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                                                                   EXHIBIT 10.31

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective the 21st day of January, 2004 by and between Waste Management, Inc.
(the "Company"), and JIMMY D. LaVALLEY (the "Executive").

         1.       EMPLOYMENT AND TERMINATION OF PREVIOUS EMPLOYMENT AGREEMENT.

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

         2.       TERM OF EMPLOYMENT.

         The period of Executive's employment under this Agreement shall
commence on January 21, 2004 ("Employment Date"), and shall continue for a
period of two (2) years thereafter, and shall automatically be renewed for
successive one (1) year periods thereafter, unless Executive's employment is
terminated in accordance with Section 5 below. The period during which Executive
is employed hereunder shall be referred to as the "Employment Period." This
offer is subject to the successful completion of background check and drug
screen.

         3.       DUTIES AND RESPONSIBILITIES.

         (a)      Executive shall serve as the Senior Vice President-People. In
such capacity, Executive shall perform such duties and have the power,
authority, and functions commensurate with such position in similarly-sized
public companies, and have and possess such other authority and functions
consistent with such position as may be assigned to Executive from time to time
by the Chief Executive Officer, President, Chief Operations Officer, Chief
Administrative Officer, Chief Financial Officer, or other Senior executive of
the Company to whom he may report, or the Board of Directors.

         (b)      Executive shall devote substantially all of his working time,
attention and energies to the business of the Company, and its affiliated
entities. Executive may make and manage his personal investments (provided such
investments in other activities do not violate, in any material respect, the
provisions of Section 8 of this Agreement), be involved in charitable and
professional activities, and, with the prior written consent of the Board of
Directors, serve on boards of other for profit entities, provided such
activities do not materially interfere with the performance of his duties
hereunder (however, the Board does not typically allow officers to serve on more
than one public company board at a time).

         4.       COMPENSATION AND BENEFITS.

         (a)      BASE SALARY. During the Employment Period, the Company shall
pay Executive a base salary at the annual rate of THREE HUNDRED TWENTY THOUSAND
DOLLARS ($320,000.00) per year, or such higher rate as may be determined from
time to time by the Company ("Base Salary"). Such Base Salary shall be paid in
accordance with the Company's standard payroll practice for its executive
officers. Once increased, Base Salary shall not be reduced.

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         (b)      ANNUAL BONUS. During the Employment Period, Executive will be
entitled to participate in an annual incentive compensation plan of the Company,
as established by the Compensation Committee of the Board of Directors from time
to time. The Executive's target annual bonus will be Seventy-Five percent (75%)
of his Base Salary in effect for such year (the "Target Bonus"), and his actual
annual bonus may range from 0% to 150% (two times Target Bonus), and will be
determined based upon (i) the achievement of certain corporate performance
goals, as may be established and approved from time to time by the Compensation
Committee of the Board of Directors, and (ii) the achievement of personal
performance goals as may be established by the Company's Chief Executive
Officer, President, Chief Operations Officer, Chief Administrative Officer,
Chief Financial Officer, or other Senior executive of the Company to whom he may
report, or the Board of Directors. Executive's bonus for 2004 will be calculated
as if he had been in his position of SVP-People beginning January 1, 2004.

         (c)      STOCK OPTIONS. Effective on or about the Employment Date,
Executive shall be granted a stock option for Fifty Thousand (50,000) shares of
common stock of Waste Management, Inc., with one-fourth (1/4) of such options
vesting on each of the next four (4) anniversaries of the grant date, subject to
the approval of the Compensation Committee of the Board of Directors. The
exercise price shall be the fair market value on the date of grant of the
option.

         The award, vesting, and exercise of all options shall be subject to and
governed by the provisions of the applicable Waste Management, Inc. Stock
Incentive Plan. Executive shall be eligible to considered for additional stock
option grants under the Company's annual stock option award program as
administered by, and at the discretion of, the Compensation Committee of the
Board of Directors, beginning in 2005.

         (d)      RESTRICTED STOCK AWARD. Effective on or about the Employment
Date, the Company will grant Executive an award of 4,600 restricted shares of
the Company's common stock (the "Stock") under the Waste Management, Inc. 2000
Stock Incentive Plan (the "Stock Incentive Plan") that will vest in equal
installments on each of the first four (4) anniversaries of the Effective Date,
subject (except as otherwise provided herein) to Executive's continuous
employment with the Company through the applicable vesting date (the "Restricted
Stock Grant"). The Restricted Stock Grant shall be deemed outstanding shares for
all purposes and Executive shall be fully vested in any cash dividends paid
therein (and non cash dividends being subject to the same forfeiture provisions
as the underlying Restricted Stock Grant shares).

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

         During the Employment Period, Executive shall be entitled to vacation
each year in accordance with the Company's policies in effect from time to time,
but in no event less than

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four (4) weeks paid vacation per calendar year.

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

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

                  1.       Automobile allowance at the annual rate of Twelve
Thousand Dollars ($12,000.00), payable in accordance with the Company's standard
payroll practice for its executive officers and prorated in any year that
Executive does not work a full calendar year;

                  2.       Financial planning services at actual cost, and not
to exceed Fifteen Thousand Dollars ($15,000.00) annually;

                  3.       Social Organization Initiation Fees and Dues with a
benefit of a one time initiation fee at actual cost but not to exceed ten
percent (10%) of Executive's Base Salary, and dues at actual cost but not to
exceed $500 per month; and

                  4.       An annual physical examination on a program
designated by the Company.

         5.       TERMINATION OF EMPLOYMENT.

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

         (a)      DEATH. Executive's employment hereunder shall terminate upon
Executive's death.

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

         (c)      TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate Executive's employment hereunder for "Cause" at any time after
providing a Notice of Termination for Cause to Executive.

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         (i)      For purposes of this Agreement, the term "Cause" means any of
                  the following: (A) willful or deliberate and continual refusal
                  to perform Executive's employment duties reasonably requested
                  by the Company after receipt of written notice to Executive of
                  such failure to perform, specifying such failure (other than
                  as a result of Executive's sickness, illness or injury) and
                  Executive fails to cure such nonperformance within ten (10)
                  days of receipt of said written notice; (B) breach of any
                  statutory or common law duty of loyalty to the Company; (C)
                  has been convicted of, or pleaded nolo contendre to, any
                  felony; (D) willfully or intentionally caused material injury
                  to the Company, its property, or its assets; (E) disclosed to
                  unauthorized person(s) proprietary or confidential information
                  of the Company; or (F) breach of any of the covenants set
                  forth in Section 8 hereof.

         (ii)     For purposes of this Agreement, the phrase "Notice of
                  Termination for Cause" shall mean a written notice that shall
                  indicate the specific termination provision in Section 5(c)(i)
                  relied upon, and shall set forth in reasonable detail the
                  facts and circumstances which provide the basis for
                  termination for Cause. Further, a Notification of Termination
                  for Cause shall be required to include a copy of a resolution
                  duly adopted by at least two-thirds (2/3) of the entire
                  membership of the Board of Directors at a meeting of the Board
                  which was called for the purpose of considering such
                  employment termination, and at which Executive and his
                  representative had the right to attend and address the Board,
                  finding that, in the good faith belief of the Board, Executive
                  engaged in conduct set forth in Section 5(c)(i) herein and
                  specifying the particulars thereof in reasonable detail. The
                  date of termination for Cause shall be the date indicated in
                  the Notice of Termination for Cause. Any purported termination
                  for Cause which is held by an arbitrator not to have been
                  based on the grounds set forth in this Agreement or not to
                  have followed the procedures set forth in this Agreement shall
                  be deemed a termination by the Company without Cause.

         (d)      VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate
his employment hereunder with or without Good Reason at any time upon written
notice to the Company.

         (i)      A termination for "Good Reason" means a resignation of
                  employment by Executive by written notice ("Notice of
                  Termination for Good Reason") given to the Company's Chief
                  Executive Officer within ninety (90) days after the occurrence
                  of the Good Reason event, unless such circumstances are
                  substantially corrected prior to the date of termination
                  specified in the Notice of Termination for Good Reason. For
                  purposes of this Agreement, "Good Reason" shall mean the
                  occurrence or failure to cause the occurrence, as the case may
                  be, without Executive's express written consent, of any of the
                  following circumstances: (A) the Company substantially changes
                  Executive's core duties or removes Executive's responsibility
                  for those core duties, so as to effectively cause Executive to
                  no longer be performing the duties of his position (except in
                  each case in connection with the termination of Executive's
                  employment for Cause or Total Disability or as a result of
                  Executive's death, or temporarily as a result of

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                  Executive's illness or other absence); provided that if the
                  Company becomes a fifty percent or more subsidiary of any
                  other entity, Executive shall be deemed to have a substantial
                  change in the core duties of his position unless he is also
                  Senior Vice-President of the ultimate parent entity; (B)
                  removal or the non-reelection of the Executive from the
                  officer position with the Company specified herein, or removal
                  of the Executive from any of his then officer positions; (C)
                  any material breach by the Company of any provision of this
                  Agreement, including without limitation Section 10 hereof; or
                  (D) failure of any successor to the Company (whether direct or
                  indirect and whether by merger, acquisition, consolidation or
                  otherwise) to assume in a writing delivered to Executive upon
                  the assignee becoming such, the obligations of the Company
                  hereunder; or (E) the reassignment of Executive to a
                  geographic location more than fifty (50) miles from his then
                  business office location.

