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                                                                    EXHIBIT 10.2


                 AMENDED AND RESTATED EMPLOYMENT AGREEMENT


                  THIS AGREEMENT ("Agreement") is made and entered into as of
this 4th day of August, 1998, by and between Michael R. Azarela, an individual
resident of the State of New York ("Employee"), and RailWorks Corporation, a
Delaware corporation (as defined below, the "Holding Company").

                               W I T N E S S E T H

                  WHEREAS, the Holding Company has been created for the purpose
of carrying on the businesses of the entities listed on Exhibit A, which is
attached hereto and hereby incorporated by reference herein (the "Founding
Companies"), and the Holding Company has completed a public offering (the "IPO")
of its common stock under applicable law.

                  WHEREAS, the Employee has substantial experience advising
entities that are in the same businesses as the Founding Companies, and has
substantial managerial experience;

                  WHEREAS, the Founding Companies desire that the Holding
Company employ the Employee to be the Executive Vice President and Chief
Financial Officer of the Holding Company on the terms and conditions as
contained herein; and

                  WHEREAS, the Employee desires to be so employed by the Holding
Company, on the terms and conditions as contained herein.

                  NOW, THEREFORE, in consideration of the premises and the
mutual promises and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties hereto, the parties hereto, intending to be legally bound, hereby
agree as follows:

                  SECTION 1.        EMPLOYMENT.

                  Subject to the terms hereof, Employer will employ Employee and
Employee hereby accepts such employment. The Employee shall serve as the
Executive Vice President and Chief Financial Officer of the Holding Company and
shall be a director of the Holding Company.

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                  Subject to the terms and conditions of this Agreement, from
the date hereof, Employee agrees to devote substantially all of his business
time and best efforts to the performance of his job as Executive Vice President
and Chief Financial Officer of the Holding Company, subject to direction by the
Board of Directors of the Holding Company (the "Board of Directors"), as long as
such directions are consistent with the duties, responsibilities and authority
customarily given or required of chief financial officers generally, with the
Employee to report his activities regularly to the Board of Directors.

                  SECTION 2.        TERM OF EMPLOYMENT. The term of the 
Employee's employment hereunder (the "Term") shall be from May 21, 1998 until
the occurrence of any of the following events:

         (i)      The death or total disability of Employee (total disability
                  meaning the failure to fully perform his normal required
                  services hereunder for a period of six (6) consecutive months
                  during any consecutive twelve (12) month period during the
                  term hereof, as determined by an independent medical doctor
                  jointly chosen by the Employee and the Employer) by reason of
                  mental or physical disability;

         (ii)     The termination by Employer of Employee's employment
                  hereunder, upon thirty (30) days prior written notice to
                  Employee, for "good cause", as reasonably determined by the
                  Board of Directors. For purposes of this Agreement, "good
                  cause" for termination of Employee's employment shall exist
                  (A) if Employee is convicted of, pleads guilty to or confesses
                  to any felony or any act of fraud, misappropriation or
                  embezzlement, (B) if Employee has engaged in a dishonest act
                  to the material damage or prejudice of Employer or an
                  affiliate of Employer, or in conduct or activities materially
                  damaging to the property, business, or reputation of Employer
                  or an affiliate of Employer, or (C) if Employee violates any
                  of the provisions contained in Section 5 of this Agreement,
                  after receiving written notice from the Employer specifically
                  outlining the alleged violations by the Employee of Section 5
                  hereof and either (1) the Employee fails to stop the alleged
                  behavior which is claimed to be such a breach within thirty
                  (30) days of receipt by the Employee of such written notice or
                  (2) the Employer prevails in mediation or binding arbitration
                  pursuant to the commercial arbitration rules of the American
                  Arbitration Association which arbitration is commenced by the
                  Employee within thirty (30) days of receipt by the Employer of
                  such notice in accordance with the provisions of Section 5.6
                  hereof;

         (iii)    The termination by either the Employee or the Employer, upon
                  thirty (30) days written notice to the other party, in the
                  event of a Change of Control of the Employer (as defined
                  hereinbelow).


