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                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

        This Employment Agreement (this "Agreement") is made as of February 1,
2002, by Jens' Oil Field Service, Inc., a Texas corporation (the "Employer"),
and Jens H. Mortensen, Jr., an individual resident in McAllen, Texas (the
"Employee").

                                 R E C I T A L S

        Concurrently with the execution and delivery of this Agreement,
Allis-Chalmers Corporation, a Delaware corporation ("Buyer"), is purchasing from
the Employee eighty-one percent (81%) of the issued shares of stock of Employer,
pursuant to a Stock Purchase Agreement dated February 1, 2002 between the
Employee and Buyer (the "Stock Purchase Agreement"). The Employer desires the
Employee's continued employment, and the Employee wishes to accept such
continued employment, upon the terms and conditions set forth in this Agreement.

                                    AGREEMENT

        The parties, intending to be legally bound, agree as follows:

1. DEFINITIONS

        For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.

        "Agreement"--this Employment Agreement.

        "Basic Compensation"--Salary and Benefits.

        "Benefits"--as defined in Section 3.1(b).

        "Board of Directors"--the board of directors of the Employer.

        "Confidential Information"--any and all:

               (a) trade secrets concerning the business and affairs of the
        Employer (not including trade secrets of Tex-Mex Rental & Supply
        Company, a Texas corporation which is owned by Employee), product
        specifications, data, know-how, formulae, compositions, processes,
        designs, sketches, photographs, graphs, drawings, samples, inventions
        and ideas, past, current, and planned research and development, current
        and planned manufacturing or distribution methods and processes,
        customer lists, current and anticipated customer requirements, price
        lists, market studies, business plans, computer software and programs
        (including object code and source code), computer software and database
        technologies, systems, structures, and architectures (and related
        formulae, compositions, processes, improvements, devices, know-how,
        inventions, discoveries, concepts, ideas, designs, methods and
        information, and any other information, however documented, that is a
        trade secret within the meaning of the law of the State of Texas; and

               (b) information concerning the business and affairs of the
        Employer (which includes historical financial statements, financial
        projections and budgets, historical and projected sales, capital
        spending budgets and plans, the names and backgrounds of key personnel,
        personnel training and techniques and materials), however documented and
        not including such information on behalf of Tex-Mex owned by Employee;
        and

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               (c) notes, analysis, compilations, studies, summaries, and other
        material prepared by or for the Employer containing or based, in whole
        or in part, on any information included in the foregoing.

        "Disability"--as defined in Section 6.2.

        "Effective Date"--the date stated in the first paragraph of the
Agreement.

        "Employee Invention"--any idea, invention, technique, modification,
        process, or improvement (whether patentable or not), any industrial
        design (whether registerable or not), any mask work, however fixed or
        encoded, that is suitable to be fixed, embedded or programmed in a
        semiconductor product (whether recordable or not), and any work of
        authorship (whether or not copyright protection may be obtained for it)
        created, conceived, or developed by the Employee, either solely or in
        conjunction with others, during the Employment Period, or a period that
        includes a portion of the Employment Period, that relates in any way to,
        or is useful in any manner in, the business then being conducted or
        proposed to be conducted by the Employer, and any such item created by
        the Employee, either solely or in conjunction with others, following
        termination of the Employee's employment with the Employer, that is
        based upon or uses Confidential Information. The term "Employee
        Invention" includes the inventions, techniques, and specially
        commissioned works, but does not include the "New Deal Elevator and
        Slips" and modifications thereto.

        "Employment Period"--the term of the Employee's employment under this
        Agreement.

        "Fiscal Year"--the Employer's fiscal year, as it exists on the Effective
        Date or as changed from time to time.

        "For Cause"--as defined in Section 6.3.

        "Non-competition Agreement"--as defined in Section 6.3.

        "Person"--any individual, corporation (including any non-profit
        corporation), general or limited partnership, limited liability company,
        joint venture, estate, trust, association, organization, or governmental
        body.

        "Post-Employment Period"--as defined in Section 8.2.

        "Proprietary Items"--as defined in Section 7.2(a)(iv).

        "Salary"--as defined in Section 3.1(a).

2. EMPLOYMENT TERMS AND DUTIES

        2.1 EMPLOYMENT

        The Employer hereby employs the Employee, and the Employee hereby
accepts employment by the Employer, upon the terms and conditions set forth in
this Agreement.

        2.2 TERM

        Subject to the provisions of Section 6, the term of the Employee's
employment under this Agreement will be three years, beginning on the Effective
Date and ending on the third anniversary of the Effective Date.

        2.3 DUTIES

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        The Employee will have such duties as are assigned or delegated to the
Employee by the Board of Directors or Chief Executive Officer, and will
initially serve as President of the Employer. The Employee will devote his
entire business time, attention, skill, and energy exclusively to the business
of the Employer, will use his best efforts to promote the success of the
Employer's business, and will cooperate fully with the Board of Directors in the
advancement of the best interests of the Employer. Nothing in this Section 2.3,
however, will prevent the Employee from engaging in additional activities in
connection with personal investments and community affairs that are not
inconsistent with the Employee's duties under this Agreement, including nominal
time or administrative hours spent on behalf of Tex-Mex Rental & Supply Company
("Tex-Mex") which is owned by Employee and his family. If the Employee is
elected as a director of the Employer or as a director or officer of any of its
affiliates, such company will maintain appropriate liability insurance, and will
provide Employee a copy of such Policy. In addition, Employer will not require
Employee to relocate outside of Hidalgo County, Texas.

3. COMPENSATION

        3.1 BASIC COMPENSATION

(a) Salary. The Employee will be paid an annual salary of $150,000.00, subject
to adjustment as provided below (the "Salary"), which will be payable in equal
periodic installments according to the Employer's customary payroll practices,
but no less frequently than monthly and will be made on a timely basis. Failure
to make timely payment of Salary unless cured within fifteen (15) days of
written notice by Employee, shall be a breach of this Agreement. The Salary will
be reviewed by the Board of Directors not less frequently than annually, and may
be adjusted upward in the sole discretion of the Board of Directors, but in no
event will the Salary be less than $150,000.00 per year.

(b) Benefits. The Employee will, during the Employment Period, be permitted to
participate in such pension, profit sharing, bonus, life insurance,
hospitalization, major medical, and other employee benefit plans of the Employer
that may be in effect from time to time, to the extent the Employee is eligible
under the terms of those plans (collectively, the "Benefits"). Employer will
maintain at least the same level and type of medical and liability insurance as
Employer has in the past, and will continue such coverage for Employee for at
least ninety (90) days following termination of this Agreement.

4. FACILITIES AND EXPENSES

        4.1 GENERAL

        The Employer will furnish the Employee office space, equipment,
supplies, and such other facilities and personnel as the Employer deems
necessary or appropriate for the performance of the Employee's duties under this
Agreement. The Employer will pay the Employee's dues in such professional
societies and organizations as the Chairman of the Board or Chief Executive
Officer deems appropriate, and will pay on behalf of the Employee (or reimburse
the Employee for) reasonable expenses incurred by the Employee at the request
of, or on behalf of, the Employer in the performance of the Employee's duties
pursuant to this Agreement, and in accordance with the Employer's employment
policies, including reasonable expenses incurred by the Employee in attending
conventions, seminars, and other business meetings, in appropriate business
entertainment activities, and for promotional expenses. The Employee must file
expense reports with respect to such expenses in accordance with the Employer's
policies.