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

         (e)      TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may
terminate Executive's employment hereunder without Cause at any time upon
written notice to Executive.

         (f)      EFFECT OF TERMINATION. Upon any termination of employment for
any reason, Executive shall immediately resign from all Board memberships and
other positions with the Company or any of its subsidiaries held by him at such
time.

         6.       COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.

         In the event that Executive's employment hereunder is terminated,
Executive shall be entitled to the following compensation and benefits upon such
termination:

         (a)      TERMINATION BY REASON OF DEATH. In the event that Executive's
employment is terminated by reason of Executive's death, the Company shall pay
the following amounts to Executive's beneficiary or estate:

         (i)      Any accrued but unpaid Base Salary for services rendered to
                  the date of death, any accrued but unpaid expenses required to
                  be reimbursed under this Agreement, any vacation accrued to
                  the date of termination, any earned but unpaid bonuses for any
                  prior period, and, to the extent not otherwise paid, a
                  pro-rata bonus or

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                  incentive compensation payment to the extent payments are
                  awarded to senior executives of the Company and paid at the
                  same time as senior executives are paid.

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

         (iii)    An amount equal to the Base Salary (at the rate in effect as
                  of the date of Executive's death) which would have been
                  payable to Executive if Executive had continued in employment
                  for two additional years. Said payments will be paid to
                  Executive's estate or beneficiary at the same time and in the
                  same manner as such compensation would have been paid if
                  Executive had remained in active employment.

         (iv)     As of the date of termination by reason of Executive's death,
                  stock options previously awarded to Executive as of the date
                  of death, and the Restricted Stock Grant, shall be fully
                  vested, and Executive's estate or beneficiary shall have up to
                  one (1) year from the date of death to exercise all such
                  previously-awarded options, provided that in no event will any
                  option be exercisable beyond its term. No stock options
                  contemplated by this Agreement, but not yet awarded to
                  Executive as of the time of his death, shall be granted.

         (b)      TERMINATION BY REASON OF TOTAL DISABILITY. In the event that
Executive's employment is terminated by reason of Executive's Total Disability
as determined in accordance with Section 5(b), the Company shall pay the
following amounts to Executive:

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

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

         (iii)    An amount equal to the Base Salary (at the rate in effect as
                  of the date of Executive's Total Disability) which would have
                  been payable to Executive if Executive had continued in active
                  employment for two years following termination of employment,
                  less any payments under any long-term disability plan or
                  arrangement paid for by the Company. Payment shall be made at
                  the same time and in the same manner as such compensation
                  would have been paid if

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                  Executive had remained in active employment until the end of
                  such period.

         (iv)     As of the date of termination by reason of Executive's Total
                  Disability, stock options previously awarded to Executive as
                  of the date of termination, and the Restricted Stock Grant,
                  shall be fully vested, and Executive or his legal guardian
                  shall have up to one (1) year from the date of termination to
                  exercise all such previously-awarded options, provided that in
                  no event will any option be exercisable beyond its term. No
                  stock options contemplated by this Agreement, but not yet
                  awarded to Executive as of the time of his employment
                  termination, shall be granted.

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

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

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

         (iii)    All options, whether vested or not vested prior to the date of
                  such termination of employment, and all unvested restricted
                  stock, shall be automatically cancelled on the date of
                  employment termination. However, it is expressly understood
                  and agreed that Executive would have no obligation to repay or
                  otherwise reimburse the Company for funds received as a result
                  of Executive's having exercised any previously-vested stock
                  options prior to his employment termination.

         (d)      VOLUNTARY TERMINATION BY EXECUTIVE. In the event that
Executive voluntarily terminates employment other than for Good Reason, the
Company shall pay the following amounts to Executive:

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

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

         (iii)    Any stock options and any restricted stock that have not then
                  vested shall be

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                  automatically cancelled as of that date, and Executive shall
                  have ninety (90) days following the date of termination of
                  employment to exercise any previously vested but unexercised
                  options; provided that in no event will any option be
                  exercisable beyond its term. No stock options contemplated by
                  this Agreement, but not yet awarded to Executive as of the
                  time of his employment termination, shall be granted.

         (e)      TERMINATION BY THE COMPANY WITHOUT CAUSE; TERMINATION BY
EXECUTIVE FOR GOOD REASON. In the event that Executive's employment is
terminated by the Company for reasons other than death, Total Disability or
Cause, or Executive terminates his employment for Good Reason, the Company shall
pay the following amounts to Executive:

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

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

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

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

         (v)      Executive shall be eligible for a bonus or incentive
                  compensation payment, at the same time, on the same basis, and
                  to the same extent payments are made to senior executives of
                  the Company, pro-rated for the fiscal year in which the
                  Executive is

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                  terminated.

         (vi)     Executive shall continue to vest in all stock option awards or
                  restricted stock awards over the two (2) year period
                  commencing on the date of such termination. Executive shall
                  have two (2) years and six (6) months after the date of
                  termination to exercise all options to the extent then vested,
                  provided that in no event may any option be exercisable beyond
                  its term.

         (f)      NO OTHER BENEFITS OR COMPENSATION. Except as may be provided
under this Agreement, under the terms of any incentive compensation, employee
benefit, or fringe benefit plan applicable to Executive at the time of
Executive's termination or resignation of employment, Executive shall have no
right to receive any other compensation, or to participate in any other plan,
arrangement or benefit, with respect to future periods after such termination or
resignation.

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

         7.       RESIGNATION BY EXECUTIVE FOR GOOD REASON AND COMPENSATION
PAYABLE FOLLOWING CHANGE IN CONTROL.

         (a)      RESIGNATION FOR GOOD REASON FOLLOWING CHANGE IN CONTROL. In
the event a "Change in Control" occurs and Executive terminates his employment
for Good Reason thereafter, or the Company terminates Executive's employment
other than for Cause, or such termination for Good Reason or without Cause
occurs in contemplation of such Change in Control (any termination within six
(6) months prior to such Change in Control being presumed to be in contemplation
unless rebutted by clear and demonstrable evidence to the contrary), the Company
shall pay the following amounts to Executive:

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

         (ii)     In lieu of Section 6(e)(vi), Executive will be 100% vested in
                  all benefits, awards, and grants (including stock option
                  grants and all other stock awards, all of such stock options
                  being exercisable for three (3) years following Termination,
                  provided that in no event will any option be exercisable
                  beyond its term) accrued but unpaid as of the date of
                  termination under any non-qualified pension plan,

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                  supplemental and/or incentive compensation or bonus plans, in
                  which Executive was a participant as of the date of
                  termination. Executive shall also receive a bonus or incentive
                  compensation payment (the "bonus payment"), payable at 100% of
                  the maximum bonus available to Executive, pro-rated as of the
                  effective date of the termination. The bonus payment shall be
                  payable within five (5) days after the effective date of
                  Executive's termination. Except as may be provided under this
                  Section 7 or under the terms of any incentive compensation,
                  employee benefit, or fringe benefit plan applicable to
                  Executive at the time of Executive's termination of
                  employment, Executive shall have no right to receive any other
                  compensation, or to participate in any other plan, arrangement
                  or benefit, with respect to future periods after such
                  resignation or termination.

         (b)      CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

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

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

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         (iii)    For purposes of determining the amount of the Gross-up
                  Payment, the Executive shall be deemed to pay U.S. federal
                  income taxes at the highest marginal rate of U.S. federal
                  income taxation in the calendar year in which the Gross-up
                  Payment is to be made and state and local income taxes at the
                  highest marginal rate of taxation in the state and locality of
                  the Executive's residence for the calendar year in which the
                  Company Payment is to be made, net of the maximum reduction in
                  U.S. federal income taxes which could be obtained from
                  deduction of such state and local taxes if paid in such year.
                  In the event that the Excise Tax is subsequently determined by
                  the Accountants to be less than the amount taken into account
                  hereunder at the time the Gross-up Payment is made, the
                  Executive shall repay to the Company, at the time that the
                  amount of such reduction in Excise Tax is finally determined,
                  the portion of the prior Gross-up Payment attributable to such
                  reduction (plus the portion of the Gross-up Payment
                  attributable to the Excise Tax and U.S. federal, state and
                  local income tax imposed on the portion of the Gross-up
                  Payment being repaid by the Executive if such repayment
                  results in a reduction in Excise Tax or a U.S. federal, state
                  and local income tax deduction), plus interest on the amount
                  of such repayment at the rate provided in Section
                  1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in
                  the event any portion of the Gross-up Payment to be refunded
                  to the Company has been paid to any U.S. federal, state and
                  local tax authority, repayment thereof (and related amounts)
                  shall not be required until actual refund or credit of such
                  portion has been made to the Executive, and interest payable
                  to the Company shall not exceed the interest received or
                  credited to the Executive by such tax authority for the period
                  it held such portion. The Executive and the Company shall
                  mutually agree upon the course of action to be pursued (and
                  the method of allocating the expense thereof) if the
                  Executive's claim for refund or credit is denied.