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                           For purposes of this Agreement, a "Change of Control"
                  shall be deemed to have occurred if (A) any "person" (as such
                  term is used in Sections 13(d) and 14(d) of the Securities
                  Exchange Act of 1934, as amended (the "Exchange Act")), other
                  than a trustee or other fiduciary holding securities under an
                  employee benefit plan of the Holding Company, a corporation
                  owned directly or indirectly by the stockholders of the
                  Holding Company (immediately after the IPO) or any of their
                  respective affiliates, becomes the "beneficial owner" (as
                  defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of the Holding Company representing
                  50% or more of the total voting power represented by the
                  Holding Company's then outstanding securities that vote
                  generally in the election of directors (referred to herein as
                  "Voting Securities"); (B) during any period of two consecutive
                  years, individuals who at the beginning of such period
                  constitute the Board of Directors and any new directors whose
                  election by the Board of Directors or nomination for election
                  by the Holding Company's stockholders was approved by a vote
                  or a majority of the directors then still in office who either
                  were directors at the beginning of the period or whose
                  election or nomination for election was previously so
                  approved, cease for any reason to constitute a majority of the
                  Board of Directors; (C) the stockholders of the Holding
                  Company approve a merger or consolidation of the Holding
                  Company with any other corporation, other than a merger or
                  consolidation (i) which would result in the Voting Securities
                  of the Holding Company outstanding immediately prior thereto
                  continuing to represent (either by remaining outstanding or by
                  being converted into Voting Securities of the surviving
                  entity) at least 50% of the total voting power represented by
                  the Voting Securities of the Holding Company or such surviving
                  entity outstanding immediately after such merger or
                  consolidation or (ii) in which 50% or more of the board of
                  directors of the surviving entity is composed of members from
                  the Board of Directors of the Holding Company; (D) the
                  stockholders of the Holding Company approve a plan of complete
                  liquidation of the Holding Company or an agreement for the
                  sale or disposition by the Holding Company of (in one
                  transaction or a series of transactions) all or substantially
                  all of the Holding Company's assets; (E) the executive offices
                  of the Holding Company are relocated from the Greater
                  Baltimore Metropolitan Area or (F) the Employee is not a
                  member of the Board of Directors or is not on any Executive
                  Committee or similar committee of the Board of Directors; or

         (iv)     After December 31, 2001, this Agreement shall continue upon a
                  year-to-year basis unless terminated by either the Employer or
                  the Employee upon ninety days (90) written notice to the other
                  before January 1 of the next year.


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                  SECTION 3.        COMPENSATION.

                  3.1      Term of Employment. Employer will provide Employee
with the following salary, expense reimbursement and additional employee
benefits during the term of employment hereunder.

                  (a)      Salary. From the date of this Agreement, Employee
                           will be paid a salary (the "Base Salary") of no less
                           than Two Hundred Thousand Dollars ($200,000) per
                           annum, less deductions and withholdings required by
                           applicable law. The Base Salary shall be paid to
                           Employee in equal monthly installments (or on such
                           more frequent basis as other executives of Employer
                           are compensated). The Base Salary shall be reviewed
                           by the Board of Directors of Employer on at least an
                           annual basis thereafter and may be increased but not
                           decreased as a result of any such review.

                  (b)      Performance Bonuses. In addition to the Base Salary,
                           the Employee shall have the right to receive from the
                           Employer, and the Employer shall be obligated to pay
                           to the Employee, a performance bonus (the
                           "Performance Bonus") for each fiscal year during the
                           term of this Agreement, equal to the aggregate amount
                           determined by the bonus formulas delineated herein
                           below. Any amount of a Performance Bonus required to
                           be paid to the Employee for a fiscal year during the
                           term of this Agreement shall be paid by the Employer
                           in the first pay period of the Employer immediately
                           following the finalization of the accounting audit
                           for financial accounting purposes of the Employer for
                           the preceding fiscal year but in all events by March
                           31 of the year immediately following the end of the
                           fiscal year for which such Performance Bonus is
                           attributable.

                           The formulas to determine a Performance Bonus for any
                           fiscal year during the term of this Agreement shall
                           be as follows:

                           (i)      For each fiscal year of the Employer, .2% of
                                    the pre-tax net income, before any
                                    performance or other periodic bonuses for
                                    any of the employees of the Employer and any
                                    of its consolidated subsidiaries, of the
                                    Employer on a consolidated basis for
                                    financial accounting basis based upon
                                    applying generally accepted accounting
                                    principles and generally accepted auditing
                                    standards on a consistent basis. This bonus
                                    shall be calculated by the independent
                                    certified public accountant regularly
                                    employed by the Employer (the "CPA")
                                    applying such generally accepted


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                                    accounting principles and generally accepted
                                    auditing standards on a consistent basis.

                                    Plus

                           (ii)     For each fiscal year of the Employer, two
                                    percent (2%) of the excess of (a) the
                                    consolidated after tax net income of the
                                    Employer and its consolidated subsidiaries
                                    for a fiscal year, computed by the CPA
                                    applying generally accepted accounting
                                    principles and generally accepted auditing
                                    standards on a consistent basis over (b) the
                                    Wall Street Estimate (as hereinafter
                                    defined) for such fiscal year. For purposes
                                    of this subsection (ii)(b), Wall Street
                                    Estimate for a fiscal year shall mean the
                                    simple arithmetical average of the
                                    consolidated earnings per share estimates
                                    for a fiscal year of the Employer and its
                                    consolidated subsidiaries in the possession
                                    of First Call on the Determination Date (as
                                    hereinafter defined), translated by the CPA
                                    into the equivalent consolidated after tax
                                    net income of the Employer and its
                                    consolidated subsidiaries for such fiscal
                                    year. For purposes of this subsection
                                    (ii)(b), the Determination Date shall mean
                                    the date the IPO is consummated and
                                    thereafter shall be the first day of the
                                    fiscal year for which such computation
                                    applies.

