Document:

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                                                                   EXHIBIT 10.25
                           STEEL CITY PRODUCTS, INC.

                     TERRANCE W. ALLAN EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of this 1st day of May
2000 by and between TERRANCE W. ALLAN (hereinafter referred to as "Mr. Allan")
and STEEL CITY PRODUCTS, INC., a Delaware corporation (hereinafter referred to
as the "Company") and a subsidiary of Oakhurst Company, Inc. (hereinafter
referred to as "Oakhurst.")

1.       BACKGROUND. Mr. Allan is currently an employee of the Company pursuant
         to an agreement dated as of September 1, 1993 (the "Prior Agreement"),
         which to date has been extended beyond its stated expiration. The
         parties now wish to enter into this Agreement, which is intended to
         replace and supersede in all respects the Prior Agreement.

2.       CONSIDERATION. The parties are entering into this Agreement for and in
         consideration of the mutual covenants contained herein and other good
         and valuable consideration, the receipt and sufficiency of which are
         hereby acknowledged.

3.       TERM OF EMPLOYMENT.

         (a)      The term of Mr. Allan's employment hereunder shall commence on
                  the date hereof and shall continue for an initial term ending
                  at the close of business on September 30, 2003 unless it is
                  earlier terminated pursuant to Section 11, or Section 12,
                  below.

         (b)      Unless sooner terminated, at the expiration of the initial
                  term, this Agreement shall continue for successive one-year
                  terms unless at least ninety (90) days prior to September 30,
                  2003 or any subsequent anniversary thereof one party gives the
                  other party notice of non-renewal, in which event this
                  Agreement shall terminate on such anniversary.

4.       TITLE, REPORTING RELATIONSHIP & RESPONSIBILITIES.

         (a)      Title. So long as this Agreement is in effect, Mr. Allan shall
                  be elected to the position and shall have the reporting
                  relationship set forth on Exhibit A.

         (b)      Responsibilities. Mr. Allan's responsibilities and job
                  description are set forth in Exhibit A. Mr. Allan shall devote
                  his full business time to diligently carrying out those
                  responsibilities to the best of his abilities. Nothing herein
                  shall be construed to prevent Mr. Allan from serving as an
                  officer or director or participating in the activities of any
                  family, religious, charitable, community service or political
                  activity so long as such participation does not interfere with
                  his carrying out his responsibilities hereunder.

         (c)      Mr. Allan's reporting relationship and job description within
                  Mr. Allan's general area of expertise shall be subject to
                  change by the Company in consultation with Mr. Allan as is
                  reasonably required to meet the needs of the business from
                  time to time.

         (d)      Mr. Allan's principal place of employment shall not be moved
                  outside of an area circumscribed by a circle having a radius
                  of 50 miles and with a center located at the City Hall of
                  Pittsburgh, Pennsylvania.

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                                          Terrance W. Allan Employment Agreement

5.       COMPENSATION. During the term of this Agreement, Mr. Allan shall be
         paid cash compensation consisting of the base salary and other
         incentive payments set forth on Exhibit A.

         (a)      Mr. Allan's base salary shall be paid in installments no less
                  frequently than twice monthly at the same time as other
                  employees of the Company are paid.

         (b)      any incentive payment that is based on the Company's annual
                  financial performance shall be made to Mr. Allan after the
                  audit has been completed for the fiscal year of the Company to
                  which the payment relates.

6.       BENEFITS. Mr. Allan shall be entitled to the same health and other
         benefits as are made available to the Company's senior officers
         generally, and on the same terms and conditions. Mr. Allan shall also
         be entitled such additional benefits as are set forth in Exhibit A. All
         of the foregoing benefits in this Section 6 are hereinafter referred to
         collectively as the "Benefits."

7.       BUSINESS EXPENSE REIMBURSEMENT. Mr. Allan shall be reimbursed in
         accordance with Company policy from time to time in effect for all
         reasonable business expenses incurred by him in the performance of his
         duties hereunder.

8.       INDEMNIFICATION. Mr. Allan shall be indemnified by the Company with
         respect to claims made against him as a director, officer and/or
         employee of the Company and of any parent, subsidiary or affiliate of
         the Company (as the case may be) to the fullest extent permitted by the
         Company's charter, by-laws and the laws of the State of Delaware.

9.       CONFIDENTIAL INFORMATION.

         (a)      During his employment by the Company and after his employment
                  terminates for whatever reason, Mr. Allan shall not disclose
                  to any person or entity Confidential Information (as defined
                  below) except, while an employee of the Company, in the proper
                  performance of his duties and responsibilities under this
                  Agreement or except as may be expressly authorized by the
                  Board of Directors of the Company. For purposes of this
                  Agreement, "Confidential Information" is defined as including
                  trade secrets; customer and vendor names and lists; business
                  plans, sales plans and marketing plans; pricing formulas;
                  non-public financial data; product specifications and designs;
                  the existence, nature, substance, progress and results of
                  research and development projects; concepts, inventions,
                  discoveries, formulae, processes, drawings, documents,
                  records, software; or any other information of the Company,
                  its parent or any of their subsidiaries that is not generally
                  available, or any such information of any third party that is
                  held by the Company, its parent or any of their subsidiaries
                  under an obligation of confidentiality.

         (b)      Mr. Allan's obligation of confidentiality shall not, however,
                  relate to any information --

                  (i)      that is or becomes publicly known through no act or
                           fault of Mr. Allan; or

                  (ii)     that is required to be disclosed pursuant to
                           applicable law, a court order or a judicial
                           proceeding, including a proceeding to enforce this
                           Agreement.