        4.2 AUTOMOBILE

        The Employer will furnish the Employee with an appropriate automobile
similar to or the same as currently used which may be used by Employee for
personal use without reimbursement to Employer, except for fuel costs incurred
in such use. The Employer will maintain liability insurance on any automobile
used in connection with the

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Employer's business. The Employee must file expense reports with respect to such
automobile in accordance with the Employer's policies.

5. VACATIONS AND HOLIDAYS

        The Employee will be entitled to four weeks' paid vacation each Fiscal
Year in accordance with the vacation policies of the Employer in effect for its
Employee officers from time to time. Vacation must be taken by the Employee at
such time or times as approved by the Chairman of the Board or Chief Executive
Officer, approval which shall not be unreasonably withheld. The Employee will
also be entitled to the paid holidays set forth in the Employer's policies of at
least New Year's Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day
and Christmas Day. Vacation days and holidays during any Fiscal Year that are
not used by the Employee during such Fiscal Year may not be used in any
subsequent Fiscal Year but shall be paid to Employee.

6. TERMINATION

        6.1 EVENTS OF TERMINATION

        The Employment Period, the Employee's Basic Compensation, and any and
all other rights of the Employee under this Agreement or otherwise as an
employee of the Employer will terminate (except as otherwise provided in this
Section 6):

(a) upon the death of the Employee;

(b) upon the disability of the Employee (as defined in Section 6.2) immediately
upon notice from either party to the other; or

(c) for cause (as defined in Section 6.3), immediately upon notice from the
Employer to the Employee, or at such later time as such notice may specify.

        Employee may terminate this Agreement upon forty-five (45) days written
notice with opportunity to cure for failure by Employer to pay timely salary and
provide the Benefits described hereunder.

        6.2 DEFINITION OF DISABILITY

        For purposes of Section 6.1, the Employee will be deemed to have a
"disability" if, for physical or mental reasons, the Employee is unable to
perform the essential functions of the Employee's duties under this Agreement
for 120 consecutive days, or 180 days during any twelvemonth period, as
determined in accordance with this Section 6.2. The disability of the Employee
will be determined by a medical doctor selected by written agreement of the
Employer and the Employee upon the request of either party by notice to the
other. If the Employer and the Employee cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Employee has a disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Employee must submit
to a reasonable number of examinations by the medical doctor making the
determination of disability under this Section 6.2, and the Employee hereby
authorizes the disclosure and release to the Employer of such determination and
all supporting medical records. If the Employee is not legally competent, the
Employee's legal guardian or duly authorized attorney-in-fact will act in the
Employee's stead, under this Section 6.2, for the purposes of submitting the
Employee to the examinations, and providing the authorization of disclosure,
required under this Section 6.2.

        6.3 DEFINITION OF "FOR CAUSE"

        For purposes of Section 6.1, the phrase "for cause" means: (a) the
Employee's breach of this Agreement or the Non-Competition Agreement entered
into on the date hereof between the Buyer and the Employee (the "Non-Competition
Agreement"); (b) the Employee's failure to adhere to any written Employer policy
if the Employee has

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been given a reasonable opportunity to comply with such policy or cure his
failure to comply (which reasonable opportunity must be granted during the
ten-day period preceding termination of this Agreement); (c) the appropriation
(or attempted appropriation) of a material business opportunity of the Employer,
including attempting to secure or securing any personal profit in connection
with any transaction entered into on behalf of the Employer; (d) the
misappropriation (or attempted misappropriation) of any of the Employer's funds
or property; or (e) the conviction of, the indictment for (or its procedural
equivalent), or the entering of a guilty plea or plea of no contest with respect
to, a felony, the equivalent thereof, or any other crime with respect to which
imprisonment is a possible punishment.

        6.4 TERMINATION PAY

        Effective upon the termination of this Agreement, the Employer will be
obligated to pay the Employee (or, in the event of his death, his designated
beneficiary as defined below) only such compensation as is provided in this
Section 6.4, and in lieu of all other amounts and in settlement and complete
release of all claims the Employee may have against the Employer. For purposes
of this Section 6.4, the Employee's designated beneficiary will be such
individual beneficiary or trust, located at such address, as the Employee may
designate by notice to the Employer from time to time or, if the Employee fails
to give notice to the Employer of such a beneficiary, the Employee's estate.
Notwithstanding the preceding sentence, the Employer will have no duty, in any
circumstances, to attempt to open an estate on behalf of the Employee, to
determine whether any beneficiary designated by the Employee is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any person or entity purporting to act as the
Employee's personal representative (or the trustee of a trust established by the
Employee) is duly authorized to act in that capacity, or to locate or attempt to
locate any beneficiary, personal representative, or trustee.

(a) Termination by the Employer for Cause. If the Employer terminates this
Agreement for cause, the Employee will be entitled to receive his Salary, plus
accrued vacation pay only through the date such termination is effective.

(b) Termination upon Disability. If this Agreement is terminated by either party
as a result of the Employee's disability, as determined under Section 6.2, the
Employer will pay the Employee his Salary, plus accrued vacation pay, through
the remainder of the calendar month during which such termination is effective
and for the lesser of (i) three consecutive months thereafter, or (ii) the
period until disability insurance benefits commence under the disability
insurance coverage furnished by the Employer to the Employee.

(c) Termination upon Death. If this Agreement is terminated because of the
Employee's death, the Employee will be entitled to receive his Salary, plus
accrued vacation pay, through the end of the calendar month in which his death
occurs, for the Fiscal Year during which his death occurs, prorated through the
end of the calendar month during which his death occurs.

(d) Benefits. The Employee's accrual of, or participation in plans providing
for, the Benefits will cease at the effective date of the termination of this
Agreement, and the Employee will be entitled to accrued Benefits pursuant to
such plans only as provided in such plans.

(e) Termination on Default. If this Agreement is terminated by Employee due to a
breach by the Employer of this Agreement, or as a result of a default by the
Buyer under the Note, the Non-Competition Agreement, the Subordination Agreement
or the Security Agreement, then all amounts due under this Agreement shall be
immediately due and payable through the third anniversary of the Effective Date
including accrued vacation pay, and the Company shall continue to provide
Employee all medical and health insurance previously provided through the third
anniversary of this Agreement.

7. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

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        7.1 ACKNOWLEDGMENTS BY THE EMPLOYEE

        The Employee acknowledges that (a) during the Employment Period and as a
part of his employment, the Employee will be afforded access to Confidential
Information; (b) public disclosure of such Confidential Information could have
an adverse effect on the Employer and its business; (c) because the Employee
possesses substantial technical expertise and skill with respect to the
Employer's business, the Employer desires to obtain exclusive ownership of each
Employee Invention, and the Employer will be at a substantial competitive
disadvantage if it fails to acquire exclusive ownership of each Employee
Invention; (d) the Buyer has required that the Employee make the covenants in
this Section 7 as a condition to its purchase of the Employer's stock; and (e)
the provisions of this Section 7 are reasonable and necessary to prevent the
improper use or disclosure of Confidential Information and to provide the
Employer with exclusive ownership of all Employee Inventions.

               7.2    AGREEMENTS OF THE EMPLOYEE

        In consideration of the compensation and benefits to be paid or provided
to the Employee by the Employer under this Agreement, the Employee covenants as
follows:

(a) Confidentiality.

               (i) During and following the Employment Period, the Employee will
        hold in confidence the Confidential Information and will not disclose it
        to any person except with the specific prior written consent of the
        Employer or except as otherwise expressly permitted by the terms of this
        Agreement.

               (ii) Any trade secrets of the Employer will be entitled to all of
        the protections and benefits under the law of the State of Texas, and
        any other applicable law. If any information that the Employer deems to
        be a trade secret is found by a court of competent jurisdiction not to
        be a trade secret for purposes of this Agreement, such information will,
        nevertheless, be considered Confidential Information for purposes of
        this Agreement. The Employee hereby waives any requirement that the
        Employer submit proof of the economic value of any trade secret or post
        a bond or other security.

