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                                                                   EXHIBIT 10.12


THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT
TO THE SECURITY, FILED AND MADE EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND
SUCH APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE ISSUER RECEIVES AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER SUCH
ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

                             OAKHURST COMPANY, INC.
                          SUBORDINATED PROMISSORY NOTE

DATE: JULY 18, 2001                                                  $798,750.61

OAKHURST COMPANY, INC., a Delaware corporation (together with its successors and
assigns the "Issuer") for value received hereby promises to pay to PATRICK T.
MANNING, or order (the "Noteholder") by wire transfer of immediately available
funds to an account designated by the Noteholder by notice to the Issuer, the
principal sum of Seven Hundred Ninety-Eight Thousand Seven Hundred Fifty Dollars
and Sixty-One Cents ($798,750.61), without interest on the Maturity Date (as
defined herein) in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts.

1.   Note Register. The Issuer shall keep at its principal office a register
     (the "Register") in which shall be entered the name and address of the
     registered holder of this Note and of all permitted transfers of this Note.
     References to the "Noteholder" shall mean the Person listed in the Register
     as the payee of the Note. The ownership of this Note shall be proven by the
     Register. For the purpose of paying the principal on this Note, the Issuer
     shall be entitled to rely on the name and address in the Register and
     notwithstanding anything to the contrary contained in this Note, no Event
     of Default shall occur under Section 3(c) if payment of principal is made
     in accordance with the name and address contained in the Register. The
     Noteholder may change his address as shown on the Note Register by written
     notice to the Company requesting such change.

2.   Definitions. The following terms for all purposes of this Note shall have
     the meanings specified below. All accounting terms used herein and not
     expressly defined shall have the meanings given to them in accordance with
     generally accepted accounting principles as in effect from time to time.
     The terms defined in this Section 2 include the plural as well as the
     singular.

         (a) "Acceleration Notice" shall have the meaning set forth in Section
3(c).

         (b) "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with,
such Person.

         (c) "Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in the State of Delaware are authorized by law to
close.

         (d) "Debt" means at any date an amount equal to or greater than
$100,000 of (i) all obligations of the Issuer for borrowed money; (ii) all
obligations of the Issuer evidenced by bonds, debentures, notes, or other
similar instruments; (iii) all obligations of the Issuer in respect of letters
of credit or other similar instruments (or reimbursement obligations with
respect thereto;) (iv) all obligations of the Issuer to pay the deferred
purchase price of property or services, except trade payables; (v) all
obligations of the Issuer as lessee under capitalized leases; (vi) all Debt of
others secured by a Lien on any asset of the Issuer, whether or not such Debt is
assumed by such Person; and (vii) any guarantee by the Issuer of the payment
obligation of another Person.



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         (e) A "Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.

         (f) Event of Default" shall have the meaning set forth in Section 3(c).

         (g) "Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Note, the Issuer shall be deemed to own subject
to a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capitalized lease or
other title retention agreement relating to such asset.

         (h) "Maturity Date" means 5:00 p.m. Eastern Time on the earliest to
occur of the following dates:

                  (i) The fourth anniversary of the date hereof;

                  (ii) The fourth anniversary of the date of the closing of the
sale by the Issuer of all of its then remaining right, title and interest in and
to New Heights Recovery & Power, LLC to KTI, Inc.; and

                  (iii) The Put Payment Date, as that term is defined in the
Transaction Agreement (defined below.)

         (i) "Notice of Default" shall have the meaning set forth in Section
3(c).

         (j) "Person" means any individual, corporation, partnership, firm,
association, joint venture, joint stock company, trust, unincorporated
organization or other entity, or any government or regulatory, administrative or
political subdivision or agency, department or instrumentality thereof.

         (k) "Senior Indebtedness" means indebtedness to any bank or other
lending institution, including, but not limited to (i) all currently outstanding
indebtedness of the Issuer to Finova Capital Corporation (the "Senior Lender"),
as the same may be amended, modified, increased or decreased from time to time,
by agreement between the Senior Lender and the Issuer; (ii) any and all
replacements or refinancings of the indebtedness to the Senior Lender with one
or more other lending entities, whether any such refinancing is for a greater or
lesser amount than the current indebtedness to the Senior Lender; (iii) all
obligations of the Issuer to Comerica Bank-Texas ("Comerica") under the guaranty
by the Issuer of the obligations of Sterling Construction Company, a Michigan
corporation, to Comerica (the "Comerica Obligations;") and (iv) any and all
replacements or refinancings of the Comerica Obligations (whether any such
replacement or refinancing is for a greater or lesser amount than the amount
replaced or refinanced) with one or more other lending institutions that is
guaranteed by, or is the direct obligation of, the Issuer.