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                                          Terrance W. Allan Employment Agreement

10.      NON-COMPETE OBLIGATIONS.

         (a)      Mr. Allan's obligations with respect to competing with the
                  Company and soliciting its employees shall be as follows:

                  (i)      Within the Market Area (as defined below) Mr. Allan
                           shall not render services or advice, whether for
                           compensation or without compensation and whether as
                           an employee, officer, director, principal or
                           otherwise, to any person or organization with respect
                           to any product, service or process in existence or
                           under development that is competitive with (1) the
                           business of the Company on the date hereof; (2) the
                           business of the Company in which Mr. Allan was
                           actively engaged during his employment by the Company
                           or of which he has detailed knowledge; or with (3)
                           any planned business of the Company in which Mr.
                           Allan has an active part in the planning or of which
                           he has detailed knowledge.

                  (ii)     Mr. Allan shall not either directly or indirectly as
                           agent or otherwise in any manner solicit influence or
                           encourage any customer of the Company to take away or
                           to divert or direct its business to Mr. Allan or to
                           any person or entity by or with which Mr. Allan is
                           employed, associated, affiliated or otherwise
                           related, other than the Company.

                  (iii)    Mr. Allan shall not recruit or otherwise solicit or
                           induce any employee of the Company to terminate his
                           or her employment or otherwise cease his or her
                           relationship with his or her employer.

         (b)      Mr. Allan's obligations under this Section 10 shall continue
                  (i) so long as he is an employee of the Company; and (ii)
                  after his employment terminates, (whether by reason of the
                  expiration of this Agreement or pursuant to Section 11 or
                  Section 12, below, or otherwise) for (x) a period of six
                  months, or (y) for the period, if any, during which the
                  Company is obligated to continue to pay, or as to which it has
                  in a lump sum paid, Mr. Allan's base salary, whichever period
                  is longer.

         (c)      Definitions.

                  (i)      For purposes of this Section 10 only, the word
                           "Company" shall include the Company's parent and any
                           subsidiary of the Company or such parent.

                  (ii)     "Market Area" is defined as an area within a 200 mile
                           radius of any operating facility of the Company.

11.      TERMINATION BY THE COMPANY: Other than as provided in Section 3(b),
         above, the Company may only terminate Mr. Allan's employment pursuant
         to the terms and conditions contained in this Section 11.

         (a)      Without Cause. The Company may terminate Mr. Allan's
                  employment without Cause (as the word "Cause" is defined
                  below) by giving Mr. Allan written notice of such termination.
                  In the event the Company gives such notice the Company shall--

                  (i)      continue to pay to Mr. Allan his then current base
                           salary for the balance of the then term of this
                           Agreement, but in any case for a period of twelve
                           (12) full calendar months;

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                                          Terrance W. Allan Employment Agreement

                  (ii)     pay to Mr. Allan any bonus or incentive payment
                           provided for in Exhibit A that but for the
                           termination of his employment, would have been paid
                           to him for the year in which the

                           termination occurs, pro-rated, however, for the
                           number of days during such year that Mr. Allan was an
                           employee of the Company;

                  (iii)    provide to him the Benefits for the same period of
                           time that it is obligated to continue to make
                           payments to him of his base salary under Section
                           11(a)(i), above; and

                  (iv)     cause all stock options held by Mr. Allan to become
                           exercisable in full and to remain exercisable for one
                           (1) year after the date of termination.

         (b)      Disability. The Company may terminate Mr. Allan's employment
                  by reason of his permanent disability (as defined below) by
                  giving Mr. Allan written notice of such termination. In the
                  event the Company gives such notice the Company shall--

                  (i)      continue to pay Mr. Allan his base salary and to
                           provide to him the Benefits for a period of twelve
                           (12) full calendar months;

                  (ii)     pay to Mr. Allan any bonus or incentive payment
                           provided for in Exhibit A that, but for the
                           termination of his employment, would have been paid
                           to him for the year in which the termination
                           occurred, pro-rated, however, for the number of days
                           during such year that Mr. Allan was an employee of
                           the Company; and

                  (iii)    cause all stock options held by Mr. Allan to become
                           exercisable in full and to remain exercisable for one
                           (1) year after the date of termination.

         (c)      Death. The Company may terminate Mr. Allan's employment by
                  reason of his death, in which event--

                  (i)      the Company shall pay his executor, administrator or
                           personal representative--

                           (1)      Mr. Allan's base salary then in effect
                                    through the date of death (to the extent not
                                    theretofore paid); and

                           (2)      any bonus or incentive payment provided for
                                    in Exhibit A that, but for the termination
                                    of his employment, would have been paid to
                                    Mr. Allan for the year in which he died,
                                    pro-rated, however, for the number of days
                                    during such year that Mr. Allan was an
                                    employee of the Company.

                  (ii)     all stock options held by Mr. Allan shall become
                           exercisable in full and shall remain exercisable for
                           one (1) year after the date of termination.

         (d)      Life Insurance Proceeds. It is the intention of the parties
                  that the proceeds of any life insurance maintained by the
                  Company for the benefit of Mr. Allan shall constitute a
                  payment in lieu of any severance or termination payment in the
                  event of his death.

