**        Composite Certificate of Incorporation of New Haven
               Residuals Systems, Inc. as of December 6, 2000
 3.28**        Bylaws of New Haven Residuals Systems, Inc. as of August 28,
               1995
 3.29**        Certificate of Limited Partnership of New Haven Residuals,
               Limited Partnership as of December 5, 2000
 3.30**        Restated Partnership Agreement of New Haven Residuals,
               Limited Partnership as of January 27, 2000
 3.31**        Amended Business Certificate New York Organic Fertilizer
               Company dated April 15, 2002
 3.32**        Composite General Partnership Agreement of New York Organic
               Fertilizer Company as of January 27, 2000
 3.33**        Composite Certificate of Incorporation of NYOFCO Holdings,
               Inc. as of December 6, 2000
 3.34**        Amended and Restated Bylaws of NYOFCO Holdings, Inc. as of
               May 1, 1999
 3.35**        Composite Articles of Incorporation of Organi-Gro, Inc. as
               of December 8, 2000
 3.36**        Amended and Restated Bylaws of Organi-Gro, Inc. as of May 1,
               2000
 3.37**        Composite Articles of Organization of Providence Soils, LLC
               dated October 4, 1999
 3.38**        Operating Agreement of Providence Soils, LLC dated January
               27, 2000
 3.39**        Composite Certificate of Incorporation of Residual
               Technologies Systems, Inc. as of December 6, 2000
 3.40**        Bylaws of Residual Technologies Systems, Inc. as of October
               23, 1995
 3.41**        Composite Certificate of Limited Partnership of Residual
               Technologies, Limited Partnership as of December 6, 2000
 3.42**        Restated Partnership Agreement of Residual Technologies,
               Limited Partnership as of January 27, 2000
 3.43**        Composite Articles of Incorporation of Residuals Processing,
               Inc. as of April 28, 1992
 3.44**        Bylaws of Residuals Processing, Inc. as of January 31, 1991
 3.45**        Composite Articles of Incorporation of Soaring Vista
               Properties, Inc. as of December 7, 2000
 3.46**        Restated Bylaws of Soaring Vista Properties, Inc. dated May
               1, 1999
 3.47**        Composite Certificate of Incorporation of ST Interco, Inc.
               as of December 6, 2000
 3.48**        Amended and Restated Bylaws of ST Interco, Inc. as of
               September 23, 1998
 3.49**        Composite Articles of Organization Synagro -- Baltimore
               L.L.C. as of December 8, 2000
 3.50**        Restated Limited Liability Company Agreement of
               Synagro -- Baltimore L.L.C. as of August 14, 2000
 3.51**        Composite Articles of Incorporation of Synagro Composting
               Company of California, Inc. as of April 14, 1999
 3.52**        Amended and Restated Bylaws of Synagro Composting Company of
               California, Inc. as of May 1, 2000
 3.53**        Corrected Certificate of Incorporation of Synagro Delaware,
               Inc. dated December 28, 2000
 3.54**        Bylaws of Synagro Delaware, Inc. dated December 14, 2000
 3.55**        Articles of Incorporation of Synagro Digestion, Inc. dated
               July 17, 2001
 3.56**        Bylaws of Synagro Digestion, Inc. dated July 17, 2001
 3.57**        Certificate of Limited Partnership of Synagro Management,
               L.P. dated December 20, 2000
 3.58**        Partnership Agreement of Synagro Management, L.P. as of
               December 20, 2000
 3.59**        Composite Certificate of Incorporation of Synagro
               Mid-Atlantic, Inc. as of December 6, 2000
 3.60**        Bylaws of Synagro Mid-Atlantic, Inc. as of June 29, 1999
 3.61**        Composite Certificate of Incorporation of Synagro
               Midwest -- Enviroland, Inc. as of December 15, 2000
 3.62**        Restated Bylaws of Synagro Midwest -- Enviroland, Inc. as of
               May 1, 1999







EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
 3.63**        Composite Certificate of Incorporation of Synagro Midwest,
               Inc. as of December 7, 2000
 3.64**        Bylaws of Synagro Midwest, Inc. as of June 23, 1999
 3.65**        Composite Certificate of Incorporation of Synagro Northeast,
               Inc. as of December 7, 2000
 3.66**        Bylaws of Synagro Northeast, Inc. as of June 23, 1999
 3.67**        Composite Articles of Incorporation of Synagro of
               California, Inc. as of December 7. 2000
 3.68**        Amended and Restated Bylaws of Synagro of California, Inc.
               as of May 1, 2000
 3.69**        Composite Articles of Incorporation of Synagro of
               Florida-A&J, Inc. as of October 11, 1999
 3.70**        Amended and Restated Bylaws of Synagro of Florida-A&J, Inc.
               as of May 1, 2000
 3.71**        Composite Articles of Incorporation of Synagro of
               Florida-Anti Pollution, Inc. as of April 23, 1999
 3.72**        Amended and Restated Bylaws of Florida-Anti Pollution, Inc.
               as of May 1, 2000
 3.73**        Composite Articles of Incorporation of Synagro of
               Florida-Davis Water, Inc. as of March 3, 2000
 3.74**        Amended and Restated Bylaws of Synagro of Florida-Davis
               Water, Inc. as of February 29, 2000
 3.75**        Composite Articles of Incorporation of Synagro of
               Florida-Ecosystems, Inc. as of March 3, 2000
 3.76**        Amended and Restated Bylaws of Synagro of
               Florida-Ecosystems, Inc. as of February 29, 2000
 3.77**        Composite Articles of Incorporation of Synagro of Michigan,
               Inc. as of May 23, 2000
 3.78**        Amended and Restated Bylaws of Synagro of Michigan, Inc. as
               of May 1, 2000
 3.79**        Composite Articles of Incorporation of Synagro of
               Minnesota -- Rehbein, Inc. as of February 28, 2001
 3.80**        Amended and Restated Bylaws of Synagro of
               Minnesota -- Rehbein, Inc. as of April 5, 2000
 3.81**        Composite Articles of Incorporation of Synagro of North
               Carolina-Amsco, Inc. as of April 30, 1999
 3.82**        Amended and Restated Bylaws of Synagro of North
               Carolina-Amsco, Inc. as of May 1, 2000
 3.83**        Composite Articles of Incorporation of Synagro of North
               Carolina-EWR, Inc. as of June 3, 1999
 3.84**        Amended and Restated Bylaws of Synagro of North
               Carolina-EWR, Inc. as of May 1, 2000
 3.85**        Composite Restated Articles of Incorporation of Synagro of
               Texas-CDR, Inc. as of February 16, 2001
 3.86**        Amended and Restated Bylaws of Synagro of Texas-CDR, Inc. as
               of May 1, 2000
 3.87**        Composite Articles of Incorporation of Synagro of
               Texas-Vital Cycle, Inc. as of June 3, 1999
 3.88**        Amended and Restated Bylaws of Synagro of Texas-Vital Cycle,
               Inc. as of May 1, 2000
 3.89**        Composite Articles of Incorporation of Synagro of Wisconsin,
               Inc. as of June 3, 1999
 3.90**        Amended and Restated Bylaws of Synagro of Wisconsin, Inc. as
               of May 1, 2000
 3.91**        Composite Certificate of Incorporation of Synagro Southeast,
               Inc. as of December 7, 2000
 3.92**        Bylaws of Synagro Southeast, Inc. as of April 22, 1999
 3.93**        Composite Certificate of Incorporation of Synagro Southwest,
               Inc. as of December 7, 2000
 3.94**        Bylaws of Synagro Southwest, Inc. as of June 23, 1999
 3.95**        Articles of Incorporation of Synagro Texas, Inc. November 3,
               2000
 3.96**        Amended and Restated Bylaws of Synagro Texas, Inc. dated
               November 3, 2000
 3.97**        Composite Certificate of Incorporation of Synagro West, Inc.
               as of December 7, 2000
 3.98**        Bylaws of Synagro West, Inc. as of June 23, 1999
 3.99**        Composite Articles of Incorporation of Synagro-WWT, Inc. as
               of December 8, 2000
3.100**        Amended and Restated Bylaws of Synagro-WWT, Inc. as of May
               1, 1999
3.101**        Composite Certificate of Incorporation of Synagro WCWNJ,
               Inc. as of December 7, 2000
3.102**        Amended and Restated Bylaws of Synagro WCWNJ, Inc. as of May
               1, 1999







EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
 4.1*          Indenture, dated as of April 17, 2002, among Synagro
               Technologies, Inc., the guarantors signatory thereto, and
               Wells Fargo Bank Minnesota, National Association, as
               trustee, relating to the 9 1/2% Senior Subordinated Notes
               due 2009 (filed as Exhibit 4.1 to the Current Report on Form
               8-K of Synagro Technologies, Inc. filed on April 18, 2002
               and incorporated herein by reference)
 4.2*          Exchange and Registration Rights Agreement, dated as of
               April 17, 2002, among Synagro Technologies, Inc., the
               guarantors signatory thereto, Lehman Brothers Inc. and Banc
               of America Securities LLC (filed as Exhibit 4.2 to the
               Current Report on Form 8-K of Synagro Technologies, Inc.
               filed on April 18, 2002 and incorporated herein by
               reference)
 4.3*          Synagro Technologies Inc.'s Note in permanent global form,
               registered in the name of Cede &Co., as nominee of The
               Depository Trust Company, in its capacity as depository,
               having an aggregate principal amount of $149,400,000 (filed
               as Exhibit 4.3 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 4.4*          Synagro Technologies Inc.'s Note in permanent global form,
               registered in the name of Cede &Co., as nominee of The
               Depository Trust Company, in its capacity as depository,
               having an aggregate principal amount of $600,000 (filed as
               Exhibit 4.4 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 4.5*          Synagro Technologies Inc.'s Note in permanent global form,
               registered in the name of Cede &Co., as nominee of The
               Depository Trust Company, in its capacity as depository,
               having an aggregate principal amount of $0 (filed as Exhibit
               4.5 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on April 18, 2002 and incorporated
               herein by reference)
 4.6*          Notation of Guaranty dated as of April 17, 2002, by the
               guarantors signatory thereto (filed as Exhibit 4.6 to the
               Current Report on Form 8-K of Synagro Technologies, Inc.
               filed on April 18, 2002 and incorporated herein by
               reference)
 5.1           Opinion of Locke Liddell & Sapp LLP
10.1*          Employment Agreement dated February 19, 1999, by and between
               Synagro Technologies, Inc. and Ross M. Patten (filed as
               Exhibit 10.20 to the Annual Report on Form 10-K/A of Synagro
               Technologies, Inc. for the Fiscal Year Ended December 31,
               2000 (the "2000 Form 10-K/A") and incorporated herein by
               reference); Agreement Concerning Employment Rights dated
               January 27, 2000, by and between Synagro Technologies, Inc.
               and Ross M. Patten (filed as Exhibit 2.8 to the Current
               Report on Form 8-K of Synagro Technologies, Inc. filed on
               February 17, 2000 and incorporated herein by reference).(1)
10.2*          Employment Agreement dated February 19, 1999, by and between
               Synagro Technologies, Inc. and Mark A. Rome (filed as
               Exhibit 10.21 to the 2000 Form 10-K/A and incorporated
               herein by reference); Agreement Concerning Employment Rights
               dated January 27, 2000, by and between Synagro Technologies,
               Inc. and Mark A. Rome (filed as Exhibit 2.9 to the Current
               Report on Form 8-K of Synagro Technologies, Inc. filed on
               February 17, 2000 and incorporated herein by reference).(1)
10.3*          Employment Agreement dated February 19, 1999, by and between
               Synagro Technologies, Inc. and Alvin L. Thomas II (filed as
               Exhibit 10.22 to the 2000 Form 10-K/A and incorporated
               herein by reference); Agreement Concerning Employment Rights
               dated January 27, 2000, by and between Synagro Technologies,
               Inc. and Alvin L. Thomas, II (filed as Exhibit 2.10 to the
               Current Report on Form 8-K of Synagro Technologies, Inc.
               filed on February 17, 2000 and incorporated herein by
               reference).(1)
10.4*          Employment Agreement dated May 10, 1999, by and between
               Synagro Technologies, Inc. and J. Paul Withrow (filed as
               Exhibit 2.11 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. filed on February 17, 2000 and
               incorporated herein by reference); Agreement Concerning
               Employment Rights dated January 27, 2000, by and between
               Synagro Technologies, Inc. and J. Paul Withrow (filed as
               Exhibit 2.12 to the Current Report on Form 8-K of Synagro
               Technologies, Inc. field on February 17, 2000 and
               incorporated herein by reference).(1)
10.5*          Employment Agreement dated January 1, 2000, by and between
               Synagro Technologies, Inc. and Randall S. Tuttle (filed as
               Exhibit 10.24 to the Quarterly Report on Form 10-Q of
               Synagro Technologies, Inc. for the Fiscal Quarter ended
               September 30, 2001 and incorporated herein by reference).(1)







EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
10.6*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and Ross M. Patten (filed as Exhibit 10.26 to the
               Annual Report on Form 10-K of Synagro Technologies, Inc. for
               the Fiscal Year Ended December 31, 2001 (the "2001 Form
               10-K") and incorporated herein by reference).(1)
10.7*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and Mark A. Rome (filed as Exhibit 10.27 to the 2001
               Form 10-K and incorporated herein by reference).(1)
10.8*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and Alvin L. Thomas, II (filed as Exhibit 10.28 to the
               2001 Form 10-K and incorporated herein by reference).(1)
10.9*          Amendment No. 2 to Agreement Concerning Employment Rights
               dated March 1, 2001, by and between Synagro Technologies,
               Inc. and J. Paul Withrow (filed as Exhibit 10.29 to the 2001
               Form 10-K and incorporated herein by reference).(1)
10.10*         2000 Stock Option Plan dated October 31, 2000 (filed as
               Exhibit A to the Proxy Statement on Schedule 14A for Annual
               Meeting of Stockholders of Synagro Technologies, Inc. filed
               on September 28, 2000 and incorporated herein by
               reference).(1)
10.11*         Employment Agreement dated September 1, 2001, by and between
               Synagro Technologies, Inc. and James P. Carmichael (filed as
               Exhibit 10.30 to the Quarterly Report on Form 10-Q of
               Synagro Technologies, Inc. for the Fiscal Quarter ended
               September 30, 2001 and incorporated herein by reference).(1)
10.12*         Employment Agreement dated March 1, 2002, by and between
               Synagro Technologies, Inc. and Robert Boucher (filed as
               Exhibit 10.32 to the 2001 Form 10-K and incorporated herein
               by reference).(1)
10.13*         Amendment No. 1 to Employment Agreement dated effective
               February 1, 2002, by and between Synagro Technologies, Inc.
               and Randall S. Tuttle (filed as Exhibit 10.33 to the 2001
               Form 10-K and incorporated herein by reference).(1)
12.1           Statement setting forth Detail for Computation of Ratio of
               Earnings to Fixed Charges
23.1           Consent of Arthur Andersen LLP (report on Synagro
               Technologies, Inc.)
23.2           Consent of Arthur Andersen LLP (report on Bio Gro Division
               of Waste Management, Inc.)
23.3**         Consent of Locke Liddell & Sapp LLP (included in Exhibit
               5.1)
24.1**         Power of Attorney -- Synagro Technologies, Inc.
24.2**         Power of Attorney -- Atlanta Residuals Company, LLC
24.3**         Power of Attorney -- Composting Corporation of America
24.4**         Power of Attorney -- Environmental Protection & Improvement
               Company, Inc.
24.5**         Power of Attorney -- Fairhaven Residuals, Limited
               Partnership
24.6**         Power of Attorney -- Fairhaven Residual Systems, Inc.
24.7**         Power of Attorney -- Future-Tech Environmental Services,
               Inc.
24.8**         Power of Attorney -- NETCO-Connecticut, Inc.
24.9**         Power of Attorney -- NETCO-Residuals Management, Limited
               Partnership
24.10**        Power of Attorney -- NETCO-Residuals Management Systems,
               Inc.
24.11**        Power of Attorney -- NETCO-Waterbury, Limited Partnership
24.12**        Power of Attorney -- NETCO-Waterbury Systems, Inc.
24.13**        Power of Attorney -- New England Treatment Company, Inc.
24.14**        Power of Attorney -- New Haven Residuals, Limited
               Partnership
24.15**        Power of Attorney -- New Haven Residuals Systems, Inc.
24.16**        Power of Attorney -- New York Organic Fertilizer Company
24.17**        Power of Attorney -- NYOFCO Holdings Inc.
24.18**        Power of Attorney -- Organi-Gro, Inc.
24.19**        Power of Attorney -- Providence Soils, LLC







EXHIBIT
NUMBER                            DESCRIPTION OF EXHIBIT
- -------                           ----------------------
         
24.20**        Power of Attorney -- Residuals Processing, Inc.
24.21**        Power of Attorney -- Residual Technologies, Limited
               Partnership
24.22**        Power of Attorney -- Residual Technologies Systems, Inc.
24.23**        Power of Attorney -- Soaring Vista Properties, Inc.
24.24**        Power of Attorney -- ST Interco, Inc.
24.25**        Power of Attorney -- Synagro-Baltimore, L.L.C.
24.26**        Power of Attorney -- Synagro Composting Company of
               California, Inc.
24.27**        Power of Attorney -- Synagro Delaware, Inc.
24.28**        Power of Attorney -- Synagro Digestions, Inc.
24.29**        Power of Attorney -- Synagro Management, L.P.
24.30**        Power of Attorney -- Synagro Mid-Atlantic, Inc.
24.31**        Power of Attorney -- Synagro Midwest -- Enviroland, Inc.
24.32**        Power of Attorney -- Synagro Midwest, Inc.
24.33**        Power of Attorney -- Synagro Northeast, Inc.
24.34**        Power of Attorney -- Synagro of California, Inc.
24.35**        Power of Attorney -- Synagro of Florida-A&J, Inc.
24.36**        Power of Attorney -- Synagro of Florida-Anti-Pollution, Inc.
24.37**        Power of Attorney -- Synagro of Florida-Davis Water, Inc.
24.38**        Power of Attorney -- Synagro of Florida-Ecosystems, Inc.
24.39**        Power of Attorney -- Synagro of Michigan, Inc.
24.40**        Power of Attorney -- Synagro of Minnesota -- Rehbein, Inc.
24.41**        Power of Attorney -- Synagro of North Carolina-Amsco, Inc.
24.42**        Power of Attorney -- Synagro of North Carolina-EWR, Inc.
24.43**        Power of Attorney -- Synagro of Texas-CDR, Inc.
24.44**        Power of Attorney -- Synagro of Texas-Vital-Cycle, Inc.
24.45**        Power of Attorney -- Synagro Wisconsin, Inc.
24.46**        Power of Attorney -- Synagro Southeast, Inc.
24.47**        Power of Attorney -- Synagro Southwest, Inc.
24.48**        Power of Attorney -- Synagro Texas, Inc.
24.49**        Power of Attorney -- Synagro West, Inc.
24.50**        Power of Attorney -- Synagro WCWNJ, Inc.
24.51**        Power of Attorney -- Synagro-WWT, Inc.
25.1**         Statement of Eligibility under the Trust Indenture Act of
               1933, as amended, of the Trustee for 9 1/2% Senior
               Subordinated Notes due 2009
25.2           Statement of Eligibility under the Trust Indenture Act of
               1933, as amended, of the Trustee for Guarantees for 9 1/2%
               Senior Subordinated Notes due 2009
99.1           Form of Letter of Transmittal for 9 1/2% Senior Subordinated
               Notes due 2009
99.2           Form of Notice of Guaranteed Delivery for 9 1/2% Senior
               Subordinated Notes due 2009
99.3**         Form of Letter to Depository Trust Company Participants for
               9 1/2% Senior Subordinated Notes due 2009
99.4**         Form of Letter to Clients for 9 1/2% Senior Subordinated
               Notes due 2009
99.5           Assurance Letter to Securities and Exchange Commission




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

*  Incorporated by reference from the filing indicated.


