EXHIBIT 10.2

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into on
this 20th day of October, 2004, but as effective as of the date set forth
herein, by and between Waste Management, Inc. (the “Company”), and Duane C.
Woods (the “Executive”).

          Employment.

     The Company shall employ Executive, and Executive shall be employed by the
Company upon the terms and subject to the conditions set forth in this
Agreement.

     Term of Employment.

     The period of Executive’s employment under this Agreement shall commence on
June 3, 2004 (“Employment Date”), and shall continue for a period of two (2)
years, and shall automatically be renewed for successive one (1) year periods on
each anniversary of the Employment Date thereafter, unless Executive’s
employment is terminated in accordance with Section 5 below. The period during
which Executive is employed hereunder shall be referred to as the “Employment
Period.”

     Duties and Responsibilities.

          Executive shall serve as the Senior Vice President, Western Group. In
such capacity, Executive shall perform such duties and have the power,
authority, and functions commensurate with such position in similarly-sized
public companies, and have and possess such other authority and functions
consistent with such position as may be assigned to Executive from time to time
by the Chief Executive Officer, President, Chief Operating Officer or the Board
of Directors (the “Board”) of the Company.

          Executive shall devote substantially all of his working time,
attention and energies to the business of the Company, and its affiliated
entities. Executive may make and manage his personal investments (provided such
investments in other activities do not violate, in any material respect, the
provisions of Section 10 of this Agreement), be involved in charitable and
professional activities, and, with the prior written consent of the Board, serve
on boards of other for profit entities, provided such activities do not
materially interfere with the performance of his duties hereunder (however, the
Board does not typically allow officers to serve on more than one public company
board at a time).

     Compensation and Benefits.

          Base Salary. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate of Four Hundred Thousand and Fifty
DOLLARS ($450,000.00) per year, or such higher rate as may be determined from
time to time by the Company (“Base Salary”). Such Base Salary shall be paid in
accordance with the Company’s standard payroll practice for its executive
officers. Once increased, Base Salary shall not be reduced.

          Annual Bonus. During the Employment Period, Executive will be entitled
to participate in an annual incentive compensation plan of the Company, as
established by the Compensation Committee of the Board from time to time. The
Executive’s target annual bonus will be fifty percent (50%) of his Base Salary
in effect for such year (the “Target Bonus”), and his actual annual bonus may

 

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range from 0% to 200% of Base Salary (i.e., a maximum possible bonus of two
times the Target Bonus), and will be determined based upon (i) the achievement
of certain corporate performance goals, as may be established and approved by
from time to time by the Compensation Committee of the Board, and (ii) the
achievement of personal performance goals as may be established by Executive’s
immediate supervisor. The annual bonus for calendar year 2004 will be paid in
2005, if earned, at the same time as similarly situated executive employees
receive or would otherwise receive their bonuses, provided that Executive
remains employed through the end of the 2004 calendar year.

     (c) Benefit Plans and Vacation. Subject to the terms of such plans,
Executive shall be eligible to participate in or receive benefits under any
pension plan, profit sharing plan, salary deferral plan, medical and dental
benefits plan, life insurance plan, short-term and long-term disability plans,
or any other health, welfare or fringe benefit plan, generally made available by
the Company to similarly-situated executive employees. The Company shall not be
obligated to institute, maintain, or refrain from changing, amending, or
discontinuing any benefit plan, or perquisite, so long as such changes are
similarly applicable to similarly situated employees generally.

     During the Employment Period, Executive shall be entitled to vacation each
year in accordance with the Company’s policies in effect from time to time, but
in no event less than four (4) weeks paid vacation per calendar year.

     (d) Expense Reimbursement. The Company shall promptly reimburse Executive
for the ordinary and necessary business expenses incurred by Executive in the
performance of the duties hereunder in accordance with the Company’s customary
practices applicable to its executive officers.

     (e) Other Perquisites. Executive shall be entitled to all perquisites
provided to Senior Vice Presidents of the Company as approved by the
Compensation Committee of the Board, and as they may exist from time to time,
including the following:

(i)  
Automobile allowance at the annual rate of Twelve Thousand Dollars ($12,000.00),
payable in accordance with the Company’s standard payroll practice for its
executive officers and prorated in any year that Executive does not work a full
calendar year;
  (ii)  
Financial planning services at actual cost, and not to exceed Fifteen Thousand
Dollars ($15,000.00) annually;
  (iii)  
Additional one-time financial planning services at actual cost, not to exceed
$20,000, for services in preparation for voluntary retirement (for such purposes
voluntary retirement means retirement from the Company after attainment of both
(x) the age of 55 and (y) a sum of years of services with the Company plus age
equal to 65 or greater);
  (iv)  
Social organization initiation fees and dues with a benefit of a one-time
initiation fee at actual cost (not to exceed ten percent (10%) of Executive’s
Base Salary), and monthly dues at actual cost (not to exceed $500 per month);
and
  (v)   An annual physical examination on a program designated by the Company.

          Termination of Employment.

 

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     Executive’s employment hereunder may be terminated during the Employment
Period under the following circumstances:

     (b) Death. Executive’s employment hereunder shall terminate upon
Executive’s death.