         (e)      For Cause. The Company may terminate Mr. Allan's employment
                  for Cause by giving him written notice thereof, in which event
                  (i) the Company shall pay him his base salary through the date
                  of such termination to the extent not theretofore paid and any
                  management bonus that had been approved by the Compensation
                  Committee of the Board of Directors of the

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                                          Terrance W. Allan Employment Agreement

                  Company prior to the date of termination; and (ii) all of his
                  stock options shall immediately terminate and be of no further
                  force or effect.

         (f)      "Permanent disability" for purposes of this Agreement shall
                  have occurred if Mr. Allan is unable to attend to his
                  responsibilities under this Agreement owing to a physical or
                  mental condition for a period of six (6) consecutive months or
                  for a period of an aggregate of nine (9) months (whether or
                  not consecutive) in any eighteen-month period.

         (g)      Insurance Payments. Any payments made to Mr. Allan under any
                  disability plans, the premiums for which were paid by the
                  Company or one of its affiliates shall serve to reduce the
                  amounts payable under Section 11(b)(i), above.

         (h)      Definition of Cause "Cause" shall mean gross or wilful
                  misconduct by Mr. Allan in connection with his employment; the
                  breach by Mr. Allan of any material obligation under this
                  Agreement, including the obligations set forth in Section 9
                  and Section 10, above; a failure to devote adequate time and
                  attention to carrying out his responsibilities (other than by
                  reason of his death or permanent disability); any act of
                  dishonesty or fraud; or the commission by Mr. Allan of a
                  felony.

         (i)      Change in Control.

                  (i)      Anything herein to the contrary notwithstanding, if
                           after a Change in Control (as defined below) either
                           (i) Mr. Allan's employment under this Agreement is
                           terminated without Cause and other than by reason of
                           his death or permanent disability; or (ii) Mr. Allan
                           resigns his employment pursuant to Section 12, below,
                           by written notice given within 180 days of the
                           effective date of the Change in Control --

                           (1)      the Company shall pay to Mr. Allan in a lump
                                    sum on the date of the termination of his
                                    employment an amount equal to two year's
                                    base salary less the amount of base salary,
                                    if any, paid to him for the period during
                                    which he remained an employee after the date
                                    of the Change of Control; and

                           (2)      All Mr. Allan's stock options shall vest in
                                    full and shall remain exercisable for a
                                    period of one (1) year after the date of
                                    termination.

                  (ii)     A "Change in Control" shall mean any transaction that
                           results in a sale of substantially all of the assets,
                           business or common stock of the Company to a third
                           party or entity that is not controlled by the senior
                           managers of the Company.

         (j)      Withholdings. All amounts payable to Mr. Allan under this
                  Agreement shall be subject to any withholdings therefrom that
                  the Company is legally required to make.

         (k)      Use of COBRA. The continuation of any health benefits provided
                  for herein may be effected by the Company making on Mr.
                  Allan's behalf his COBRA payments for the period of such
                  continuation.

12.      RESIGNATION BY MR. ALLAN.

         (a)      In addition to the provisions of Section 3(b), above, Mr.
                  Allan may resign his employment with the Company

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                                          Terrance W. Allan Employment Agreement

                  on ninety (90) days' prior written notice to the Company. The
                  Company may deem any such notice given by Mr. Allan as a
                  resignation by him, effective upon the giving of such notice,
                  of any or all directorships and offices then held by Mr. Allan
                  in the Company, its parent and any of their subsidiaries, but
                  the Company shall nevertheless continue to pay to Mr. Allan
                  his base salary and any special bonus then in effect during
                  the ninety-day period. No incentive payments shall be made to
                  Mr. Allan for the fiscal year in which he resigns his
                  employment with the Company.

         (b)      In the event of Mr. Allan's resignation, all stock options
                  then held by him shall expire on the thirtieth day after the
                  effective date of his resignation except to the extent
                  otherwise expressly provided in the agreement covering a given
                  stock option.

13.      NOTICES. All notices required or permitted under this Agreement shall
         be in writing and shall be deemed given by a party when hand delivered
         to the other party or when deposited with a delivery service that
         provides next-business-day delivery and proof of delivery, addressed to
         the other party as follows:

            If to the Company:                    If to Mr. Allan:
              At its headquarters address           At his most recent residence
              attention of the President.             address on the books of
                                                      the Company.

            With a copy to:
              Roger M. Barzun
              General Counsel
              60 Hubbard Street
              P.O. Box 767
              Concord, Massachusetts 01742

         or to such other address of a party as such party may by notice
         hereunder designate to the other party.

14.      SEVERABILITY. If any provision or part of a provision of this Agreement
         is finally declared to be invalid by any tribunal of competent
         jurisdiction, such part shall be deemed automatically adjusted, if
         possible, to conform to the requirements for validity, but, if such
         adjustment is not possible, it shall be deemed deleted from this
         Agreement as though it had never been included herein. In either case,
         the balance of any such provision and of this Agreement shall remain in
         full force and effect. Notwithstanding the foregoing, however, no
         provision shall be deleted if it is clearly apparent under the
         circumstances that either or both of the parties would not have entered
         into this Agreement without such provision.

15.      SURVIVAL. Notwithstanding the expiration or earlier termination of this
         Agreement or of Mr. Allan's employment for any reason, the terms and
         conditions of Section 9 and Section 10 and any other obligations of the
         parties that by their terms are to be performed or are to have
         continued effect after such termination shall survive such expiration
         or termination.

16.      PRORATION. All amounts payable to Mr. Allan hereunder for a period
         shorter than the period for which they are described herein shall be
         pro-rated on a daily basis using a 365-day year.

