EXHIBIT 10.46
                                                                   -------------

                              EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, dated as of December 8, 1999 (the "Agreement"), is
made by and between Casella Waste Systems, Inc., a Delaware corporation (the
"Company"), and Martin J. Sergi, a resident of Denville, New Jersey (the
"Employee").

WHEREAS, the Company is in the business of solid waste services and related
businesses; and

WHEREAS, the Company and the Employee are mutually desirous that the Company
employ the Employee, and the Employee accept employment, upon the terms and
conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the Company and the
Employee hereby agree as follows:

         1.    Duties.
               ------

         1.1   During the Agreement Term (as defined below), the Employee shall
be Executive Vice President - Business Development and Director (or such other
and comparable titles and positions as shall be given the Employee by the Board
of Directors (the "Board") of the Company) and shall faithfully perform for the
Company the duties of said office. The Company shall use its best efforts to
cause the Employee to be nominated and elected to the Board and the board of
directors of any successors to the Company for the duration of the Agreement
Term (as defined below). The Employee shall have such corporate power and
authority as are necessary to perform the duties of such office and any other
office(s) that are so assigned to him. The Employee shall report directly to the
Chief Executive Officer of the Company. The Employee shall devote substantially
all of his business time and effort to the performance of his duties hereunder,
shall use his best efforts to advance the best interests of the Company and
shall not engage in outside business activities which materially interfere with
the performance of his duties hereunder; provided, however, that, subject to
Section 6 below, nothing in this Agreement shall preclude the Employee from
devoting reasonable periods required for participating in his family business
ventures or in other professional, educational, philanthropic, public interest,
charitable, social or community activities, including without limitation his
participation in business activities with respect to the Mall at the Galaxy,
Inc., of which the Employee is a principal stockholder (provided that such
activities do not materially interfere with the performance of his duties
hereunder).

         1.2   The duties to be performed by the Employee hereunder shall be
performed primarily in Guttenberg, New Jersey, subject to reasonable travel
requirements on behalf of the Company. The Company shall not relocate the
Employee outside of Guttenberg, New Jersey, without his prior written consent.

         2.    Term. The Company hereby employs the Employee, and the Employee
hereby accepts such employment, for an initial term commencing as of the date
hereof and ending on the third anniversary of such date, unless sooner
terminated in accordance with the provisions of Section 4 (said initial
three-year term, unless sooner terminated in accordance with the provisions of
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Section 4, being hereinafter referred to as the "Initial Term"). The term of
this Agreement shall be automatically extended for an additional year at the
expiration of the Initial Term or any succeeding term, unless written notice of
non-extension is provided by either party to the other party 180 days prior to
the expiration of the Initial Term or the succeeding term, as the case may be
(said Initial Term and any succeeding terms, being hereinafter referred to as
the "Agreement Term").

         3.    Compensation.
               ------------

         3.1   Base Salary. During the Agreement Term and subject to the next
sentence of this Section 3.1, the Employee shall be compensated at the annual
rate of $250,000 ("Base Salary"), payable on a bi-weekly basis in accordance
with the Company's standard payroll procedures. On each anniversary of the date
hereof, the Base Salary will be increased by an amount which will not be less
than the product (if positive) of (i) the Base Salary in effect immediately
prior to such anniversary and (ii) the percentage (if positive) by which the
Consumer Price Index (All Items less shelter) for Urban Wage Earners and
Clerical Workers, for the Northeast Region, published by the United States
Government for the month preceding such anniversary exceeds such index for the
comparable month in the preceding year.

         3.2   Incentive Compensation. In addition to the Base Salary, the
Employee shall be entitled to receive a bonus ("Bonus") consisting of (i) cash,
(ii) stock options of the Company or (iii) a combination of both cash and stock
options in an amount to be determined prior to the conclusion of each fiscal
year of the Company during the Agreement Term in the sole discretion of the
Compensation Committee of the Board (the "Compensation Committee").

