EMPLOYMENT AGREEMENTWASTE MANAGEMENT, INC., for and on behalf of its affiliated corporations(collectively referred to as the "Company") and ROBERT G. SIMPSON (the"Employee") hereby enter into this EMPLOYMENT AGREEMENT ("Agreement") dated asof October 15, 1998, as follows:1.  EMPLOYMENT.The Company shall employ Employee, and Employee shall be employed by the Companyupon the terms and subject to the conditions set forth in this Agreement.2.  TERM OF EMPLOYMENT.The period of Employee's employment under this Agreement shall begin as ofNovember 17, 1998, and shall continue for a period of three (3) years thereafter(the "Initial Term") and shall be automatically renewed for successive one (1)year periods thereafter, unless Employee's employment is terminated inaccordance with Section 6 below.3.  DUTIES AND RESPONSIBILITIES.         (a) Employee shall serve as Vice President, Taxation. In such capacity,         Employee shall perform such duties as may be assigned to Employee from         time to time by the Company.         (b) Employee shall faithfully serve the Company and/or its affiliated         corporations, devote Employee's full working time, attention and         energies to the business of the Company and/or its affiliated         corporations, and perform the duties under this Agreement to the best         of Employee's abilities.         (c) Employee shall (i) comply with all applicable laws, rules and         regulations, and all requirements of all applicable regulatory,         self-regulatory, and administrative bodies; (ii) comply with the         Company's rules, procedures, policies, requirements, and directions;         and (iii) not engage in any other business or employment without the         written consent of the Company, except as otherwise specifically         provided herein.4.  COMPENSATION AND BENEFITS.         (a) BASE SALARY. During the Employment Term, the Company shall pay         Employee a base salary at the annual rate of Two Hundred Fifty Thousand         ($250,000) Dollars 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 employees.         (b) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse         Employee for the ordinary and necessary business expenses incurred by         Employee                                   Page 1 of 11<PAGE>   2         in the performance of Employee's duties hereunder in accordance with         the Company's customary practices applicable to employees, provided         that such expenses are incurred and accounted for in accordance with         the Company's policy.         (c) BENEFIT PLANS. Employee shall be eligible to participate in or         receive benefits under any pension plan, profit sharing plan, medical         and dental benefits plan, life insurance plan, short-term and long-term         disability plans, supplemental and/or incentive compensation plans, or         any other benefit plan or arrangement generally made available by the         Company to employees of similar status and responsibilities         (hereinafter referred to as "similarly situated employees").         (d) INCENTIVE/BONUS. Employee shall be eligible for a bonus or         incentive compensation payment ("bonus") of up to fifty (50%) percent         of Employee's base pay. Qualification for the bonus shall be pursuant         to the applicable Bonus Plan in effect for the year in which the bonus         is earned. Employee is guaranteed a 1998 bonus in the amount of Fifty         Thousand ($50,000) Dollars, to be paid at the same time as other         corporate office bonuses are paid (in 1999, following the release of         earning for the 1998 calendar year).         (e) STOCK OPTIONS. Employee shall be awarded fifty thousand (50,000)         Waste Management stock options, subject to the approval of the         Compensation Committee of the Board of Directors. The award, vesting         and exercise of all options shall be subject to the provisions of the         Waste Management, Inc., 1993 Stock Incentive Plan.5.  TERMINATION OF EMPLOYMENT.Employee's employment hereunder may be terminated under the followingcircumstances:         (a) DEATH. Employee's employment hereunder shall terminate upon         Employee's death.         (b) TOTAL DISABILITY. The Company may terminate Employee's employment         hereunder upon Employee's becoming "Totally Disabled". For purposes of         this Agreement, Employee shall be "Totally Disabled" if Employee is         physically or mentally incapacitated so as to render Employee incapable         of performing Employee's usual and customary duties under this         Agreement. Employee'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 Employee's receipt of such long-term disability benefits         or Social Security benefits, the Company may, in its reasonable         discretion (but based upon appropriate medical evidence), determine         that Employee is Totally Disabled.         (c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate         Employee's employment hereunder for "Cause" at any time after providing         written notice to Employee.                                  