                  (c)      Discretionary Bonus. The Board of Directors may, from
                           time to time, award the Employee an additional
                           discretionary bonus based upon such factors as the
                           Board of Directors deems appropriate. The Employer
                           shall have no entitlement to such a discretionary
                           bonus until and unless so awarded by the Board of
                           Directors.

                  (d)      Vacation. Employee shall receive four (4) weeks
                           vacation time per calendar year during the term of
                           this Agreement in addition to customary holidays
                           afforded other employees of Employer. Any unused
                           vacation days in any calendar year may not be carried
                           over to subsequent years. The Employer recognizes the
                           benefit to it of the Employee attending and
                           participating in trade seminars, conventions, and
                           similar gatherings and educational seminars and
                           encourages the Employee to attend such seminars and
                           conventions. Accordingly, any reasonable cost and
                           expenses thereof will be paid for by the Employer and
                           any time spent by the Employee at such seminars and
                           conventions shall not constitute vacation


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                           time but shall constitute part of the Employee's
                           duties under this Agreement.

                  (e)      Expenses. Employer shall reimburse Employee, within
                           thirty (30) days of its receipt of a reimbursement
                           report from the Employee, for all reasonable and
                           necessary expenses incurred by Employee on behalf of
                           Employer.

                  (f)      Benefit Plans. Employee shall have the option of
                           participating in such medical, dental, disability,
                           hospitalization, life insurance, stock option and
                           other benefit plans (such as pension and profit
                           sharing plans) as Employer maintains from time to
                           time for the benefit of other senior executives of
                           Employer, on the terms and subject to the conditions
                           set forth in such plans.

                  (g)      Relocation. In addition to other compensation and
                           reimbursement of expenses required to be paid under
                           this Agreement, Employer shall reimburse Employee
                           within ten (10) days of submission of a reimbursement
                           report:

                           (A)      Any and all of his out-of-pocket expenses of
                                    any kind or nature, incurred by Employee
                                    relating to the relocation ("Relocation") of
                                    Employee and/or his family from the New York
                                    City Metropolitan area to the Baltimore
                                    Metropolitan area including, but not limited
                                    to:

                                    I.       Packing, storage and professional
                                             mover costs relating to the
                                             furniture, clothing, household
                                             belongings and other personal
                                             property of Employee and his
                                             family.

                                    II.      Travel expenses incurred by
                                             Employee and his family in
                                             connection with commuting to and
                                             from New York and Maryland relating
                                             to searching for a new residence
                                             ("Maryland Home") in Maryland and
                                             the sale of Employee's existing
                                             home ("New York Home") in New York.

                                    III.     Real estate commissions paid
                                             relating to the sale of the New
                                             York Home.


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                                    IV.      Mortgage application, points, fees,
                                             charges, appraisal, attorney fees
                                             of the mortgage lender, title
                                             insurance, survey, and all other
                                             costs and expenses associated with
                                             obtaining a loan and mortgage and
                                             the purchase of the Maryland Home.

                                    V.       Attorney fees incurred by Employee
                                             relating to the sale of the New
                                             York Home and purchase of the
                                             Maryland Home.

                           (B)      Temporary housing costs in Maryland for
                                    Employee and/or his family pending
                                    completion of the Relocation, for a period
                                    not exceeding six months from the effective
                                    date of the IPO.

                  3.2      Effect of Termination. Except as hereinafter
provided, upon the termination of the employment of Employee hereunder for any
reason, Employee shall be entitled to all compensation and benefits earned or
accrued under Section 3.1 as of the effective date of termination (the
"Termination Date"), but from and after the Termination Date no additional
compensation or benefits shall be earned by Employee hereunder. Except upon
termination by the Employer of the employment of the Employee pursuant to the
provisions of Section 2(ii) hereof, Employee shall be deemed to have earned any
Performance Bonus payable with respect to the fiscal year in which the
Termination Date occurs on a prorated basis (based on the number of days in such
calendar year through and including the Termination Date divided by 365). Any
such Performance Bonus shall be payable on the date on which the Performance
Bonus would have been paid had Employee continued his employment hereunder. In
addition, the Employee and his eligible dependents shall be entitled to receive
at the sole cost of the Employer (A) the health insurance benefits specified
hereunder for a period of twelve (12) months following the Termination Date (the
"Continuation Period") and following such time period, the Employee shall be
entitled to all rights afforded to him under the Federal Omnibus Reconciliation
Act ("COBRA") to purchase continuation coverage of such health insurance
benefits for himself and his dependents for the maximum period permitted by law,
and the Employee shall be deemed to have elected to exercise his rights under
Cobra as of the first day of the Continuation Period, and (B) the life insurance
benefits specified hereinabove for the period of the Continuation Period.