               (iii) None of the foregoing obligations and restrictions applies
        to any part of the Confidential Information that the Employee
        demonstrates was or became generally available to the public other than
        as a result of a disclosure by the Employee.

               (iv) The Employee will not remove from the Employer's premises
        (except to the extent such removal is for purposes of the performance of
        the Employee's duties at home or while traveling, or except as otherwise
        specifically authorized by the Employer) any document, record, notebook,
        plan, model, component, device, or computer software or code, whether
        embodied in a disk or in any other form (collectively, the "Proprietary
        Items"). The Employee recognizes that, as between the Employer and the
        Employee, all of the Proprietary Items, whether or not developed by the
        Employee, are the exclusive property of the Employer. Upon termination
        of this Agreement by either party, or upon the request of the Employer
        during the Employment Period, the Employee will return to the Employer
        all of the Proprietary Items in the Employee's possession or subject to
        the Employee's control, and the Employee shall not retain any copies,
        abstracts, sketches, or other physical embodiment of any of the
        Proprietary Items.

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(b) Employee Inventions. Each Employee Invention will belong exclusively to the
Employer. The Employee acknowledges that all of the Employee's writing, works of
authorship and other Employee Inventions are works made for hire and the
property of the Employer, including any copyrights, patents, or other
intellectual property rights pertaining thereto. If it is determined that any
such works are not works made for hire, the Employee hereby assigns to the
Employer all of the Employee's right, title, and interest, including all rights
of copyright, patent, and other intellectual property rights, to or in such
Employee Inventions. Employee and the Company acknowledge that "The New Deal
Elevator and Slips" and modifications thereto are inventions that are not owned
by or works for hire of the Company. The Employee covenants that he will
promptly:

               (i) disclose to the Employer in writing any Employee Invention;

               (ii) assign to the Employer or to a party designated by the
        Employer, at the Employer's request and without additional compensation,
        all of the Employee's right to the Employee Invention for the United
        States and all foreign jurisdictions;

               (iii) execute and deliver to the Employer such applications,
        assignments, and other documents as the Employer may request in order to
        apply for and obtain patents or other registrations with respect to any
        Employee Invention in the United States and any foreign jurisdictions;

               (iv) sign all other papers necessary to carry out the above
        obligations; and

               (v) give testimony and render any other assistance in support of
        the Employer's rights to any Employee Invention.

        7.3 DISPUTES OR CONTROVERSIES

        The Employee recognizes that should a dispute or controversy arising
from or relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained in
secrecy and will be available for inspection by the Employer, the Employee, and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.

8. GENERAL PROVISIONS

        8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

        The Employee acknowledges that the injury that would be suffered by the
Employer as a result of a breach of the provisions of this Agreement (including
any provision of Section 7) would be irreparable and that an award of monetary
damages to the Employer for such a breach would be an inadequate remedy.
Consequently, the Employer will have the right, in addition to any other rights
it may have, to obtain injunctive relief to restrain any breach or threatened
breach or otherwise to specifically enforce any provision of this Agreement, and
the Employer will not be obligated to post bond or other security in seeking
such relief. In the event of any dispute involving this Agreement, the
prevailing party shall be entitled to attorney's fees, expenses, court costs and
expert fees from the non-prevailing party.

        8.2 COVENANTS OF SECTION 7 IS ESSENTIAL
            AND INDEPENDENT COVENANTS

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        The covenants by the Employee in Section 7 are essential elements of
this Agreement, and without the Employee's agreement to comply with such
covenants the Buyer would not have purchased the Employee's stock under the
Stock Purchase Agreement and the Employer would not have entered into this
Agreement or employed or continued the employment of the Employee. The Employer
and the Employee have independently consulted their respective counsel and have
been advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Employer.

        The Employee's covenants in Section 7 are independent covenants and the
existence of any claim by the Employee against the Employer under this Agreement
or otherwise, or against the Buyer, will not excuse the Employee's breach of any
covenant in Section 7.

        If the Employee's employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Employee in Section 7.

        8.3 REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE

        The Employee represents and warrants to the Employer that the execution
and delivery by the Employee of this Agreement do not, and the performance by
the Employee of the Employee's obligations hereunder will not, with or without
the giving of notice or the passage of time, or both: (a) violate any judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Employee; or (b) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreement to which the Employee is a party or by which the Employee is or may be
bound.

        8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE

        The obligations of the Employer hereunder, including its obligation to
pay the compensation provided for herein, are contingent upon the Employee's
performance of the Employee's obligations hereunder.

        8.5 BINDING ARBITRATION

(a) On the request of any party hereto, whether made before or after the
institution of any legal proceeding, any action, dispute, claim or controversy
of any kind now existing or hereafter arising between any of the parties hereto
in any way arising out of, pertaining to or in connection with this Agreement (a
"Dispute) shall be resolved by binding arbitration in accordance with the terms
hereof. In the event of any Dispute, any party may serve written notice of such
Dispute on any other party and each party to such Dispute shall undertake in
good faith to resolve such Dispute. If the parties cannot agree to resolve such
Dispute within fifteen (15) days after such written notice, any party to such
Dispute may, by further written notice (the "Arbitration Notice") to the other
party, commence an arbitration proceeding by bringing the Dispute to one
arbitrator or to an arbitration panel selected as provided below.

(b) Arbitrators. Dispute shall be decided by a single arbitrator, unless the
parties cannot agree within ten (10) days on a single arbitrator, in which case
they shall choose an arbitration panel comprised of three arbitrators, one
arbitrator to be selected by the party who sent the Arbitration Notice, a second
arbitrator to be selected by the other adverse party, and the third arbitrator
(the "Independent Arbitrator") who will be the Chairman of the arbitration
panel, to be appointed by the first two arbitrators. In the event the first two
arbitrators fail to agree on the appointment of the Independent Arbitrator
within fifteen (15) days, the Independent Arbitrator shall be appointed on
request of any party hereto by any state district court judge in Hidalgo or
Harris County, Texas. Whether there is one arbitrator or a panel, each
arbitrator shall be a third party and a business person knowledgeable in the
subject matter of the Dispute. In the

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event that any arbitrator shall resign, be unable or otherwise fail to perform
his or her duties, each party shall immediately notify the other parties of such
resignation, inability or failure, and a replacement shall immediately be
selected by the party who selected such arbitrator in the instance, or, if the
arbitrator to be replaced is the Independent Arbitrator, then the parties shall
attempt in good faith to appoint a mutually agreeable replacement Independent
Arbitrator. If the parties fail to agree on such replacement within fifteen (15)
days, either party may request any state district court judge in Hidalgo or
Harris County, Texas to appoint such replacement Independent Arbitrator.