     (c) Total Disability. The Company may terminate Executive’s employment
hereunder upon Executive becoming “Totally Disabled.” For purposes of this
Agreement, Executive shall be considered “Totally Disabled” if Executive has
been physically or mentally incapacitated so as to render Executive incapable of
performing the essential functions of Executive’s position with or without
reasonable accommodation. Executive’s receipt of disability benefits under the
Company’s long-term disability plan or receipt of Social Security disability
benefits shall be deemed conclusive evidence of Total Disability for purpose of
this Agreement; provided, however, that in the absence of Executive’s receipt of
such long-term disability benefits or Social Security benefits, the Company’s
Board may, in their reasonable discretion (but based upon appropriate medical
evidence), determine that Executive is Totally Disabled.

     (d) Termination by the Company for Cause. The Company may terminate
Executive’s employment hereunder for “Cause” at any time after providing a
Notice of Termination for Cause to Executive.

     For purposes of this Agreement, the term “Cause” means any of the
following: (A) willful or deliberate and continual refusal to perform
Executive’s employment duties reasonably requested by the Company after receipt
of written notice to Executive of such failure to perform, specifying such
failure (other than as a result of Executive’s sickness, illness or injury) and
Executive fails to cure such nonperformance within ten (10) days of receipt of
said written notice; (B) breach of any statutory or common law duty of loyalty
to the Company; (C) has been convicted of, or pleaded nolo contendre to, any
felony; (D) willfully or intentionally caused material injury to the Company,
its property, or its assets; (E) disclosed to unauthorized person(s) proprietary
or confidential information of the Company; (F) any material violation or a
repeated and willful violation of Company policies or procedures, including but
not limited to, the Company’s Code of Business Conduct and Ethics (or any
successor policy) then in effect; or (G) breach of any of the covenants set
forth in Section 10 hereof.

(ii)   For purposes of this Agreement, the phrase “Notice of Termination for
Cause” shall mean a written notice that shall indicate the specific termination
provision in Section 5(c)(i) relied upon, and shall set forth in reasonable
detail the facts and circumstances which provide the basis for termination for
Cause. Further, a Notification of Termination for Cause shall be required to
include a copy of a resolution duly adopted by at least two-thirds (2/3) of the
entire membership of the Board of Directors at a meeting of the Board which was
called for the purpose of considering such employment termination, and at which
Executive and his representative had the right to attend and address the Board,
finding that, in the good faith belief of the Board, Executive engaged in
conduct set forth in Section 5(c)(i) herein and specifying the particulars
thereof in reasonable detail. The date of termination for Cause shall be the
date indicated in the Notice of Termination for Cause. Any purported termination
for Cause which is held by an arbitrator not to have been based on the grounds
set forth in this Agreement or not to have followed the

 

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    procedures set forth in this Agreement shall be deemed a termination by the
Company without Cause.

             Voluntary Termination by Executive. Executive may terminate his
employment hereunder with or without Good Reason at any time upon written notice
to the Company.

     A termination for “Good Reason” means a resignation of employment by
Executive by written notice (“Notice of Termination for Good Reason”) given to
the Company’s Chief Executive Officer or President within ninety (90) days after
the occurrence of the Good Reason event, unless such circumstances are
substantially corrected prior to the date of termination specified in the Notice
of Termination for Good Reason. For purposes of this Agreement, “Good Reason”
shall mean the occurrence or failure to cause the occurrence, as the case may
be, without Executive’s express written consent, of any of the following
circumstances: (A) the Company substantially changes Executive’s core duties or
removes Executive’s responsibility for those core duties, so as to effectively
cause Executive to no longer be performing the duties of his position (except in
each case in connection with the termination of Executive’s employment for
Death, Total Disability, or Cause, or temporarily as a result of Executive’s
illness or other absence); provided that if the Company becomes a fifty percent
or more subsidiary of any other entity, Executive shall be deemed to have a
substantial change in the core duties of his position unless he is also Senior
Vice-President of the ultimate parent entity; (B) removal or the non-reelection
of the Executive from the officer position with the Company specified herein, or
removal of the Executive from any of his then officer positions; (C) any
material breach by the Company of any provision of this Agreement, including
without limitation Section 10 hereof; or (D) failure of any successor to the
Company (whether direct or indirect and whether by merger, acquisition,
consolidation or otherwise) to assume in a writing delivered to Executive upon
the assignee becoming such, the obligations of the Company hereunder; or (E) the
reassignment of Executive to a geographic location more than fifty (50) miles
from his then business office location.

     A “Notice of Termination for Good Reason” shall mean a notice that shall
indicate the specific termination provision relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason. The failure by Executive to set forth in the Notice
of Termination for Good Reason any facts or circumstances which contribute to
the showing of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing his
rights hereunder. The Notice of Termination for Good Reason shall provide for a
date of termination not less than ten (10) nor more than sixty (60) days after
the date such Notice of Termination for Good Reason is given, provided that in
the case of the events set forth in Sections 5(d)(i)(A) or (B), the date may be
five (5) business days after the giving of such notice. The Company, at its sole
discretion, may waive this requirement.

             Termination by the Company without Cause. The Company may terminate
Executive’s employment hereunder without Cause at any time upon written notice
to Executive.