         3.3  Expenses. Upon submission of appropriate invoices or vouchers, the
Company shall pay or reimburse the Employee for all reasonable expenses actually
incurred or paid by him during the Agreement Term in the performance of his
duties hereunder.

         3.4   Participation in Benefit Plans. The Employee shall be entitled to
participate in any health benefit or other employee benefit plans available to
the Company's senior executives as in effect from time to time, including,
without limitation, any qualified or non-qualified pension, profit sharing and
savings plans, any death and disability benefit plans, any medical, dental,
health and welfare plans and any stock purchase programs, on terms and
conditions at least as favorable as provided to other senior executives, to the
extent that he may be eligible to do so under the applicable provisions of any
such plan. Following the termination of the Employee hereunder or the expiration
of any Severance Benefits (as defined in Section 4.4.1) and for the lifetime of
the Employee, the Employee and his eligible dependents shall be entitled to
continue participating (at the Employee's sole expense) in the Company's group
medical, dental, disability and life insurance coverages (to the extent the
Company's plans entitle the Employee and his dependents to be so covered), with
the Employee's cost to be determined on a basis consistent with the method of
determining employee payments under the health care continuation requirements of
the Consolidated Omnibus Reconciliation Act of 1985 ("COBRA").

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         3.5   Vacation. The Employee shall be entitled to five weeks of annual
vacation and shall be subject to the Company's standard vacation policy
applicable to someone of his position and seniority. Unused vacation shall not
be carried over into any subsequent year during the Agreement Term. The Company
shall have no obligation to pay the Employee for any unused vacation.

         3.6  Fringe Benefits and Perquisites. The Employee shall be entitled to
all fringe benefits and perquisites that are generally made available to senior
executives of the Company from time to time and that are approved by the
Compensation Committee.

         4.   Termination. The Employee's employment hereunder may be terminated
only upon the expiration of the Agreement Term of this Agreement pursuant to
Section 2 above or under the following circumstances:

         4.1   Death. The Employee's employment hereunder shall terminate
automatically upon his death, in which event the Company shall pay to the
Employee's written designee or, if he has no written designee, to his spouse or,
if he leaves no spouse and has no written designee, to his estate, (i) Severance
and Acceleration Payment (as such terms are defined in Section 4.4.1 below)
immediately upon death, (ii) Severance Benefits to the Employee's eligible
dependents for a one-year period from the date of death and (iii) all reasonable
expenses actually incurred or paid by the Employee in the performance of his
duties hereunder prior to the date of death.

         4.2   Disability. The Company may terminate the Employee's employment
hereunder if (i) as a result of the Employee's incapacity due to physical or
mental illness, the Employee shall have been absent from his duties hereunder on
a full-time basis for an aggregate of 180 consecutive or non-consecutive
business days in any 12 consecutive-month period and (ii) within 10 days after
written notice of termination hereunder is given by the Company, the Employee
shall not have returned to the performance of his duties hereunder on a
full-time basis. The determination of incapacity or disability under the
preceding sentence shall be made in good faith by the Company based upon
information supplied by a physician selected by the Company or its insurers and
reasonably acceptable to the Employee or his legal representative. During any
period that the Employee fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness (the "Disability Period"), the
Employee shall continue to receive his full Base Salary hereunder until his
employment is terminated pursuant to this Section 4.2, provided that amounts
payable to the Employee shall be reduced by the sum of the amounts, if any, paid
to the Employee during the Disability Period under any disability benefit plans
of the Company. If the Employee is terminated pursuant to this Section 4.2 the
Company shall pay to the Employee (or his legal representative) (i) Severance
and Acceleration Payment (as such terms are defined in Section 4.4.1 below),
(ii) Severance Benefits to the Employee for a one-year period from the date of
termination due to disability and (iii) all reasonable expenses actually
incurred or paid by the Employee in the performance of his duties hereunder
prior to the date of termination due to disability.