         (l) "Subordinated Note" and "Subordinated Notes" shall have the
meanings set forth in Section 7.

         (m) "Transaction Agreement" shall have the meaning set forth in Section
3(c).

3. PAYMENT OF PRINCIPAL.

         (a) Payment Obligation. No provision of this Note shall alter or impair
the obligations of the Issuer to pay the principal of this Note at the place and
time, and in the currency, herein prescribed.

         (b) Prepayment. The principal hereunder shall be subject to prepayment
by the Issuer at any time without the consent of the Noteholder and without
premium or penalty. Insomuch as this is a zero coupon note, any prepayment of
this Note shall be in an amount equal to the net present value as



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of the prepayment date of the principal amount hereof, applying an interest rate
of twelve percent (12%) per annum.

         (c) Events of Default and Remedies. In case one or more of the
following events ("Events of Default") shall have occurred and be continuing:

                  (i) Default in the payment of the principal of this Note as
and when the same shall become due and payable, at maturity, upon any
redemption, by declaration or otherwise; or

                  (ii) failure on the part of the Issuer duly to observe or
perform (A) any other of the covenants or agreements on the part of the Issuer
contained herein (other than those covered by clause (i), above;) or (B) any
material covenants or agreements on the part of the Issuer contained in any
other agreement between the Issuer and the Noteholder, including, but not
limited to, that certain Transaction Agreement of even date herewith (the
"Transaction Agreement,") in either such case for a period of 30 days after the
date on which written notice specifying such failure, stating that such notice
is a "Notice of Default" hereunder and demanding that the Issuer remedy the
same, shall have been given by registered or certified mail, return receipt
requested, to the Issuer; or

                  (iii) the prepayment of any Subordinated Note in violation of
the provisions of Section 7 of this Note; or

                  (iv) any event or condition shall occur which results in the
acceleration of the maturity of any Debt or enables or, with the giving of
notice or lapse of time or both, would enable the holder of such Debt or any
Person acting on such holder's behalf to accelerate the maturity thereof; or

                  (v) the Issuer pursuant to, or within the meaning of, any
bankruptcy or insolvency law: (A) commences a voluntary case or proceeding; (B)
consents to the entry of an order for relief against it in an involuntary case
or proceeding; (C) consents to the appointment of a receiver or custodian of it
or for all or substantially all of its property; (D) makes a general assignment
for the benefit of its creditors; or (E) admits in writing its inability to pay
its debts as the same become due;

     then, subject to the last paragraph of this Section 3(c), set forth below,
     in each case where an Event of Default specified in Section 3(c)(i) through
     3(c)(iv) occurs, the Noteholder, by notice in writing to the Issuer (the
     "Acceleration Notice") may declare the principal hereunder to be due and
     payable immediately, and upon any such declaration the same shall become
     immediately due and payable; provided however, that if an Event of Default
     specified in Section 3(c)(v) occurs, the principal hereunder shall become
     and be immediately due and payable without any declaration or other act on
     the part of the Noteholder.

     Any principal, the payment of which shall become accelerated pursuant to
     this Section 3(c), shall be equal to (i) the net present value as of the
     payment date of the principal amount hereof applying an interest rate of
     twelve percent (12%) per annum less (ii) any prepayments made pursuant to
     Section 3(b), above.

4.   REIMBURSEMENT OF EXPENSES. The Issuer shall reimburse the Noteholder, on
     demand, for any and all costs and expenses, including reasonable attorneys'
     fees and court costs, incurred by the Noteholder in collecting or otherwise
     enforcing this Note or in attempting to do any of the foregoing.

5.   POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT A WAIVER OF DEFAULT.

         (a) No right or remedy herein conferred upon or reserved to the
Noteholder is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or



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hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

         (b) No delay or omission of the Noteholder to exercise any right or
power accruing upon any Default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Default or Event of Default or an acquiescence therein; and
every power and remedy given by this Note or by law may be exercised from time
to time, and as often as shall be deemed expedient, by the Noteholder.

6. WAIVER OF PAST DEFAULTS.

         (a) The Noteholder may waive any past Default or Event of Default
hereunder and its consequences. In the case of any such waiver, the Issuer and
the Noteholder shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon.

         (b) Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Default or Event of
Default arising therefrom shall be deemed to have been cured, and not to have
occurred for every purpose of this Note; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.