** Previously filed.



(1) Management contract or compensatory plan or agreement.

EX-5.1

                                                                    EXHIBIT 5.1

                                 April 26, 2002

Synagro Technologies, Inc.
1800 Bering Drive, Suite 1000
Houston, Texas  77037

Gentlemen:

         We have acted as special counsel to Synagro Technologies, Inc., a
Delaware corporation (the "Company") and the subsidiaries of the Company named
in Schedule I hereto (the "Guarantors"), in connection with the preparation and
filing of the Registration Statement on Form S-4 by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), on April 26, 2002 (the "Registration
Statement"), with respect to the issuance by the Company of up to $150,000,000
aggregate principal amount of its 9 1/2% Senior Subordinated Notes due 2009 (the
"New Notes") in exchange for up to $150,000,000 in aggregate principal amount of
its outstanding 9 1/2% Senior Subordinated Notes due 2009 (the "Old Notes")
and the issuance by the Guarantors of guarantees (the "Guarantees") with respect
to the New Notes. The New Notes and the Guarantees are to be issued in
accordance with the provisions of the Indenture, dated as of April 17, 2002 (the
"Indenture"), by and between the Company, the guarantors signatory thereto, and
Wells Fargo Bank Minnesota, National Association, as trustee (the "Trustee").
The New Notes and the Guarantees are to be issued pursuant to an exchange offer
(the "Exchange Offer") by the Company to holders of the issued and outstanding
Old Notes, as contemplated by the Exchange and Registration Rights Agreement,
dated as of April 17, 2002 (the "Registration Rights Agreement"), by and between
the Company, the guarantors signatory thereto, Lehman Brothers Inc. and Banc of
America Securities LLC.

         This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act.

         In our capacity as counsel to the Company and the Guarantors in
connection with the Exchange Offer, we have examined the Registration
Statement, the Indenture (including each guarantee set forth therein) and the
forms of the New Notes, each of which will be filed with the Commission as an
exhibit to the Registration Statement. We have also examined originals, or
copies certified or otherwise identified, of (i) the Company's Restated
Certificate of Incorporation and Amended and Restated Bylaws, each as amended to
date, (ii) corporate records of the Company, including minute books of the
Company as furnished to us by the Company, (iii) the charter, bylaws or other
governing documents of each of the Guarantors, (iv) corporate or partnership
records of each of the Guarantors, including minute books of each of the
Guarantors furnished to us by the Guarantors, (v) certificates of public
officials and of representatives of the Company and the Guarantors, and (vi)
statutes and other instruments and documents as a basis for the opinions
hereinafter expressed. In giving the opinions set forth below, we have relied
upon certificates of officers or other representatives of the Company and the
Guarantors with respect to the accuracy of the factual matters contained in such
certificates. In making our examination, we have assumed that all signatures on
documents examined by us are genuine, all documents submitted to us as originals
are authentic and complete and all documents submitted to us as certified or
photostatic copies conform to the originals thereof. As to any facts material to
the opinion expressed herein which we have not independently established or
verified, we have relied upon oral or written statements and representations of
officers and other representatives of the Company and others.

         Our opinion set forth herein is limited to the laws of the State of New
York (other than municipal and local ordinances and regulations) that are
normally applicable to transactions of the type contemplated by the Exchange
Offer and to the extent that judicial or regulatory orders or decrees or
consents, approvals, licenses, authorizations, validations, filings, recordings
or registrations with governmental authorities are relevant, to those required
under such laws. We do not express any opinion with respect to the law of any
jurisdiction other than as set forth above or as to the effect of any such other
law on the opinion stated herein. In rendering the opinion set forth herein with
respect to the laws of the State of New York, we have relied, with your consent,
in all respects as to matters regarding the laws of the State of New York on the
opinion of counsel in such State that has been furnished to you.





Synagro Technologies, Inc.
1800 Bering Drive, Suite 1000
Houston, Texas  77037


         Based upon and subject to the foregoing, and subject to the
limitations, qualifications, exceptions and assumptions set forth herein, we are
of the opinion that when the New Notes have been duly executed by the Company,
authenticated by the Trustee in accordance with the terms of the Indenture, and
delivered upon consummation of the Exchange Offer against receipt of Old Notes
surrendered in exchange therefor in accordance with the terms of the
Registration Rights Agreement and the Indenture, the New Notes and the
Guarantees will constitute valid and binding obligations of the Company and the
Guarantors, respectively, enforceable against them in accordance with their
terms, except, to the extent that enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity), including
reasonableness, good faith, materiality and fair dealing, and the discretion of
the court before which any proceeding therefor may be brought.

         We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement. We also consent to the reference to our
firm under the caption "Legal matters" in the Registration Statement. In giving
this consent, we do not thereby admit that we are included in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the SEC. This opinion is expressed as of the date hereof, and we
disclaim any undertaking to advise you of any subsequent changes in the facts
stated or assumed herein or of any subsequent changes in applicable law.

                                        Very truly yours,


                                        /s/ LOCKE LIDDELL & SAPP LLP
                                        ----------------------------
                                        Locke Liddell & Sapp LLP





                                   Schedule I

                                   Guarantors



            EXACT NAME OF REGISTRANT                          STATE OR OTHER JURISDICTION OF
          AS SPECIFIED IN ITS CHARTER                         INCORPORATION OR ORGANIZATION
          ----------------------------                        -----------------------------
                                                           
Composting Corporation of America                                        Arkansas
Environmental Protection & Improvement Company, Inc.                     New Jersey
Fairhaven Residual Systems, Inc.                                         Delaware
Fairhaven Residuals, Limited Partnership                                 Delaware
Future - Tech Environmental Services, Inc.                               California
NETCO-Connecticut, Inc.                                                  Connecticut
NETCO-Residuals Management Systems, Inc.                                 Delaware
NETCO-Residuals Management, Limited Partnership                          Delaware
NETCO-Waterbury Systems, Inc., f/k/a NETCO-Waterbury, Inc.               Delaware
NETCO-Waterbury, Limited Partnership                                     Delaware
New England Treatment Company, Inc.                                      Rhode Island
New Haven Residuals Systems, Inc.                                        Delaware
New Haven Residuals, Limited Partnership                                 Delaware
New York Organic Fertilizer Company                                      New York
NYOFCO Holdings Inc.                                                     Delaware
Organi-Gro, Inc.                                                         Arkansas
Providence Soils, LLC                                                    Rhode Island
Residual Technologies Systems, Inc.                                      Delaware
Residual Technologies, Limited Partnership                               Delaware
Residuals Processing, Inc.                                               California
Soaring Vista Properties, Inc.                                           Maryland








            EXACT NAME OF REGISTRANT                          STATE OR OTHER JURISDICTION OF
          AS SPECIFIED IN ITS CHARTER                         INCORPORATION OR ORGANIZATION
          ----------------------------                        -----------------------------
                                                           
ST Interco, Inc.                                                         Delaware
Synagro - Baltimore L.L.C.                                               Maryland
Synagro Composting Company of California, Inc.                           California
Synagro Delaware, Inc.                                                   Delaware
Synagro Digestion, Inc.                                                  California
Synagro Management, L.P.                                                 Texas
Synagro Mid-Atlantic, Inc.                                               Delaware
Synagro Midwest - Enviroland, Inc., f/k/a Enviroland, Inc.               Michigan
Synagro Midwest, Inc.                                                    Delaware
Synagro Northeast, Inc.                                                  Delaware
Synagro of California, Inc.                                              Arizona
Synagro of Florida-A&J, Inc.                                             Florida
Synagro of Florida-Anti-Pollution, Inc.                                  Florida
Synagro of Florida-Davis Water, Inc.                                     Florida
Synagro of Florida-Ecosystems, Inc.                                      Florida
Synagro of Michigan, Inc.                                                Michigan
Synagro of Minnesota--Rehbein, Inc.                                      Minnesota
Synagro of North Carolina-Amsco, Inc.                                    North Carolina
Synagro of North Carolina-EWR, Inc.                                      North Carolina
Synagro of Texas-CDR, Inc.                                               Texas
Synagro of Texas-Vital-Cycle, Inc.                                       Wisconsin
Synagro of Wisconsin, Inc.                                               Wisconsin
Synagro Southeast, Inc.                                                  Delaware
Synagro Southwest, Inc.                                                  Delaware
Synagro Texas, Inc.                                                      Texas







            EXACT NAME OF REGISTRANT                          STATE OR OTHER JURISDICTION OF
          AS SPECIFIED IN ITS CHARTER                         INCORPORATION OR ORGANIZATION
          ----------------------------                        -----------------------------
                                                           
Synagro West, Inc.                                                       Delaware
Synagro-WWT, Inc., f/k/a Wheelabrator Water Technologies, Inc.           Maryland
Synagro WCWNJ, Inc., f/k/a Wheelabrator Clean Water New Jersey, Inc.     Delaware

EX-12.1

                                                                    EXHIBIT 12.1

                           SYNAGRO TECHNOLOGIES, INC.