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                                          Terrance W. Allan Employment Agreement

17.      INJUNCTIVE RELIEF. It is acknowledged and agreed that the Company shall
         have the right to bring an action to enjoin any violation by Mr. Allan
         of his obligations under Section 9 and Section 10, above, because a
         suit for monetary damages alone would be an inadequate remedy.

18.      ARBITRATION.

         (a)      Except as otherwise provided below, this Agreement and any
                  controversy, claim or dispute between the parties directly or
                  indirectly concerning this Agreement or the breach hereof or
                  the subject matter hereof, including questions concerning the
                  scope and applicability of this Section 18 shall be finally
                  settled by arbitration held in Pittsburgh, Pennsylvania in
                  accordance with the provisions of this Section and the
                  Employment Dispute Resolution Rules of the American
                  Arbitration Association or any successor thereto.

         (b)      The arbitrator or arbitrators (the "arbitrators") shall be
                  chosen in accordance with such rules. A majority of the
                  arbitrators shall have the right and authority to determine
                  how their decision or determination as to each issue or matter
                  in dispute may be implemented or enforced. Any decision or
                  award of a majority of the arbitrators shall be final and
                  conclusive on the parties to this Agreement, and there shall
                  be no appeal therefrom other than for fraud or willful
                  misconduct. Notwithstanding anything in this Section 18 to the
                  contrary, no arbitrator in any such proceeding shall have
                  authority or power to (i) modify or alter any express
                  condition or provision hereof by an award or otherwise; or
                  (ii) to award punitive or exemplary damages for or against any
                  party to any such proceeding.

         (c)      The parties hereto agree that an action to compel arbitration
                  pursuant to this Agreement may be brought in the appropriate
                  court of the Commonwealth of Pennsylvania sitting in
                  Pittsburgh, Pennsylvania. Application may also be made to such
                  court for confirmation of any decision or award of a majority
                  of the arbitrators, for an order of enforcement and for any
                  other remedies that may be necessary to effectuate such
                  decision or award. Each of the parties hereto hereby consents
                  to the jurisdiction of the arbitrators and of such court and
                  waives any objection to the jurisdiction of such arbitrators
                  and court.

         (d)      Notwithstanding anything contained in this Section 18 to the
                  contrary, the parties hereby agree that this Section 18 shall
                  not apply to any action brought by a party seeking an
                  injunction or other equitable relief.

         (e)      In any controversy, claim or dispute subject to arbitration
                  under the terms of this Section 18, the parties shall pay the
                  fees and expenses of the arbitrators in accordance with any
                  decision or award of a majority of the arbitrators.

19.      MISCELLANEOUS.

         (a)      This Agreement together with Exhibit A--

                  (i)      Supersedes and replaces in its entirety the Prior
                           Agreement;

                  (ii)     contains the entire understanding of the parties on
                           the subject matter hereof;

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                                          Terrance W. Allan Employment Agreement

                  (iii)    shall not be amended, and no term hereof shall be
                           waived, except by written agreement of the parties
                           signed by each of them;

                  (iv)     shall be binding upon and inure to the benefit of the
                           parties and their successors, personal
                           representatives and permitted assigns;

                  (v)      may be executed in one or more counterparts, each of
                           which shall be deemed an original hereof, but all of
                           which shall constitute but one and the same
                           agreement; and

                  (vi)     shall not be assignable by either party without the
                           prior written consent of the other party, except that
                           the Company may assign this Agreement to any entity
                           acquiring substantially all of the stock, business or
                           assets of the Company, provided that the acquiror
                           assumes all of the Company's obligations hereunder.

         (b)      The words "herein," "hereof," "hereunder," "hereby,"
                  "herewith" and words of similar import when used in this
                  Agreement shall be construed to refer to this Agreement as a
                  whole. The word "including" shall mean including, but not
                  limited to any one or more enumerated items.

         (c)      Each provision of this Agreement shall be interpreted and
                  enforced without the aid of any canon, custom or rule of law
                  requiring or suggestion construction against the party
                  drafting or causing the drafting of such provision.

         (d)      No representation, affirmation of fact, course of prior
                  dealings, promise or condition in connection herewith or usage
                  of the trade not expressly incorporated herein shall be
                  binding on the parties.

         (e)      The failure to insist upon strict compliance with any term,
                  covenant or condition contained herein shall not be deemed a
                  waiver of such term, nor shall any waiver or relinquishment of
                  any right at any one or more times be deemed a waiver or
                  relinquishment of such right at any other time or times.

         (f)      The captions of the paragraphs herein are for convenience only
                  and shall not be used to construe or interpret this Agreement.

20.      GOVERNING LAW. This Agreement shall be governed by, and construed in
         accordance with, the domestic laws of the Commonwealth of Pennsylvania
         without giving effect to any choice of law or conflict of law provision
         or rule (whether of the Commonwealth of Pennsylvania or of any other
         jurisdiction) that would cause the application hereto of the laws of
         any jurisdiction other than the Commonwealth of Pennsylvania.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

STEEL CITY PRODUCTS, INC.

By:  /s/ BERNARD H. FRANK                  /s/ TERRANCE W. ALLAN
   ------------------------------          ------------------------------
     Bernard H. Frank                        TERRANCE W. ALLAN
     Chief Executive Officer

                                                                    Page 8 of 10
<PAGE>   9

                                                                       EXHIBIT A

                  EMPLOYMENT AGREEMENT DATED AS OF MAY 1, 2000

                                 BY AND BETWEEN

                 TERRANCE W. ALLAN AND STEEL CITY PRODUCTS, INC.