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

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

                                       11
<PAGE>

                  that the amount of the estimated payments exceeds the amount
                  subsequently determined to have been due, such excess shall
                  constitute a loan by the Company to the Executive, payable on
                  the fifth day after demand by the Company (together with
                  interest at the rate provided in Section 1274(b)(2)(B) of the
                  Code).

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

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

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

         (c)      CHANGE IN CONTROL. For purposes of this Agreement, "Change in
Control" means the occurrence of any of the following events:

         (i)      any Person is or becomes the Beneficial Owner, directly or
                  indirectly, of securities of the Company (not including in the
                  securities beneficially owned by such person any securities
                  acquired directly from the Company or its Affiliates)
                  representing twenty-five percent (25%) or more of the combined
                  voting power of the Company's then outstanding voting
                  securities;

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

         (iii)    there is a consummated merger or consolidation of the Company
                  or any direct or indirect subsidiary of the Company with any
                  other corporation, other than (A) a

                                       12
<PAGE>

                  merger or consolidation which would result in the voting
                  securities of the Company outstanding immediately prior
                  thereto continuing to represent (either by remaining
                  outstanding or by being converted into voting securities of
                  the surviving or parent entity) more than fifty percent (50%)
                  of the combined voting power of the voting securities of the
                  Company or such surviving or parent entity outstanding
                  immediately after such merger or consolidation or (B) a merger
                  or consolidation effected to implement a recapitalization of
                  the Company (or similar transaction) in which no Person,
                  directly or indirectly, acquired twenty-five percent (25%) or
                  more of the combined voting power of the Company's then
                  outstanding securities (not including in the securities
                  beneficially owned by such person any securities acquired
                  directly from the Company or its Affiliates); or

         (iv)     the stock holders of the Company approve a plan of complete
                  liquidation of the Company or there is consummated an
                  agreement for the sale or disposition by the Company of all or
                  substantially all of the Company's assets (or any transaction
                  having a similar effect), other than a sale or disposition by
                  the Company of all or substantially all of the Company's
                  assets to an entity, at least fifty percent (50%) of the
                  combined voting power of the voting securities of which are
                  owned by stockholders of the Company in substantially the same
                  proportions as their ownership of the Company immediately
                  prior to such sale.

         For purposes of this Section 7(c), the following terms shall have the
following meanings:

         (i)      "Affiliate" shall mean an affiliate of the Company, as defined
                  in Rule 12b-2 promulgated under Section 12 of the Securities
                  Exchange Act of 1934, as amended from time to time (the
                  "Exchange Act");

         (ii)     "Beneficial Owner" shall have the meaning set forth in Rule
                  13d-3 under the Exchange Act;

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

         8.       COVENANTS

         (a)      COMPANY PROPERTY. All written materials, records, data, and
other documents prepared or possessed by Executive during Executive's employment
with the Company are the Company's property. All information, ideas, concepts,
improvements, discoveries, and inventions that are conceived, made, developed,
or acquired by Executive individually or in conjunction with others during
Executive's employment (whether during business hours and whether on the
Company's premises or otherwise) which relate to the Company's business,

                                       13
<PAGE>

products, or services are the Company's sole and exclusive property. All
memoranda, notes, records, files, correspondence, drawings, manuals, models,
specifications, computer programs, maps, and all other documents, data, or
materials of any type embodying such information, ideas, concepts, improvements,
discoveries, and inventions are the Company's property. At the termination of
Executive's employment with the Company for any reason, Executive shall return
all of the Company's documents, data, or other Company property to the Company.

         (b)      CONFIDENTIAL INFORMATION; NON-DISCLOSURE. Executive
acknowledges that the business of the Company is highly competitive and that the
Company has agreed to provide and immediately will provide Executive with access
to "Confidential Information" relating to the business of the Company and its
affiliates.

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

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

         The Company also agrees to provide Executive with one or more of the
following: access to Confidential Information; specialized training regarding
the Company's methodologies and

                                       14
<PAGE>

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

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

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

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

         It is further agreed that during the Restricted Term, Executive cannot
engage in any of the enumerated prohibited activities in the Restricted Area by
means of telephone, telecommunications, satellite communications,
correspondence, or other contact from outside the Restricted Area. Executive
further understands that the foregoing restrictions may limit his ability to
engage in certain businesses during the Restricted Term, but acknowledges that
these

                                       15
<PAGE>

restrictions are necessary to protect the Confidential Information the Company
has provided to Executive.

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

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

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

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

         9.       ENFORCEMENT OF COVENANTS.

         (a)      TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION.
Executive agrees that any breach by Executive of any of the covenants set forth
in Section 8 hereof during Executive's employment by the Company, shall be
grounds for immediate dismissal of Executive for Cause pursuant to Section
5(c)(i), which shall be in addition to and not exclusive of any and all other
rights and remedies the Company may have against Executive.

         (b)      RIGHT TO INJUNCTION. Executive acknowledges that a breach of
the covenants set forth in Section 8 hereof will cause irreparable damage to the
Company with respect to which the Company's remedy at law for damages will be
inadequate. Therefore, in the event of breach or anticipatory breach of the
covenants set forth in this section by Executive, Executive and the

                                       16
<PAGE>

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

         (c)      SEPARABILITY OF COVENANTS. The covenants contained in Section
8 hereof constitute a series of separate but ancillary covenants, one for each
applicable State in the United States and the District of Columbia, and one for
each applicable foreign country. If in any judicial proceeding, a court shall
hold that any of the covenants set forth in Section 8 exceed the time,
geographic, or occupational limitations permitted by applicable laws, Executive
and the Company agree that such provisions shall and are hereby reformed to the
maximum time, geographic, or occupational limitations permitted by such laws.
Further, in the event a court shall hold unenforceable any of the separate
covenants deemed included herein, then such unenforceable covenant or covenants
shall be deemed eliminated from the provisions of this Agreement for the purpose
of such proceeding to the extent necessary to permit the remaining separate
covenants to be enforced in such proceeding. Executive and the Company further
agree that the covenants in Section 8 shall each be construed as a separate
agreement independent of any other provisions of this Agreement, and the
existence of any claim or cause of action by Executive against the Company
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of any of the covenants of Section 8.

         10.      INDEMNIFICATION.

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

         11.      DISPUTES AND PAYMENT OF ATTORNEY'S FEES.

         If at any time during the term of this Agreement or afterwards there
should arise any dispute as to the validity, interpretation or application of
any term or condition of this Agreement, the Company agrees, upon written demand
by Executive (and Executive shall be entitled upon application to any court of
competent jurisdiction, to the entry of a mandatory injunction, without the
necessity of posting any bond with respect thereto, compelling the Company) to
promptly provide sums sufficient to pay on a current basis (either directly or
by reimbursing Executive) Executive's costs and reasonable attorney's fees
(including expenses of investigation and disbursements for the fees and expenses
of experts, etc.) incurred by Executive

                                       17
<PAGE>

in connection with any such dispute or any litigation, provided that Executive
shall repay any such amounts paid or advanced if Executive is not the prevailing
party with respect to at least one material claim or issue in such dispute or
litigation. The provisions of this Section 11, without implication as to any
other section hereof, shall survive the expiration or termination of this
Agreement and of Executive's employment hereunder.

         12.      WITHHOLDING OF TAXES.

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

         13.      SOURCE OF PAYMENTS.

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

         14.      ASSIGNMENT.

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

         15.      ENTIRE AGREEMENT; AMENDMENT.

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

                                       18
<PAGE>

         16.      GOVERNING LAW.

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

         17.      REQUIREMENT OF TIMELY PAYMENTS.

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

         18.      NOTICES.

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

                   To the Company: Waste Management, Inc.
                                   1001 Fannin, Suite 4000
                                   Houston, Texas 77002
                                   Attention: Corporate Secretary

                   To Executive:   At the address for Executive set forth below.