(c) Conduct of Arbitration. The arbitrator or the arbitration panel shall
conduct the arbitration in accordance with the Rules of Arbitration of the
American Arbitration Association then in effect, except to the extent such rules
are inconsistent with the provisions of this Section 13. The parties shall
prepare in writing a statement of their positions, together with counterclaims,
with supporting facts, data, and affidavits, if any, and shall submit such
statement to the arbitrator, or arbitration panel within fifteen (15) days after
selection, but, in any event, within forty-five (45) days after service of the
Arbitration Notice. The arbitrator or the arbitration panel shall give all
parties the opportunity to make an oral presentation to the arbitrator or the
arbitration panel in the presence of the other party, if either party so
requests. The parties shall have, for a period of one-hundred twenty (120) days
after service of the Arbitration Notice (the "Discovery Period"), all rights of
discovery provided by the Texas Rules of Civil Procedures then obtaining,
except, unless otherwise agreed, that all responses to discovery requests shall
be served within ten (10) days of such discovery request and no discovery
request may be served after the date ten (10) days before the termination of the
Discovery Period. The arbitrator or the arbitration panel shall assume exclusive
jurisdiction over the Dispute, may order interim equitable relief (which shall
be specifically enforceable as if it were a final Award, as hereinafter
defined), and shall be required to make a final binding determination (the
"Award"). The Award shall not be subject to appeal to or review by any court or
administrative body except as set forth in Section 10(a) of the Federal
Arbitration Act, codified as 9 U.S.C.A. Section 10(a) (West Supp. 1997). The
Award shall determine (i) whether each party's obligations under this Agreement
were met, and (ii) what damages or remedies (which may include final equitable
reliefs) are due under the terms of this Agreement. In addition, the arbitrator
or the arbitration panel shall award recovery of all costs and fees of
arbitration to the prevailing party. The agreement to arbitrate contained in
this Section 13 shall be specifically enforceable under the prevailing
arbitration law, and shall survive termination of this Agreement. Judgment upon
the Award rendered by the arbitrator or the arbitration panel may be entered in
accordance with applicable law in any court having jurisdiction therefor.
Arbitration shall, unless all the parties otherwise agree in writing, take place
in Houston, Texas.

        8.6 WAIVER

        The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.

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        8.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED

        This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Employee under this Agreement,
being personal, may not be delegated.

               8.8    NOTICES

        All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nation-ally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):

        If to Employer:      Jens' Oil Field Services, Inc.
                             P. O. Box 1176
                             Edinburg, Texas 78540-1176
                             Attn: President
                             Facsimile No: (956) 381-1151

                             with a copy to: Wilson, Cribbs, Goren & Flaum, P.C.
                             440 Louisiana, Suite 2200
                             Houston, TX 77002
                             Attn: Theodore F.  Pound III
                             Facsimile No: (713) 229-8824

        If to the Employee:  Jens H. Mortensen, Jr.
                             12301 Rooth Road
                             McAllen, Texas 78504

                                       255
<PAGE>

                             With a copy to:  J. W. Dyer
                             Dyer & Associates
                             3700 North Tenth Street, Suite 105
                             McAllen, Texas 78501
                             Facsimile No: (956) 686-6601

        8.10 ENTIRE AGREEMENT; AMENDMENTS

        This Agreement, the Stock Purchase Agreement, and the documents executed
in connection with the Stock Purchase Agreement, contain the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral or written, between the parties hereto
with respect to the subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the parties hereto.

        8.11 GOVERNING LAW

        This Agreement will be governed by the laws of the State of Texas
without regard to conflicts of laws principles.

        8.12 JURISDICTION

        Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against either of the
parties in the courts of Hidalgo County or Harris County, Texas, or, if it has
or can acquire jurisdiction, in the United States District Court for the
Southern District of Texas, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on either
party anywhere in the world.

        8.13 SECTION HEADINGS, CONSTRUCTION

        The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.

        8.14 SEVERABILITY

        If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

        8.15 COUNTERPARTS

        This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.

                                      256
<PAGE>

        IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.

EMPLOYER:                                   JENS' OIL FIELD SERVICE, INC.

                                            By:_________________________________
                                               Munawar H. Hidayatallah, Chairman
                                               And Chief Executive Officer

EMPLOYEE:                                   ____________________________________

                                      257<PAGE>
                                                                     EXHIBIT 4.1

                            WASTE CONNECTIONS, INC.
                             2002 STOCK OPTION PLAN

1.     PURPOSE.

        The purpose of the Plan is to provide a means for the Company and any
Subsidiary, through the grant of Nonqualified Stock Options to selected
Employees and Consultants, to attract and retain persons of ability as Employees
and Consultants, and to motivate such persons to exert their best efforts on
behalf of the Company and any Subsidiary.

2.      DEFINITIONS.

        (a) "BOARD" means the Company's Board of Directors.

        (b) "CHANGE IN CONTROL" means:

            (i) any reorganization, liquidation or consolidation of the Company,
or any merger or other business combination of the Company with any other
corporation, other than any such merger or other combination that 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 entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such transaction;

            (ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company; or

            (iii) any "person" (as defined in Section 13(d) and 14(d) of the
Exchange Act) shall become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of fifty percent (50%) or more
of the Company's outstanding voting securities (except that for purposes of this
definition, "person" shall not include any person (or any person that controls,
is controlled by or is under common control with such person) who as of the date
of an Option Agreement owns ten percent (10%) or more of the total voting power
represented by the outstanding voting securities of the Company, or a trustee or
other fiduciary holding securities under any employee benefit plan of the
Company, or a corporation that is owned directly or indirectly by the
stockholders of the Company in substantially the same percentage as their
ownership of the Company).

        A transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by the
persons who held the Company's securities immediately before such transaction.

        (c) "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.

        (d) "COMMITTEE" means a committee appointed by the Board in accordance
with section 4(b) of the Plan.

<PAGE>

        (e) "COMPANY" means Waste Connections, Inc., a Delaware corporation.

        (f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Subsidiary to render consulting services and who is compensated for
such services; provided that the term "Consultant" shall not include Directors.

        (g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
employment or relationship as a Consultant is not interrupted or terminated. The
Board, in its sole discretion, may determine whether Continuous Status as an
Employee or Consultant shall be considered interrupted in the case of (i) any
leave of absence approved by the Board, including sick leave, military leave or
any other personal leave, or (ii) transfers between locations of the Company or
between the Company and a Subsidiary or their successors.

        (h) "DIRECTOR" means a member of the Company's Board.

        (i) "DISABILITY" means permanent and total disability within the meaning
of section 422(c)(6) of the Code.

        (j) "EMPLOYEE" means any person, other than officers and Directors,
employed by the Company or any Subsidiary of the Company. Service as a
Consultant shall not be sufficient to constitute "employment" by the Company.

        (k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

        (l) "FAIR MARKET VALUE" means, as of any date, the value of Stock
determined as follows:

            (i) If the Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for the Stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system on the market trading day of
the date of determination, or, if the date of determination is not a market
trading day, the last market trading day prior to the date of determination, in
each case as reported in The Wall Street Journal or such other sources as the
Board deems reliable;

            (ii) If the Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Stock on the market
trading day of the date of determination, or, if the date of determination is
not a market trading day, the last market trading day prior to the date of
determination; or

            (iii) In absence of an established market for the Stock, the Fair
Market Value thereof shall be determined in good faith by the Board.

        (m) "NON-EMPLOYEE DIRECTOR" means a Director who satisfies the
requirements established from time to time by the Securities and Exchange
Commission for non-employee directors under Rule 16b-3.

        (n) "NONQUALIFIED STOCK OPTIONS" means Options that are not intended to
qualify as incentive stock options within the meaning of section 422 of the
Code.

                                       2
<PAGE>

        (o) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.

        (p) "OPTIONEE" means an Employee or Consultant who holds an
outstanding Option.

        (q) "OPTIONS" means Nonqualified Stock Options.

        (r) "OUTSIDE DIRECTOR" means a member of the Board who satisfies the
requirements established from time to time for outside directors under section
162(m) of the Code.

        (s) "PLAN" means this Waste Connections, Inc. 2002 Stock Option Plan.

        (t) "RULE 16b-3" means Rule 16b-3 under the Exchange Act or any
successor to Rule 16b-3, as amended from time to time.