                  (i)      Upon termination of this Agreement, pursuant to the
provisions of Sections 2 (i) or (iii) hereof, any stock grants or options
previously awarded to the Employee, either by this Agreement or otherwise, shall
fully and completely vest and the Employee shall be able to retain or obtain as
the case may be, such stock, as though there was no vesting period or criteria
of any kind or nature, with respect to such stock. If stock options have
previously been awarded to the Employee, notwithstanding any terms and
conditions of such award or any plan


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pursuant to which such stock options were awarded, the Employee or his
authorized representative shall have a period of three (3) months from the
Termination Date to exercise any or all of such stock options and acquire for
his own benefit the shares of stock covered by such stock options.

                  (ii)     Upon termination of the Agreement pursuant to the
terms of Section 2(ii) or (iv) hereof, all granted but unvested, at the
Termination Date, stock grants or options shall be forfeited upon such
termination; provided that the Employee shall be able to retain or exercise any
rights for a period of one (1) month after the Termination Date, notwithstanding
the terms and provisions of such stock options awarded or the plan under which
they were awarded, with respect to any shares of stock granted or shares of
stock covered by stock options that have fully vested as of the Termination
Date.

                  SECTION 4.        COMMON STOCK.

                  4.1.     Term of Employment. So that Employee can share in the
increase in value of the business of Employer over time, Employee will be
granted common stock of Employer as follows:

                  (i)      Stock Grant. Simultaneously with the consummation of
                           the IPO, Employee will be granted that number of
                           shares of all classes of stock of the Holding Company
                           equal to one percent (1.0%) of the number of shares
                           of all classes of stock of the Holding Company
                           outstanding immediately upon consummation of the IPO.
                           Such shares so granted shall fully and completely
                           vest on the date of issuance.

                  (ii)     Stock Splits and Recapitalization. The number of
                           shares of common stock granted hereby shall be
                           automatically adjusted to reflect any change in the
                           capitalization of the Holding Company, including, but
                           not limited to, such changes as stock dividends,
                           stock splits or recapitalizations. If any adjustment
                           under this Section would create the right of Employee
                           to acquire a fractional share of stock, such
                           fractional share shall be disregarded and the number
                           of shares of common stock subject to the grant shall
                           be the next higher number of whole shares of common
                           stock, rounding all fractions upward.

                  4.2      Stock Loan.

                  (i)      In order to help the Employee pay any required income
                           taxes with respect to the stock granted to the
                           Employee pursuant to the provisions of Section


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                           4.1 hereof, at any time after the IPO has been
                           consummated, the Employer, upon thirty (30) days
                           written notice from the Employee, shall provide to
                           the Employee a loan (the "Loan") in an amount equal
                           to such income taxes, to be interest only for a
                           period of five (5) years, to require yearly payments
                           of simple interest at the same interest rate as the
                           Holding Company incurs to borrow funds from its
                           institutional lenders, to be collateralized only by
                           the stock granted and the Employee otherwise will not
                           be personally obligated to repay the Loan; provided
                           that upon the termination of this Agreement pursuant
                           to the provisions of Section 2(i) or (ii), the loan
                           shall be fully paid off within three (3) months of
                           the Termination Date and upon the termination of this
                           Agreement pursuant to Sections 2 (iii) or (iv),
                           hereof, the Loan shall be fully paid off within one
                           (1) year after the Termination Date.

                  (ii)     To the extent that the Employee has not repaid the
                           entire principal balance of the Loan plus any accrued
                           interest thereon before January 1, 2001, the Employee
                           agrees to sell, as promptly as practicable, a
                           sufficient number of shares of Common Stock to enable
                           the Employee to repay the then remaining outstanding
                           balance (unpaid principal balance and unpaid accrued
                           interest from time to time, the ("Unpaid Balance of
                           the Loan")) of the Loan after any taxes have been
                           provided for (the "Required Number of Shares"),
                           subject to the following conditions and requirements:

                           (A)      Such sales shall be made in a manner which
                                    shall reasonably not disrupt the orderly
                                    trading of Common Stock, either through open
                                    market or privately negotiated transactions
                                    as long as no sales shall be made at a price
                                    lower that 1/16 below the last sales price
                                    of Common Stock publicly traded immediately
                                    prior to such sale even if such prohibition
                                    shall cause a delay in Employee's compliance
                                    with his obligation to sell Common Stock as
                                    provided hereinabove;

                           (B)      If after January 1, 2001 the Holding Company
                                    proposes to register any of its securities
                                    under the Securities Act for sale to the
                                    public for its own account or for the
                                    account of other security holders or both,
                                    the Holding Company may, upon 30 days prior
                                    written notice to the Employee, require the
                                    Employee to include the Required Number of
                                    Shares in such offering and to sell such
                                    shares as part of such offering. In such
                                    event, all of the costs of registering the