Page 2 of 11<PAGE>   3                  (i) For purposes of this Agreement, the term "Cause" shall                  mean any of the following: (A) conviction of a crime                  (including conviction on a nolo contendere plea) involving a                  felony or, in the good faith judgment of the Company, fraud,                  dishonesty, or moral turpitude; (B) deliberate and continual                  refusal to perform employment duties reasonably requested by                  the Company or an affiliate after thirty (30) days' written                  notice by certified mail of such failure to perform,                  specifying that the failure constitutes cause (other than as a                  result of vacation, sickness, illness or injury); (C) fraud or                  embezzlement determined in accordance with the Company's                  normal, internal investigative procedures consistently applied                  in comparable circumstances; (D) gross misconduct or gross                  negligence in connection with the business of the Company or                  an affiliate which has substantial effect on the Company or                  the affiliate; or (E) breach of any of the covenants set forth                  in Section 8 hereof.                  (ii) An individual will be considered to have been terminated                  for Cause if the Company determines that the individual                  engaged in an act constituting Cause at any time prior to a                  payment date for an award, regardless of whether the                  individual terminates employment voluntarily or is terminated                  involuntarily, and regardless of whether the individual's                  termination initially was considered to have been for Cause.                  (iii) Any determination of Cause under this Agreement shall be                  made by the Company after giving Employee a reasonable                  opportunity to be heard.         (d) VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate         employment hereunder at any time after providing ninety (90) days'         written notice to the Company.         (e) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate         Employee's employment hereunder without Cause at any time after         providing written notice to Employee.6.  COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.In the event that Employee's employment hereunder is terminated, Employee shallbe entitled to the following compensation and benefits upon such termination:         (a) TERMINATION BY REASON OF DEATH. In the event that Employee's         employment is terminated by reason of Employee's death, the Company         shall pay the following amounts to Employee'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, and any vacation                  accrued to the date of death.                                  Page 3 of 11<PAGE>   4                  (ii) Any benefits to which Employee may be entitled pursuant                  to the plans, policies and arrangements referred to in Section                  4(c) 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 Employee's death) which would have                  been payable to Employee if Employee had continued in                  employment until the end of the 12-month period beginning on                  the date of Employee's death. Such amount shall be paid in a                  single lump sum cash payment within thirty (30) days after                  Employee's death.         (b) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that         Employee's employment is terminated by reason of Employee's Total         Disability as determined in accordance with Section 5(b), the Company         shall pay the following amounts to Employee:                  (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. Employee shall also be                  entitled to a bonus or incentive compensation payment to the                  extent such awards are made to similarly situated executives,                  pro-rated for the year in which Executive is terminated and                  paid at the same time as similarly situated executives are                  paid.                  (ii) Any benefits to which Employee may be entitled pursuant                  to the plans, policies and arrangements referred to in Section                  4(c) hereof shall be determined and paid in accordance with                  the terms of such plans, policies and arrangements.                  (iii) An amount equal to                           (A) the Base Salary (at the rate in effect as of the                           date of Employee's Total Disability) which would have                           been payable to Employee if Employee had continued in                           active employment until the end of the 12-month                           period beginning on the date of Employee's                           termination; reduced by                           (B) the maximum annual amount of the long term                           disability benefits payable to Employee under the                           Company's long-term disability plan as determined                           prior to the reduction of such benefits under the                           terms of the plan for other disability income.                  Payment shall be made at the same time and in the same manner                  as such compensation would have been paid if Employee had                  remained in active employment until the end of such period.                                  Page 4 of 11<PAGE>   5         (c) TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION BY EMPLOYEE. In the         event that Employee's employment is terminated by the Company for Cause         pursuant to Section 5(c), or Employee terminates employment pursuant to         Section 5(d), the Company shall pay the following amounts to Employee:                  (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.                  (ii) Any benefits to which Employee may be entitled pursuant                  to the plans, policies and arrangements referred to in Section                  4(c) hereof shall be determined and paid in accordance with                  the terms of such plans, policies and arrangements.         (d) TERMINATION BY THE COMPANY WITHOUT CAUSE. In the event that         Employee's employment is terminated by the Company pursuant to Section         5(e) for reasons other than death, Total Disability or Cause, the         Company shall pay the following amounts to Employee:                  (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.                  (ii) Any benefits to which Employee may be entitled pursuant                  to the plans, policies and arrangements referred to in Section                  4(c) hereof shall be determined and paid in accordance with                  the terms of such plans, policies and arrangements.                  (iii) The Base Salary (at the rate in effect as of the date of                  Employee's termination) which would have been payable to                  Employee if Employee had continued in active employment until                  the later of: (A) the period ending on the last day of the                  Initial Term; or (B) the end of the 12-month period beginning                  on the date of Employee's termination. Payment shall be made                  at the same time and in the same manner as such compensation                  would have been paid if Employee had remained in active                  employment until the end of such period. The Employee shall                  also be eligible for a bonus or incentive compensation                  payment, to the extent bonuses are paid to similarly situated                  employees, pro-rated for the year in which the Employee is                  terminated, and paid at the same time as similarly situated                  employees are paid.                  (iv) The Company, completely at its expense, will continue for                  Employee and Employee's spouse and dependents, group health                  plans, programs or arrangements, in which Employee was                  entitled to participate at any time during the twelve-month                  period prior to the date of termination, until the earlier of:                  (A) last day of period during which Employee receives payment                  in                                   Page 5 of 11<PAGE>   6                  accordance with clause (iii) above; (B) Employee's death                  (provided that benefits payable to Employee's beneficiaries                  shall not terminate upon Employee's death); or (C) with                  respect to any particular plan, program or arrangement, the                  date Employee becomes covered by a comparable benefit provided                  by a subsequent employer.         (e) 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 Employee at the time of         Employee's termination or resignation of employment, Employee 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.         (f) SUSPENSION OR TERMINATION OF BENEFITS AND COMPENSATION. In the         event that the Company, in its sole discretion determines that, without         the Company's express written consent, Employee has                  (i) directly or indirectly engaged in, assisted or have any                  active interest or involvement whether as an employee, agent,                  consultant, creditor, advisor, officer, director, stockholder                  (excluding holding of less than 1% of the stock of a public                  company), partner, proprietor, or any type of principal                  whatsoever, in any person, firm, or business entity which is                  directly or indirectly competitive with the Company or any of                  its affiliates, or                  (ii) directly or indirectly, for or on behalf of any person,                  firm, or business entity which is directly or indirectly                  competitive with the Company or any of its affiliates (A)                  solicited or accepted from any person or entity who is or was                  a client of the Company during the term of Employee's                  employment hereunder or during any of the twelve calendar                  months preceding or following the termination of Employee's                  employment any business for services similar to those rendered                  by the Company, (B) requested or advised any present or future                  customer of the Company to withdraw, curtail or cancel its                  business dealings with the Company, or (C) requested or                  advised any employee of the Company to terminate his or her                  employment with the Company;         the Company shall have the right to suspend or terminate any or all         remaining benefits payable pursuant to Section 6 of this Agreement.         Such suspension or termination of benefits shall be in addition to and         shall not limit any and all other rights and remedies that the Company         may have against Employee.7.  