         19.      MISCELLANEOUS.

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

         (b)      SEPARABILITY. Subject to Section 9 hereof, if any term or
provision of this Agreement is declared illegal or unenforceable by any court of
competent jurisdiction and cannot be modified to be enforceable, such term or
provision shall immediately become null and void, leaving the remainder of this
Agreement in full force and effect.

                                       19
<PAGE>

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

         (d)      RULES OF CONSTRUCTION. Whenever the context so requires, the
use of the singular shall be deemed to include the plural and vice versa.

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

         IN WITNESS WHEREOF, this Agreement is EXECUTED and EFFECTIVE as of the
day set forth above.

                                JIMMY D. LaVALLEY
                                ("Executive")

                                   /s/ Jimmy La Valley
                                ------------------------------------------------
                                Jimmy D. LaValley

                                Address;
                                ________________________________________________
                                ________________________________________________

                                WASTE MANAGEMENT, INC.
                                (The "Company")

                                By:     /s/ Lawrence O'Donnell, III
                                    --------------------------------------------
                                    Lawrence O'Donnell, III
                                    Executive Vice President, Operations Support
                                    & Chief Administrative Officer

                                       20<PAGE>

                                                                     EXHIBIT 4.2

                                                                  EXECUTION COPY

                               HALLIBURTON COMPANY

                                                   as Issuer

                                       and

                               JPMORGAN CHASE BANK

                                                   as Trustee

                                   ----------

                          THIRD SUPPLEMENTAL INDENTURE

                          Dated as of January 26, 2004

                                   ----------

                 $500,000,000 Senior Notes due January 26, 2007

<PAGE>

                  THIRD SUPPLEMENTAL INDENTURE dated as of January 26, 2004
between Halliburton Company, a Delaware corporation (the "Company"), and
JPMorgan Chase Bank, as trustee (the "Trustee").

                                   WITNESSETH:

                  WHEREAS, the Company has heretofore entered into an Indenture,
dated as of October 17, 2003 (the "Original Indenture"), with the Trustee, as
supplemented by a First Supplemental Indenture, dated as of October 17, 2003
(the "First Supplemental Indenture"), and a Second Supplemental Indenture, dated
as of December 15, 2003 (together with the First Supplemental Indenture, the
"Supplemental Indentures");

                  WHEREAS, the Original Indenture is incorporated herein by this
reference and the Original Indenture, as supplemented by the Supplemental
Indentures and this Third Supplemental Indenture, is herein called the
"Indenture";

                  WHEREAS, under the Original Indenture, a new series of
Securities may at any time be established pursuant to a supplemental indenture
executed by the Company and the Trustee;

                  WHEREAS, the Company desires to issue $500,000,000 aggregate
principal amount of Notes (as defined below), which will be a new series of
Securities under the Indenture; and

                  WHEREAS, all conditions necessary to authorize the execution
and delivery of this Third Supplemental Indenture and to make it a valid and
binding obligation of the Company have been done or performed.

                  NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto hereby agree to
the following provisions:

                  Capitalized terms used but not defined herein have the
meanings ascribed thereto in the Original Indenture.

                                    ARTICLE I
                                    THE NOTES

                  SECTION 1.01 Establishment and Terms

                  There is hereby established a new series of Securities to be
issued under the Indenture, to be designated as the Company's Senior Notes due
2007 (the "Notes"). The Notes are being sold initially by the Company pursuant
to Rule 144A under the Securities Act of 1933, as amended (the "Act").

                  The aggregate principal amount of Notes that may be
authenticated and delivered under this Indenture is unlimited. The Notes that
are to be authenticated and delivered on the

                                      -1-
<PAGE>

date hereof (the "Initial Notes") will be in an aggregate principal amount of
$500,000,000. The Notes shall be issued in definitive fully registered form
without coupons.

                  With respect to any additional Notes the Company elects to
issue under this Indenture (the "Additional Notes"), the Company shall set forth
in an Officer's Certificate the following information:

                  (i)      the aggregate principal amount of such Additional
                           Notes to be authenticated and delivered pursuant to
                           this Indenture;

                  (ii)     the issue price and the issue date of such Additional
                           Notes, including the date from which interest shall
                           accrue; and

                  (iii)    whether such Additional Notes shall be a Note that
                           constitutes a "restricted security" within the
                           meaning of Rule 144(a)(3) of the Securities Act (a
                           "Restricted Note") or a Note that is not a Restricted
                           Note (an "Unrestricted Note); provided, however, that
                           the Trustee shall be entitled to request and
                           conclusively rely on an opinion of counsel with
                           respect to whether any Note constitutes a Restricted
                           Note.

                  For purposes of the Indenture, Notes will not be deemed to be
Additional Notes unless the maturity date, Interest Payment Dates, record date
and interest rate are identical to the Initial Notes. The Initial Notes and the
Additional Notes shall be considered collectively as a single class for all
purposes of this Indenture. Holders of the Initial Notes and the Additional
Notes will vote and consent together on all matters to which such Holders are
entitled to vote or consent as one class, and none of the Holders of the Initial
Notes or the Additional Notes shall have the right to vote or consent as a
separate class on any matter to which such Holders are entitled to vote or
consent.

                  The Notes shall be issued in the form of one or more Global
Securities in substantially the form set out in Exhibit A and as further
provided in Article II. The initial Depositary with respect to the Notes shall
be The Depository Trust Company ("DTC").

                  All payments of principal, premium (if any) and interest on
the Notes shall be made in accordance with Sections 2.14 and 4.01 of the
Original Indenture. No Additional Amounts will be payable on the Notes.

                  SECTION 1.02 Maturity, Payment of Principal and Interest. The
Notes will mature on January 26, 2007. The Notes will bear interest for each
Interest Period at a rate determined by the Calculation Agent. The interest rate
on the Notes for a particular Interest Period will be a per annum rate equal to
the Three-Month LIBOR Rate, as determined on the Interest Determination Date,
plus 0.75%, for each interest period. The Interest Periods with respect to the
Notes are: January 27 though April 26; April 27 through July 26; July 27 through
October 26; and October 27 through January 26, except that the first Interest
Period with respect to the Initial Notes will be from January 26, 2004 through
April 26, 2004. The Interest Determination Date with respect to the Notes will
be the second London Business Day preceding the commencement of an Interest
Period, except that the Interest Determination Date for the first Interest
Period with respect to the Initial Notes will be January 22, 2004. Interest will
be

                                      -2-
<PAGE>

calculated on the basis of the actual number of days in an interest period and a
360-day year. Dollar amounts resulting from such calculation will be rounded
down to the nearest cent, with one-half cent being rounded upward. The interest
rate for the first Interest Period with respect to the Initial Notes is 1.87%.

                  The Interest Payment Dates with respect to the Notes will be
January 26, April 26, July 26 and October 26 of each year. The first Interest
Payment Date with respect to the Initial Notes will be April 26, 2004. Interest
shall be paid to the Person in whose name the applicable Note is registered at
the close of business on January 1, in the case of a January 26 Interest Payment
Date, April 1, in the case of a April 26 Interest Payment Date, July 1, in the
case of a July 26 Interest Payment Date and October 1, in the case of an October
26 Interest Payment Date. Interest on the Initial Notes will accrue from January
26, 2004, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for.

                  The following definitions are used in the calculation of the
interest rate:

                  "Three-Month LIBOR Rate" means the rate for deposits in
amounts of at least $1,000,000 U.S. dollars for the 3-month period commencing on
the applicable Interest Determination Date which appears on Telerate Page 3750
at approximately 11:00 a.m., London time, on the second London banking day prior
to the applicable Interest Reset Date. If Telerate page 3750 is replaced by
another service or ceases to exist, the Calculation Agent (after consultation
with the Company) will use the replacing service or such other service that may
be nominated by the British Bankers' Association for the purpose of displaying
such rate for U.S. dollar deposits. If this rate does not appear on Telerate
Page 3750 at approximately 11:00 a.m London time, on the second London banking
day prior to the applicable Interest Reset Date, the Calculation Agent will
determine the rate on the basis of the rates at which deposits in U.S. dollars
are offered by four major banks in the London interbank market (selected by the
Calculation Agent) to prime banks in the London interbank market for a period of
three months commencing on that Interest Determination Date and in a principal
amount equal to an amount not less than $1,000,000 that is representative for a
single transaction in such market at such time. In such case, the Calculation
Agent will request the principal London office of each of the aforesaid major
banks to provide a quotation of such rate. If at least two such quotations are
provided, the rate for that Interest Determination Date will be the arithmetic
average of the quotations, and, if fewer than two quotations are provided as
requested, the Calculation Agent will select three major banks in The City of
New York to provide a quotation of the rate offered by them at approximately
11:00 a.m., New York City time, on the Interest Determination Date for loans in
U.S. dollars to leading European banks for a period of three months commencing
on that Interest Determination Date and in a principal amount equal to an amount
not less than $1,000,000 that is representative of a single transaction in such
market at such time. If three quotations are provided, the rate for that
Interest Determination Date will be the arithmetic average of the three rates
quoted; otherwise, the rate for that Interest Determination Date will be set
equal to the rate of LIBOR for the then-current interest period.