         4.3   Termination by the Company.
               --------------------------

         4.3.1 The Company (i) shall have "cause" to terminate the Employee's
employment hereunder upon the Employee (A) being convicted of a crime involving
the Company (other than

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pursuant to actions taken at the direction or with the approval of the Board),
(B) being found by reasonable determination of the Company, made in good faith,
to have engaged in (1) willful misconduct which has a material adverse effect on
the Company, (2) willful or gross neglect which has a material adverse effect on
the Company, (3) fraud, (4) misappropriation or (5) embezzlement in the
performance of his duties hereunder or (C) having breached in any material
respect the material terms and provisions of this Agreement and failed to cure
such breach within 15 days following written notice from the Company specifying
such breach and (ii) may terminate the Employee's employment on written notice
given to the Employee at any time following the occurrence of any of the events
described in clauses (i)(A) and (i)(B) above and on written notice given to the
Employee at any time not less than 60 days following the occurrence of any of
the events described in clause (i)(C) above. However, in no event shall the
Employee's employment be considered to have been terminated for "cause" unless
and until the Employee receives a copy of a resolution adopted by the Board
finding that, in the good faith opinion of the Board, the Employee is guilty of
acts or omissions constituting "cause," which resolution has been duly adopted
by an affirmative vote of a majority of the Board, excluding the Employee and
any individual alleged to have participated in the acts constituting "cause."
Any such vote shall be taken at a meeting of the Board called and held for such
purpose, after reasonable written notice is provided to the Employee setting
forth in reasonable detail the facts and circumstances claimed to provide a
basis of termination for "cause" and the Employee is given an opportunity,
together with counsel, to be heard before the Board. In the event the Employee's
employment is terminated by the Company for "cause", the Employee shall be
entitled to continue to receive Base Salary accrued but unpaid and expenses
incurred but not repaid to the Employee, in each case only until the effective
date of such termination.

         4.3.2 In the event the Employee's employment is terminated by the
Company other than for "cause", the Employee shall be entitled to (i) Severance
and Acceleration Payment immediately upon termination and (ii) Severance
Benefits for each year during the Severance Benefits Term (as such capitalized
terms are defined in Section 4.4 below).

         4.4   Termination by Employee.
               -----------------------

         4.4.1 Definitions. For purposes of this Section 4.4, the following
terms shall have the respective meanings set forth below:

               (a) "Affiliate" means, with respect to the Company, any entity
         directly or indirectly controlled, controlling or under common control
         with the Company.

               (b) "Acceleration Payment" means an amount in cash equal to the
         value of (i) any Base Salary accrued but unpaid prior to the date of
         termination, (ii) Bonus accrued but unpaid prior to the date of
         termination and (iii) any vacation accrued but unused prior to the date
         of termination.

               (c) "Change of Control" means: (i) a person, corporation, entity
         or group acquires, directly or indirectly, the beneficial ownership of
         40% or more of the issued and outstanding stock of the Company in a
         single transaction or series of transactions, (ii) the Company is a
         party to a merger, consolidation or similar transaction and following
         such transaction 40% or more of the issued and outstanding securities
         of said party is

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         beneficially owned by a person, corporation, entity or group other than
         the Company or an Affiliate of the Company, (iii) the Company sells or
         transfers all or substantially all of its assets to any other persons
         or persons other than an Affiliate of the Company, (iv) the
         shareholders of the Company approve a plan or proposal for the
         liquidation or dissolution of the Company or (v) during any two-year
         period, individuals who comprise a majority of the Board at the
         beginning of such two-year period do not comprise a majority of the
         Board at the end of such two-year period (such Board composition being
         referred to as a "Continuing Majority").

               (d) "Good Reason" means: the occurrence of a (A) Change of
         Control, accompanied by, or followed within the twelve-month period
         after a Change in Control by: (B) (i) the assignment to the Employee of
         any duties inconsistent with his status as Executive Vice President-
         Business Development and Director or which require travel significantly
         more time-consuming than that required at commencement of this
         Agreement or, (ii) a material adverse alteration in the nature or
         status of his responsibilities from those provided herein or the
         transfer of a significant portion of such responsibilities to one or
         more other persons, or (iii) a material diminution in the Employee's
         compensation.