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

TITLE/POSITION:            President

MR. ALLAN REPORTS TO:      The Chairman of the Company.

JOB DESCRIPTION:           The normal duties of a President and chief operating
                           officer of a privately held company.
ANNUALIZED
BASE SALARY:               $133,000 effective on the date hereof;
                           $140,000 effective September 1, 2001; and
                           $145,000 effective September 1, 2002 and thereafter.

INCENTIVE                  Mr. Allan shall be entitled to the following
COMPENSATION:              incentive compensation:

                  o        Participation in the Company's Annual Management
                           Bonus pool, which consists of an amount equal to 8%
                           of the annual Consolidated Net Income (as defined
                           below) of the Company. Mr. Allan's share of the pool
                           shall be determined by the Compensation Committee of
                           the Board of Directors of the Company from year to
                           year and shall be subject to the same provisions of
                           the Management Bonus Plan as are applicable to other
                           eligible managers of the Company.

                  o        An Annual Executive Bonus equal to one percent (1%)
                           of the annual Consolidated Net Income, of the
                           Company, if any, that exceeds $2,000,000.

                  o        "Consolidated Net Income" of the Company for a given
                           year means the net income of the Company and any of
                           its subsidiaries derived from the sale of auto and
                           pet products, calculated in accordance with GAAP
                           consistently applied, but to which is added back
                           interest, taxes, depreciation, amortization, LIFO
                           adjustments, inter-company charges and income, and
                           allocations of parent company overhead expenses other
                           than expenses that had they not been paid or incurred
                           by the parent company would have been paid or
                           incurred by the Company, all as determined from the
                           Company's audited financial statements.

                                                                    Page 9 of 10
<PAGE>   10

                        o           Income of the Company derived from any new
                                    line of business entered into after the date
                                    of this Agreement shall be included in the
                                    definition of Consolidated Net Income only
                                    after first deducting interest expense
                                    incurred on the investment cost and working
                                    capital requirements of such business.

AUTOMOBILE:             The Company shall furnish Mr. Allan with the use of a
                        Company-leased automobile with a monthly rental rate not
                        to exceed $600 per month or a Company-owned automobile
                        that, if leased, would have a monthly lease rate of no
                        more than $600.

                        In lieu of either of the foregoing, the Company shall
                        pay Mr. Allan a monthly automobile allowance of $600.

                        The cost of all insurance, maintenance and repairs for,
                        and gasoline consumed by, such automobile shall be paid
                        or reimbursed (as the case may be) to Mr. Allan other
                        than the cost of gasoline for his personal use of such
                        automobile.

GROUP TERM LIFE
INSURANCE COVERAGE      A minimum of $100,000.

PAID VACATION           In accordance with Company policies from time to time
                        in effect.

                                                                   Page 10 of 10<PAGE>   1
                                                                   EXHIBIT 10.26

                                WIND-UP AGREEMENT

         KTI, INC., CASELLA WASTE SYSTEMS, INC., OAKHURST COMPANY, INC.
                         AND OAKHURST TECHNOLOGY, INC.

THIS WIND-UP AGREEMENT (this "Agreement") is made as of the 19th day of April,
2001 by and between KTI, INC., a New Jersey corporation (hereinafter referred to
as "KTI;") CASELLA WASTE SYSTEMS, INC., a Delaware corporation (hereinafter
referred to as the "Casella;"); OAKHURST COMPANY, INC., a Delaware corporation
(hereinafter referred to as "OCI;") and OAKHURST TECHNOLOGY, INC., a Delaware
corporation (hereinafter referred to as "OTI.")

                                   BACKGROUND

The parties entered into that certain Investment Agreement dated as of December
29, 1998 (the "Investment Agreement") pursuant to which KTI purchased 1,730,056
shares of OCI's common stock, $0.01 par value per share, (the "OCI Stock.")

Pursuant to the Investment Agreement, KTI, OCI and OTI entered into a Letter
Loan Agreement dated December 29, 1998 (the "Loan Agreement") providing for the
loan to OCI of up to $11.5 million in connection with the purchase by OCI of the
common stock of OTI and the use by OTI of the proceeds of such purchase to
satisfy as KTI's "affiliate" certain obligations of KTI to fund the operations
of New Heights Recovery & Power, LLC ("New Heights") pursuant to New Heights'
bankruptcy plan and for certain other purposes, including investments having the
potential of expanding or enhancing the recycling of rubber tires.

In connection with the Loan Agreement, OCI entered into a Pledge Agreement dated
as of December 29, 1998 (the "Pledge Agreement") pursuant to which OCI pledged
to KTI as security for the repayment of amounts borrowed under the Loan
Agreement the stock of OTI that OCI had purchased.

As provided in New Heights' bankruptcy plan, OTI acquired a 50% interest in New
Heights pursuant to its funding of New Heights' operations. As contemplated by
the bankruptcy plan, KTI Operations, a subsidiary of KTI operated New Heights
and its related businesses for the benefit of its members. In addition, OCI used
certain amounts borrowed under the Loan Agreement to pay certain expenses of OTI
and to fund in part the purchase (for aggregate consideration of $2,525,000) of
certain equity and subordinated debt securities (the "First Tranche") of
Sterling Construction Company of Houston, Texas.