                  A London banking day is any day in which dealings in U.S.
dollars are transacted in the London interbank market.

                                      -3-
<PAGE>

                  "Telerate Page 3750" means the display page so designated on
the Telerate Service (or such other page as may replace such page on that
service for the purpose of displaying London interbank offered rates of major
banks). The interest rate on the Notes will in no event be higher than the
maximum rate permitted by New York law as the same may be modified by United
States law of general application.

                  SECTION 1.03 Denominations. The Notes shall be issued in
denominations of $1,000 or any integral multiple thereof.

                  SECTION 1.04 No Sinking Fund. The Notes will not be subject to
a sinking fund.

                  SECTION 1.05 Optional Redemption. At January 26, 2005 and at
any Interest Payment Date thereafter, the Notes will be redeemable, in the
Company's sole discretion, in whole or in part, in principal amounts of $1,000
or any integral multiple of $1,000 for an amount equal to 100% of the principal
amount of the Notes to be redeemed, plus accrued and unpaid interest to the
Redemption Date.

                  In the event of any such redemption, interest will accrue up
to and including the Redemption Date. Unless there is a default in payment of
the Redemption Price on and after the Redemption Date, interest will cease to
accrue on the Notes or portions thereof called for redemption.

                  SECTION 1.06 Transfer Restrictions. The Notes shall be subject
to the restrictions on transfer and exchange set forth in Section 2.01, which
restrictions on transfer and exchange shall amend, supplement, modify or
supersede those contained in Article II of the Original Indenture to the extent
applicable.

                  SECTION 1.07 Paying Agent and Calculation Agent. The Company
initially appoints the Trustee as Paying Agent and as Calculation Agent with
respect to the Notes (the "Calculation Agent").

                  SECTION 1.08 Calculation of Interest Rate by the Calculation
Agent. The Calculation Agent will calculate the interest rate applicable to the
Notes for each Interest Period in accordance with the provisions of this Article
I. Promptly upon determination, the Calculation Agent will inform the Trustee
and the Company of the interest rate for the next Interest Period. Absent
manifest error, the determination of the interest rate by the Calculation Agent
shall be binding and conclusive on all Holders of Notes, the Trustee and the
Company. Upon request by any Holder of Notes, the Calculation Agent will provide
notice of the interest rate in effect on the Notes for the then-current Interest
Period and, if it has been determined, the interest rate to be in effect for the
next succeeding Interest Period.

                                   ARTICLE II
                 RESTRICTIONS ON TRANSFER AND EXCHANGE OF NOTES

                  SECTION 2.01 Form; Restrictions on Transfer and Exchange.

                  The Initial Notes are being offered and sold by the Company
pursuant to a Purchase Agreement, dated January 21, 2004, among the Company,
Citigroup Global Markets

                                      -4-
<PAGE>

Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc. and the other initial
purchasers named therein. The Initial Notes and any Additional Notes (if issued
with transfer restrictions) (the "Restricted Notes") will be resold initially
only to (A) qualified institutional buyers (as defined in Rule 144A under the
Act ("Rule 144A")) in reliance on Rule 144A ("QIBs") and (B) Persons other than
U.S. Persons (as defined in Regulation S under the Act ("Regulation S")) in
reliance on Regulation S. Such Restricted Notes may thereafter be transferred
to, among others, QIBs, purchasers in reliance on Regulation S and institutional
"accredited investors" (as defined in Rules 501(a)(1), (2), (3) and (7) under
the Securities Act) who are not QIBs ("IAIs") in accordance with Rule 501 of the
Securities Act in accordance with the procedure described herein.

                  Restricted Notes offered and sold to qualified institutional
buyers in the United States of America in reliance on Rule 144A shall be issued
in the form of a permanent Global Security, without interest coupons,
substantially in the form of Exhibit A (the "Rule 144A Securities"), deposited
with the Trustee, as custodian for DTC, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Rule 144A Securities
may be represented by more than one certificate, if so required by DTC's rules
regarding the maximum principal amount to be represented by a single
certificate. The aggregate principal amount of the Rule 144A Securities may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for DTC or its nominee, as hereinafter provided.

                  Initial Notes and Additional Notes offered and sold outside
the United States of America (the "Regulation S Notes") in reliance on
Regulation S shall be issued in the form of a permanent Global Security, without
interest coupons, substantially in the form of Exhibit A (the "Regulation S
Global Securities"), deposited with the Trustee, as custodian for DTC, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The Regulation S Global Note may be represented by more than one
certificate, if so required by DTC's rules regarding the maximum principal
amount to be represented by a single certificate. The aggregate principal amount
of the Regulation S Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
DTC or its nominee, as hereinafter provided.

                  Each Regulation S Global Note will be deposited with, or on
behalf of, a custodian for DTC for credit to the respective accounts of the
purchasers (or to such other accounts as they may direct) on behalf of the
Euroclear S.A. N.V., as operator of the Euroclear System ("Euroclear") or
Clearstream Banking, societe anonyme ("Clearstream"). Prior to the 40th day
after the later of the commencement of the offering of the Notes and January 26,
2004 (such period through and including such 40th day, the "Restricted Period"),
interests in the Regulation S Temporary Global Notes may only be held through
Euroclear or Cedel (as indirect participants in DTC) unless exchanged for
interests in the Rule 144A Securities.

                  Initial Notes and Additional Notes resold to IAIs (the
"Institutional Accredited Investor Notes") in the United States of America shall
be issued in the form of a permanent Global Security, without interest coupons,
substantially in the form of Exhibit A (the "Institutional Accredited Investor
Global Security"), deposited with the Trustee, as custodian for DTC, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. A transfer of an Institutional Accredited Investor Note shall be made
upon receipt by the Trustee

                                      -5-
<PAGE>

or its agent of a certificate substantially in the form set forth in Exhibit D
from the proposed transferee and, if requested by the Company or the Trustee,
the delivery of an opinion of counsel, certification and/or other information
satisfactory to each of them. The Institutional Accredited Investor Global Note
may be represented by more than one certificate, if so required by DTC's rules
regarding the maximum principal amount to be represented by a single
certificate. The aggregate principal amount of the Institutional Accredited
Investor Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC or its
nominee, as hereinafter provided.

                  Securities issued in exchange for interests in the Rule 144A
Notes, the Regulation S Notes and the Institutional Accredited Investor Notes
will be issued in the form of a permanent Global Security, without interest
coupons, substantially in the form of Exhibit A, and deposited with the Trustee
as hereinafter provided (the "Exchange Global Securities"). The Exchange Global
Securities may be represented by more than one certificate, if so required by
DTC's rules regarding the maximum principal amount to be represented by a single
certificate.

                  Upon any sale or transfer of a Restricted Note (x) pursuant to
Rule 144, (y) pursuant to an effective registration statement under the
Securities Act or (z) pursuant to any other available exemption (other than Rule
144A) from the registration requirements of the Securities Act and as a result
of which, in the case of a Security transferred pursuant to this clause (z),
such Security shall cease to be a "restricted security" within the meaning of
Rule 144, the Trustee shall permit the beneficial owner thereof to transfer such
beneficial interest to a transferee who shall take such interest in the form of
a beneficial interest in an unrestricted Global Security and shall rescind any
restriction on transfer of such beneficial interest; provided, however, that the
owner of such beneficial interest shall, in connection with such transfer,
comply with the other applicable provisions of this Article II.

                  Upon the exchange, registration of transfer or replacement of
Securities not bearing the legends with respect to restrictions on transfer set
forth in Exhibit A, the Company shall execute and the Trustee shall authenticate
and deliver Securities that do not bear such legend and which do not have a
Assignment Form attached thereto.

                  The Securities may have notations, legends or endorsements
required by law, stock exchange rule or usage, in addition to those set forth on
Exhibit A. The Company and the Trustee shall approve the forms of the Securities
and any notation, endorsement or legend on them. Each Security shall be dated
the date of its authentication. The terms of the Securities set forth in Exhibit
A are part of the terms of this Indenture and, to the extent applicable, the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to be bound by such terms.

                                      -6-
<PAGE>

                  SECTION 2.02 Exchanges Among the Global Notes. Transfers by an
owner of a beneficial interest in a Rule 144A Security to a transferee who takes
delivery of such interest through a Regulation S Global Note, whether before or
after the expiration of the Restricted Period, will be made only upon receipt by
the Trustee of a certification from the transferor substantially in the form of
Exhibit B.