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                                    Required Number of Shares, including but not
                                    limited to, all registration and filing
                                    fees, printing expenses, fees and
                                    disbursements of counsel and independent
                                    public accountants for the Holding Company;
                                    fees of the National Association of
                                    Securities Dealers, Inc., state Blue Sky
                                    fees and expenses, transfer taxes, fees of
                                    transfer agents and registrars and costs of
                                    insurance; and all underwriting discounts
                                    and selling commissions applicable to the
                                    sale of shares other than the Required
                                    Number of Shares, shall be paid by the
                                    Holding Company. Notwithstanding the above,
                                    the Employee shall pay all underwriting
                                    discounts and selling commissions directly
                                    payable with respect to the registration of
                                    the Required Number of Shares; or

                           (C)      If, as of June 1, 2001, Employee has not yet
                                    disposed of the Required Number of Shares,
                                    the Holding Company will repurchase from the
                                    Employee the Required Number of Shares at a
                                    per share price equal to 1/16 lower than the
                                    average of the closing sales price for the
                                    Common Stock as reported on the national
                                    stock exchange on which the Holding
                                    Company's stock trades for a ten (10) day
                                    period prior to the date of such sale to the
                                    Holding Company, provided, however, that
                                    such repurchase shall only be required if it
                                    can be effected in a manner that complies
                                    with all applicable securities laws.

                  Notwithstanding anything contained herein to the contrary, the
Employee shall not be required to sell any of the Required Number of Shares
unless the net proceeds paid to the Employee as a result of such shares equals
or exceeds 150% of the IPO Price per share.

                  Nothing in this Section 4.2(ii) shall be construed to require
the Employee to sell common stock except in compliance with all applicable
securities laws. Any delay imposed due to compliance with requirements of
applicable securities laws shall suspend the Employee's obligation to sell
Common Stock as otherwise provided hereinabove.

                  Lastly, notwithstanding anything to the contrary contained in
this Section 4.2(ii), the Employee shall have the right but not the obligation,
at any time and from time to time, to repay the Unpaid Balance of the Loan from
his personal resources.

                  4.3      Securities Act. THE SHARES OF COMMON STOCK (THE
"SHARES") GRANTED PURSUANT TO THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR


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ANY APPLICABLE STATE SECURITIES LAWS, THE SHARES ARE OFFERED PURSUANT TO
EXEMPTIONS PROVIDED BY SECTION 4(2) OF THE ACT AND CERTAIN RULES AND REGULATIONS
PROMULGATED PURSUANT THERETO. THE SHARES MAY NOT BE TRANSFERRED BY THE EMPLOYEE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO EMPLOYER
AND ITS COUNSEL, WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD, THAT SUCH
REGISTRATION IS NOT REQUIRED.

                  At such time as counsel for the Employee, which is acceptable
to the Holding Company, which acceptance shall not be unreasonably withheld,
opines that the aforementioned stock restriction and legend can be removed from
the certificates representing stock granted pursuant to Section 4.1(i) hereof in
accordance with applicable securities law, the Holding Company agrees to delete
any such legend from the certificates representing such shares that have been so
granted.

                  SECTION 5.        PARTIAL RESTRAINT ON COMPETITION.

                  5.1      Definitions. For the purposes of this Section 5, the
following definitions shall apply.

                           (a)      "Company Activities" means the business of
                                    construction and maintenance of railway beds
                                    and tracks; construction and maintenance of
                                    elevated rail systems and structures;
                                    construction and maintenance of railway
                                    switching and signaling equipment,
                                    distributorships and supply in the field of
                                    rail and railway construction materials;
                                    distributorships and supply in the field of
                                    electromechanical controls for use in the
                                    railroad industry, namely, railway switching
                                    equipment and railway signaling equipment;
                                    and design for others in the field of
                                    railroad industry, namely, engineering
                                    design of rail and railway related
                                    structures and equipment or any other
                                    business of the Employer and its
                                    consolidated (for financial accounting
                                    purposes) subsidiaries (the "Consolidated
                                    Group") which said entities are engaged in
                                    on the Termination Date as long as such
                                    business generated gross sales of at least
                                    10% or more of the total gross sales of the
                                    Consolidated Group for the most recent
                                    fiscal year of the Employer before or on the
                                    Termination Date.


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                           (b)      "Competitor" means any business, individual,
                                    partnership, joint venture, association,
                                    firm, corporation or other entity, other
                                    than the Employer or its affiliates or
                                    subsidiaries, engaged, wholly or partly, in
                                    Company Activities.

                           (c)      "Competitive Position" means (i) having any
                                    financial interest in a Competitor,
                                    including but not limited to, the direct or
                                    indirect ownership or control of all or any
                                    portion of a Competitor, or acting as a
                                    partner, officer, director, principal, agent
                                    or trustee of any Competitor or (ii)
                                    engaging in any employment or independent
                                    contractor arrangement, business or other
                                    activity with any Competitor whereby
                                    Employee will serve such Competitor in any
                                    senior managerial capacity.