               (e) "Qualified Good Reason" means the occurrence of one of the
         events under clause (B)(i), (ii) or (iii) of the definition of Good
         Reason.

               (f) "Severance" means three times the sum of (i) the highest Base
         Salary that was paid to the Employee at any time prior to termination
         by the Employee for Good Reason or prior to when the Employee's
         employment is terminated by the Company other than for "cause" and (ii)
         the higher of (A) the most recent Bonus paid to the Employee prior to
         termination by the Employee for Good Reason or prior to when the
         Employee's employment is terminated by the Company other than for
         "cause" or (B) 50% of the Employee's Base Salary immediately prior to
         such termination.

               (g) "Severance Benefits" means the benefits contemplated by
         Section 3.4 of this Agreement.

               (h) "Severance Benefits Term" means three years from the date
         Employee elects to terminate his employment for Good Reason, or the
         Employee's employment is terminated by the Company other than for
         "cause."

         4.4.2 At the election of the Employee for Good Reason or Qualified Good
Reason, the Employee may terminate his employment immediately upon written
notice to the Company; provided, however, that Employee must make such election
to terminate his employment for Good Reason or Qualified Good Reason within 90
days of the occurrence of such event that qualifies as Good Reason or Qualified
Good Reason under Section 4.4.1(d) of this Agreement. If during the Agreement
Term the Employee's employment is terminated by the Employee for Good Reason,
the Employee shall be entitled to receive from the Company (i) Severance and the
Acceleration Payment immediately upon termination, (ii) Severance Benefits for
each year during the Severance Benefits Term and (iii) a cash payment in an
amount equal to the amount of any excise tax imposed on Employee under Section
4999 of the Internal Revenue Code of

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1986, as amended ("Section 4999"), increased by the additional federal and state
income taxes on such amount, such that, after payment of this additional cash
payment, the Employee's Severance, Acceleration Payment and Severance Benefits
after federal and state income taxes are equal to the amount that the Employee
would have received but for the imposition of the excise tax under Section 4999.
If during the Agreement Term the Employee's employment is terminated by the
Employee for Qualified Good Reason, the Employee shall be entitled to receive
only an amount equal to his Base Salary through the remainder of the Agreement
Term, payable on a bi-weekly basis, together with expenses incurred but not
repaid to the Employee prior to such termination.

         4.4.3 Upon 90 days' prior written notice, the Employee may terminate
his employment with the Company other than for Good Reason. If the Employee
voluntarily terminates his employment with the Company other than for Good
Reason, no further payment shall be due the Employee pursuant to Section 3 above
(other than payments for accrued and unpaid Base Salary and expenses incurred
but not repaid to the Employee, in each case prior to such termination).

         4.5   Effect of Termination on Certain Obligations. No termination of
the employment of the Employee, whether voluntary or involuntary, shall
terminate, affect or impair any of the obligations or rights of the parties set
forth in Sections 4, 5, 6, 7 and 8 of this Agreement, all of which obligations
and rights shall survive any termination of employment of the Employee
hereunder.