                  Prior to the expiration of the Restricted Period, transfers by
an owner of a beneficial interest in a Regulation S Global Note to a transferee
who takes delivery of such interest through the applicable Rule 144A Security
will be made only in accordance with applicable procedures and upon receipt by
the Trustee of a written certification from the transferor of the beneficial
interest substantially in the form of Exhibit C.

                                   ARTICLE III
                                  MISCELLANEOUS

                  SECTION 3.01 Trustee Matters. The recitals in this Third
Supplemental Indenture are made by the Company only and not by the Trustee, and
all of the provisions contained in the Original Indenture in respect of the
rights, privileges, immunities, powers and duties of the Trustee shall be
applicable in respect of the Securities and of this Third Supplemental Indenture
as fully and with like effect as if set forth herein in full.

                  SECTION 3.02 Ratification. The Original Indenture is in all
respects ratified and confirmed, and the Original Indenture and this Third
Supplemental Indenture shall be read, taken and construed as one and the same
instrument; provided that, in case of conflict between this Third Supplemental
Indenture and the Original Indenture, this Third Supplemental Indenture shall
control.

                  SECTION 3.03 Counterpart Originals. This Third Supplemental
Indenture may be simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and such counterparts shall together
constitute one and the same instrument.

                  SECTION 3.04 Performance by DTC, Euroclear or Cedel. Neither
the Company nor the Trustee will have any responsibility for the performance of
DTC, Euroclear or Cedel, or any of their participants, direct or indirect, of
their respective obligations under the rules and procedures governing their
operations.

                  SECTION 3.05 Effect of Headings. The Article and Section
headings herein have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.

                  SECTION 3.06 Governing Law. This Third Supplemental Indenture
and the Notes shall be governed by and construed in accordance with the law of
the State of New York.

                  SECTION 3.07 Provisions for the Sole Benefit of Parties and
Holders. Nothing in the Indenture, as supplemented, amended and modified by this
Third Supplemental Indenture, or in the Notes, expressed or implied, is intended
or shall be construed to confer upon, or to give or grant to, any person or
entity, other than the Company, the Trustee, the Paying Agent, the Calculation
Agent and the registered owners of the Notes, any legal or equitable right,

                                      -7-
<PAGE>

remedy or claim under or by reason of the Indenture or any covenant, condition
or stipulation hereof, and all covenants, stipulations, promises and agreements
in the Indenture contained by and on behalf of the Company shall be for the sole
and exclusive benefit of the Company, the Trustee, the Paying Agent, the
Calculation Agent and the registered owners of the Notes.

                                      -8-
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed as of the day and year first above
written.

                                          HALLIBURTON COMPANY, as Issuer

                                          By:   /s/ C. Christopher Gaut
                                              ----------------------------------
                                              Name: C. Christopher Gaut
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

                                          JPMORGAN CHASE BANK, as Trustee

                                          By:      /s/ Frank W. McCreary
                                              ----------------------------------
                                              Name: Frank W. McCreary
                                              Title: Trust Officer

<PAGE>

                                    EXHIBIT A
                                  FORM OF NOTE

                               [FACE OF SECURITY]

                                                                   [Global Note]
                                                             [Certificated Note]

                  [THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF
REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN
MAY BE OFFERED, SOLD, OR DELIVERED, EXCEPT AS PERMITTED BELOW.

                  NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED
CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE (AS
DEFINED HEREAFTER).](1)

                  [UNTIL THIS SECURITY IS SOLD PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, IT SHALL BEAR THE FOLLOWING LEGEND:]

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THESE SECURITIES
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT or outside
the United States in compliance with Regulation S of the Securities Act, and, in
each case, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER JURISDICTION.

                  THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE

----------

(1) To be included in a Regulation S Temporary Global Note.

<PAGE>

ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

                  THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER
TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION
(OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR
TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL
BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO ANY SUCH
AMENDMENT OR SUPPLEMENT.

                  [IF THIS SECURITY HAS BEEN TRANSFERRED PURSUANT TO REGULATION
S, IT SHALL BEAR THE FOLLOWING LEGEND:]

                  THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.

                  BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT
IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE THAT IS 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE"), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S, (E) TO AN

<PAGE>

INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A TRANSACTION INVOLVING A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN THE CASE OF THE
FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS
BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE
OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B)
THE DATE OF THE CLOSING OF THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

                  BY ITS ACQUISITION OF THIS SECURITY THE HOLDER THEREOF WILL BE
DEEMED TO HAVE REPRESENTED AND WARRANTED THAT EITHER (I) NO PORTION OF THE
ASSETS USED BY SUCH HOLDER TO ACQUIRE AND HOLD THIS SECURITY CONSTITUTES THE
ASSETS OF AN EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO TITLE I OF THE U.S.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OF PLANS,
INDIVIDUAL RETIREMENT ACCOUNTS OR OTHER ARRANGEMENTS THAT ARE SUBJECT TO SECTION
4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR
PROVISIONS UNDER ANY FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR
REGULATIONS THAT ARE SIMILAR TO SUCH PROVISIONS OF ERISA OR THE CODE ("SIMILAR
LAWS"), OR OF AN ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO INCLUDE "PLAN
ASSETS" OF SUCH PLANS, ACCOUNTS OR ARRANGEMENTS, OR (II) THE PURCHASE AND
HOLDING OF THIS SECURITY WILL NOT CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR A SIMILAR VIOLATION
UNDER ANY APPLICABLE SIMILAR LAWS.

                  THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER
TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION
(OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR
TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL
BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO ANY SUCH
AMENDMENT OR SUPPLEMENT.

<PAGE>

                  [IF THIS SECURITY IS TO BE A GLOBAL NOTE, IT SHALL BEAR THE
FOLLOWING LEGEND:]

                  THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY.

                  [FOR AS LONG AS THIS GLOBAL SECURITY IS DEPOSITED WITH OR ON
BEHALF OF THE DEPOSITORY TRUST COMPANY IT SHALL BEAR THE FOLLOWING LEGEND:]

                  THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY.

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO HALLIBURTON COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

                  TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

<PAGE>

                               HALLIBURTON COMPANY

                              SENIOR NOTES due 2007

No. ___                                                      CUSIP No. _________
                                                                               $

                  Halliburton Company, a Delaware corporation (the "Issuer"),
for value received promises to pay to _________ or registered assigns, the
principal sum of_______________ Dollars[, or such greater or lesser amount as
indicated on the Schedule I hereto,](2) on January 26, 2007.

                  Interest Payment
                  Dates:            January 26, April 26, July 26 and October 26

                  Record Dates:     January 1, April 1, July 1 and October 1

                  Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

                  IN WITNESS WHEREOF, the Issuer has caused this Security to be
signed manually or by facsimile by its duly authorized officers.

Dated:
       ----------------

                                          HALLIBURTON COMPANY

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

Certificate of Authentication:

This is one of the Securities of the series
designated therein referred to in the within-
mentioned Indenture.

JPMORGAN CHASE BANK, as Trustee

By:                                                    Dated:
    --------------------------------                           -----------------
         Authorized Signatory

----------

(2) To be included in any Global Note.

<PAGE>

                              [REVERSE OF SECURITY]

                               HALLIBURTON COMPANY

                              Senior Notes due 2007

                  This Security is one of a duly authorized issue of Senior
Notes Due 2007 (the "Securities") of Halliburton Company, a Delaware corporation
(the "Issuer"). The Issuer issued the Securities under an Indenture dated as of
October 17, 2003 between the Issuer and the Trustee, as supplemented by the
Third Supplemental Indenture dated as of January 26, 2004 (the "Indenture").
Capitalized terms used herein for which no definition is provided herein shall
have the meanings set forth in the Indenture.

         1. Interest. The Issuer promises to pay interest on the principal
amount of this Security from January 26, 2004 until maturity. The Securities
shall bear interest at the Three-Month LIBOR Rate, as determined by the
Calculation Agent on each Interest Determination Date, plus 0.75%, for each
Interest Period, until paid or duly provided for. The Issuer will pay interest
quarterly on January 26, April 26, July 26 and October 26 of each year, or, if
any such day is not a Business Day, on the next succeeding Business Day;
provided that if there is no existing Default in the payment of interest, and if
this Security is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be April 26, 2004. Interest on the Securities will
accrue from the most recent Interest Payment Date on which interest has been
paid or, if no interest has been paid, from January 26, 2004. The Three-Month
LIBOR Rate will be reset quarterly on each Interest Determination Date. Interest
payments for the Securities shall be computed and paid on the basis of a 360-day
year and the actual number of days in each interest period.