        (u) "SECURITIES ACT" means the Securities Act of 1933, as amended.

        (v) "STOCK" means the Common Stock of the Company.

        (w) "SUBSIDIARY" means any corporation that at the time an Option is
granted under the Plan qualifies as a subsidiary of the Company under the
definition of "subsidiary corporation" contained in section 424(f) of the Code,
or any similar provision hereafter enacted.

3.      SHARES SUBJECT TO THE PLAN.

        Subject to adjustment as provided in section 6 for changes in Stock, the
Stock that may be sold pursuant to Options shall not exceed in the aggregate
2,500,000 shares. Such number of shares shall be reserved for Options (subject
to adjustment as provided in section 6). If any Option for any reason
terminates, expires or is cancelled without having been exercised in full, the
Stock not purchased under such Option shall revert to and again become available
for issuance under the Plan.

4.      ADMINISTRATION.

        (a) The Plan shall be administered by the Board or, at the election of
the Board, by a Committee, as provided in subsection (b), or, as to certain
functions, by an officer of the Company, as provided in subsection (c). Subject
to the Plan, the Board shall:

            (i) determine and designate from time to time those Employees and
Consultants to whom Options are to be granted;

            (ii) authorize the granting of Options;

            (iii) determine the number of shares subject to each Option and the
Exercise Price of each Option;

            (iv) determine the time or times when and the manner in which each
Option shall be exercisable and the duration of the exercise period;

                                       3
<PAGE>

            (v)   construe and interpret the Plan and the Options, and
establish, amend and revoke rules and regulations for the Plan's administration,
and correct any defect, omission or inconsistency in the Plan or any Option
Agreement in a manner and to the extent it deems necessary or expedient to make
the Plan fully effective;

            (vi)   determine the Fair Market Value;

            (vii)  approve forms of agreements for use under the Plan;

            (viii) reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Stock covered by such Option
has declined since the date the option was granted; and

            (ix) make such other determinations as it may be authorized to make
in the Plan and as it may deem necessary and desirable for the purposes of the
Plan.

        Notwithstanding the foregoing, however, no Option shall be granted after
the expiration of ten years from the effective date of the Plan specified in
section 9 below.

        (b) The Board may delegate administration of the Plan to a Committee of
the Board. The Committee shall consist of not less than three members appointed
by the Board. Subject to the foregoing, the Board may from time to time increase
the size of the Committee and appoint additional members, remove members (with
or without cause) and appoint new members in substitution therefor, or fill
vacancies, however caused. If the Board delegates administration of the Plan to
a Committee, the Committee shall have the same powers theretofore possessed by
the Board with respect to the administration of the Plan (and references in this
Plan to the Board shall apply to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan.

        (c) The Board may delegate administration of sections 4(a)(i) through
4(a)(iii) above to the Chief Executive Officer of the Company; provided,
however, that such officer may not issue Options to purchase more than 2,500,000
shares of Stock and may not designate a Consultant as an Optionee.

5.      TERMS AND CONDITIONS OF OPTIONS.

        Each Option granted shall be evidenced by an Option Agreement in
substantially the form attached hereto as Annex A or such other form as may be
approved by the Board. Each Option Agreement shall include the following terms
and conditions and such other terms and conditions as the Board may deem
appropriate:

        (a) OPTION TERM. Each Option Agreement shall specify the term for which
the Option thereunder is granted and shall provide that such Option shall expire
at the end of such term. The Board may extend such term; provided that the term
of any Option, including any such extensions, shall not exceed ten years from
the date of grant.

        (b) EXERCISE PRICE. Each Option Agreement shall specify the exercise
price per share, as determined by the Board at the time the Option is granted.

                                       4
<PAGE>

        (c) VESTING. Each Option Agreement shall specify when it is exercisable.
The total number of shares of Stock subject to an Option may, but need not, be
allotted in periodic installments (which may, but need not be, equal). An Option
Agreement may provide that from time to time during each of such installment
periods, the Option may become exercisable ("vest") with respect to some or all
of the shares allotted to that period, and may be exercised with respect to some
or all of the shares allotted to such period or any prior period as to which the
Option shall have become vested but shall not have been fully exercised. An
Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria)
as the Board deems appropriate.

        (d) PAYMENT OF PURCHASE PRICE ON EXERCISE. Each Option Agreement shall
provide that the purchase price of the shares as to which such Option may be
exercised shall be paid to the Company at the time of exercise either (i) in
cash, or (ii) in the absolute discretion of the Board (which discretion may be
exercised in a particular case without regard to any other case or cases), at
the time of the grant or thereafter, (A) by the withholding of shares of Stock
issuable on exercise of the Option or the delivery to the Company of other Stock
owned by the Optionee, provided in either case that the Optionee has owned
shares of Stock equal in number to the shares so withheld for a period
sufficient to avoid a charge to the Company's reported earnings, (B) according
to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of Stock) with the person to whom the
Option is granted or to whom the Option is transferred pursuant to section 5(e),
(C) by delivery of a properly executed notice together with irrevocable
instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the Stock being
acquired upon the exercise of the Option, including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System (a
"cashless exercise"), or (D) in any other form or combination of forms of legal
consideration that may be acceptable to the Board.

        In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement, or if less, the maximum rate permitted by law.

        (e) NONTRANSFERABILITY. An Option shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by the Optionee
during his or her lifetime, whether by operation of law or otherwise, other than
by will or the laws of descent and distribution applicable to the Optionee, and
shall not be made subject to execution, attachment or similar process; provided
that the Board may in its discretion at the time of approval of the grant of an
Option or thereafter permit an Optionee to transfer an Option to a trust or
other entity established by the Optionee for estate planning purposes, and may
permit further transferability or impose conditions or limitations on any
permitted transferability. Otherwise, during the lifetime of an Optionee, an
Option shall be exercisable only by such Optionee.

        (f) CONDITIONS ON EXERCISE OF OPTIONS AND ISSUANCE OF SHARES.

            (i) SECURITIES LAW COMPLIANCE. The Plan, the grant and exercise of
Options thereunder and the obligation of the Company to sell and deliver shares
on exercise of

                                       5
<PAGE>

Options shall be subject to all applicable Federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required, in the opinion of the Board. Options may not be exercised if the
issuance of shares of Stock upon exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Option may be exercised unless (a) a
registration statement under the Securities Act shall at the time of exercise of
the Option be in effect with respect to the shares issuable upon exercise of the
Option or (b) in the opinion of legal counsel to the Company, the shares
issuable upon exercise of the Option may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the exercise of any Option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.

            (ii) INVESTMENT REPRESENTATION. The Company may require any
Optionee, or any person to whom an Option is transferred, as a condition of
exercising such Option, to (A) give written assurances satisfactory to the
Company as to the Optionee's knowledge and experience in financial and business
matters or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters,
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option, and (B)
to give written assurances satisfactory to the Company stating that such person
is acquiring the Stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the Stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall not apply if (1) the issuance of the Stock on the exercise
of the Option has been registered under a then currently effective registration
statement under the Securities Act, or (2) counsel for the Company determines as
to any particular requirement that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, with
the advice of its counsel, place such legends on stock certificates issued under
the Plan as the Company deems necessary or appropriate to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the Stock.