(e) Effect of Termination. Upon any termination of employment for any reason,
Executive shall

 

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    immediately resign from all Board memberships and other positions with the
Company or any of its subsidiaries held by him at such time.

          Compensation Following Termination of Employment.

     In the event that Executive’s employment hereunder is terminated in a
manner as set forth in Section 5 above, Executive shall be entitled to the
compensation and benefits provided under this Section 6, as applicable to the
form of termination:

          Termination by Reason of Death. In the event that Executive’s
employment is terminated by reason of Executive’s death, the Company shall pay
the following amounts to Executive’s beneficiary or estate:

     Any accrued but unpaid Base Salary for services rendered to the date of
death, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination, any earned but
unpaid bonuses for any prior calendar year, and, to the extent not otherwise
paid, a pro-rata bonus or incentive compensation payment for the current
calendar year to the extent payments are awarded to senior executives of the
Company and paid at the same time as senior executives are paid.

(ii)   Any benefits to which Executive may be entitled pursuant to the plans,
policies and arrangements (including those referred to in Section 4(d) hereof),
as determined and paid in accordance with the terms of such plans, policies and
arrangements.

     (b) Termination by Reason of Total Disability. In the event that
Executive’s employment is terminated by the Company by reason of Executive’s
Total Disability (as determined in accordance with Section 5(b)), the Company
shall pay the following amounts to Executive:

(i)   Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under
this Agreement, any vacation accrued to the date of termination, and any earned
but unpaid bonuses for any prior calendar year. Executive shall also be eligible
for a pro-rata bonus or incentive compensation payment for the current calendar
year to the extent such awards are made to senior executives of the Company for
the year in which Executive is terminated, and to the extent not otherwise paid
to the Executive.

     Any benefits to which Executive may be entitled pursuant to the plans,
policies and arrangements (including those referred to in Section 4(d) hereof)
shall be determined and paid in accordance with the terms of such plans,
policies and arrangements.

     (c) Termination for Cause. In the event that Executive’s employment is
terminated by the Company for Cause, the Company shall pay the following amounts
to Executive:

(ii)   Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under
this Agreement, any vacation accrued to the date of termination, and any earned
but unpaid bonuses for any prior calendar year.

 

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     Any benefits to which Executive may be entitled pursuant to the plans,
policies and arrangements (including those referred to in Section 4(d) hereof up
to the date of termination) shall be determined and paid in accordance with the
terms of such plans, policies and arrangements.

     (d) Voluntary Termination by Executive. In the event that Executive
voluntarily terminates employment other than for Good Reason, the Company shall
pay the following amounts to Executive:

(iii)   Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under
this Agreement, any vacation accrued to the date of termination, and any earned
but unpaid bonuses for any prior calendar year.

     Any benefits to which Executive may be entitled pursuant to the plans,
policies and arrangements (including those referred to in Section 4(d) hereof up
to the date of termination) shall be determined and paid in accordance with the
terms of such plans, policies and arrangements.

     (e) Termination by the Company Without Cause Outside a Change in Control
Period; Termination by Executive for Good Reason Outside a Change in Control
Period. In the event that Executive’s employment is terminated by the Company
outside a Change in Control Period (as defined in Section 7) for reasons other
than death, Total Disability or Cause, or Executive terminates his employment
for Good Reason outside of a Change in Control Period, the Company shall pay the
following amounts to Executive:

(iv)   Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under
this Agreement, any vacation accrued to the date of termination, and any earned
but unpaid bonuses for any prior calendar year.

     Any benefits to which Executive may be entitled pursuant to the plans,
policies and arrangements referred to in Section 4(d) hereof shall be determined
and paid in accordance with the terms of such plans, policies and arrangements.

     Subject to Executive’s execution of the Release (as defined in Section 7),
an amount equal to two times the sum of Executive’s Base Salary plus his Target
Annual Bonus (in each case, as then in effect), of which one-half shall be paid
in a lump sum within ten (10) days after such termination and one-half shall be
paid during the two (2) year period beginning on the date of Executive’s
termination and shall be paid at the same time and in the same manner as Base
Salary would have been paid if Executive had remained in active employment until
the end of such period.

     Subject to Executive’s execution of the Release (as defined in Section 7),
the Company at its expense will continue for Executive and Executive’s spouse
and dependents, all health benefit plans, programs or arrangements, whether
group or individual, disability, and other benefit plans, in which Executive was
entitled to

 

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participate at any time during the twelve-month period prior to the date of
termination, until the earliest to occur of (A) two years after the date of
termination; (B) Executive’s death (provided that benefits provided to
Executive’s spouse and dependents shall not terminate upon Executive’s death);
or (C) with respect to any particular plan, program or arrangement, the date
Executive becomes eligible to participate in a comparable benefit provided by a
subsequent employer. In the event that Executive’s continued participation in
any such Company plan, program, or arrangement is prohibited, the Company will
arrange to provide Executive with benefits substantially similar to those which
Executive would have been entitled to receive under such plan, program, or
arrangement, for such period on a basis which provides Executive with no
additional after tax cost.

     Subject to Executive’s execution of the Release (as defined in Section 7),
Executive shall be eligible for a bonus or incentive compensation payment, at
the same time, on the same basis, and to the same extent payments are made to
senior executives of the Company, pro-rated for the fiscal year in which the
Executive is terminated.