           STATEMENT SETTING FORTH DETAIL FOR COMPUTATION OF RATIO OF
                            EARNINGS TO FIXED CHARGES
                             (DOLLARS IN THOUSANDS)





                                                                                                                      THREE MONTHS
                                                                         YEAR ENDED DECEMBER 31,                          ENDED
                                                    -------------------------------------------------------------       MARCH 31,
                                                      1997          1998          1999         2000         2001          2002
                                                    -------       -------       -------      -------      -------     ------------
                                                                                           
EARNINGS
   Income before provision for income taxes
      from continuing operations..............      $ 1,116       $  (537)      $ 1,148      $ 6,551      $20,237         $2,308
   Fixed charges .............................        1,182         1,908         3,687       20,182       28,551          5,893
   Amortization of capitalized interest ......         --            --            --           --           --               --
                                                    -------       -------       -------      -------      -------         ------
                                                      2,298         1,371         4,835       26,733       48,788          8,201
                                                    -------       -------       -------      -------      -------         ------

FIXED CHARGES
   (a)  Interest expense and
        amortized loan costs .................        1,007         1,558         3,236       18,908       26,969          5,493
   (b)  Estimate of interest within
        rental expense (33%) .................          175           350           451        1,274        1,582            400
                                                    -------       -------       -------      -------      -------         ------
                                                      1,182         1,908         3,687       20,182       28,551          5,893

EARNING (DEFICIENCY) TO FIXED CHARGES ........                       (537)

RATIO OF EARNINGS TO FIXED CHARGES ...........         1.94          0.72          1.31         1.32         1.71           1.39

EX-23.1

                                                                    EXHIBIT 23.1



                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

                As independent public accountants, we hereby consent to the
incorporation of our report on Synagro Technologies, Inc. dated March 13, 2002
(except with respect to the matter discussed in Note 15, for which the date is
April 17, 2002), and to all references to our firm included in or made a part of
this registration statement.



Arthur Andersen LLP

Houston, Texas
June 5, 2002

EX-23.2

                                                                    EXHIBIT 23.2



                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


                    As independent public accountants, we hereby consent to the
incorporation of our report on the Bio Gro Division of Waste Management, Inc.
dated October 27, 2000, included in this registration statement.



ARTHUR ANDERSEN LLP

Houston, Texas
June 5, 2002

EX-25.2

                                                                    EXHIBIT 25.2
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ---------

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                   UNDER THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

                                   ---------

 [ ] CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
                                SECTION 305(b)(2)

                           WELLS FARGO BANK MINNESOTA,
                              NATIONAL ASSOCIATION
               (Exact name of trustee as specified in its charter)

    A U.S. NATIONAL BANKING ASSOCIATION                      41-1592157
    (Jurisdiction of incorporation or                     (I.R.S. Employer
organization if not a U.S. national bank)                Identification No.)


     SIXTH STREET AND MARQUETTE AVENUE                          55479
          MINNEAPOLIS, MINNESOTA                              (Zip code)
(Address of principal executive offices)

                       STANLEY S. STROUP, GENERAL COUNSEL
                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
                        SIXTH STREET AND MARQUETTE AVENUE
                          MINNEAPOLIS, MINNESOTA 55479
                                 (612) 667-1234
                               (Agent for Service)

                                   ---------

                           SYNAGRO TECHNOLOGIES, INC.
               (Exact name of obligor as specified in its charter)

                          See Table of Guarantors Below

                 DELAWARE                                    76-051132 4
    (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                      Identification No.)


      1800 BERING DRIVE, SUITE 1000                             77037
             HOUSTON, TEXAS                                   (Zip code)
(Address of principal executive offices)

                                   ---------

      GUARANTEES RELATING TO THE 9 1/2% SENIOR SUBORDINATED NOTES DUE 2009
                       (Title of the indenture securities)





                               TABLE OF GUARANTORS




                                                          STATE OR OTHER         PRIMARY STANDARD
                                                          JURISDICTION OF           INDUSTRIAL
          EXACT NAME OF REGISTRANT                       INCORPORATION OR         CLASSIFICATION        I.R.S. EMPLOYER
        AS SPECIFIED IN ITS CHARTER                        ORGANIZATION            CODE NUMBER       IDENTIFICATION NUMBER
        ---------------------------                      ----------------        ----------------    ---------------------
                                                                                            
Composting Corporation of America                           Arkansas                  4953                 None
Environmental Protection & Improvement Company, Inc.        New Jersey                4953, 4212           22-1922397
Fairhaven Residual Systems, Inc.                            Delaware                  4953                 06-1450050
Fairhaven Residuals, Limited Partnership                    Delaware                  4953                 06-1450051
Future - Tech Environmental Services, Inc.                  California                4953                 68-0281821
NETCO-Connecticut, Inc.                                     Connecticut               4953                 06-1345532
NETCO-Residuals Management Systems, Inc.                    Delaware                  4953                 06-1391602
NETCO-Residuals Management, Limited Partnership             Delaware                  4953                 06-1392669
NETCO-Waterbury Systems, Inc., f/k/a
NETCO-Waterbury, Inc.                                       Delaware                  4953                 06-1372032
NETCO-Waterbury, Limited Partnership                        Delaware                  4953                 06-1375202
New England Treatment Company, Inc.                         Rhode Island              4953                 06-1201634
New Haven Residuals Systems, Inc.                           Delaware                  4953                 06-1432757
New Haven Residuals, Limited Partnership                    Delaware                  4953                 06-1432758
New York Organic Fertilizer Company                         New York                  4953                 36-4148694
NYOFCO Holdings Inc.                                        Delaware                  4953                 36-4122352
Organi-Gro, Inc.                                            Arkansas                  4953                 None
Providence Soils, LLC                                       Rhode Island              4953                 06-1559061
Residual Technologies Systems, Inc.                         Delaware                  4953                 06-1439485
Residual Technologies, Limited Partnership                  Delaware                  4953                 06-1439486
Residuals Processing, Inc.                                  California                4953                 76-0366005







                                                          STATE OR OTHER         PRIMARY STANDARD
                                                          JURISDICTION OF           INDUSTRIAL
          EXACT NAME OF REGISTRANT                       INCORPORATION OR         CLASSIFICATION        I.R.S. EMPLOYER
        AS SPECIFIED IN ITS CHARTER                        ORGANIZATION            CODE NUMBER       IDENTIFICATION NUMBER
        ---------------------------                      ----------------        ----------------    ---------------------
                                                                                            
Soaring Vista Properties, Inc.                              Maryland                  6531                 52-1444015
ST Interco, Inc.                                            Delaware                  4953                 None
Synagro - Baltimore L.L.C.                                  Maryland                  4953                 36-4097600
Synagro Composting Company of California, Inc.              California                4953                 33-0267671
Synagro Delaware, Inc.                                      Delaware                  4953                 51-0405181
Synagro Digestion, Inc.                                     California                4953                 33-0979381
Synagro Management, L.P.                                    Texas                     8741                 76-0664546
Synagro Mid-Atlantic, Inc.                                  Delaware                  4953                 76-0612565
Synagro Midwest - Enviroland, Inc., f/k/a
Enviroland, Inc.                                            Michigan                  4953                 38-2589060
Synagro Midwest, Inc.                                       Delaware                  4953                 76-0612568
Synagro Northeast, Inc.                                     Delaware                  4953                 76-0612564
Synagro of California, Inc.                                 Arizona                   4953                 86-0468598
Synagro of Florida-A&J, Inc.                                Florida                   4953                 65-0751886
Synagro of Florida-Anti-Pollution, Inc.                     Florida                   4953                 74-2917159
Synagro of Florida-Davis Water, Inc.                        Florida                   4953                 59-2210462
Synagro of Florida-Ecosystems, Inc.                         Florida                   4953                 59-2580855
Synagro of Michigan, Inc.                                   Michigan                  4953                 38-3028422
Synagro of Minnesota--Rehbein, Inc.                         Minnesota                 4953                 41-1507969
Synagro of North Carolina-Amsco, Inc.                       North Carolina            4953                 76-0605487
Synagro of North Carolina-EWR, Inc.                         North Carolina            4953                 56-2110110
Synagro of Texas-CDR, Inc.                                  Texas                     4953                 74-2648566
Synagro of Texas-Vital-Cycle, Inc.                          Wisconsin                 4953                 39-1763997
Synagro of Wisconsin, Inc.                                  Wisconsin                 4953                 39-1446277
Synagro Southeast, Inc.                                     Delaware                  4953                 74-2924511






                                                          STATE OR OTHER         PRIMARY STANDARD
                                                          JURISDICTION OF           INDUSTRIAL
          EXACT NAME OF REGISTRANT                       INCORPORATION OR         CLASSIFICATION        I.R.S. EMPLOYER
        AS SPECIFIED IN ITS CHARTER                        ORGANIZATION            CODE NUMBER       IDENTIFICATION NUMBER
        ---------------------------                      ----------------        ----------------    ---------------------
                                                                                            
Synagro Southwest, Inc.                                     Delaware                  4953                 76-0612567
Synagro Texas, Inc.                                         Texas                     4953                 76-0664372
Synagro West, Inc.                                          Delaware                  4953                 76-0612566
Synagro-WWT, Inc., f/k/a Wheelabrator Water
Technologies, Inc.                                          Maryland                  4953                 52-1130492
Synagro WCWNJ, Inc., f/k/a Wheelabrator Clean
Water New Jersey, Inc.                                      Delaware                  4953                 36-3960817







                                                   
Item 1. General Information.                          Furnish the following information as to the trustee:

                                                      (a)    Name and address of each examining or supervising
                                                             authority to which it is subject.
                                                             Comptroller of the Currency Treasury Department
                                                             Washington, D.C.

                                                             Federal Deposit Insurance Corporation Washington, D.C.

                                                             The Board of Governors of the Federal Reserve System
                                                             Washington, D.C.

                                                      (b)    Whether it is authorized to exercise corporate trust
                                                             powers.

                                                             The trustee is authorized to exercise corporate trust
                                                             powers.

Item 2. Affiliations with Obligor.                    If the obligor is an affiliate of the trustee, describe each
                                                      such affiliation.

                                                      None with respect to the trustee.

No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under
Item 13.

Item 15. Foreign Trustee.                             Not applicable.

Item 16. List of Exhibits.                            List below all exhibits filed as a part of this Statement of
                                                      Eligibility. Wells Fargo Bank Minnesota, National
                                                      Association incorporates by reference into this Form T-1 the
                                                      exhibits attached hereto.