        (g) EXERCISE AFTER DEATH OF OPTIONEE. If an Optionee dies (i) while an
Employee or Consultant, or (ii) within three months after termination of the
Optionee's Continuous Status as an Employee or Consultant because of his or her
Disability or retirement, his or her Options may be exercised (to the extent
that the Optionee was entitled to do so on the date of death or termination) by
the Optionee's estate or by a person who shall have acquired the right to
exercise the Options by bequest or inheritance, but only within the period
ending on the earlier of (A) one year after the Optionee's death (or such
shorter or longer period specified in the Option Agreement, which period shall
not be less than six months), or (B) the expiration date specified in the Option
Agreement. If, after the Optionee's death, the Optionee's estate or the person
who acquired the right to exercise the Optionee's Options does not exercise the
Options within the time specified herein, the Options shall terminate and the
shares covered by such Options shall revert to and again become available for
issuance under the Plan.

                                       6
<PAGE>

        (h) EXERCISE AFTER TERMINATION OF OPTIONEE'S CONTINUOUS STATUS AS AN
EMPLOYEE OR CONSULTANT AS A RESULT OF DISABILITY OR RETIREMENT. If an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability or retirement, and the Optionee does not die within the
following three months, the Optionee may exercise his or her Options (to the
extent that the Optionee was entitled to exercise them on the date of
termination), but only within the period ending on the earlier of (i) six months
after Disability or retirement (or such longer period specified in the Option
Agreement), and (ii) the expiration of the term set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Options within the time specified herein, the Options shall terminate, and the
shares covered by such Options shall revert to and again become available for
issuance under the Plan.

        (i) NO EXERCISE AFTER TERMINATION OF OPTIONEE'S CONTINUOUS STATUS AS AN
EMPLOYEE OR CONSULTANT OTHER THAN AS A RESULT OF DEATH, DISABILITY OR
RETIREMENT. If an Optionee's Continuous Status as an Employee or Consultant
terminates other than as a result of the Optionee's death, Disability or
retirement, all right of the Optionee to exercise his or her Options shall
terminate on the date of termination of such Continuous Status as an Employee or
Consultant. The Options shall terminate on such termination date, and the shares
covered by such Options shall revert to and again become available for issuance
under the Plan.

        (j) EXCEPTIONS. Notwithstanding subsections (g), (h) and (i), the Board
shall have the authority to extend the expiration date of any outstanding Option
in circumstances in which it deems such action to be appropriate, provided that
no such extension shall extend the term of an Option beyond the expiration date
of the term of such Option as set forth in the Option Agreement.

        (k) COMPANY'S REPURCHASE RIGHT. Each Option Agreement may, but is not
required to, include provisions whereby the Company shall have the right to
repurchase any and all shares acquired by an Optionee on exercise of any Option
granted under the Plan, at such price and on such other terms and conditions as
the Board may approve and as may be set forth in the Option Agreement. Such
right shall be exercisable by the Company after termination of an Optionee's
Continuous Status as an Employee or Consultant, whenever such termination may
occur and whether such termination is voluntary or involuntary, with cause or
without cause, without regard to the reason therefor, if any.

6.      ADJUSTMENTS ON CERTAIN EVENTS.

        (a) CHANGES IN CONTROL. Each Option Agreement shall provide that in the
event that the Company is subject to a Change in Control:

            (i) immediately prior thereto all outstanding Options shall be
automatically accelerated and become immediately exercisable as to all of the
shares of Stock covered thereby, notwithstanding anything to the contrary in the
Plan or the Option Agreement; and

            (ii) the Board may, in its discretion, and on such terms and
conditions as it deems appropriate, by resolution adopted by the Board or by the
terms of any agreement of sale, merger or consolidation giving rise to the
Change in Control, provide that, without Optionee's consent, the shares subject
to an Option may (A) continue as an immediately exercisable Option

                                       7
<PAGE>

of the Company (if the Company is the surviving corporation), (B) be assumed as
immediately exercisable Options by the surviving corporation or its parent, (C)
be substituted by immediately exercisable options granted by the surviving
corporation or its parent with substantially the same terms for the Option, or
(D) be cancelled after payment to Optionee of an amount in cash or other
consideration delivered to stockholders of the Company in the transaction
resulting in a Change in Control of the Company equal to the total number of
shares subject to the Option multiplied by the remainder of (1) the amount per
share to be received by holders of the Company's Stock in the sale, merger or
consolidation, minus (2) the exercise price per share of the shares subject to
the Option.

        (b) ADJUSTMENT OF SHARES. The exercise price shall be subject to
adjustment from time to time in the event that the Company shall (i) pay a
dividend in, or make a distribution of, shares of Stock (or securities
convertible into, exchangeable for or otherwise entitling a holder thereof to
receive Stock), or evidences of indebtedness or other property or assets, on
outstanding Stock, (ii) subdivide the outstanding shares of Stock into a greater
number of shares, (iii) combine the outstanding shares of Stock into a smaller
number of shares or (iv) issue any shares of its capital stock in a
reclassification of the Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the resulting
corporation). An adjustment made pursuant to this section 6(b) shall, in the
case of a dividend or distribution, be made as of the record date therefor and,
in the case of a subdivision, combination or reclassification, be made as of the
effective date thereof. In any such case, the total number of shares and the
number of shares or other units of such other securities purchasable on exercise
of the Option immediately prior thereto shall be adjusted so that the Optionee
shall be entitled to receive at the same aggregate purchase price the number of
shares of Stock and the number of shares or other units of such other securities
that the Optionee would have owned or would have been entitled to receive
immediately following the occurrence of any of the events described above had
the Option been exercised in full immediately prior to the occurrence (or
applicable record date) of such event. If, as a result of any adjustment
pursuant to this section 6(b), the Optionee shall become entitled to receive
shares of two or more classes or series of securities of the Company, the Board
shall equitably determine the allocation of the adjusted exercise price between
or among shares or other units of such classes or series and shall notify the
Optionee of such allocation.

        (c) If at any time, as a result of an adjustment made pursuant to this
section 6, the Optionee shall become entitled to receive any shares of capital
stock or shares or other units of other securities or property or assets other
than Stock, the number of such other shares or units so receivable on any
exercise of the Option shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Stock in this section 6, and the provisions of this
Agreement with respect to the shares of Stock shall apply, with necessary
changes in points of detail, on like terms to any such other shares or units.

        (d) All calculations under this section 6 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be, but in no
event shall the Company be obligated to issue any fractional share on any
exercise of the Option.

7.      AMENDMENT OF THE PLAN.

                                       8
<PAGE>

        The Board may from time to time amend or modify the Plan for any reason;
provided that the Company will seek shareholder approval for any change if and
to the extent required by applicable law, regulation or rule. Rights and
obligations under any Option granted before amendment of the Plan shall not be
altered or impaired by any amendment, unless the Optionee consents in writing.

8.      TERMINATION OR SUSPENSION OF THE PLAN.

        The Board may suspend or terminate the Plan at any time for any reason.
Unless sooner terminated, the Plan shall terminate on the day prior to the tenth
anniversary of the earlier of the date the Plan is adopted by the Board or the
date the Plan is approved by the Company's shareholders. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
Rights and obligations under any Option granted while the Plan is in effect
shall not be altered or impaired by suspension or termination of the Plan,
except with the written consent of the Optionee.

9.      EFFECTIVE DATE OF THE PLAN.

        The effective date of the Plan shall be determined by the Board.

10.     WITHHOLDING TAXES.

        Whenever the Company proposes or is required to issue or transfer shares
of Stock under the Plan, the Company shall have the right to require the grantee
to remit to the Company an amount sufficient to satisfy any Federal, state or
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. Alternatively, the Company may issue or transfer
such shares net of the number of shares sufficient to satisfy the withholding
tax requirements. For withholding tax purposes, the shares of Stock shall be
valued on the date the withholding obligation is incurred.

11.     NO RIGHTS AS SHAREHOLDER.

        No Optionee, as such, shall have any rights as a shareholder of the
Company.