(f) Suspension and Refund of Termination Benefits for Subsequently Discovered
Cause. Notwithstanding any provision of this Agreement to the contrary, if
within one (1) year of termination of employment of Executive by the Company for
any reason other than for Cause, it is determined by Company that Executive
could have been terminated for Cause then, to the extent permitted by law:

(i)   the Company may elect to cancel any and all payments of any benefits
otherwise due Executive, but not yet paid, under this Agreement or otherwise;
and   (ii)   Executive will refund to the Company any amounts, plus interest,
previously paid by Company to Executive pursuant to Subsections 6(e)(iii),
6(e)(iv) or 6(e)(v).

          Resignation by Executive for Good Reason or Termination by Company
Without Cause During a Change in Control Period.

(f)   Certain Terminations During a Change in Control Period. In the event a
Change in Control occurs and (x) Executive terminates his employment for Good
Reason during a Change in Control Period , or (y) the Company terminates
Executive’s employment without Cause (and for reason other than Death of Total
Disability) during a Change in Control Period, the Company shall, subject to
Executive’s execution of the Release (as defined in this Section 7), pay the
following amounts to Executive:

     The payments and benefits provided for in Section 6(e), except that (A) the
amount and period with respect to which severance is calculated pursuant to
Section 6(e)(iii) will be three (3) years and the amount shall be paid in a
lump-sum and (B) the benefit continuation period in Section 6(e)(iv) shall be
for three (3) years.

     Executive shall also receive a bonus or incentive compensation payment for
the calendar year of the termination, payable at 100% of the maximum bonus
available to Executive, pro-rated as of the effective date of the termination.
Such bonus payment shall be payable within five (5) days after the effective
date of Executive’s termination. Except as may be provided under this Section 7
or under the terms of any incentive compensation, employee benefit, or fringe
benefit plan applicable to Executive at the time of Executive’s termination of
employment, Executive shall have no right to receive any other

 

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compensation, or to participate in any other plan, arrangement or benefit, with
respect to future periods after such resignation or termination.

           Certain Additional Payments by the Company.

(i)   In the event that the Executive shall become entitled to payments and/or
benefits provided by this Agreement or any other amounts in the “nature of
compensation” (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions result
in a change of ownership or effective control covered by Section 280G(b)(2) of
the Code or any person affiliated with the Company or such person) as a result
of such change in ownership or effective control (collectively the “Company
Payments”), and such Company Payments will be subject to the tax (the “Excise
Tax”) imposed by Section 4999 of the Code (and any similar tax that may
hereafter be imposed by any taxing authority) the Company shall pay to the
Executive at the time specified in subsection (iv) below an additional amount
(the “Gross-up Payment”) such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Company Payments and any U.S. federal,
state, and for local income or payroll tax upon the Gross-up Payment provided
for by this Section 7(b), but before deduction for any U.S. federal, state, and
local income or payroll tax on the Company Payments, shall be equal to the
Company Payments.

     For purposes of determining whether any of the Company Payments and
Gross-up Payments (collectively the “Total Payments”) will be subject to the
Excise Tax and the amount of such Excise Tax, (x) the Total Payments shall be
treated as “parachute payments” within the meaning of Section 280G(b)(2) of the
Code, and all “parachute payments” in excess of the “base amount” (as defined
under Code Section 280G(b)(3) of the Code) shall be treated as subject to the
Excise Tax, unless and except to the extent that, in the opinion of the
Company’s independent certified public accountants appointed prior to any change
in ownership (as defined under Code Section 280G(b)(2) or tax counsel selected
by such accountants (the “Accountants”) such Total Payments (in whole or in
part) either do not constitute “parachute payments,” represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the “base amount” or are otherwise
not subject to the Excise Tax, and (y) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code.

     For purposes of determining the amount of the Gross-up Payment, the
Executive shall be deemed to pay U.S. federal income taxes at the highest
marginal rate of U.S. federal income taxation in the calendar year in which the
Gross-up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive’s residence
for the calendar year in which the Company Payment is to be made, net of the
maximum reduction in U.S. federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. In the event that
the Excise Tax is subsequently determined by the Accountants to be less than the
amount taken into account hereunder at the time the Gross-up Payment is made,
the Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the prior Gross-up
Payment attributable to such reduction

 

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(plus the portion of the Gross-up Payment attributable to the Excise Tax and
U.S. federal, state and local income tax imposed on the portion of the Gross-up
Payment being repaid by the Executive if such repayment results in a reduction
in Excise Tax or a U.S. federal, state and local income tax deduction), plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event
any portion of the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or credit of such
portion has been made to the Executive, and interest payable to the Company
shall not exceed the interest received or credited to the Executive by such tax
authority for the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and the method of
allocating the expense thereof) if the Executive’s claim for refund or credit is
denied.

In the event that the Excise Tax is later determined by the Accountant or the
Internal Revenue Service to exceed the amount taken into account hereunder at
the time the Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such excess)
at the time that the amount of such excess is finally determined.