   Exhibit 1                                          a.     A copy of the Articles of Association of the trustee
                                                             now in effect.***

   Exhibit 2                                          a.     A copy of the certificate of authority of the trustee
                                                             to commence business issued June 28, 1872, by the
                                                             Comptroller of the Currency to The Northwestern
                                                             National Bank of Minneapolis.*

                                                      b.     A copy of the certificate of the Comptroller of the
                                                             Currency dated January 2, 1934, approving the
                                                             consolidation of The Northwestern National Bank of
                                                             Minneapolis and The Minnesota Loan and Trust Company
                                                             of Minneapolis, with the surviving entity being
                                                             titled Northwestern National Bank and Trust Company
                                                             of Minneapolis.*

                                                      c.     A copy of the certificate of the Acting Comptroller
                                                             of the Currency dated January 12, 1943, as to change
                                                             of corporate title of Northwestern National Bank and
                                                             Trust Company of Minneapolis to Northwestern
                                                             National Bank of Minneapolis.*






                                                   
                                                      d.     A copy of the letter dated May 12, 1983, from the
                                                             Regional Counsel, Comptroller of the Currency,
                                                             acknowledging receipt of notice of name change
                                                             effective May 1, 1983 from Northwestern National
                                                             Bank of Minneapolis to Norwest Bank Minneapolis,
                                                             National Association.*

                                                      e.     A copy of the letter dated January 4, 1988, from the
                                                             Administrator of National Banks for the Comptroller
                                                             of the Currency certifying approval of consolidation
                                                             and merger effective January 1, 1988 of Norwest Bank
                                                             Minneapolis, National Association with various other
                                                             banks under the title of "Norwest Bank Minnesota,
                                                             National Association."*

                                                      f.     A copy of the letter dated July 10, 2000, from the
                                                             Administrator of National Banks for the Comptroller
                                                             of the Currency certifying approval of consolidation
                                                             effective July 8, 2000 of Norwest Bank Minnesota,
                                                             National Association with various other banks under
                                                             the title of "Wells Fargo Bank Minnesota, National
                                                             Association."****

Exhibit 3.                                            A copy of the authorization of the trustee to exercise
                                                      corporate trust powers issued January 2, 1934, by the
                                                      Federal Reserve Board.*

Exhibit 4.                                            Copy of By-laws of the trustee as now in effect.***

Exhibit 5.                                            Not applicable.

Exhibit 6.                                            The consent of the trustee required by Section 321(b) of
                                                      the Act.

Exhibit 7.                                            A copy of the latest report of condition of the trustee
                                                      published pursuant to law or the requirements of its
                                                      supervising or examining authority.**

Exhibit 8.                                            Not applicable.

Exhibit 9.                                            Not applicable.



- ---------
*        Incorporated by reference to exhibit number 25 filed with registration
         statement number 33-66026.

**       Incorporated by reference to exhibit number 25 filed with registration
         statement number 022-22555.

***      Incorporated by reference to exhibit T3G filed with registration
         statement number 022-22473.

****     Incorporated by reference to exhibit number 25.1 filed with
         registration statement number 001-15891.





                                    SIGNATURE

         Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wells Fargo Bank Minnesota, National Association, a
national banking association organized and existing under the laws of the United
States of America, has duly caused this statement of eligibility to be signed on
its behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 16th day of April, 2002.


                                               WELLS FARGO BANK MINNESOTA,
                                               NATIONAL ASSOCIATION

                                               /s/ Melissa A. Scott
                                               -----------------------
                                                   Melissa A. Scott
                                               Corporate Trust Officer





                                   EXHIBIT 6

April 24, 2002

Securities and Exchange Commission
Washington, D.C. 20549

Gentlemen:

         In accordance with Section 321(b) of the Trust Indenture Act of 1939,
as amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.

                                               Very truly yours,

                                               WELLS FARGO BANK MINNESOTA,
                                               NATIONAL ASSOCIATION

                                               /s/ Melissa A. Scott
                                               -----------------------
                                                   Melissa A. Scott
                                               Corporate Trust Officer

EX-99.1

                                                                    EXHIBIT 99.1

                           SYNAGRO TECHNOLOGIES, INC.
                             LETTER OF TRANSMITTAL

                         FOR TENDER OF ALL OUTSTANDING
      9 1/2% SENIOR SUBORDINATED NOTES DUE 2009 IN EXCHANGE FOR REGISTERED
                   9 1/2% SENIOR SUBORDINATED NOTES DUE 2009

     THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
          , 2002 (THE "EXPIRATION DATE"), UNLESS SOONER TERMINATED OR EXTENDED.
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE FOR THE EXCHANGE OFFER.

                PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS

     If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed and submitted to the Exchange Agent:

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

                        For Delivery By Mail (registered

                        or certified mail recommended):


                Wells Fargo Bank Minnesota, National Association


                           Corporate Trust Operations


                                 MAC N9303-121


                                 P.O. Box 1517


                       Minneapolis, Minnesota 55480-1517



                 For Delivery By Overnight Courier or By Hand:


                Wells Fargo Bank Minnesota, National Association


                           Corporate Trust Operations


                                 MAC N9303-121


                              Sixth and Marquette


                          Minneapolis, Minnesota 55479


            By Facsimile Transmission (eligible institutions only):

                                 (612) 667-4927

                Attn: Melissa A. Scott, Corporate Trust Officer

                             Confirm by telephone:

                                 (800) 344-5128


     Delivery of this instrument to an address other than as shown above or
transmission via a facsimile number other than the one listed above will not
constitute a valid delivery. The instructions accompanying this Letter of
Transmittal should be read carefully before this Letter of Transmittal is
completed.

     The undersigned hereby acknowledges receipt and review of the prospectus
dated          , 2002 (the "Prospectus") of Synagro Technologies, Inc. (the
"Issuer") and this Letter of Transmittal which together constitute the Issuer's
offer to exchange its 9 1/2% Senior Subordinated Notes due 2009 (the "New
Notes"), the issuance of which has been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of issued
and outstanding unregistered 9 1/2% Senior Subordinated Notes due 2009 (the "Old
Notes"). The exchange of Old Notes for New Notes and the related documentation
are


referred to as the "Exchange Offer." Capitalized terms used but not defined
herein have the respective meanings given to them in the Prospectus.

     The Issuer reserves the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer for the Old Notes is open, at
its discretion, in which event the term "Expiration Date" shall mean the latest
date to which such Exchange Offer is extended. The Issuer shall notify Wells
Fargo Bank Minnesota, National Association (the "Exchange Agent") of any
extension by oral or written notice and shall make a public announcement thereof
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.

     The New Notes will bear interest at 9 1/2% per annum. Interest payment
dates will be April 1 and October 1 of each year, commencing October 1, 2002.
Registered holders of New Notes on the relevant record date for the first
interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid from April 17. Old Notes
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders whose Old Notes are accepted for
exchange will not receive any payment in respect of accrued interest on such Old
Notes otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer. Interest will be paid to
the person in whose name the applicable New Note is registered at the close of
business on March 15, in the case of the April 1 interest payment date, and
September 15, in the case of the October 1 interest payment date. Interest will
be computed on the basis of 360-day year of twelve 30-day months. No additional
interest will be payable on the New Notes.

     This Letter of Transmittal is to be used by a holder of Old Notes if:

     - certificates of Old Notes are to be forwarded herewith; or

     - delivery of Old Notes is to be made by book-entry transfer to the account
       maintained by the Exchange Agent at The Depository Trust Company (the
       "DTC") pursuant to the procedures set forth in the Prospectus under the
       caption "The Exchange Offer -- Procedures for Tendering -- Book Entry
       Transfer" and an "agent's message" is not delivered as described in the
       Prospectus under the caption "The Exchange Offer -- Procedures for
       Tendering -- Tendering Through DTC's Automated Tender Offer Program."

     Tenders by book-entry transfer may also be made by delivering an agent's
message pursuant to DTC's Automated Tender Offer Program in lieu of this Letter
of Transmittal. Holders of Old Notes whose Old Notes are not immediately
available, or who are unable to deliver their Old Notes, this Letter of
Transmittal and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date for the Exchange Offer, or who are unable to
complete the procedure for book-entry transfer on a timely basis, must tender
their Old Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures." See Instruction 2 of this Letter of Transmittal. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.

     The term "holder" with respect to the Exchange Offer for Old Notes means
any person in whose name such Old Notes are registered on the books of Synagro
Technologies, Inc., any person who holds such Old Notes and has obtained a
properly completed bond power from the registered holder or any participant in
the DTC system whose name appears on a security position listing as the holder
of such Old Notes and who desires to deliver the Old Notes by book-entry
transfer to DTC. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Old Notes
must complete this Letter of Transmittal in its entirety (unless such Old Notes
are to be tendered by book-entry transfer and an agent's message is delivered in
lieu hereof).

     Please read the entire Letter of Transmittal and the Prospectus carefully
before checking any box below. The instructions included with this Letter of
Transmittal must be followed. Questions and requests for assistance or for
additional copies of the Prospectus and this Letter of Transmittal may be
directed to the Exchange Agent.
                                        2


     List below the Old Notes tendered under this Letter of Transmittal. If the
space below is inadequate, list the title, registered numbers and principal
amount on a separate signed schedule and affix the list to this Letter of
Transmittal.



- ------------------------------------------------------------------------------------------------------------
                                 DESCRIPTION OF OUTSTANDING NOTES TENDERED
- ------------------------------------------------------------------------------------------------------------
     NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON OUTSTANDING NOTES
                                         (PLEASE FILL IN, IF BLANK)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
                                            OLD NOTE(S) TENDERED
- ------------------------------------------------------------------------------------------------------------
                                                                          AGGREGATE
                                                                      PRINCIPAL AMOUNT        PRINCIPAL
                                                     REGISTERED        REPRESENTED BY          AMOUNT
                TITLE OF SERIES                      NUMBER(S)*            NOTE(S)           TENDERED**
- ------------------------------------------------------------------------------------------------------------
                                                                                
 Synagro Technologies, Inc.
 9 1/2% Senior Subordinated Notes due 2009
                                                   ------------------------------------------------------

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

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

- ------------------------------------------------------------------------------------------------------------
 Total
- ------------------------------------------------------------------------------------------------------------


   
    *     Need not be completed by book-entry holders.
    **    Unless otherwise indicated, any tendering holder of Old Notes will be deemed to have tendered the
          entire aggregate principal amount represented by such Old Notes. All tenders must be in integral
          multiples of $1,000.