12.     NO RIGHTS TO CONTINUED EMPLOYMENT OR ENGAGEMENT.

        The Plan and any Options granted under the Plan shall not confer on any
Optionee any right with respect to continuation of employment by the Company or
any Subsidiary or engagement as a Consultant, nor shall they interfere in any
way with the right of the Company or any Subsidiary that employs or engages an
Optionee to terminate the Optionee's employment or engagement at any time.

13.     COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT.

        So long as a class of the Company's equity securities is registered
under section 12 of the Exchange Act, the Company intends that the Plan shall
comply in all respects with Rule 16b-3. If during such time any provision of
this Plan is found not to be in compliance with Rule 16b-3, that provision shall
be deemed to have been amended or deleted as and to the extent necessary to
comply with Rule 16b-3, and the remaining provisions of the Plan shall continue
in full force and effect without change. All transactions under the Plan during
such time shall be executed in

                                       9
<PAGE>

accordance with the requirements of section 16 of the Exchange Act and the
applicable regulations promulgated thereunder.

14.     INDEMNIFICATION.

        In addition to such other rights of indemnification as they may have as
Directors or officers, Directors and officers to whom authority to act for the
Board or the Company is delegated shall be indemnified by the Company against
all reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, or any right granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such person
is liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.

                                       10
<PAGE>

                                                                         ANNEX A

                       NONQUALIFIED STOCK OPTION AGREEMENT

____________, Optionee:

        Waste Connections, Inc. (the "Company"), pursuant to its 2002 Stock
Option Plan (the "Plan"), has this __________, 20__, granted to you, the
optionee named above, an option to purchase shares of the common stock of the
Company ("Stock"). This option is not intended to qualify and will not be
treated as an "incentive stock option" within the meaning of section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").

        The grant under this Nonqualified Stock Option Agreement (the
"Agreement") is in connection with and in furtherance of the Company's
compensatory benefit plan for participation of the Company's Employees or
Consultants. Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Plan. The option granted hereunder shall be
subject to and governed by the following terms and conditions:

        1. The total number of shares of Stock subject to this option is
_______________ shares. Subject to the limitations herein and in the Plan, this
option shall become exercisable (vest) as follows:

          Number of Shares                            Date of Earliest Exercise
           (Installment)                                      (Vesting)
          ----------------                            -------------------------

The installments provided for are cumulative. Each such installment that becomes
exercisable shall remain exercisable until expiration or earlier termination of
the option.

        2.  (a) The exercise price of this option is $______________ per share.

            (b) Payment of the exercise price per share is due in full in cash
(including check) on exercise of all or any part of each installment that has
become exercisable by you; provided that, if at the time of exercise the Stock
is publicly traded and quoted regularly in the Wall Street Journal, payment of
the exercise price, to the extent permitted by the Company and applicable
statutes and regulations, may be made by having the Company withhold shares of
Stock issuable on such exercise, by delivering shares of Stock already owned by
you, by cashless exercise described in Section 5(d) of the Plan and complying
with its provisions, or by delivering a combination of such forms of payment.
Such Stock (i) shall be valued at its Fair Market Value at the close of business
on the date of exercise, (ii) if originally acquired from the Company, must have
been held for the period required to avoid a charge to the Company's reported
earnings, and (iii) must be owned free and clear of any liens, claims,
encumbrances or security interests.

                                Annex A: Page 1
<PAGE>

        3. (a) Subject to the provisions of this Agreement, you may elect at any
time during your Continuous Status as an Employee or Consultant to exercise this
option as to any part or all of the shares subject to this option at any time
during the term hereof, including, without limitation, a time prior to the date
of earliest exercise (vesting) stated in paragraph 1 hereof; provided that:

               (i) a partial exercise of this option shall be deemed to cover
first vested shares and then unvested shares next vesting;

               (ii) any shares so purchased that shall not have vested as of the
date of exercise shall be subject to the purchase option in favor of the Company
as described in the Early Exercise Stock Purchase Agreement available from the
Company; and

               (iii) you shall enter into an Early Exercise Stock Purchase
Agreement in the form available from the Company with a vesting schedule that
will result in the same vesting as if no early exercise had occurred.

            (b) The election provided in this paragraph 3 to purchase shares on
the exercise of this option prior to the vesting dates shall cease on
termination of your Continuous Status as an Employee or Consultant and may not
be exercised from or after the date thereof.

        4. This option may not be exercised for any number of shares that would
require the issuance of anything other than whole shares.

        5. Notwithstanding anything to the contrary herein, this option may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, this option may not be
exercised unless (a) a registration statement under the Securities Act shall at
the time of exercise of the option be in effect with respect to the shares
issuable upon exercise of the option or (b) in the opinion of legal counsel to
the Company, the shares issuable upon exercise of the option may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained. As a condition to the exercise of any option, the
Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

        6. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on
________________ (which date shall be no more than ten years from the date this
option is granted). In no event may this option be exercised on or after the
date on which it terminates. This option shall terminate prior to the expiration
of its term on the day after the termination of your Continuous Status as an
Employee or Consultant for any reason or for no reason, unless:

               (a) such termination is due to your retirement or Disability and
you do not die within the three months after such termination, in which event
the option shall terminate on the

                                Annex A: Page 2
<PAGE>

earlier of the termination date set forth above or six months after such
termination of your Continuous Status as an Employee or Consultant; or

            (b) such termination is due to your death, or such termination is
due to your retirement or Disability and you die within three months after such
termination, in which event the option shall terminate on the earlier of the
termination date set forth above or the first anniversary of your death.

        Notwithstanding any of the foregoing provisions to the contrary however,
this option may be exercised following termination of your Continuous Status as
an Employee or Consultant only as to that number of shares as to which it shall
have been exercisable under paragraph 1 of this Agreement on the date of such
termination.

        7. (a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to subsection 5(f)
of the Plan.

            (b) By exercising this option you agree that the Company (or a
representative of the underwriters) may, in connection with an underwritten
registration of the offering of any securities of the Company under the Exchange
Act, require that you not sell or otherwise transfer or dispose of any shares of
Stock or other securities of the Company during such period (not to exceed 180
days) following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Exchange Act as may be requested by the
Company or the representative of the underwriters. For purposes of this
restriction, you will be deemed to own securities which (A) are owned directly
or indirectly by you, including securities held for your benefit by nominees,
custodians, brokers or pledgees, (B) may be acquired by you within sixty days of
the Effective Date, (C) are owned directly or indirectly, by or for your
brothers or sisters (whether by whole or half blood), spouse, ancestors and
lineal descendants, or (D) are owned, directly or indirectly, by or for a
corporation, partnership, estate or trust of which you are a shareholder,
partner or beneficiary, but only to the extent of your proportionate interest
therein as a shareholder, partner or beneficiary thereof. You further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period.

        8. (a) In the event that the Company is subject to a Change in Control:

               (i) immediately prior thereto this option shall be automatically
accelerated and become immediately exercisable as to all of the shares of Stock
covered hereby, notwithstanding anything to the contrary in the Plan or this
Agreement; and

               (ii) the Board may, in its discretion, and on such terms and
conditions as it deems appropriate, by resolution adopted by the Board or by the
terms of any agreement of sale, merger or consolidation giving rise to the
Change in Control, provide that, without Optionee's consent, the shares subject
to this option may (A) continue as an immediately exercisable option of the
Company (if the Company is the surviving corporation), (B) be assumed as
immediately exercisable options by the surviving corporation or its parent, (C)
be substituted by immediately exercisable options granted by the surviving
corporation or its parent

                                Annex A: Page 3
<PAGE>

with substantially the same terms for this option, or (D) be cancelled after
payment to Optionee of an amount in cash or other consideration delivered to
stockholders of the Company in the transaction resulting in a Change in Control
of the Company equal to the total number of shares subject to this option
multiplied by the remainder of (1) the amount per share to be received by
holders of the Company's Stock in the sale, merger or consolidation, minus (2)
the exercise price per share of the shares subject to this option.