     The Gross-up Payment or portion thereof provided for in subsection
(iii) above shall be paid not later than the thirtieth (30th) day following an
event occurring which subjects the Executive to the Excise Tax; provided,
however, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the
Accountant, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code), subject to further payments pursuant to
subsection (iii) hereof, as soon as the amount thereof can reasonably be
determined, but in no event later than the ninetieth day after the occurrence of
the event subjecting the Executive to the Excise Tax. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth day after demand by the Company (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code).

     In the event of any controversy with the Internal Revenue Service (or other
taxing authority) with regard to the Excise Tax, the Executive shall permit the
Company to control issues related to the Excise Tax (at its expense), provided
that such issues do not potentially materially adversely affect the Executive,
but the Executive shall control any other issues. In the event the issues are
interrelated, the Executive and the Company shall in good faith cooperate so as
not to jeopardize resolution of either issue, but if the parties cannot agree
the Executive shall make the final determination with regard to the issues. In
the event of any conference with any taxing authority as to the Excise Tax or
associated income taxes, the Executive shall permit the representative of the
Company to accompany the Executive, and the Executive and the Executive’s
representative shall cooperate with

 

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the Company and its representative.

     The Company shall be responsible for all charges of the Accountant.

     The Company and the Executive shall promptly deliver to each other copies
of any written communications, and summaries of any verbal communications, with
any taxing authority regarding the Excise Tax covered by this Section 7(b).

Certain Definitions.

     For purposes of this Agreement, “Change in Control” means the first to
occur on or after the date on which this Agreement is first signed, the
occurrence of any of the following events:

     any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company’s then outstanding Voting Securities;

     the following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on the Commencement Date,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating or the
election of directors of the Company) whose appointment or election by the Board
or nomination for election by the Company’s stockholders was approved or
recommended by a vote of at least two-thirds (2/3rds) of the directors then
still in office who either were directors on the Commencement Date or whose
appointment, election or nomination for election was previously so approved or
recommended (the “Incumbent Board”);

     there is a consummated merger or consolidation of the Company with any
other corporation, other than (1) a merger or consolidation which would result
in the Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving or parent entity) more than fifty
percent (50%) of the combined voting power of the Voting Securities of the
Company or such surviving or parent entity outstanding immediately after such
merger or consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person,
directly or indirectly, acquired twenty-five percent (25%) or more of the
combined voting power of the Company’s then outstanding securities; or

     the stockholders of the Company approve a plan of complete liquidation of
the Company or there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company’s assets (or any
transaction having a similar effect), other than a sale or disposition by the
Company of all or substantially all of the Company’s assets to an entity, at
least fifty percent (50%) of the combined voting power of the Voting Securities
of which are owned by stockholders of the Company in

 

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substantially the same proportions as their ownership of the Company immediately
prior to such sale.

     For purposes of this Section 7, “Beneficial Owner” shall have the meaning
set forth in Rule 13d-3 under the Exchange Act;

     For purposes of this Agreement, “Change in Control Period” means the period
commencing on the date occurring six months immediately prior to the date on
which a Change in Control occurs and ending on the second anniversary of the
date on which a Change in Control occurs.

     For purposes of this Agreement, “Exchange Act’ means the Securities and
Exchange Act of 1934, as amended from time to time;

(v) For purposes of this Section 7, “Person” shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (1) the Company, (2) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company, (3) an employee benefit plan of the Company, (4) an underwriter
temporarily holding securities pursuant to an offering of such securities or
(5) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of shares of
Common Stock of the Company.

(vi)   For purposes of this Agreement, “Release” means that specific document
which the Company shall present to Executive for consideration and execution
after any termination of employment pursuant to Section 5(e) and Section 6(e),
wherein if he agrees to such, he will irrevocably and unconditionally release
and forever discharge the Company, it subsidiaries, affiliates and related
parties from any and all causes of action which Executive at that time had or
may have had against the Company (excluding any claim for indemnity under this
Agreement, any claim under state workers’ compensation or unemployment laws, or
any claim under COBRA).

              No Other Benefits or Compensation. Except as may be provided under
this Agreement, or under the terms of any incentive compensation, employee
benefit, or fringe benefit plan applicable to Executive at the time of
Executive’s termination or resignation, Executive shall have no right to receive
any other compensation, or to participate in any other plan, arrangement or
benefit, with respect to future periods after such termination or resignation.

             No Mitigation; No Set-Off. In the event of any termination of
employment hereunder, Executive shall be under no obligation to seek other
employment, and there shall be no offset against any amounts due Executive under
this Agreement on account of any remuneration attributable to any subsequent
employment that Executive may obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or other right which the
Company may have against the Executive or others, except upon obtaining by the
Company of a final non-appealable judgment against Executive.

 

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           Covenants

     (a) Company Property. All written materials, records, data, and other
documents prepared or possessed by Executive during Executive’s employment with
the Company are the Company’s property. All information, ideas, concepts,
improvements, discoveries, and inventions that are conceived, made, developed,
or acquired by Executive individually or in conjunction with others during
Executive’s employment (whether during business hours and whether on the
Company’s premises or otherwise) which relate to the Company’s business,
products, or services are the Company’s sole and exclusive property. All
memoranda, notes, records, files, correspondence, drawings, manuals, models,
specifications, computer programs, maps, and all other documents, data, or
materials of any type embodying such information, ideas, concepts, improvements,
discoveries, and inventions are the Company’s property. At the termination of
Executive’s employment with the Company for any reason, Executive shall return
all of the Company’s documents, data, or other Company property to the Company.