         2. Method of Payment. The Issuer will pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are canceled after such record
date and on or before such Interest Payment Date. The Holder must surrender this
Security to a Paying Agent to collect principal payments. The Issuer will pay
the principal of and interest on the Securities in money of the United States of
America that at the time of payment is legal tender for payment of public and
private debts. Such amounts shall be payable at the offices of the Trustee or
any Paying Agent, provided that at the option of the Issuer, the Issuer may pay
such amounts (1) by wire transfer with respect to Securities represented by a
Global Note or (2) by check payable in such money mailed to a Holder's
registered address with respect to any Securities.

         3. Paying Agent, Calculation Agent and Registrar. Initially, JPMorgan
Chase Bank (the "Trustee"), the Trustee under the Indenture, will act as Paying
Agent and Registrar and as Calculation Agent. The Issuer may change any Paying
Agent, Calculation Agent, Registrar, co-registrar, additional paying agent or
calculation agent without notice to any Holder. The Issuer or any of the
Issuer's subsidiaries may act in any such capacity.

         4. Indenture. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb) (the
"TIA"), as in effect on the date of execution of the Indenture.

<PAGE>

The Securities are subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
unsecured senior obligations of the Issuer and rank equally with all of the
Issuer's existing and future unsecured indebtedness. The Indenture provides for
the issuance of other series of debt securities thereunder.

         5. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Securities during the period between a record date and the corresponding
Interest Payment Date.

         6. Optional Redemption. No sinking fund is provided for the Securities.
At January 26, 2005 and at any Interest Payment Date thereafter, the Securities
will be redeemable, in the Issuer's sole discretion, in whole or in part, in
principal amounts of $1,000 or any integral multiple of $1,000 for an amount
equal to 100% of the principal amount of the Security to be redeemed, plus
accrued and unpaid interest to the Redemption Date. In the event of any such
redemption, interest will accrue up to and including the Redemption Date. Unless
there is a default in payment of the Redemption Price on and after the
Redemption Date, interest will cease to accrue on the Security or portions
thereof called for redemption. The Notes are not redeemable by the Issuer at any
time.

         7. Persons Deemed Owners. The registered Holder of a Security shall be
treated as its owner for all purposes.

         8. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or the Securities may be amended or supplemented by
the Issuer and the Trustee with the written consent (including consents obtained
in connection with a tender offer or exchange offer for the Securities of any
one or more series or all series or a solicitation of consents in respect of the
Securities of any one or more series or all series, provided that in each case
such offer or solicitation is made to all Holders of then outstanding Securities
of each series (but the terms of such solicitation may vary from series to
series)) of the Holders of at least a majority in principal amount of the then
outstanding Securities of all series under the Indenture affected by such
amendment or supplement (acting as one class), and any existing or past Default
or Event of Default under, or compliance with any provision of, the Indenture
may be waived (other than any continuing Default or Event of Default in the
payment of the principal of, premium (if any) or interest on the Securities) by
the Holders of at least a majority in principal amount of the then outstanding
Securities of any series or of all series (acting as one class) in accordance
with the terms of the Indenture. The Issuer and the Trustee may amend or
supplement the Indenture or the Securities or waive any provision of either, to:

                  (1) cure any ambiguity, omission, defect or inconsistency;

                  (2) evidence the assumption by a Successor of the Issuer's
         obligations under the Indenture and the Securities;

                  (3) provide for uncertificated Securities in addition to or in
         place of certificated Securities or to provide for the issuance of
         bearer securities (with or without coupons);

<PAGE>

                  (4) provide any security for the Securities or to add
         guarantees of, or additional obligors on, the Securities;

                  (5) comply with any requirement in order to effect or maintain
         the qualification of the Indenture under the TIA;

                  (6) add to the covenants of the Issuer for the benefit of the
         Holders of the Securities, or to surrender any right or power conferred
         by the Indenture upon the Issuer;

                  (7) add any additional Events of Default with respect to the
         Securities;

                  (8) change or eliminate any of the provisions of the
         Indenture, provided that any such change or elimination shall become
         effective only when there are no outstanding Securities of any series
         that are adversely affected in any material respect by such changes in
         or elimination of such provisions;

                  (9) establish the form or terms of securities of any series as
         permitted by the Indenture;

                  (10) supplement any of the provisions of the Indenture to such
         extent as shall be necessary to permit or facilitate the defeasance and
         discharge of the Securities pursuant to the Indenture, provided that
         any such action shall not adversely affect the interest of the Holders
         of the Securities of any series in any material respect;

                  (11) evidence and provide for the acceptance of appointment
         hereunder by a successor Trustee with respect to the Securities and to
         add to or change any of the provisions of this Indenture as shall be
         necessary to provide for or facilitate the administration of the trusts
         thereunder by more than one Trustee, pursuant to the requirements of
         the Indenture; or

                  (12) make any other change that does not adversely affect the
         rights of any Holder of any series of Securities under the Indenture.

                  The right of any Holder to participate in any consent required
or sought pursuant to any provision of the Indenture (and the obligation of the
Issuer to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of record
of any Securities with respect to which such consent is required or sought as of
a date fixed in accordance with the terms of the Indenture.

         Without the consent of each Holder affected, the Issuer may not:

                  (1) reduce the amount of Securities whose Holders must consent
         to an amendment, supplement or waiver;

                  (2) reduce the rate of or change the time for payment of
         interest, including default interest, on any Security;

                  (3) change the Stated Maturity of any Security;

<PAGE>

                  (4) change the coin or currency or currencies (including
         composite currencies) in which any Security or any premium or interest
         with respect thereto are payable;

                  (5) impair the right to institute suit for the enforcement of
         any payment of principal of, premium (if any) or interest on any
         Security pursuant to Sections 6.07 and 6.08 of the Indenture, except as
         limited by Section 6.06 of the Indenture;

                  (6) make any change in the percentage of principal amount of
         Securities necessary to waive compliance with certain provisions of the
         Indenture pursuant to Section 6.04 or 6.07 of the Indenture or make any
         change in Section 9.02(8) of the Indenture; or

                  (7) waive a continuing Default or Event of Default in the
         payment of principal of, premium (if any) or interest on the
         Securities.

                  A supplemental indenture that changes or eliminates any
covenant or other provision of the Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities under the
Indenture, or which modifies the rights of the Holders of Securities of such
series with respect to such covenant or other provision, shall be deemed not to
affect the rights under the Indenture of the Holders of the Securities.

         9. Defaults and Remedies. Events of Default are defined in the
Indenture and with respect to the Securities generally include:

                  (1) default by the Issuer in the payment of any interest on
         the Securities when the same becomes due and payable and such default
         continues for a period of 30 days;

                  (2) default by the Issuer in any payment of principal of or
         premium (if any) on the Securities when the same becomes due and
         payable;

                  (3) default by the Issuer in observing or performing any of
         its other covenants or agreements in, or provisions of, the Securities
         or the Indenture which shall not have been remedied within 60 days
         after written notice to the Issuer by the Trustee or to the Issuer and
         Trustee by the holders of at least 25% in aggregate principal amount of
         the Securities then outstanding affected by such default;

                  (4) default by the Issuer on a scheduled payment at maturity,
         in the aggregate principal amount of $125 million or more, after the
         expiration of any applicable grace period, of any Indebtedness or the
         acceleration of any Indebtedness of the Issuer in such aggregate
         principal amount, so that it becomes due and payable prior to the date
         on which it would otherwise have become due and payable and such
         payment default is not cured or such acceleration is not rescinded
         within 30 days after notice to the Issuer in accordance with the terms
         of the Indebtedness; or

                  (5) certain events involving bankruptcy, insolvency or
         reorganization affecting the Issuer.

                  If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the outstanding
Securities affected by such default

<PAGE>

(or, in the case of an Event of Default described in clause (5) above, if
outstanding Securities of other series are affected by such Default, then at
least 25% in principal amount of the then outstanding Securities so affected),
may declare the principal of and interest on all the Securities to be
immediately due and payable, except that in the case of an Event of Default
arising from certain events of bankruptcy, insolvency or reorganization
affecting the Issuer, all outstanding Securities become due and payable
immediately without further action or notice by the Trustee or any Holder. The
amount due and payable upon the acceleration of any Security is equal to 100% of
the principal amount thereof plus accrued interest to the date of payment.
Holders may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or may direct the Trustee in its
exercise of any trust or power conferred on the Trustee. The Trustee may
withhold from Holders notice of any continuing default (except a default in
payment of principal or interest) if it determines that withholding notice is in
their interests. The Issuer must furnish an annual compliance certificate to the
Trustee.

         10. Discharge Prior to Maturity. The Indenture with respect to the
Securities shall be discharged and canceled upon the payment of all of the
Securities issued thereunder and shall be discharged except for certain
obligations upon the irrevocable deposit with the Trustee of funds or Government
Obligations sufficient for such payment.

         11. Trustee Dealings with the Issuer. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuer or its Affiliates, and may otherwise deal with the
Issuer or its Affiliates, as if it were not Trustee.