                           (d)      "Confidential Information" means any
                                    confidential, proprietary business
                                    information or data belonging to or
                                    pertaining to Employer that does not
                                    constitute a "Trade Secret" (as hereinafter
                                    defined) and that is not generally known by
                                    or available through legal means to the
                                    public, including, but not limited to,
                                    information regarding Employer's customers
                                    or actively sought prospective customers,
                                    acquisition targets, suppliers,
                                    manufacturers and distributors gained by
                                    Employee as a result of his employment with
                                    Employer. Information shall be excluded from
                                    this definition if (i) it, at the time of
                                    disclosure, is generally known to the trade
                                    or public, (ii) it becomes at a later date
                                    generally known to the trade or public
                                    through no fault of the Employee, (iii) it
                                    is known or possessed by the Employee prior
                                    to the effectiveness of this Agreement, (iv)
                                    it is disclosed to the Employee in good
                                    faith by a third party who has a right to
                                    such information, (v) it is disclosed in
                                    compliance with a subpoena or court order or
                                    (vi) it is possessed by the recipient of the
                                    information prior to receipt of same from
                                    the Employee.

                           (e)      "Customer" means actual customers or
                                    actively sought prospective customers of
                                    Employer during the Term.

                           (f)      "Noncompete Period" or "Nonsolicitation
                                    Period" means the period beginning the date
                                    hereof and ending on the first anniversary
                                    of the termination of Employee's employment
                                    with Employer; provided that such Noncompete
                                    Period or


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                                    Nonsolicitation Period shall end on the
                                    Termination Date in the event this Agreement
                                    is terminated pursuant to the provisions of
                                    Section 2(iii), hereof and, provided
                                    further, that the Noncompete Period or
                                    Nonsolicitation Period may be shortened at
                                    the discretion of the Board of Directors of
                                    Employer.

                           (g)      "Territory" means the area within a one
                                    hundred (100) mile radius of any corporate
                                    office or job site of Employer or any of its
                                    subsidiaries, affiliates or divisions.

                           (h)      "Trade Secrets" means information or data of
                                    or about Employer, including but not limited
                                    to technical or non-technical data,
                                    formulas, patterns, compilations, programs,
                                    devices, methods, techniques, drawings,
                                    processes, financial data, financial plans,
                                    products plans, or lists of actual or
                                    potential customers, clients, distributees
                                    or licensees, information concerning
                                    Employer's finances, services, staff,
                                    contemplated acquisitions, marketing
                                    investigations and surveys, that are not
                                    generally known to, and/or are not readily
                                    ascertainable by legal means by, other
                                    persons. Information and/or data shall be
                                    excluded from this definition if (i) it, at
                                    the time of disclosure, is generally known
                                    to the trade or public or (ii) it becomes at
                                    a later date generally known to the trade or
                                    public through no fault of the Employee.

                           (i)      "Work Product" means any and all work
                                    product property, data documentation or
                                    information of any kind prepared, conceived,
                                    discovered, developed or created by Employee
                                    for Employer or its affiliates, or any of
                                    Employer's or its affiliates' clients or
                                    customers for utilization in Company
                                    Activities, not generally known by and/or
                                    not readily ascertainable by proper means by
                                    other persons who can obtain economic value
                                    from their disclosure or use.

                  5.2      Trade Name and Confidential Information.

                           (a)      Employee hereby agrees that (i) with regard
                                    to each item constituting all or any portion
                                    of the Trade Secrets and Confidential
                                    Information, at all times during the Term
                                    and all


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<PAGE>   14
                                    times during which such item continues to
                                    constitute a Trade Secret or Confidential
                                    Information, respectively:

                                    (i)      Employee shall not, directly or by
                                             assisting others own, manage,
                                             operate, join, control or
                                             participate in the ownership,
                                             management, operation or control
                                             of, or be connected in any manner
                                             with, any business conducted under
                                             any corporate or trade name of
                                             Employer or name confusingly
                                             similar thereto, without the prior
                                             written consent of Employer;

                                    (ii)     Employee shall hold in confidence
                                             all Trade Secrets and all
                                             Confidential Information and will
                                             not, either directly or indirectly,
                                             use, sell, lend, lease, distribute,
                                             license, give, transfer, assign,
                                             show, disclose, disseminate,
                                             reproduce, copy, appropriate or
                                             otherwise communicate any Trade
                                             Secrets or Confidential
                                             Information, without the prior
                                             written consent of Employer; and

                                    (iii)    Employee shall immediately notify
                                             Employer of any unauthorized
                                             disclosure or use of any Trade
                                             Secrets or Confidential Information
                                             of which Employee becomes aware.
                                             Employee shall assist Employer, to
                                             the extent necessary, in the
                                             procurement or any protection of
                                             Employer's rights to or in any of
                                             the Trade Secrets or Confidential
                                             Information.