RESTRICTIVE COVENANTS         (a) COMPETITIVE ACTIVITY. Employee covenants and agrees that at all         times during Employee's period of employment with the Company, and         while Employee is receiving payments pursuant to Section 6 of this         Agreement, Employee will not,                                   Page 6 of 11<PAGE>   7         directly or indirectly, engage in, assist, or have any active interest         or involvement, whether as an employee, agent, consultant, creditor,         advisor, officer, director, stockholder (excluding holding of less than         1% of the stock of a public company), partner, proprietor or any type         of principal whatsoever in any person, firm, or business entity which,         directly or indirectly, is engaged in the same business as that         conducted and carried on by the Company, without the Company's specific         written consent to do so. Furthermore, for a period of one (1) year         after the date of termination of Employee's employment, whether such         termination is voluntary or involuntary, by wrongful discharge, or         otherwise, or one (1) year following the cessation of payments made         pursuant to Section 6 of this Agreement, or for a period of one (1)         year following the date of termination, whichever date is later,         Employee will not directly or indirectly, within 75 miles of the         principal place of business of the Company, the principal place of         business of any corporation or other entity owned, controlled by (or         otherwise affiliated with) the Company by which Employee may also be         employed or served by Employee, or any other geographic location in         which Employee has specifically represented the interests of the         Company or such other affiliated entity, during the twelve (12) months         prior to the termination of Employee's employment, engage in, assist,         or have any active interest or involvement, whether as an employee,         agent, consultant, creditor, advisor, officer, director, stockholder         (excluding holding of less than 1% of the stock of a public company),         partner, proprietor or any type of principal whatsoever in any person,         firm, or business entity which, directly or indirectly, is engaged in         the same business as that conducted and carried on by the Company,         without the Company's specific written consent to do so.         (b) NON-SOLICITATION. Employee covenants and agrees that at all times         during Employee's period of employment with the Company, and for a         period of one (1) year after the date of termination of Employee's         employment, whether such termination is voluntary or involuntary by         wrongful discharge, or otherwise, or the date of the cessation of         payments made to the Employee pursuant to Section 6 of this Agreement,         whichever date is later. Employee will not directly or indirectly (i)         induce any customers of the Company or corporations affiliated with the         Company to patronize any similar business which competes with any         material business of the Company; (ii) canvass, solicit or accept any         similar business from any customer of the Company or corporations         affiliated with the Company; (iii) directly or indirectly request or         advise any customers of the Company or corporations affiliated with the         Company to withdraw, curtail or cancel such customer's business with         the Company; (iv) directly or indirectly disclose to any other person,         firm or corporation the names or addresses of any of the customers of         the Company or corporations affiliated with the Company; or (v)         individually of through any person, firm, association or corporation         with which Employee is now or may hereafter become associated, cause,         solicit, entice, or induce any present or future employee of the         Company, or any corporation affiliated with the Company to leave the         employ of the Company, or such other corporation to accept employment         with, or compensation from, the Employee or any such person, firm,         association or corporation without the prior written consent of the         Company.                                  Page 7 of 11<PAGE>   8         (c) NON-DISPARAGEMENT. Employee covenants and agrees that Employee         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.         (d) PROTECTED INFORMATION. Employee recognizes and acknowledges that         Employee has had and will continue to have access to various         confidential or proprietary information concerning the Company and         corporations affiliated with the Company, of a special and unique value         which may include, without limitation, (i) books and records relating         to operation, finance, accounting, sales, personnel and management,         (ii) policies and matters relating particularly to operations such as         customer service requirements, costs of providing service and         equipment, operating costs and pricing matters, and (iii) various trade         or business secrets, including business opportunities, marketing or         business diversification plans, business development and bidding         techniques, methods and processes, financial data and the like         (collectively, the "Protected Information"). Employee therefore         covenants and agrees that Employee will not at any time, either while         employed by the Company or afterwards, knowingly make any independent         use of, or knowingly disclose to any other person or organization         (except as authorized by the Company) any of the Protected Information.8.  ENFORCEMENT OF COVENANTS.         (a) TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION. Employee         agrees that any breach by Employee of any of the covenants set forth in         Section 7 hereof during Employee's employment by the Company, shall be         grounds for immediate dismissal of Employee and forfeiture of any         accrued and unpaid salary, bonus, commissions or other compensation of         such Employee as liquidated damages, which shall be in addition to and         not exclusive of any and all other rights and remedies the Company may         have against Employee.         (b) RIGHT TO INJUNCTION. Employee acknowledges that a breach of the         covenants set forth in Section 7 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 of         anticipatory breach of the covenants set forth in this section by         Employee, Employee and the Company agree that the Company shall be         entitled to the following particular forms of relief, in addition to         remedies otherwise available to it at law or equity; (i) injunctions,         both preliminary and permanent, enjoining or retraining such breach or         anticipatory breach and Employee hereby consents to the issuance         thereof forthwith and without bond by any court of competent         jurisdiction; and (ii) recovery of all reasonable sums                                   Page 8 of 11<PAGE>   9         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 7         hereof constitute a series of separate 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 7         exceed the time, geographic, or occupational limitations permitted by         applicable laws, Employee 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. Employee and the         Company further agree that the covenants in Section 7 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         Employee 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 7.9.  WITHHOLDING OF TAXES.The Company may withhold from any compensation and benefits payable under thisAgreement all applicable federal, state, local, or other taxes.10.  NON-DISCLOSURE OF AGREEMENT TERMS.Employee agrees that Employee will not disclose the terms of this Agreement toany third party other than Employee's immediate family, attorney, accountants,or other consultants or advisors or except as may be required by anygovernmental authority.11.  SOURCE OF PAYMENTS.All payments provided under this Agreement, other than payments made pursuant toa plan which provides otherwise, shall be paid from the general funds of theCompany, and no special or separate fund shall be established, and no othersegregation of assets made, to assure payment. Employee shall have no right,title or interest whatever in or to any investments which the Company may maketo aid the Company in meeting its obligations hereunder. To the extent that anyperson acquires a right to receive payments from the Company hereunder, suchright shall be no greater than the right of an unsecured creditor of theCompany.                                  Page 9 of 11<PAGE>   1012.  ASSIGNMENT.Except as otherwise provided in this Agreement, this Agreement shall inure tothe benefit of and be binding upon the parties hereto and their respectiveheirs, representatives, successors and assigns. This Agreement shall not beassignable by Employee.13.  ENTIRE AGREEMENT; AMENDMENT.This Agreement shall supersede any and all existing oral or written agreements,representations, or warranties between Employee and the Company or any of itssubsidiaries or affiliated entities relating to the terms of Employee'semployment by the Company. It may not be amended except by a written agreementsigned by both parties.14.  GOVERNING LAW.This Agreement shall be governed by and construed in accordance with the laws ofthe State of Texas, applicable to agreements made and to be performed in thatState, without regard to its conflict of laws provisions.15.  NOTICES.Any notice, consent, request or other communication made or given in connectionwith this Agreement shall be in writing and shall be deemed to have been dulygiven when delivered or mailed by registered or certified mail, return receiptrequested, or by facsimile or by hand delivery, to those listed below at theirfollowing respective addresses or at such other address as each may specify bynotice to the others:         To the Company:            Waste Management, Inc.         1001 Fannin, Suite 4000         Houston, Texas 77002         Attention: Corporate Secretary         To Employee:               At the address for Employee set forth below.16.  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 8 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.                                 Page 10 of 11<PAGE>   11         (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, the parties hereto have duly executed this Agreement as ofthe day and year first above written.WASTE MANAGEMENT, INC.By:       /s/ Earl E. DeFrates   --------------------------------------------Name:     Earl E. DeFrates     ------------------------------------------Title:    Executive Vice President & CFO      -----------------------------------------Date:     October 15, 1998     ------------------------------------------EMPLOYEE          /s/ Robert G. Simpson-----------------------------------------------Date:     October 15, 1998     ------------------------------------------Address:  5627 Palisade Falls Trail        ---------------------------------------          Kingwood, TX   77345-----------------------------------------------                                 Page 11 of 11