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


    

   
    [ ]   CHECK HERE IF TENDERED OUTSTANDING NOTES ARE ENCLOSED HEREWITH.

    [ ]   CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY
          BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DTC (FOR USE BY
          ELIGIBLE INSTITUTIONS ONLY):



          Name of Tendering Institution:
                                         ---------------------------------------------------------------------



          Book-Entry Facility Account Number(s):
                                                 -------------------------------------------------------------



          Transaction Code Number(s):
                                      ------------------------------------------------------------------------

    

                                        3

   
    [ ]   CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO
          A NOTICE OF GUARANTEED DELIVERY EITHER ENCLOSED HEREWITH OR PREVIOUSLY DELIVERED TO THE EXCHANGE
          AGENT (COPY ATTACHED) (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):



          Name(s) of Registered Holder(s) of Old Notes:
                                                        ------------------------------------------



          Date of Execution of Notice of Guaranteed Delivery:
                                                              ------------------------------------



          Name(s) of Registered Holder(s) of Old Notes:
                                                        ------------------------------------------



          Window Ticket Number (if available):
                                               ---------------------------------------------------



          Name of Eligible Institution that Guaranteed Delivery:
                                                                 ---------------------------------



          DTC Account Number(s) (if delivered by book-entry transfer):
                                                                       ---------------------------



          Transaction Code Number (if delivered by book-entry transfer):
                                                                         -------------------------



          Name of Tendering Institution (if delivered by book-entry transfer):
                                                                               ---------------------

    [ ]   CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER AND
          NON-EXCHANGED OUTSTANDING NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER S
          ABOVE (FOR USE BY ELIGIBLE INSTITUTIONS ONLY).

    [ ]   CHECK HERE AND COMPLETE THE FOLLOWING IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
          COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO:



          Name:
                ----------------------------------------------------------------------------------



          Address:
                   -------------------------------------------------------------------------------

    

     If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to participate in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes, it represents that the New Notes are
acquired as a result of market-making activities or other trading activities and
that it will deliver a Prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a Prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

                                        4


                       SIGNATURES MUST BE PROVIDED BELOW,
              PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.

Ladies and Gentlemen:

     Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuer for exchange the principal amount of the Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to, or upon
the order of, the Issuer all right, title and interest in and to the Old Notes
tendered for exchange hereby, including all rights to accrued and unpaid
interest thereon as of the Expiration Date. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact for the undersigned (with full knowledge that said Exchange
Agent also acts as the agent for the Issuer in connection with the Exchange
Offer) with respect to the tendered Old Notes with full power of substitution
to:

     - deliver such Old Notes, or transfer ownership of such Old Notes on the
       account books maintained by the DTC, to the Issuer and deliver all
       accompanying evidence of transfer and authenticity; and

     - present such Old Notes for transfer on the books of the Issuer and
       receive all benefits and otherwise exercise all rights of beneficial
       ownership of such Old Notes, all in accordance with the terms of the
       Exchange Offer.

The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.

     The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are accepted for exchange by the
Issuer as contemplated herein.

     The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretations set forth in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation (available April 13, 1988), Morgan
Stanley & Co. Incorporated (available June 5, 1991), Shearman & Sterling
(available July 2, 1993) and similar no-action letters (the "Prior No-Action
Letters"), that the New Notes issued in exchange for Old Notes pursuant to the
Exchange Offer may be offered for resale or resold and otherwise transferred by
holders thereof (other than any such holder that is an "affiliate" of the Issuer
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holders' business and that such holders are not engaging in, do not intend to
participate in and have no arrangement or understanding with any person to
participate in a distribution of such New Notes. The SEC has not, however,
considered the Exchange Offer in the context of a no-action letter and there can
be no assurance that the staff of the SEC would make a similar determination
with respect to the Exchange Offer as in other circumstances.

     The undersigned hereby further represents to the Issuer that:

     - neither the holder nor any other person receiving New Notes in the
       Exchange Offer is an "affiliate," as defined in Rule 405 under the
       Securities Act, of the Issuer or a broker-dealer tendering Old Notes
       acquired directly from the Issuer for its own account;

     - if the undersigned is not a broker-dealer or is a broker-dealer but will
       not receive New Notes for its own account in exchange for Old Notes; the
       undersigned represents that it is not engaged in, and does not intend to
       participate in, a distribution of New Notes;

     - neither the undersigned nor any other person receiving notes in the
       Exchange Offer has an arrangement of understanding with any person to
       participate in the distribution of the Old Notes or the New Notes within
       the meaning of the Securities Act; and
                                        5


     - the New Notes to be received are being acquired in the ordinary course of
       business of the person receiving such New Notes, whether or not the
       undersigned.

     If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes, it represents that the New Notes are
being acquired by it as a result of market-making activities or other trading
activities and that it will deliver a Prospectus in connection with any resale
of such New Notes. By so acknowledging and by delivering a Prospectus, however,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.

     The undersigned acknowledges that if the undersigned is tendering Old Notes
in the Exchange Offer with the intention of participating in any manner in a
distribution of the New Notes:

     - the undersigned cannot rely on the position of the staff of the SEC set
       forth in the Prior No-Action Letters and, in the absence of an exemption
       therefrom, must comply with the registration and prospectus delivery
       requirements of the Securities Act in connection with the resale
       transaction of the New Notes, in which case the registration statement
       must contain the selling security holder information required by Item 507
       or Item 508, as applicable, of Regulation S-K of the SEC; and

     - failure to comply with such requirements in such instance could result in
       the undersigned incurring liability for which the undersigned is not
       indemnified by the Issuer.

     The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the DTC.

     For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Issuer
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under Special
Delivery Instructions as promptly as practicable after the Expiration Date for
such Exchange Offer.

     All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives. This tender
may be withdrawn only in accordance with the procedures set forth in the section
of the Prospectus entitled "The Exchange Offer -- Withdrawal of Tenders."

     The undersigned acknowledges that the Issuer's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Issuer upon the terms and subject to the conditions of the Exchange
Offer. The undersigned further agrees that acceptance of any tendered Old Notes
by the Issuer and the issuance of New Notes in exchange therefor shall
constitute performance in full by the Issuer of their obligations under the
registration rights agreement and that the Issuer shall have no further
obligations or liabilities thereunder for the registration of the Old Notes or
the New Notes.

     The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Issuer), the Issuer may not be
required to exchange any of the Old Notes tendered hereby. In such event, the
Old Notes not exchanged will be returned to the undersigned at the address shown
below the signature of the undersigned.

     Unless otherwise indicated under "Special Issuance Instructions," please
issue the New Notes issued in exchange for the Old Notes accepted for exchange
and return any Old Notes not tendered or not exchanged, in the name(s) of the
undersigned (or, in the case of a book-entry delivery of Old Notes, please
credit the account indicated above maintained at the DTC). Similarly, unless
otherwise indicated under "Special
                                        6


Delivery Instructions," please mail or deliver the New Notes issued in exchange
for the Old Notes accepted for exchange and any Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s). In the event that both
"Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the New Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes that
the Issuer has no obligation pursuant to the "Special Issuance Instructions" and
"Special Delivery Instructions" to transfer any Old Notes from the name of the
registered holder(s) thereof if the Issuer does not accept for exchange any of
the Old Notes so tendered for exchange.

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

                         SPECIAL ISSUANCE INSTRUCTIONS
                           (SEE INSTRUCTIONS 5 AND 6)

     To be completed ONLY (i) if Outstanding Notes in a principal amount not
tendered, or New Notes issued in exchange for Old Notes accepted for exchange,
are to be issued in the name of someone other than the undersigned, or (ii) if
Old Notes tendered by book-entry transfer which are not exchanged are to be
returned by credit to an account maintained at the DTC other than the DTC
Account Number set forth above. Issue New Notes and/or Old Notes to:

Name
      --------------------------------------------------------------------------

Address
         -----------------------------------------------------------------------

- --------------------------------------------------------------------------------
                               (Include Zip Code)

- --------------------------------------------------------------------------------
                 (Tax Identification or Social Security Number)

                             (Please Type or Print)

                          Credit Unexchanged Old Notes
                        Delivered by Book-Entry Transfer
                           to the DTC Account Number
                                   Set Forth:

- --------------------------------------------------------------------------------
                              DTC Account Number:

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

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


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

                         SPECIAL DELIVERY INSTRUCTIONS
                           (SEE INSTRUCTIONS 5 AND 6)

     To be completed ONLY if Old Notes in a principal amount not tendered, or
New Notes issued in exchange for Old Notes accepted for exchange, are to be
mailed or delivered to someone other than the undersigned, or to the undersigned
at an address other than that shown below the undersigned's signature. Mail or
deliver New Notes and/or Old Notes to:

Name
      --------------------------------------------------------------------------

Address:
         -----------------------------------------------------------------------

- --------------------------------------------------------------------------------
                               (Include Zip Code)

- --------------------------------------------------------------------------------
                 (Tax Identification or Social Security Number)

                             (Please Type or Print)

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


                                        7


                                   IMPORTANT
                        PLEASE SIGN HERE WHETHER OR NOT
             OUTSTANDING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
               (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 BELOW)

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

X
  ------------------------------------------------------------------------------

X
  ------------------------------------------------------------------------------
              (Signature(s) of Registered Holder(s) of Old Notes)

Dated ________, 2002

    (The above lines must be signed by the registered holder(s) of Old Notes as
your name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Issuer,
submit evidence satisfactory to the Issuer of such person's authority so to act.
See Instruction 5 regarding the completion of this Letter of Transmittal,
printed below.)

Name(s):
         -----------------------------------------------------------------------
                             (Please Type or Print)

Capacity (Full Title):
                         -------------------------------------------------------

Address:
         -----------------------------------------------------------------------

- --------------------------------------------------------------------------------
                               (Include Zip Code)

Area Code and Telephone Number:
                                 -----------------------------------------------

Taxpayer Identification or Social Security Number:
                                                     ---------------------------

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

                         MEDALLION SIGNATURE GUARANTEE
                         (IF REQUIRED BY INSTRUCTION 5)

Certain signatures must be guaranteed by an Eligible Institution.