                           (b)      Upon the request of Employer and, in any
                                    event, upon the termination of Employee's
                                    employment with Employer, Employee shall
                                    deliver to Employer all memoranda, notes,
                                    records, manuals and other documents,
                                    including all copies of such materials and
                                    all documentation prepared or produced in
                                    connection therewith, pertaining to the
                                    performance of Employee's services hereunder
                                    or Employer's business or containing Trade
                                    Secrets or Confidential Information, whether
                                    made or complied by Employee or furnished to
                                    Employee from another source by virtue of
                                    Employee's employment with Employer.

                           (c)      To the greatest extent possible, all Work
                                    Product shall be deemed to be "work made for
                                    hire" (as defined in the Copyright Act, 17


                                       14
<PAGE>   15
                                    U.S.C.A. Sections 101 et seq., as amended)
                                    and owned exclusively by Employer. Employee
                                    hereby unconditionally and irrevocably
                                    transfers and assigns to Employer all
                                    rights, title and interest Employee may have
                                    in or to any and all Work Product,
                                    including, without limitation, all patents,
                                    copyrights, trademarks, service marks and
                                    other intellectual property rights. Employee
                                    agrees to execute and deliver to Employer
                                    any transfers, assignments, documents or
                                    other instruments which Employer may deem
                                    necessary or appropriate to vest complete
                                    title and ownership of any and all such Work
                                    Product, and all rights therein, exclusively
                                    in Employer.

                  5.3      Noncompetition.

                           (a)      The parties hereto acknowledge that Employee
                                    is conducting Company Activities throughout
                                    the Territory. Employee acknowledges that to
                                    protect adequately the interest of Employer
                                    in the business of Employer it is essential
                                    that any noncompete covenant with respect
                                    thereto cover all Company Activities and the
                                    entire Territory.

                           (b)      Employee hereby agrees that, during the Term
                                    and the Noncompete Period, Employee will
                                    not, in the Territory, either directly or
                                    indirectly, alone or in conjunction with any
                                    other party, accept, enter into or take any
                                    action in conjunction with or in furtherance
                                    of a Competitive Position with Employer.
                                    Employee shall notify Employer promptly in
                                    writing if Employee receives an offer of a
                                    Competitive Position during the Noncompete
                                    Term, and such notice shall describe all
                                    material terms of such offer.

                  Nothing contained in this Section 5 shall prohibit Employee
from acquiring not more than five percent (5%) of any Competitor, or from
acquiring any percentage of any company which is non-competitive with Employer,
whose common stock is publicly traded on a national securities exchange or in
the over-the-counter market.

                  5.4      Nonsolicitation During Employment Term. Employee
hereby agrees that Employee will not, during the Term, either directly or
indirectly, alone or in conjunction with any other party:


                                       15
<PAGE>   16
                           (a)      solicit, divert or appropriate or attempt to
                                    solicit, divert or appropriate, any Customer
                                    for the purpose of providing the Customer
                                    with services or products competitive with
                                    those offered by Employer during the Term,
                                    or

                           (b)      solicit or attempt to solicit any officer,
                                    director, employee, consultant, contractor,
                                    agent, lessor, lessee, licensor, licensee,
                                    supplier or any shareholder of any of the
                                    Founding Companies or other personnel of
                                    Employer or any of its affiliates or
                                    subsidiaries to terminate, alter or lessen
                                    that party's affiliation with Employer or
                                    such affiliate or subsidiary or to violate
                                    the terms of any agreement or understanding
                                    between such employee, consultant,
                                    contractor or other person and Employer.

                  5.5      Nonsolicitation During Nonsolicitation Period.
Employee hereby agrees that Employee will not, during the Nonsolicitation
Period, either directly or indirectly, alone or in conjunction with any other
party:

                           (a)      solicit, divert or appropriate or attempt to
                                    solicit, divert or appropriate, any Customer
                                    for the purpose of providing the Customer
                                    with services or products that qualify as
                                    Company Activities during the Term;
                                    provided, however, that the covenant in this
                                    clause shall limit Employee's conduct only
                                    with respect to those Customers with whom
                                    Employee had substantial contact (through
                                    direct or supervisory interaction with the
                                    Customer or the Customer's account) during a
                                    period of time up to but no greater than two
                                    (2) years prior to the last day of the Term;
                                    or

                           (b)      solicit or attempt to solicit any officer,
                                    director, employee, consultant, contractor,
                                    agent, lessor, lessee, licensor, licensee,
                                    supplier or any shareholder of any of the
                                    Founding Companies or other personnel of
                                    Employer or any of its affiliates or
                                    subsidiaries residing at the time of the
                                    solicitation in the Territory to terminate,
                                    alter or lessen that party's affiliation
                                    with Employer or such affiliate or
                                    subsidiary or to violate the terms of any
                                    agreement or understanding between such
                                    employee, consultant, contractor or other
                                    person and Employer. For purposes of this
                                    clause (b), employees, consultants,
                                    contractors, or other personnel are those
                                    with knowledge of or access to Trade Secrets
                                    and Confidential Information of the
                                    Employer.