         12. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Issuer shall not have any liability for any
obligations of the Issuer under the Securities or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Holder by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.

         13. Authentication. The Securities shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.

         14. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed thereon.

         15. Indenture to Control; Governing Law. In the case of any conflict
between the provisions of this Security and the Indenture, the provisions of the
Indenture shall control. The Indenture and the Securities shall be governed by
and construed under the laws of the State of New York.

         16. Successor Person. When a Successor assumes all the obligations of
its predecessor under the Securities and the Indenture in accordance with the
terms and conditions

<PAGE>

of the Indenture, the predecessor person will (except in certain circumstances
specified in the Indenture) be released from those obligations.

         17. Abbreviations and Definitions. Customary abbreviations may be used
in the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).

                  The Issuer will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:

                  Halliburton Company
                  1401 McKinney, Suite 2400
                  Houston, Texas 77010
                  Telephone:  (713) 759-2600
                  Attention:  General Counsel

<PAGE>

                                   SCHEDULE A

                  The initial aggregate principal amount of Securities evidenced
by the Certificate to which this Schedule is attached is $___________. The
notations on the following table evidence decreases and increases in the
aggregate principal amount of Securities evidenced by such Certificate.

<Table>
<Caption>
                                                               Principal Amount of
                                                               Securities Remaining
Decrease in Principal             Increase in Principal       After Such Decrease or            Notation by
Amount of Securities              Amount of Securities               Increase               Security Registrar
---------------------             ---------------------       ----------------------        ------------------
<S>                               <C>                         <C>                           <C>

</Table>

<PAGE>

                                 ASSIGNMENT FORM

To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to

--------------------------------------------------------------------------------
             (Insert assignee's social security or tax I.D. number)

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

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

--------------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)

and irrevocably appoint
                        --------------------------------------------------------
as agent to transfer this Security on the books of the Issuer. The agent may
substitute another to act for him.

Date:                       Your Signature:
      -----------------                    -------------------------------------
                                           (Sign exactly as your name appears on
                                                the face of this Security)

Signature Guarantee:
                     -----------------------------------------------------------
                             (Participant in a Recognized Signature
                                   Guaranty Medallion Program)

                  This assignment relates to $_____ principal amount of Senior
Notes due 2007 of Halliburton Company held in (5)______ book-entry or (5) ______
definitive form by _____________________ (the "Transferor").

                  The Transferor has requested the Trustee by written order to
exchange or register the transfer of a Note or Notes.

                  In connection with such request and in respect of each such
Note, the Transferor does hereby certify that the Transferor is familiar with
the Indenture, as supplemented, relating to the above-captioned Notes and that
the transfer of this Note does not require registration under the Securities Act
(as defined below) because:(5)

         [ ] Such Note is being acquired for the Transferor's own account
without transfer.

         [ ] Such Note is being transferred to the Issuer.

         [ ] Such Note is being transferred pursuant to a registration statement
that has been declared effective under the Securities Act of 1933, as amended
(the "Securities Act").

         [ ] Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act), in accordance with Rule 144A
under the Securities Act.

----------

(5) Fill in blank or check appropriate box, as applicable

<PAGE>

         [ ] Such Note is being transferred pursuant to an exemption from
registration in accordance with Rule 904 of Regulation S under the Securities
Act, based upon an opinion of counsel if the Issuer or the Trustee so requests,
together with a certification in substantially the form of attached to the
Indenture.

         [ ] Such Note is being transferred to an institutional accredited
investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act), that has furnished to the Trustee a signed letter containing certain
representations and agreements as required by the Indenture.

         [ ] Such Note is being transferred pursuant to another available
exemption under the Securities Act.

                                       -----------------------------------------
                                       [INSERT NAME OF TRANSFEROR]

                                       By:
                                          --------------------------------------
                                       Name:
                                       Title:
                                       Address:

Date:
     --------------------------

<PAGE>

                                    EXHIBIT B

             FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
                       TRANSFERS PURSUANT TO REGULATION S

                                                  [Date]

JPMorgan Chase Bank, as Trustee

         Re:      Senior Notes due 2007 of Halliburton Company (the "Notes")

Dear Sir or Madam:

                  Reference is hereby made to the Indenture dated as of October
17, 2003, as amended and supplemented by the Third Supplemental Indenture
thereto, and as amended and supplemented from time to time thereafter (the
"Indenture") between Halliburton Company, as issuer, and JPMorgan Chase Bank, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture. In connection with our proposed sale of $________
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:

                  (a) the offer of the Notes was not made to a person in the
United States;

                  (b) either (i) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States or
(ii) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;

                  (c) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;

                  (d) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and

                  (e) we are the beneficial owner of the principal amount of
Notes being transferred.

                  In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may
be.

                                      B-1
<PAGE>

                  You and the issuer are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.

                                              Very truly yours,

                                              [Name of Transferor]

                                              By:
                                                 -------------------------------

                  Authorized Signature            Signature Medallion Guaranteed

                                      B-2
<PAGE>

                                    EXHIBIT C

                  FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO
                         QUALIFIED INSTITUTIONAL BUYERS

                                                  [Date]

JPMorgan Chase Bank, as Trustee

         Re:      Senior Notes due 2007 of Halliburton Company (the "Notes")

Dear Sir or Madam:

                  Reference is hereby made to the Indenture dated as of January
26, 2004, as amended and supplemented by the Third Supplemental Indenture
thereto, and as amended and supplemented from time to time thereafter (the
"Indenture") between Halliburton Company, as issuer, and JPMorgan Chase Bank, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture. This letter relates to $___________ aggregate
principal amount of Notes which are held in the name of [name of transferor]
(the "Transferor") to effect the transfer of such Notes in exchange for an
equivalent beneficial interest in the Rule 144A Securities.

                  In connection with such request, and with respect to such
Notes, the Transferor does hereby certify that such Notes are being transferred
in accordance with (i) the transfer restrictions set forth in the Notes and (ii)
Rule 144A under the United States Securities Act of 1933, as amended ("Rule
144A"), to a transferee that the Transferor reasonably believes is purchasing
the Notes for its own account or an account with respect to which the transferee
exercises sole investment discretion, and the transferee, as well as any such
account, is a "qualified institutional buyer" within the meaning of Rule 144A,
in a transaction meeting the requirements of Rule 144A and in accordance with
applicable securities laws of any state of the United States or any other
jurisdiction.

                  You and the issuer are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.

                                      C-1
<PAGE>

                                             Very truly yours,
                                             [Name of Transferor]

                                             By:
                                                --------------------------------

                  Authorized Signature            Signature Medallion Guaranteed

                                      C-2
<PAGE>

                                    EXHIBIT D

             FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
                 TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS

                                                     [Date]

Halliburton Company
c/o JPMorgan Chase Bank
600 Travis, Suite 1150
Houston, Texas  77002
Attention:  Institutional Trust Services

Ladies and Gentlemen:

                  This certificate is delivered to request a transfer of
$__________ principal amount of the Senior Notes due January 26, 2007 (the
"Notes") of Halliburton Company (the "Company").

                  Upon transfer, the Notes would be registered in the name of
the new beneficial owner as follows:

                  Name: ____________________________________

                  Address: __________________________________

                  Taxpayer ID Number: ________________________

                  The undersigned represents and warrants to you that:

                  1. We are an institutional accredited investor (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act")) purchasing for our own account or for the account of
such an institutional accredited investor at least $250,000 principal amount of
the Notes, and we are acquiring the Notes not with a view to, or for offer or
sale in connection with, any distribution in violation of the Securities Act. We
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Notes and we
invest in or purchase securities similar to the Notes in the normal course of
our business. We and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.

                  2. We understand that the Notes have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date that is two years after the
later of the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement

                                      D-1
<PAGE>

which has been declared effective under the Securities Act, (c) in a transaction
complying with the requirements of Rule 144A under the Securities Act ("Rule
144A"), to a person we reasonably believe is a qualified institutional buyer
under Rule 144A (a "QIB") that purchases for its own account or for the account
of a QIB and to whom notice is given that the transfer is being made in reliance
on Rule 144A, (d) pursuant to offers and sales that occur outside the United
States within the meaning of Regulation S under the Securities Act, (e) to an
institutional accredited investor within the meaning of Rule 501(a)(1), (2), (3)
or (7) under the Securities Act that is purchasing for its own account or for
the account of such an institutional accredited investor, in each case in a
minimum principal amount of Notes of $250,000 or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional accredited investor (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring
such Notes for investment purposes and not for distribution in violation of the
Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Termination Date of the Notes pursuant to clause (d), (e) or (f) above to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.

                  TRANSFEREE:
                             ----------------------

                  BY:
                     ------------------------------

                                      D-2

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