     (b) Confidential Information; Non-Disclosure. Executive acknowledges that
the business of the Company is highly competitive and that the Company has
provided and will continue to provide Executive with access to “Confidential
Information” relating to the business of the Company and its affiliates.

     For purposes of this Agreement, “Confidential Information” means and
includes the Company’s confidential and/or proprietary information and/or trade
secrets that have been developed or used and/or will be developed and that
cannot be obtained readily by third parties from outside sources. Confidential
Information includes, by way of example and without limitation, the following
information regarding customers, employees, contractors, and the industry not
generally known to the public; strategies, methods, books, records, and
documents; technical information concerning products, equipment, services, and
processes; procurement procedures and pricing techniques; the names of and other
information concerning customers, investors, and business affiliates (such as
contact name, service provided, pricing for that customer, type and amount of
services used, credit and financial data, and/or other information relating to
the Company’s relationship with that customer); pricing strategies and price
curves; positions, plans, and strategies for expansion or acquisitions; budgets;
customer lists; research; weather data; financial and sales data; trading
methodologies and terms; evaluations, opinions, and interpretations of
information and data; marketing and merchandising techniques; prospective
customers’ names and marks; grids and maps; electronic databases; models;
specifications; computer programs; internal business records; contracts
benefiting or obligating the Company; bids or proposals submitted to any third
party; technologies and methods; training methods and training processes;
organizational structure; personnel information, including salaries of
personnel; payment amounts or rates paid to consultants or other service
providers; and other such confidential or proprietary information. Information
need not qualify as a trade secret to be protected as Confidential Information
under this Agreement, and the authorized and controlled disclosure of
Confidential Information to authorized parties by Company in the pursuit of its
business will not cause the information to lose its protected status under this
Agreement. Executive acknowledges that this Confidential Information constitutes
a valuable, special, and unique asset used by the Company or its affiliates in
their businesses to obtain a competitive advantage over their competitors.
Executive further acknowledges that protection of such Confidential Information
against unauthorized disclosure and use is of critical importance to the Company
and its affiliates in maintaining their competitive position.

 

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     Executive has and will continue to have access to, or knowledge of,
Confidential Information of third parties, such as actual and potential
customers, suppliers, partners, joint venturers, investors, financing sources,
and the like, of the Company and its affiliates.

     The Company also agrees to provide Executive with one or more of the
following: access to Confidential Information; specialized training regarding
the Company’s methodologies and business strategies, and/or support in the
development of goodwill such as introductions, information and reimbursement of
customer development expenses consistent with Company policy. The foregoing is
not contingent on continued employment, but is contingent upon Executive’s use
of the Confidential Information access, specialized training, and goodwill
support provided by Company for the exclusive benefit of the Company and upon
Executive’s full compliance with the restrictions on Executive’s conduct
provided for in this Agreement.

     In addition to the requirements set forth in Section 5(c)(i), Executive
agrees that Executive will not after Executive’s employment with the Company,
make any unauthorized disclosure of any then Confidential Information or
specialized training of the Company or its affiliates, or make any use thereof,
except in the carrying out of his employment responsibilities hereunder.
Executive also agrees to preserve and protect the confidentiality of third party
Confidential Information to the same extent, and on the same basis, as the
Company’s Confidential Information.

     (c) Unfair Competition Restrictions. The Company agrees to and shall
provide Executive with immediate access to Confidential Information. Ancillary
to the rights provided to Executive following employment termination, the
Company’s provision of Confidential Information, specialized training, and/or
goodwill support to Executive, and Executive’s agreements, regarding the use of
same, and in order to protect the value of the above-referenced stock options,
any restricted stock, training, goodwill support and/or the Confidential
Information described above, the Company and Executive agree to the following
provisions against unfair competition. Executive agrees that for a period of two
(2) years following the termination of employment for any reason (“Restricted
Term”), Executive will not, directly or indirectly, for Executive or for others,
anywhere in the United States (including all parishes in Louisiana, and Puerto
Rico) (the “Restricted Area”) do the following, unless expressly authorized to
do so in writing by the Chief Executive Officer of the Company:

Engage in, or assist any person, entity, or business engaged in, the selling or
providing of products or services that would displace the products or services
that (i) the Company is currently in the business of providing and was in the
business of providing, or was planning to be in the business of providing, at
the time Executive was employed with the Company, and (ii) that Executive had
involvement in or received Confidential Information about in the course of
employment; the foregoing is expressly understood to include, without
limitation, the business of the collection, transfer, recycling and resource
recovery, or disposal of solid waste, hazardous or other waste, including the
operation of waste-to-energy facilities.

     It is further agreed that during the Restricted Term, Executive cannot
engage in any of the enumerated prohibited activities in the Restricted Area by
means of telephone, telecommunications, satellite communications,
correspondence, or other contact from outside the Restricted Area. Executive

 

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further understands that the foregoing restrictions may limit his ability to
engage in certain businesses during the Restricted Term, but acknowledges that
these restrictions are necessary to protect the Confidential Information the
Company has provided to Executive.