            (b) The exercise price shall be subject to adjustment from time to
time in the event that the Company shall (i) pay a dividend in, or make a
distribution of, shares of Stock (or securities convertible into, exchangeable
for or otherwise entitling a holder thereof to receive Stock), or evidences of
indebtedness or other property or assets, on outstanding Stock, (ii) subdivide
the outstanding shares of Stock into a greater number of shares, (iii) combine
the outstanding shares of Stock into a smaller number of shares or (iv) issue
any shares of its capital stock in a reclassification of the Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the resulting corporation). An adjustment made pursuant to this
section 8(b) shall, in the case of a dividend or distribution, be made as of the
record date therefor and, in the case of a subdivision, combination or
reclassification, be made as of the effective date thereof. In any such case,
the total number of shares and the number of shares or other units of such other
securities purchasable on exercise of the option immediately prior thereto shall
be adjusted so that the Optionee shall be entitled to receive at the same
aggregate purchase price the number of shares of Stock and the number of shares
or other units of such other securities that the Optionee would have owned or
would have been entitled to receive immediately following the occurrence of any
of the events described above had the option been exercised in full immediately
prior to the occurrence (or applicable record date) of such event. If, as a
result of any adjustment pursuant to this section 8(b), the Optionee shall
become entitled to receive shares of two or more classes or series of securities
of the Company, the Board shall equitably determine the allocation of the
adjusted exercise price between or among shares or other units of such classes
or series and shall notify the Optionee of such allocation.

            (c) If at any time, as a result of an adjustment made pursuant to
this section 8, the Optionee shall become entitled to receive any shares of
capital stock or shares or other units of other securities or property or assets
other than Stock, the number of such other shares or units so receivable on any
exercise of the option shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Stock in this section 8, and the provisions of this
Agreement with respect to the shares of Stock shall apply, with necessary
changes in points of detail, on like terms to any such other shares or units.

            (d) All calculations under this section 8 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be, but
in no event shall the Company be obligated to issue any fractional share on any
exercise of the option.

        9. This option is generally not transferable, except by will or by the
laws of descent and distribution, unless the Company expressly permits a
transfer, such as to a trust or other entity for estate planning purposes.
Unless the Company approves such a transfer, this option is exercisable during
your life only by you.

                                Annex A: Page 4
<PAGE>

        10. This Agreement is not an employment contract and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company, or of the Company to continue
your employment with the Company. If this option is granted to you in connection
with your performance of services as a Consultant, references to employment,
Employee and similar terms shall be deemed to include the performance of
services as a Consultant; provided that no rights as an Employee shall arise by
reason of the use of such terms.

        11. Any notice or other communication to be given under or in connection
with this Agreement or the Plan shall be given in writing and shall be deemed
effectively given on receipt or, in the case of notices from the Company to you,
five days after deposit in the United States mail, postage prepaid, addressed to
you at the address specified below or at such other address as you may hereafter
designate by notice to the Company.

        12. This Agreement is subject to all provisions of the Plan, a copy of
which is attached hereto and made a part of this Agreement, including, without
limitation, the provisions of section 5 of the Plan relating to option
provisions, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of this Agreement
and those of the Plan, the provisions of the Plan shall control.

                                            WASTE CONNECTIONS, INC.

                                            By ________________________________
                                               Duly authorized on behalf
                                               of the Board of Directors

ATTACHMENTS:

Waste Connections, Inc. 2002 Stock Option Plan
Notice of Exercise

                                Annex A: Page 5
<PAGE>

The undersigned:

        (a) Acknowledges receipt of the foregoing Nonqualified Stock Option
Agreement and the attachments referenced therein and understands that all rights
and liabilities with respect to the option granted under the Agreement are set
forth in such Agreement and the Plan; and

        (b) Acknowledges that as of the date of grant set forth in such
Agreement, the Agreement sets forth the entire understanding between the
undersigned optionee and the Company and its Subsidiaries regarding the
acquisition of Stock pursuant to the option and supersedes all prior oral and
written agreements on that subject with the exception of (i) the options, if
any, previously granted and delivered to the undersigned under stock option
plans of the Company, and (ii) the following agreements only:

NONE:   _____________
          (Initial)

OTHER:  _________________________

        _________________________

        _________________________

                                      _______________________________________
                                      OPTIONEE

                                      Address: ______________________________

                                               ______________________________

                                Annex A: Page 6
<PAGE>

                               NOTICE OF EXERCISE

Waste Connections, Inc.
620 Coolidge Drive, Suite 350
Folsom, CA  95630-3155                              Date of Exercise: __________

Ladies and Gentlemen:

        This constitutes notice under my Nonqualified Stock Option Agreement
that I elect to purchase the number of shares of Common Stock ("Stock") of Waste
Connections, Inc. (the "Company") for the price set forth below.

<TABLE>

<S>                                        <C>
Option Agreement dated:                     _______________________

Number of shares as
to which option is
exercised:                                  _______________________

Certificates to be

issued in name of:                          _______________________

Total exercise price:                       $______________________

Cash payment delivered

herewith:                                   $______________________

Value of __________ shares
of _________________ common
stock delivered herewith:(1)                $______________________

</TABLE>

        By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Waste Connections, Inc. 2002 Stock
Option Plan or the Option Agreement, (ii) to provide for the payment by me to
you (in the manner designated by you) of your withholding obligation, if any,
relating to the exercise of this option, and (iii) if this exercise relates to
an incentive stock option, to notify you in writing within fifteen days after
the date of any disposition of any of the shares of Stock issued on exercise of
this option that occurs within two years after the date of grant of this option
or within one year after such shares of Stock are issued on exercise of this
option.

        I hereby represent, warrant and agree with respect to the shares of
Stock of the Company that I am acquiring by this exercise of the option (the
"Shares") that, if required by the Company (or a representative of the
underwriters) in connection with an underwritten registration of the offering of
any securities of the Company under the Securities Act, I will not sell or
otherwise transfer or dispose of any shares of Stock or other securities of the
Company during such period

--------
(1) Shares must meet the public trading requirements set forth in the Option
Agreement. Shares must be valued in accordance with the terms of the option
being exercised, must have been owned for the minimum period required in the
Option Agreement, and must be owned free and clear of any liens, claims,
encumbrances or security interests. Certificates must be endorsed or accompanied
by an executed assignment separate from certificate.

                                Annex A: Page 7
<PAGE>

(not to exceed 180 days) following the effective date of the registration
statement of the Company filed under the Securities Act (the "Effective Date")
as may be requested by the Company or the representative of the underwriters.
For purposes of this restriction, I will be deemed to own securities that (i)
are owned, directly or indirectly by me, including securities held for my
benefit by nominees, custodians, brokers or pledgees; (ii) may be acquired by me
within sixty days of the Effective Date; (iii) are owned directly or indirectly,
by or for my brothers or sisters (whether by whole or half blood), spouse,
ancestors and lineal descendants; or (iv) are owned, directly or indirectly, by
or for a corporation, partnership, estate or trust of which I am a shareholder,
partner or beneficiary, but only to the extent of my proportionate interest
therein as a shareholder, partner or beneficiary thereof. I further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to this restriction until the end of such period.

                                Very truly yours,

                                _________________________

                                 Annex A: Page 8

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