Signature(s) Guaranteed by an
Eligible Institution:
                       ---------------------------------------------------------
                             (Authorized Signature)


- --------------------------------------------------------------------------------
                                    (Title)


- --------------------------------------------------------------------------------
                                 (Name of Firm)


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

                         (Address, Including Zip Code)


- --------------------------------------------------------------------------------
                        (Area Code and Telephone Number)

Dated ________, 2002

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


                                        8


                     INSTRUCTIONS TO LETTER OF TRANSMITTAL
         FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER

     1. Delivery of this Letter of Transmittal and Old Notes or Agent's Message
and Book-Entry Confirmation.  All physically delivered Old Notes or any
confirmation of a book-entry transfer to the Exchange Agent's account at the DTC
of Old Notes tendered by book-entry transfer (a "Book-Entry Confirmation"), as
well as a properly completed and duly executed copy of this Letter of
Transmittal or facsimile hereof (or an agent's message in lieu hereof), and any
other documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein on or prior to 5:00 p.m., New
York City time, on the Expiration Date for the Exchange Offer, or the tendering
holder must comply with the guaranteed delivery procedures set forth below. Old
Notes tendered hereby must be in denominations of principal amount of $1,000 and
any integral multiple thereof. The method of delivery of the tendered Old Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to ensure delivery to the Exchange Agent
before the Expiration Date. NEITHER THIS LETTER TRANSMITTAL NOR OUTSTANDING
NOTES SHOULD BE SENT TO THE ISSUER.

     All questions as to the validity, form, eligibility (including time of
receipt) or acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes the
Issuer's acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Issuer's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Issuer shall determine.
Neither the Issuer, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes received
by the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders of Old Notes, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date. See
"The Exchange Offer" section of the Prospectus.

     2. Guaranteed Delivery Procedures.  Holders who wish to tender their Old
Notes and (a) whose Old Notes are not immediately available, or (b) who cannot
deliver their Old Notes, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date, or (c) who
are unable to comply with the applicable procedures under the DTC's Automated
Tender Offer Program on a timely basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in the Prospectus.

     Pursuant to such procedures:

     - such tender must be made by or through a financial institution (including
       most banks, savings and loan associations, and brokerage houses) that is
       a participant in the Securities Transfer Agents' Medallion Program, the
       New York Stock Exchange Medallion Program or the Stock Exchanges'
       Medallion Program approved by the Securities Transfer Association Inc.
       (an "Eligible Institution");

     - prior to the Expiration Date, the Exchange Agent must have received from
       the Eligible Institution a properly completed and duly executed Notice of
       Guaranteed Delivery (by facsimile transmission, mail or hand delivery) or
       a properly transmitted agent's message and Notice of Guaranteed Delivery
       setting forth the name and address of the holder of the Old Notes, the
       registration number(s) of such Old Notes and the total principal amount
       of Old Notes tendered, stating that the tender is being made thereby and
       guaranteeing that, within five Nasdaq National Market trading days after
       such Expiration
                                        9


       Date, this Letter of Transmittal (or facsimile hereof or an agent's
       message in lieu hereof) together with the Old Notes in proper form for
       transfer (or a Book-Entry Confirmation) and any other documents required
       by this Letter of Transmittal will be deposited by the Eligible
       Institution with the Exchange Agent; and

     - this Letter of Transmittal (or a facsimile hereof or an agent's message
       in lieu hereof) together with the certificates for all physically
       tendered Old Notes in proper from for transfer (or Book-Entry
       Confirmation, as the case may be) and all other documents required hereby
       are received by the Exchange Agent within five Nasdaq National Market
       trading days after such Expiration Date.

     Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above. See "The
Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus.

     3. Tender by Holder.  Only a registered holder of Old Notes may tender such
Old Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not
the registered holder and who wishes to tender should arrange with the
registered holder to execute and deliver this Letter of Transmittal on his
behalf or must, prior to completing and executing this Letter of Transmittal and
delivering his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or obtain a properly completed
bond power from the registered holder.

     4. Partial Tenders (Not Applicable to Holders Who Tender by Book-Entry
Transfer).  Tenders of Old Notes will be accepted only in integral multiples of
$1,000. If less than the entire principal amount of any Old Notes is tendered,
the tendering holder should fill in the principal amount tendered in the third
column of the box entitled "Description of Old Notes Tendered" above. The entire
principal amount of Old Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated. If the entire principal amount of
all Old Notes is not tendered, then Old Notes for the principal amount of Old
Notes not tendered and New Notes issued in exchange for any Old Notes accepted
will be returned to the holder as promptly as practicable after the Old Notes
are accepted for exchange.

     5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures.  If this Letter of Transmittal (or facsimile
hereof) is signed by the record holder(s) of the Old Notes tendered hereby, the
signature(s) must correspond exactly with the name(s) as written on the face of
the Old Notes without alteration, enlargement or any change whatsoever. If this
Letter of Transmittal (or facsimile hereof) is signed by a participant in the
DTC, the signature must correspond with the name as it appears on the security
position listing as the holder of the Old Notes.

     If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter of Transmittal.

     If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder(s) of Old Notes listed and tendered hereby and the New Notes
issued in exchange therefor are to be issued (or any untendered principal amount
of Old Notes is to be reissued) to the registered holder(s), then said holder(s)
need not and should not endorse any tendered Old Notes, nor provide a separate
bond power. In any other case, such holder(s) must either properly endorse the
Old Notes tendered or transmit a properly completed separate bond power with
this Letter of Transmittal, with the signatures on the endorsement or bond power
guaranteed by an Eligible Institution.

     If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuer, evidence satisfactory to the Issuer of their
authority to act must be submitted with this Letter of Transmittal.

                                        10


     No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the DTC whose name appears on a security
position listing as the owner of the tendered Old Notes) and the New Notes are
to be issued directly to such registered holder(s) (or, if signed by a
participant in the DTC, deposited to such participant's account at the DTC)and
neither the box entitled "Special Delivery Instructions" nor the box entitled
"Special Registration Instructions" has been completed, or (ii) such Old Notes
are tendered for the account of an Eligible Institution. In all other cases, all
signatures on this Letter of Transmittal (or facsimile hereof) must be
guaranteed by an Eligible Institution.

     6. Special Issuance and Delivery Instructions.  Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated. Holders tendering Old Notes by book-entry
transfer may request that Old Notes not exchanged be credited to such account
maintained at the DTC as such noteholder may designate hereon. If no such
instructions are given, such Old Notes not exchanged will be returned to the
name and address (or account number) of the person signing this Letter of
Transmittal.

     7. Transfer Taxes.  The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered holder of the Old Notes tendered
hereby, or if tendered Old Notes are registered in the name of any person other
than the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with this Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder and the Exchange Agent
will retain possession of an amount of New Notes with a face amount at least
equal to the amount of such transfer taxes due by such tendering holder pending
receipt by the Exchange Agent of the amount of such taxes.

     8. Tax Identification Number.  Federal income tax law requires that a
holder of any Old Notes or New Notes must provide the Issuer (as payor) with its
correct taxpayer identification number ("TIN"), which, in the case of a holder
who is an individual, is his or her social security number or, if a U.S.
resident alien, his or her IRS individual taxpayer identification number. If the
Issuer is not provided with the correct TIN, the holder or payee may be subject
to a $50 penalty imposed by Internal Revenue Service and backup withholding,
currently at a rate of 30%, on interest payments on the New Notes.

     To prevent backup withholding, each tendering holder and each prospective
holder that is a U.S. person (including a U.S. resident alien) must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying (a) that the TIN provided is correct (or that such holder is awaiting
a TIN), (b) that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding
and (c) that the holder is a U.S. person (including a U.S. resident alien). If
the New Notes will be registered in more than one name or will not be in the
name of the actual owner, consult the instructions on Internal Revenue Service
Form W-9, which may be obtained from the Exchange Agent, for information on
which TIN to report.

     If such holder does not have a TIN, such holder should consult the
instructions on Form W-9 concerning applying for a TIN, check the box in Part 3
of the Substitute Form W-9, write "applied for" in lieu of its TIN and sign and
date the form and the Certificate of Awaiting Taxpayer Identification Number.
Checking this box, writing "applied for" on the form and signing such
certificate means that such holder has already applied for a TIN or that such
holder intends to apply for one in the near future. If such holder does not
provide its

                                        11


TIN to the Issuer within 60 days, backup withholding will begin and continue
until such holder furnishes its TIN to the Issuer.

     Certain foreign individuals and entities will not be subject to backup
withholding or information reporting if they submit an applicable Form W-8 (Form
W-8BEN, Form W-8ECI, Form W-8EXP or Form W-8JMY, signed under penalties of
perjury, attesting to their foreign status. The applicable Form W-8 can be
obtained from the Exchange Agent.

     The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligations regarding backup
withholding.

     9. Validity of Tenders.  All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes the
Issuer's acceptance of which might, in the opinion of the Issuer or its counsel,
be unlawful. The Issuer also reserves the absolute right to waive any conditions
of the Exchange Offer or defects or irregularities of tenders as to particular
Old Notes. The Issuer's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes nor shall any of them incur
any liability for failure to give such notification.

     10. Waiver of Conditions.  The Issuer reserves the absolute right to waive,
in whole or in part, any of the conditions to the Exchange Offer set forth in
the Prospectus.

     11. No Conditional Tender.  No alternative, conditional, irregular or
contingent tender of Old Notes will be accepted.

     12. Mutilated, Lost, Stolen or Destroyed Old Notes.  Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, stolen or destroyed Old Notes have been followed.

     13. Request for Assistance or Additional Copies.  Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.

     14. Withdrawal.  Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."

     IMPORTANT:  THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE OLD NOTES
DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FORM) MUST BE RECEIVED
BY THE EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE EXCHANGE AGENT, PRIOR TO THE EXPIRATION DATE.