     A failure to comply with the foregoing restrictions will create a
presumption that Executive is engaging in unfair competition. Executive agrees
that this Section defining unfair competition with the Company does not prevent
Executive from using and offering the skills that Executive possessed prior to
receiving access to Confidential Information, confidential training, and
knowledge from the Company. This Agreement creates an advance approval process,
and nothing herein is intended, or will be construed as, a general restriction
against the pursuit of lawful employment in violation of any controlling state
or federal laws. Executive shall be permitted to engage in activities that would
otherwise be prohibited by this covenant if such activities are determined in
the sole discretion of the Chief Executive Officer of the Company to be no
material threat to the legitimate business interests of the Company.

     (d) Non-Solicitation of Customers. For a period of two (2) years following
the termination of employment for any reason, Executive will not call on,
service, or solicit competing business from customers of the Company or its
affiliates whom Executive, within the previous twelve (12) months, (i) had or
made contact with, or (ii) had access to information and files about, or induce
or encourage any such customer or other source of ongoing business to stop doing
business with Company.

     (e) Non-Solicitation of Employees. During Executive’s employment, and for a
period of two (2) years following the termination of employment for any reason,
Executive will not, either directly or indirectly, call on, solicit, encourage,
or induce any other employee or officer of the Company or its affiliates whom
Executive had contact with, knowledge of, or association within the course of
employment with the Company to terminate his employment, and will not assist any
other person or entity in such a solicitation.

     (f) Non-Disparagement. Executive covenants and agrees that Executive shall
not engage in any pattern of conduct that involves the making or publishing of
written or oral statements or remarks (including, without limitation, the
repetition or distribution of derogatory rumors, allegations, negative reports
or comments) which are disparaging, deleterious or damaging to the integrity,
reputation or good will of the Company, its management, or of management of
corporations affiliated with the Company.

     11. Enforcement of Covenants.

     (a) Termination of Employment and Forfeiture of Compensation. Executive
agrees that any breach by Executive of any of the covenants set forth in
Section 10 hereof during Executive’s employment by the Company, shall be grounds
for immediate dismissal of Executive for Cause pursuant to Section 5(c)(i),
which shall be in addition to and not exclusive of any and all other rights and
remedies the Company may have against Executive.

     (b) Right to Injunction. Executive acknowledges that a breach of the
covenants set forth in Section 10 hereof will cause irreparable damage to the
Company with respect to which the Company’s remedy at law for damages will be
inadequate. Therefore, in the event of breach or anticipatory breach of the
covenants set forth in this section by Executive, Executive and the Company
agree that the Company shall be entitled to seek the following particular forms
of relief, in addition to remedies otherwise

 

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available to it at law or equity: (A) injunctions, both preliminary and
permanent, enjoining or restraining such breach or anticipatory breach and
Executive hereby consents to the issuance thereof forthwith and without bond by
any court of competent jurisdiction; and (B) recovery of all reasonable sums as
determined by a court of competent jurisdiction expended and costs, including
reasonable attorney’s fees, incurred by the Company to enforce the covenants set
forth in this section.

     (c) Separability of Covenants. The covenants contained in Section 10 hereof
constitute a series of separate but ancillary covenants, one for each applicable
State in the United States and the District of Columbia, and one for each
applicable foreign country. If in any judicial proceeding, a court shall hold
that any of the covenants set forth in Section 10 exceed the time, geographic,
or occupational limitations permitted by applicable laws, Executive and the
Company agree that such provisions shall and are hereby reformed to the maximum
time, geographic, or occupational limitations permitted by such laws. Further,
in the event a court shall hold unenforceable any of the separate covenants
deemed included herein, then such unenforceable covenant or covenants shall be
deemed eliminated from the provisions of this Agreement for the purpose of such
proceeding to the extent necessary to permit the remaining separate covenants to
be enforced in such proceeding. Executive and the Company further agree that the
covenants in Section 10 shall each be construed as a separate agreement
independent of any other provisions of this Agreement, and the existence of any
claim or cause of action by Executive against the Company whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of any of the covenants of Section 10.

12. Indemnification.

     The Company shall indemnify and hold harmless Executive to the fullest
extent permitted by Delaware law for any action or inaction of Executive while
serving as an officer and director of the Company or, at the Company’s request,
as an officer or director of any other entity or as a fiduciary of any benefit
plan. This provision includes the obligation and undertaking of the Executive to
reimburse the Company for any fees advanced by the Company on behalf of the
Executive should it later be determined that Executive was not entitled to have
such fees advanced by the Company under Delaware law. The Company shall cover
the Executive under directors and officers liability insurance both during and,
while potential liability exists, after the Employment Period in the same amount
and to the same extent as the Company covers its other officers and directors.

          Arbitration.