By an Amendment Agreement dated as of May 3, 2000 (the "Amendment Agreement")
the parties amended the Loan Agreement and entered into certain other agreements
pursuant to which, among other things, OTI agreed to transfer 25% of its
interest in New Heights to KTI in consideration of direct funding by KTI of $3
million of New Heights' working capital needs, and OCI pledged the First Tranche
to KTI (the "Sterling Pledge Agreement") as security for the purchase price
thereof.

By a series of stock purchase agreements dated December 1999, KTI transferred
80% of the common stock of SeaGlass, Inc. to OCI, which in turn transferred the
shares to OTI, which in turn transferred the shares to New Heights as part of
the funding of New Heights (the "SeaGlass Transactions.")

In addition, Casella has acquired all of the outstanding capital stock of KTI.

The parties now wish to provide for (a) the transfer to KTI or its designee or
designees of all of OTI's interest in New Heights; (b) the transfer by KTI to
OCI or its designee or designees of the OCI Stock and the return to OCI of all
securities pledged to KTI by OCI and/or OTI as security under the Loan
Agreement; (c) the cancellation of all but $1 million of the debt

                                                                     Page 1 of 9
<PAGE>   2

(including accrued interest thereon) owed by OCI to KTI and the exchange of that
remaining $1 million of debt for a subordinated, promissory note of OCI in the
amount of $1,000,000 and the issuance by OCI to KTI of a ten-year warrant to
purchase shares of OCI common stock, $0.01 par value per share; (d) certain
indemnifications by the parties; and (e) a general release and waiver of all
claims known or unknown by one party against the others, all on the terms and
conditions set forth herein.

1.    CONSIDERATION. The parties are entering into this Agreement for and in
      consideration of the mutual covenants contained herein and other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged.

2.    TRANSFERS AT THE CLOSING.

      (a)   Transfers by KTI. At the consummation of the transactions described
            in this Agreement (the "Closing,") KTI shall deliver to OCI or to
            such other entity or person as OCI shall direct in a writing given
            to KTI prior to the Closing --

            (i)   The OCI Stock free and clear of all liens and encumbrances of
                  any kind or nature together with an executed stock power in
                  form and substance reasonably satisfactory to OCI;

            (ii)  All of the shares of OTI and all of the equity and debt
                  securities comprising the First Tranche that are under KTI's
                  possession or control, free and clear of all liens and
                  encumbrances of any kind or nature imposed thereon by KTI, if
                  any;

            (iii) That certain promissory note dated December 29, 1998 in the
                  original principal amount of $11.5 million (the "Original
                  Note") marked "paid in full" together with a written waiver of
                  all interest accrued thereon and not paid as of the Closing,
                  free and clear of all liens and encumbrances of any kind or
                  nature imposed thereon by KTI, if any; and

            (iv)  The written resignations from the Board of Directors of OCI
                  and/or OTI of Messrs. Pirasteh, Sergi, and Polak.

      (b)   Transfers by OCI and OTI. At the Closing, OCI and/or OTI shall
            deliver to KTI or to such other person or entity as KTI shall direct
            in a writing given to OCI prior to the Closing --

            (i)   A subordinated promissory note of OCI in the form attached
                  hereto as Exhibit A (the "Promissory Note.")

            (ii)  A ten-year warrant to purchase shares of the common stock of
                  OCI in the form attached hereto as Exhibit B (the "Warrant.")

            (iii) An assignment in the form attached hereto as Exhibit C of all
                  of OTI's interest in New Heights free and clear of all liens
                  and encumbrances of any kind or nature imposed thereon by or
                  through OCI or OTI.

            (iv)  An amendment to the New Heights limited liability company
                  agreement in the form attached hereto as Exhibit D, duly
                  executed by New Heights, OTI and each other member of New
                  Heights.

3.    REPRESENTATIONS AND WARRANTIES OF KTI AND CASELLA. KTI and Casella jointly
      and severally represent and warrant to OCI and OTI as follows:

      (a)   Organization and Qualification. KTI is a corporation duly organized,
            validly existing and in good standing under the laws of the State of
            New Jersey. KTI has the

                                                                     Page 2 of 9
<PAGE>   3

            requisite corporate power and authority to carry on its business as
            it is now being conducted.

      (b)   Authority Relative to this Agreement. KTI has all necessary power
            and authority to execute and deliver this Agreement and to
            consummate the transactions contemplated hereby. The execution and
            delivery by KTI of this Agreement and the agreements provided for
            herein, and the consummation by KTI of the transactions contemplated
            hereby and thereby, have been duly authorized by all requisite
            corporate and stockholder action. This Agreement has been duly
            executed and delivered by KTI and constitutes a valid and legally
            binding obligation of KTI enforceable against it in accordance with
            its terms except as enforceability may be limited by bankruptcy and
            insolvency laws and by general equitable principles.

      (c)   No Conflicts & Required Consents. The execution and delivery of this
            Agreement does not, and the performance of this Agreement will not:
            (i) conflict with or violate the Certificate of Incorporation or
            By-laws of KTI; (ii) conflict with or violate in any material
            respect any laws, rules or regulations applicable to KTI or by which
            any property or asset of KTI is bound; or (iii) result in any
            material default under any contract, instrument, note, mortgage or
            agreement to which KTI is a party or by which any property or asset
            of KTI is bound. The execution and delivery of this Agreement by KTI
            does not, and the performance of this Agreement will not, require
            any consent of any governmental entity.