                                        12


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

 SUBSTITUTE                    PART 1 -- PLEASE PROVIDE YOUR NAME,     -------------------------------------
                               ADDRESS, AND TAXPAYER IDENTIFICATION                     TIN
 FORM W-9                      NUMBER (TIN)
                                            .                          -------------------------------------
                               --------------------------------------          Social Security Number
 DEPARTMENT OF THE TREASURY    Name
 INTERNAL REVENUE SERVICE                                              -------------------------------------
                               --------------------------------------             Employer ID Number
                               Address (Number and Street)

                               --------------------------------------
                               City, State and Zip Code
                               ------------------------------------------------------------------------------
                               PART 2 -- CERTIFICATION -- Under penalties of perjury. I certify that:
 PAYOR'S REQUEST FOR TAXPAYER
 IDENTIFICATION NUMBER (TIN)   (1) The number shown in Part 1 of this form is my correct Taxpayer
                               Identification Number (or I have checked the box in Part 1 and executed the
                                   Certificate of Awaiting Taxpayer Identification Number below;
                               (2) I am not subject to backup withholding either because I have not been
                               notified by the Internal Revenue Service ("IRS") that I am subject to backup
                                   withholding as a result of failure to report all interest or dividends, or
                                   because the IRS has notified me that I am no longer subject to backup
                                   withholding; and
                               (3) I am a U.S. person (including a U.S. resident alien).
- ---------------------------------------------------------------------------------------------------------------

 CERTIFICATE INSTRUCTIONS -- You must cross out item (2) in Part 2 above if you have been
 notified by the IRS that you are subject to backup withholding because of underreporting   Awaiting TIN  [ ]
 interest or dividends on your tax return. However, if after being notified by the IRS
 that you are subject to backup withholding you received another notification from the IRS  Please complete the
 that you are no longer subject to backup withholding, do not cross out item (2).           Certificate of
                                                                                            Awaiting Taxpayer
 SIGNATURE -------------------------------------------------------------------------------  Identification
                                                                                            Number below.
 DATE------------------------------------------------------------------------------ , 2000
- ---------------------------------------------------------------------------------------------------------------



             FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
             BACKUP WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU
                         WITH RESPECT TO THE NEW NOTES.

           YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
                 THE BOX IN PART 1 OF THE SUBSTITUTE FORM W-9.

             CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

     I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payor within 60
days, 30% (29% for 2004-2005 and 28% thereafter), of all reportable payments
made to me thereafter will be withheld until I provide a taxpayer identification
number.

                                           
- ------------------------------------------    ------------------------------------------ ,
                Signature                     2002               Date



                                        13

EX-99.2

                                                                    EXHIBIT 99.2

                           SYNAGRO TECHNOLOGIES, INC.
                         NOTICE OF GUARANTEED DELIVERY

                         FOR TENDER OF ALL OUTSTANDING
      9 1/2% SENIOR SUBORDINATED NOTES DUE 2009 IN EXCHANGE FOR REGISTERED
                   9 1/2% SENIOR SUBORDINATED NOTES DUE 2009

     This form, or one substantially equivalent hereto, must be used by a holder
to accept the Exchange Offer of Synagro Technologies, Inc. (the "Issuer"), and
to tender outstanding unregistered 9 1/2% Senior Secured Notes due 2009 (the
"Old Notes") to Wells Fargo Bank Minnesota, National Association, as exchange
agent (the "Exchange Agent") pursuant to the guaranteed delivery procedures
described in "The Exchange Offer -- Guaranteed Delivery Procedures" of the
Issuer's prospectus dated          , 2002 (the "Prospectus") and in Instruction
2 to the related Letter of Transmittal. Any holder who wishes to tender Old
Notes pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery, properly completed
and duly executed, prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.

     THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
          , 2002 (THE "EXPIRATION DATE"), UNLESS SOONER TERMINATED OR EXTENDED.
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE FOR THE EXCHANGE OFFER.

                 THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION


        For Delivery By Mail (registered or certified mail recommended):


                Wells Fargo Bank Minnesota, National Association


                           Corporate Trust Operations


                                 MAC N9303-121


                                 P.O. Box 1517


                       Minneapolis, Minnesota 55480-1517



                 For Delivery By Overnight Courier or By Hand:


                Wells Fargo Bank Minnesota, National Association


                           Corporate Trust Operations


                                 MAC N9303-121


                              Sixth and Marquette


                          Minneapolis, Minnesota 55479


            By Facsimile Transmission (eligible institutions only):

                                 (612) 667-4927

                Attn: Melissa A. Scott, Corporate Trust Officer

                             Confirm by telephone:

                                 (800) 344-5128


     Delivery of this instrument to an address other than as set forth above, or
transmission via facsimile to a number other than as set forth above, will not
constitute a valid delivery. The instructions accompanying this


Notice of Guaranteed Delivery should be read carefully before the Notice of
Guaranteed Delivery is completed.

     This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space in the box provided on
the Letter of Transmittal for guarantee of signatures.

                                        2


Ladies and Gentlemen:

     The undersigned hereby tenders to the Issuer, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures" and in Instruction 2 of the Letter of Transmittal.

     The undersigned hereby tenders the Old Notes listed below:



- ---------------------------------------------------------------------------------------------------------------
                                 CERTIFICATE NUMBER(S) (IF
                                  KNOWN) OF OLD NOTES OR             AGGREGATE
                                   ACCOUNT NUMBER AT THE          PRINCIPAL AMOUNT       AGGREGATE PRINCIPAL
       TITLE OF SERIES           DEPOSITORY TRUST COMPANY           REPRESENTED            AMOUNT TENDERED
- ---------------------------------------------------------------------------------------------------------------
                                                                              
  Synagro Technologies, Inc.
  9 1/2% Senior Subordinated
  Notes due 2009

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


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

                            PLEASE SIGN AND COMPLETE

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

- ---------------------------------------------------          ---------------------------------------------------
Name(s) of Registered Holders(s)                             Signatures of Registered Holder(s) or Authorized
                                                             Signatory

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

- ---------------------------------------------------
Address
- ---------------------------------------------------
Area Code and Telephone Number(s)                            Dated ------------------------------------, 2002

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




                                        3


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

     This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as the name(s) of such person(s) appear(s) on
certificates for Old Notes or on a security position listing as the owner of Old
Notes, or by person(s) authorized to become holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information:

                      Please print name(s) and address(es)

Name(s):

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

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

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

Capacity:

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

Address(es):

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

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

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

                                   GUARANTEE

                    (NOT TO BE USED FOR SIGNATURE GUARANTEE)

     The undersigned, a firm which is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, hereby
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof or agent's message in lieu thereof), together with the Old
Notes tendered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Old Notes into the Exchange Agent's account at the
DTC described in the Prospectus under the caption "The Exchange
Offers -- Book-Entry Transfer" and in the Letter of Transmittal) and any other
required documents, all by 5:00 p.m., New York City time, within five New York
Stock Exchange trading days following the Expiration Date.

                                                          
  ----------------------------------------------------         ----------------------------------------------------
                  Name of Firm Address                                         Authorized Signature
  ----------------------------------------------------         ----------------------------------------------------
                         Address                                                       Title
  ----------------------------------------------------         ----------------------------------------------------
                        Zip Code                                              (Please Type or Print)



DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.

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

                                        4


                 INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY

     1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY.  A properly completed
and duly executed copy of this Notice of Guaranteed Delivery (or facsimile
hereof or an agent's message and Notice of Guaranteed Delivery in lieu hereof)
and any other documents required by this Notice of Guaranteed Delivery with
respect to the Old Notes must be received by the Exchange Agent at its address
set forth herein prior to the Expiration Date of the Exchange Offer The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, holders
may wish to consider using an overnight or hand delivery service. In all cases,
sufficient time should be allowed to ensure timely delivery. For a description
of the guaranteed delivery procedures, see Instruction 2 of the Letter of
Transmittal.

     2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY.  If this Notice of
Guaranteed Delivery (or facsimile hereof) is signed by the registered holder(s)
of the Old Notes referred to herein, the signature(s) must correspond exactly
with the name(s) written on the face of the Old Notes without alteration,
enlargement or any change whatsoever. If this Notice of Guaranteed Delivery (or
facsimile hereof) is signed by a participant of the DTC whose name appears on a
security position listing as the owner of the Old Notes, the signature must
correspond with the name shown on the security position listing as the owner of
the Old Notes.

     If this Notice of Guaranteed Delivery (or facsimile hereof) is signed by a
person other than the registered holder(s) of any Old Notes listed or a
participant of the DTC, this Notice of Guaranteed Delivery must be accompanied
by appropriate bond powers, signed as the name(s) of the registered holder(s)
appear(s) on the Old Notes or signed as the name(s) of the participant shown on
the DTC's security position listing.

     If this Notice of Guaranteed Delivery (or facsimile hereof) is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and submit with the Letter of
Transmittal evidence satisfactory to the Exchange Agent of such person's
authority to so act.

     3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.  Questions and requests
for assistance and requests for additional copies of the Prospectus and this
Notice of Guaranteed Delivery may be directed to the Exchange Agent at the
address set forth on the cover page hereof. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.

                                        5

EX-99.5

                                                                    EXHIBIT 99.5

                              [SYNAGRO LETTERHEAD]

June 6, 2002

Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549

Ladies and Gentlemen:

     Our auditors, Arthur Andersen LLP, have represented to us in a letter dated
April 24, 2002, that their audit of the consolidated financial statements of
Synagro Technologies, Inc. and subsidiaries as of December 31, 2001, and for the
year then ended was subject to their quality control system for the U.S.
accounting and auditing practice to provide reasonable assurance that the
engagement was conducted in compliance with professional standards, that there
was appropriate continuity of Arthur Andersen personnel working on the audit and
availability of national office consultation. Arthur Andersen LLP has advised us
in such letter that availability of personnel at foreign affiliates of Arthur
Andersen was not relevant to this audit.

                                          SYNAGRO TECHNOLOGIES, INC.

                                          By       /s/ THOMAS J. BINTZ
                                            ------------------------------------
                                                      Thomas J. Bintz
                                                   (Corporate Controller)

                                        5