         5.    Covenant Not to Disclose Confidential Information. The Employee
acknowledges that during the course of his affiliation with the Company he has
or will have access to and knowledge of certain information and data which the
Company considers confidential and the release of such information or data to
unauthorized persons would be extremely detrimental to the Company. As a
consequence, the Employee hereby agrees and acknowledges that he owes a duty to
the Company not to disclose, and agrees that without the prior written consent
of the Company, at any time, either during or after his employment with the
Company, he will not communicate, publish or disclose, to any person anywhere,
or use, any Confidential Information (as hereinafter defined), except as may be
necessary or appropriate to conduct his duties hereunder, provided the Employee
is acting in good faith and in the best interest of the Company. The Employee
will use his best efforts at all times to hold in confidence and to safeguard
any Confidential Information from falling into the hands of any unauthorized
person and, in particular, will not permit any Confidential Information to be
read, duplicated or copied. The Employee will return to the Company all
Confidential Information in the Employee's possession or under the Employee's
control when the duties of the Employee no longer require the Employee's
possession thereof, or whenever the Company shall so request, and in any event
will promptly return all such Confidential Information if the Employee's
relationship with the Company is terminated for any or no reason and will not
retain any copies thereof. For purposes hereof, the term "Confidential
Information" shall mean any information or data used by or belonging or relating
to the Company that is not known generally to the industry in which the Company
is or may be engaged, including without limitation, any and all trade secrets,
proprietary data and information relating to the Company's business and
products, price list, customer lists, processes, procedures or standards,
know-how, manuals, business strategies, records, drawings, specifications,
designs, financial information, whether or not reduced to

                                       -6-
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writing, or information or data which the Company advises the Employee should be
treated as confidential information.

         6.   Covenant Not to Compete. The Employee acknowledges that he, at the
expense of the Company, has been and will be specially trained in the business
of the Company, has established and will continue to establish favorable
relations with the customers, clients and accounts of the Company and will have
access to trade secrets of the Company. Therefore, in consideration of such
training and relations and to further protect trade secrets, directly or
indirectly, of the Company, the Employee agrees that during the term of his
employment by the Company and for a period of two (2) years from and after the
voluntary or involuntary termination of such employment for any or no reason, he
will not, directly or indirectly, without the express written consent of the
Company:

               (a) own or have any interest in or act as an officer, director,
         partner, principal, employee, agent, representative, consultant or
         independent contractor of, or in any way assist in, any business
         located in or doing business in the United States of America or Canada
         in any area within 300 miles of any facility of the Company during the
         term of the Employee's employment by the Company which is engaged,
         directly or indirectly, in (i) the solid waste processing business,
         (ii) the utilization of recyclable materials business or (iii) any
         other business the Company is engaged in or proposes to engage in on
         the date this Agreement is terminated (the businesses described in
         clauses (a)(i), (ii) and (iii) are collectively referred to as the
         "Competitive Businesses"); provided, however, that notwithstanding the
         above, the Employee may own, directly or indirectly, solely as an
         investment, securities of any such person which are traded on any
         national securities exchange or NASDAQ if the Employee (A) is not a
         controlling person of, or a member of a group which controls, such
         person and (B) does not, directly or indirectly, own 5% or more of any
         class of securities of such person;

               (b) solicit clients, customers (who are or were customers of the
         Company within the twelve (12) months prior to termination) or accounts
         of the Company for, on behalf of or otherwise related to any such
         Competitive Businesses or any products related thereto; or

               (c) solicit, employ or in any manner influence or encourage any
         person who is or shall be in the employ or service of the Company to
         leave such employ or service.

Notwithstanding the foregoing, the terms of this covenant not to compete shall
be enforceable against Employee only to the extent that during Employee's
employment the Company continues to pay Employee compensation equal to the
salary level set forth in Section 3.1 of this Agreement and after termination of
Employee's employment the Company continues to pay Employee (i) his Base Salary,
in the case of termination pursuant to Section 4.4.3, and (ii) any and all
termination payments and benefits as required under Section 4 of this Agreement.
Furthermore, if any court determines that the covenant not to compete, or any
part thereof, is unenforceable because of the duration of such provision or the
geographic area or scope covered thereby, such court shall have the power to
reduce the duration, area or scope of such provisions and, in its reduced form,
such provision shall then be enforceable and shall be enforced.