7. SUBORDINATION.

         (a) No payment on account of principal of or interest on (i) that
certain promissory note dated July 3, 2001 in the original principal amount of
$1,000,000 issued to KTI, Inc.; (ii) this Note; or (ii) any other promissory
note issued contemporaneously herewith pursuant to the Transaction Agreement
(each a "Subordinated Note and collectively, the "Subordinated Notes") shall be
made, and no Subordinated Notes shall be redeemed or purchased directly or
indirectly by the Issuer (or any of its subsidiaries), if at the time of such
payment or purchase or immediately after giving effect thereto, (x) there shall
exist a default in any payment with respect to the Senior Indebtedness; or (y)
there shall have occurred any other default or event of default as those terms
may be defined in the instrument under which such Senior Indebtedness is
outstanding (other than a default in the payment of amounts due thereon) with
respect to the Senior Indebtedness permitting the holders thereof to accelerate
the maturity thereof, and such default or event of default shall not have been
cured or waived or shall not have ceased to exist.

         (b) Subject to payment in full of the Senior Indebtedness, the holders
of the Subordinated Notes shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of the assets of the
Issuer made on such Senior Indebtedness until all principal and interest on the
Subordinated Notes shall be paid in full; and for purposes of such subrogation,
no payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which any holders of the Subordinated Notes would be
entitled except for the subordination provisions of this Section 7 shall, as
between the holders of the Subordinated Notes and the Issuer and/or its
creditors (other than the holders of the Senior Indebtedness) be deemed to be a
payment on account of the Senior Indebtedness.

         (c) The provisions of this Section 7 are and are intended solely for
the purposes of defining the relative rights of the holders of the Subordinated
Notes and the holders of Senior Indebtedness and nothing in this Section 7 shall
impair, as between the Issuer and any holders of the Subordinated Notes, the
obligation of the Issuer, which is unconditional and absolute, to pay to the
holders of the Subordinated Notes the principal thereof and interest thereon, in
accordance with the terms of the



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Subordinated Notes, nor shall anything herein prevent any holders of the
Subordinated Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default, subject to the rights set forth above
of holders of Senior Indebtedness to receive cash, property or securities
otherwise payable or deliverable to the holders of the Subordinated Notes.

         (d) Upon any payment (including by redemption) which is not a payment
in full of all of the principal amount and accrued interest of all outstanding
Subordinated Notes, the aggregate amount of the payments shall be allocated to
all the Subordinated Notes then outstanding in proportion to the amounts of
principal and interest due thereunder, so that the amount of principal paid
under this Note shall bear the same ratio to the aggregate principal and accrued
interest paid under all of the Subordinated Notes as the then outstanding
principal then owed under this Note (as if the same were then being prepaid
pursuant to Section 3(b)) bears to the aggregate principal and accrued interest
then owed under all Subordinated Notes then outstanding.

8.   MODIFICATION OF NOTE. This Note may be modified only with the written
     consent of the Noteholder and the Issuer.

9.   MISCELLANEOUS. This Note shall be governed by and be construed in
     accordance with the laws of the State of New York without regard to the
     conflicts of law rules of such state. The Issuer hereby waives presentment,
     demand, notice, protest and all other demands and notices in connection
     with the delivery, acceptance, performance and enforcement of this Note,
     except as specifically provided herein, and assents to extensions of the
     time of payment, or forbearance or other indulgence without notice. The
     section headings herein are for convenience only and shall not affect the
     construction hereof. THE ISSUER AND THE NOTEHOLDER HEREBY IRREVOCABLY WAIVE
     ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
     ARISING OUT OF OR RELATING TO THIS NOTE.

10.  SUBMISSION TO JURISDICTION. The Issuer irrevocably submits to the exclusive
     jurisdiction of the state and federal courts located in the State of
     Delaware for the purposes of any suit, action or other proceeding arising
     out of this Note. The Issuer further agrees that service of any process,
     summons, notice or document by U.S. registered mail to the Issuer address
     set forth below shall be effective service of process for any action, suit
     or proceeding in the State of Delaware with respect to any matters to which
     it has submitted to jurisdiction in this paragraph. The Issuer irrevocably
     and unconditionally waives any objection to the laying of venue of any
     action, suit or proceeding arising out of this Note in the foregoing
     courts, and hereby and thereby further irrevocably and unconditionally
     waives and agrees not to plead or claim in any such court that any such
     action, suit or proceeding brought in any such court has been brought in an
     inconvenient forum.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed as
of the date first set forth above.



OAKHURST COMPANY, INC.
2751 Centerville Road -- Suite 3131
Wilmington, Delaware 19803



By: /s/ Robert M. Davies
   -----------------------------------------
   Robert M. Davies, Chief Executive Officer