      (d)   Title. KTI has all right, title and interest in and to the OCI Stock
            and the Original Note, free and clear of all covenants, conditions,
            restrictions, voting trust arrangements, liens and encumbrances,
            options and adverse claims whatsoever.

      (e)   The Promissory Note and the Warrant.

            (i)   KTI is acquiring the Promissory Note and the Warrant for its
                  own account for investment and not with a view to any resale
                  or "distribution" thereof within the meaning of the Securities
                  Act of 1933, as amended (the "Securities Act.")

            (ii)  KTI understands that because the sale of the Promissory Note
                  and the Warrant to it has not been registered under the
                  Securities Act or under the "blue sky" laws of any state, KTI
                  cannot dispose of either of them until their sale is
                  registered under the Securities Act and such state laws or
                  pursuant to an exemption therefrom.

            (iii) KTI acknowledges that OCI is issuing the Promissory Note and
                  Warrant pursuant to this Agreement in reliance upon, among
                  other things, the representations and warranties of KTI and
                  Casella contained in this Section 3(e).

      (f)   New Heights Value. At the date hereof, neither KTI nor Casella has
            entered into any agreement, is not in the process of negotiating
            and/or has not received any offer for the purchase of any interest
            New Heights that would result on a pro rata basis in the interest in
            New Heights to be transferred hereunder by OCI to KTI having a value
            in excess of the debt (including interest thereon) to be forgiven
            hereunder.

      (g)   Litigation. There are no legal or governmental proceedings pending
            or to KTI's or Casella's knowledge threatened to which KTI, Casella
            or any of their affiliates is a party which would prevent or delay
            KTI in the performance of its obligations hereunder.

      (h)   Brokers and Finders. No agent, broker, finder, investment banker,
            lawyer, entity or other firm or person is or will be entitled to any
            broker's or finder's fee or other

                                                                     Page 3 of 9
<PAGE>   4

            similar commission or other fee in connection with the transactions
            contemplated hereby based upon arrangements made by or on behalf of
            KTI or Casella.

      Except as set forth in this Agreement, neither KTI nor Casella makes any
      other representation or warranty and in particular, makes no other
      representations or warranties with respect to the OCI Stock or the
      securities comprising the First Tranche.

4.    REPRESENTATIONS AND WARRANTIES OF OCI AND OTI. OCI and OTI jointly and
      severally represent and warrant to KTI as follows:

      (a)   Organization and Qualification. That each of OCI and OTI is a
            corporation duly organized, validly existing and in good standing
            under the laws of the State of Delaware. That each of OCI and OTI
            has the requisite corporate power and authority to carry on its
            business as it is now being conducted.

      (b)   Authority Relative to this Agreement. That each of OCI and OTI has
            all necessary power and authority to execute and deliver this
            Agreement and to consummate the transactions contemplated hereby.
            That the execution and delivery by each of OCI and OTI of this
            Agreement and the agreements provided for herein, and the
            consummation by each of OCI and OTI of the transactions contemplated
            hereby and thereby, have been duly authorized by all requisite
            corporate and stockholder action. That this Agreement has been duly
            executed and delivered by each of OCI and OTI and constitutes its
            valid and legally binding obligation, enforceable against it in
            accordance with its terms except as enforceability may be limited by
            bankruptcy and insolvency laws and by general principles of equity.

      (c)   No Conflicts & Required Consents. That the execution and delivery of
            this Agreement does not, and the performance of this Agreement will
            not: (i) conflict with or violate the Certificate of Incorporation
            or By-laws or OCI or OTI; (ii) conflict with or violate in any
            material respect any laws, rules or regulations applicable to OCI or
            OTI or by which any of the property or asset of OCI or OTI is bound;
            or (iii) result in any material default under any contract,
            instrument, note, mortgage or agreement to which OCI or OTI is a
            party or by which any of the property or asset of OCI or OTI is
            bound. That its execution and delivery of this Agreement by OCI and
            OTI does not, and the performance of this Agreement will not,
            require any consent of any governmental entity.

      (d)   Title. OTI has all right, title and interest in and to the New
            Heights interest to be transferred hereunder, free and clear of all
            covenants, conditions, restrictions, voting trust arrangements,
            liens and encumbrances, options and adverse claims or rights
            whatsoever.

      (e)   Litigation. That there are no legal or governmental proceedings
            pending or to OCI's or OTI's knowledge threatened to which OCI or
            OTI or any of their respective affiliates is a party or which would
            prevent or delay OCI or OTI in the performance of its obligations
            hereunder.

      (f)   Solvency. Immediately after giving effect to the transactions
            contemplated by this Agreement, each of OCI and OTI shall be able to
            pay its debts as they become due and shall own property having a
            fair saleable value greater than the amounts required to pay its
            debts (including a reasonable estimate of the amount of all
            contingent liabilities, discounted by the probability that the
            collection of such contingent liabilities will occur). Immediately
            after giving effect to the transactions contemplated by this
            Agreement, each of OCI and OTI shall have adequate capital to

                                                                     Page 4 of 9
<PAGE>   5

            carry on its business. No transfer of property is being made and no
            obligation is being incurred in connection with the transactions
            contemplated by this Agreement with the intent to hinder, delay or
            defraud either present or future creditors.

      (g)   Brokers and Finders. No agent, broker, finder, investment banker,
            lawyer, entity or other firm or person is or will be entitled to any
            broker's or finder's fee or other similar commission or other fee in
            connection with the transactions contemplated hereby based upon
            arrangements made by or on behalf of OCI or OTI.