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         7.    Specific Performance. Recognizing that irreparable damage will
result to the Company in the event of the breach or threatened breach of any of
the foregoing covenants and assurance by the Employee contained in Sections 5 or
6 hereof, and that the Company's remedies at law for any such breach or
threatened breach will be inadequate, the Company and its successors and
assigns, in addition to such other remedies which may be available to them,
shall be entitled to an injunction, including a mandatory injunction, to be
issued by any court of competent jurisdiction ordering compliance with this
Agreement or enjoining and restraining the Employee, and each and every person,
firm or company acting in concert or participation with him, from the
continuation of such breach.

         8.    Potential Unenforceability of Any Provision. The Employee
acknowledges and agrees that he has had an opportunity to seek advice of counsel
in connection with this Agreement. If a final judicial determination is made
that any provision of this Agreement is an unenforceable restriction against the
Employee, the provisions hereof shall be rendered void only to the extent that
such judicial determination finds such provisions unenforceable, and such
unenforceable provisions shall automatically be reconstituted and became a part
of this Agreement, effective as of the date first written above, to the maximum
extent in favor of the Company that is lawfully enforceable. A judicial
determination that any provision of this Agreement is unenforceable shall in no
instance render the entire Agreement unenforceable, but rather the Agreement
will continue in full force and effect absent any unenforceable provision to the
maximum extent permitted by law.

         9.    Indemnification. To the fullest extent permitted or required by
the laws of the State of Delaware, the Company shall indemnify and hold harmless
(including the advance payment of expenses) the Employee, in accordance with the
terms of such laws, if the Employee is made a party, or threatened to be made a
party, to any threatened, pending, or contemplated suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that the
Employee is or was an officer or director of the Company or any subsidiary or
affiliate of the Company, against expenses (including reasonable attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any such action, suit or proceeding. The
Company's obligations under this paragraph will survive the termination of this
Agreement for any reason whatsoever.

         10.   Notice. Any notice or other communication hereunder shall be in
writing and shall be mailed or delivered to the respective parties hereto as
follows:

               (a)   If to the Company:

                     Casella Waste Systems, Inc.
                     25 Greens Hill Lane
                     Rutland, VT 05702
                     Attention:  Chief Executive Officer and Chairman
                                 of the Board of Directors

               (b)   If to the Employee:

                     Martin J. Sergi
                     17 North Ridge Road
                     Denville, New Jersey 07834

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<PAGE>

The addresses of either party hereto above may be changed by written notice to
the other party.

         11.   Amendment; Waiver. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms of covenants hereof may
be waived, only by written instrument executed by the party against whom such
modification or waiver is sought to be enforced. The failure of either party at
any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by either
party of the breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant in this Agreement.

         12.   Benefit and Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company, but
shall be personal to and not assignable by the Employee. The obligations of the
Company hereunder are personal to the Employee or where applicable to his spouse
or estate, and shall be continued only so long as the Employee shall be
personally discharging his duties hereunder. The Company may assign its rights,
together with its obligations, to any corporation which is a direct or indirect
wholly-owned subsidiary of the Company; provided, however, that the Company
shall not be released from its obligations hereunder without the prior written
consent of the Employee, which consent shall not be unreasonably withheld.

         13.  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT BE APPLICABLE UNDER
PRINCIPLES OF CONFLICTS OF LAW.

         14.  Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each signed by one
of the parties hereto.

         15.   Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

         16.   Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions and preliminary agreements. No
subsequent modifications may be made to this Agreement except by signed writing
of the parties. Without limiting the generality of the foregoing, any employment
agreement or other arrangement between the Employee and KTI, Inc. or any
subsidiary or other affiliate thereof is hereby terminated and no party thereto
shall have any further obligation on account thereof.

                  [Remainder of page intentionally left blank.]


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         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.


Witness: /s/ R.E. Wetzel                        /s/ Martin J. Sergi
         --------------------                   ----------------------------
                                                Martin J. Sergi




                                                CASELLA WASTE SYSTEMS, INC.


                                                By: /s/ John W. Casella
                                                    ------------------------
                                                    Name: John W. Casella
                                                    Title: President & CEO


















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