Except with respect to enforcement of the covenants contained in Section 11
herein, the parties agree that any dispute relating to this Agreement, or to the
breach of this Agreement, arising between Executive and the Company shall be
settled by arbitration in accordance with the Federal Arbitration Act and the
commercial arbitration rules of the American Arbitration Association (“AAA”), or
any other mutually agreed upon arbitration service. The arbitration proceeding,
including the rendering of an award, shall take place in Houston, Texas, and
shall be administered by the AAA (or any other mutually agreed upon arbitration
service). The arbitrator shall be jointly selected by the Company and Executive
within thirty (30) days of the notice of dispute, or if the parties cannot
agree, in accordance with the commercial arbitration rules of the AAA (or any
other mutually agreed upon arbitration service). All fees and expenses
associated with the arbitration shall be borne equally by Executive and the
Company during the arbitration, pending final decision by the arbitrator as to
who should bear fees, unless otherwise ordered by the arbitrator. The arbitrator
shall not be authorized to create a cause of action or remedy not recognized by
applicable state or federal law. The award of the arbitrator shall be final and
binding upon the parties without appeal or review, except as permitted by the
arbitration laws of the State of Texas. The award shall be enforceable through a
court of law upon motion of either party.

 

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          Disputes and Payment of Attorney’s Fees.

If at any time during the term of this Agreement or afterwards there should
arise any dispute as to the validity, interpretation or application of any term
or condition of this Agreement, the Company agrees, upon written demand by
Executive (and Executive shall be entitled upon application to any court of
competent jurisdiction, to the entry of a mandatory injunction, without the
necessity of posting any bond with respect thereto, compelling the Company) to
promptly provide sums sufficient to pay on a current basis (either directly or
by reimbursing Executive) Executive’s costs and reasonable attorney’s fees
(including expenses of investigation and disbursements for the fees and expenses
of experts, etc.) incurred by Executive in connection with any such dispute or
any litigation, provided that Executive shall repay any such amounts paid or
advanced if Executive is not the prevailing party with respect to at least one
material claim or issue in such dispute or litigation. The provisions of this
Section 11, without implication as to any other section hereof, shall survive
the expiration or termination of this Agreement and of Executive’s employment
hereunder.

          Requirement of Timely Payments.

If any amounts which are required, or determined to be paid or payable, or
reimbursed or reimbursable, to Executive under this Agreement (or any other
plan, agreement, policy or arrangement with the Company) are not so paid
promptly at the times provided herein or therein, such amounts shall accrue
interest, compounded daily, at an 8% annual percentage rate, from the date such
amounts were required or determined to have been paid or payable, reimbursed or
reimbursable to Executive, until such amounts and any interest accrued thereon
are finally and fully paid, provided, however, that in no event shall the amount
of interest contracted for, charged or received hereunder, exceed the maximum
non-usurious amount of interest allowed by applicable law.

          Withholding of Taxes.

     The Company may withhold from any compensation and benefits payable under
this Agreement all applicable federal, state, local, or other taxes.

          Source of Payments.

     All payments provided under this Agreement, other than payments made
pursuant to a plan which provides otherwise, shall be paid from the general
funds of the Company, and no special or separate fund shall be established, and
no other segregation of assets made, to assure payment. Executive shall have no
right, title or interest whatever in or to any investments which the Company may
make to aid the Company in meeting its obligations hereunder. To the extent that
any person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company.

          Assignment.

     Except as otherwise provided in this Agreement, this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
heirs, representatives, successors and assigns. This Agreement shall not be
assignable by Executive (but any payments due hereunder which would be payable
at a time after Executive’s death shall be paid to Executive’s designated
beneficiary or, if none, his estate) and shall be assignable by the Company only
to any financially solvent corporation or other entity resulting from the
reorganization, merger or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company’s business or substantially all of its business or assets may be sold,
exchanged or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection

 

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with any such reorganization, merger, consolidation, sale, exchange or transfer
in a writing delivered to Executive in a form reasonably acceptable to Executive
(the provisions of this sentence also being applicable to any successive such
transaction).

          Entire Agreement; Amendment.

     This Agreement shall supersede any and all existing oral or written
agreements, representations, or warranties between Executive and the Company or
any of its subsidiaries or affiliated entities relating to the terms of
Executive’s employment by the Company. It may not be amended except by a written
agreement signed by both parties.

          Governing Law.

     This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas applicable to agreements made and to be performed in
that State, without regard to its conflict of laws provisions.

          Notices.

     Any notice, consent, request or other communication made or given in
connection with this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by registered or certified mail, return
receipt requested, or by facsimile or by hand delivery, to those listed below at
their following respective addresses or at such other address as each may
specify by notice to the others:

     
To the Company:
  Waste Management , Inc.

  1001 Fannin, Suite 4000

  Houston, Texas 77002

  Attention: Corporate Secretary
 
   
To Executive:
  At the address for Executive set forth below.

     Miscellaneous.

          Waiver. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver thereof
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.

     Separability. Subject to Section 11 hereof, if any term or provision of
this Agreement is declared illegal or unenforceable by any court of competent
jurisdiction and cannot be modified to be enforceable, such term or provision
shall immediately become null and void, leaving the remainder of this Agreement
in full force and effect.

     Headings. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this Agreement.

     Rules of Construction. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.

 

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     Counterparts. This Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts will together constitute but one Agreement.

 

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     IN WITNESS WHEREOF, this Agreement is EXECUTED as of the date first set
forth above and effective as set forth therein.

              /s/ Duane C. Woods    

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    Duane C. Woods     (“Executive”)
 
                 

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    Home Address
 
                 

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    City, State, ZIP Code
 
            WASTE MANAGEMENT, INC.     (The “Company”)
 
       

  By:   /s/ David P. Steiner

     

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      David P. Steiner

      Chief Executive Officer