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<PAGE>   17
                  5.6      Binding Arbitration. The parties shall refer any
dispute as to whether or not the Employee has violated the provisions of this
Section 5 to a mediator and, in the event that mediation is unsuccessful, such
dispute shall be resolved by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator shall be selected by the mediator. The cost of the mediator and, if
necessary, the arbitrator and all other costs of the mediation and, if
necessary, the arbitration shall be split equally between the Employee and the
Employer, except for attorneys fees which shall be paid by the party employing
such attorney.

                  SECTION 6.        MISCELLANEOUS.

                  6.1      Severability. The covenants in this Agreement shall
be construed as covenants independent of one another and as obligations distinct
from any other contract between Employee and Employer.

                  6.2      Survival of Obligations. The covenants in Section 5
of this Agreement shall survive termination of Employee's employment, except in
the case of termination of this Agreement pursuant to the provisions of Section
2(iii) hereof, in which case they shall terminate also and have no further force
or legal effect as of the Termination Date.

                  6.3      Notices. Any notice or other document to be given
hereunder by any party hereto to any other party hereto shall be in writing and
delivered in person or by courier, by telecopy transmission or sent by any
express mail service, postage or fees prepaid at the following addresses:

                  HOLDING COMPANY

                           RailWorks Corporation
                           c/o L.K. Comstock & Company, Inc.
                           One North Lexington Avenue
                           White Plains, New York 10601
                           Attention: RailWorks Chief Executive Officer
                           Telecopy No.: (914) 285-9879


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<PAGE>   18
                  EMPLOYEE

                           Mr. Michael R. Azarela
                           17 Livery Land
                           North Salem, New York 10560

or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.

                  6.4      Binding Effect. This Agreement ensures to the benefit
of, and is binding upon, Employer and their respective successors and assigns,
and Employee, together with Employee's executor, administrator, personal
representative, heirs, and legatees.

                  6.5      Entire Agreement. This Agreement is intended by the
parties hereto to be the final expression of their agreement with respect to the
subject matter hereof and is the complete and exclusive statement of the terms
thereof, notwithstanding any representations, statements or agreements to the
contrary heretofore made. This Agreement supersedes and terminates all prior
employment and compensation agreements, arrangements and understandings between
or among Employer and Employee. This Agreement may be modified only by a written
instrument signed by all of the parties hereto.

                  6.6      Governing Law. This Agreement shall be deemed to be
made in, and in all respects shall be interpreted, construed, and governed by
and in accordance with, the laws of the State of Maryland. No provision of this
Agreement shall be construed against or interpreted to the disadvantage of any
party hereto by any court of other governmental or judicial authority or by any
board of arbitrators by reasons of such party or its counsel having or being
deemed to have structured or drafted such provision.

                  6.7      Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

                  6.8      Specific Performance. Each party hereby agrees that
any remedy at law for any breach of provisions contained in this Agreement shall
be inadequate and that the other parties hereto shall be entitled to specific
performance and any other appropriate injunctive relief in addition to any other
remedy such party might have under this Agreement or at law or in equity.


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<PAGE>   19
                  6.9      Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.

                  6.10     Other Employment Agreements. Without the prior
written consent of Employee, no person that is subsequently hired by RailWorks
in a position comparable to the position held by Employee shall be offered an
employment agreement that contain benefits that are more favorable to such
person than the terms contained herein.










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<PAGE>   20
                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.


                                    RAILWORKS CORPORATION


                                    By: /s/ John G. Larkin                (SEAL)
                                        ---------------------------------
                                        John G. Larkin
                                        Chief Executive Officer


                                    EMPLOYEE


                                    /s/ Michael R. Azarela                (SEAL)
                                    --------------------------------------
                                    Michael R. Azarela










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<PAGE>   21
                                                                       EXHIBIT A

Annex Railroad Builders, Inc.
Mize Construction Company
Railroad Specialties, Inc.
U.S. Railway Supply, Inc.
Comtrak Construction, Inc.
Condon Brothers, Inc.
HP McGinley, Inc.
Kennedy Railroad Builders, Inc.
Alpha-Keystone Engineering, Inc.
Railcorp, Inc.
Merit Railroad Contractors, Inc.
Midwest Construction Services, Inc.
New England Railroad Construction Co.
Comstock Holdings, Inc.
Railroad Service, Inc.
Minnesota Railroad Service, Inc.
Southern Indiana Wood Preserving Co.
U.S. Trackworks, Inc.
Northern Rail Service & Supply Co.
W.A. Smith Construction Co., Inc.
W.A. Smith Rerailing Serviceds, Inc.
CPI Concrete Products, Inc.






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