      Except as set forth herein, neither OCI nor OTI makes any other
      representation or warranty and in particular, makes no other
      representations or warranties with respect to the interest in New Heights
      to be transferred to KTI pursuant to Section 2(b)(iii), above.

5.    INDEMNITIES BY KTI AND CASELLA. By the execution hereof, KTI and Casella
      jointly and severally hereby agree to indemnify and hold harmless, OCI,
      OTI and each of their officers, directors and employees (any or all of the
      foregoing being hereinafter referred to as an "OCI Indemnified Person")
      from and against any and all claims, debts, obligations and other
      liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
      whether known or unknown, or due or to become due or otherwise), monetary
      damages, fines, fees, penalties, interest obligations, deficiencies,
      losses and expenses (including without limitation amounts paid in
      settlement, interest, court costs, costs of investigators, reasonable fees
      and expenses of attorneys, accountants, financial advisors and other
      experts, and other expenses of litigation) ("Damages") incurred or
      suffered by an OCI Indemnified Person or any affiliate thereof:

      (a)   resulting from or constituting any breach of a representation or
            warranty contained in this Agreement or the failure to perform any
            covenant or agreement of KTI set forth herein;

      (b)   resulting from or relating to any failure by KTI to have good, valid
            and marketable title to the OCI Stock or the Original Note, free and
            clear of all liens, claims, pledges, options, adverse claims or
            charges of any nature whatsoever;

      (c)   resulting from or relating to the SeaGlass Transactions, including
            that certain law suit pending in the Superior Court of New Jersey,
            Essex County, commenced by Fred Devlin, plaintiff, against SeaGlass,
            Inc. and others (including OCI,) defendants; and

      (d)   resulting from or relating to OTI's status as KTI's "affiliate"
            pursuant to New Heights' bankruptcy plan; provided, however, that
            neither KTI nor Casella shall be obligated to indemnify any OCI
            Indemnified Person from any Damages resulting from or relating to
            any actions taken by any such OCI Indemnified Person or any breach
            of their fiduciary responsibilities.

6.    INDEMNITIES BY OCI AND OTI. By the execution hereof, OCI and OTI hereby
      jointly and severally agree to indemnify and hold harmless KTI and its
      affiliates and their respective officers, directors, and employees (any or
      all of the foregoing being hereinafter referred to as a "KTI Indemnified
      Person") from and against any and all Damages incurred or suffered by a
      KTI Indemnified Person:

      (a)   resulting from or constituting any breach of a representation or
            warranty contained in this Agreement or the failure to perform any
            covenant or agreement of OCI or OTI set forth herein;

      (b)   resulting from or relating to any failure by OCI to have good, valid
            and marketable title to the New Heights interest to be transferred
            hereunder, free and clear of all

                                                                     Page 5 of 9
<PAGE>   6

            liens, claims, pledges, options, adverse claims or charges of any
            nature whatsoever; or

      (c)   resulting from or relating to any actions taken by any OCI
            Indemnified Person with respect to OTI's ownership of an interest in
            New Heights.

7.    SURVIVAL. Unless otherwise specified in this Section 7 or elsewhere in
      this Agreement, all provisions of this Agreement shall survive the Closing
      and the consummation of the transactions contemplated hereby and shall
      continue forever in full force and effect in accordance with their terms.
      Except for claims based on fraud, the representations and warranties of
      the parties set forth in Section 3 and Section 4 of this Agreement, and
      the indemnification obligations set forth in Section 5 and Section 6 of
      this Agreement, and shall survive the Closing and the consummation of the
      transactions contemplated hereby until the third anniversary of the
      Closing; provided, however, that the representation and warranties set
      forth in Sections 3(a), (b) and (d) and Section 4(a), (b) and (d) shall
      survive the Closing without limitation.

8.    LIMITATIONS. Notwithstanding anything to the contrary contained in this
      Agreement, the following limitations shall apply:

      (a)   The aggregate liability of KTI and Casella for the sum of all
            Damages payable by it under this Agreement shall not exceed
            $2,000,000.

      (b)   The aggregate liability of OCI and OTI for the sum of all Damages
            payable by them under this Agreement shall not exceed the sum of (i)
            the fair market value of the OCI Stock at the time of Closing; and
            (ii) the principal and all interest due under the Original Note at
            the time of Closing.

      (c)   KTI and Casella shall be liable under Section 5 for only that
            portion of the aggregate Damages which exceeds $10,000 (it being
            understood that neither KTI nor Casella shall be liable, in any
            event, for the first $10,000 of said Damages); provided, however,
            that such limitation shall not apply to Damages under Sections 5(b),
            (c) or (d);

      (d)   OCI and OTI shall be liable under Section 6 for only that portion of
            the aggregate Damages which exceeds $10,000 (it being understood
            that OCI and OTI shall not be liable, in any event, for the first
            $10,000 of said Damages); provided, however, that such limitation
            shall not apply to Damages under Section 6(b) or (c).

      (e)   In no event shall any party be responsible and liable for any
            Damages or other amounts that are consequential, in the nature of
            lost profits, diminution in value, damage to reputation or the like,
            special or punitive or otherwise not actual Damages (it being
            understood that for purposes of this sentence, actual Damages
            includes all amounts required to be paid to third parties pursuant
            to any judgment or judgments.) Each party shall use commercially
            reasonable efforts to minimize the Damages for which indemnification
            is provided by the other party under this Agreement.

9.    THE CLOSING.

      (a)   The obligations of KTI, OCI and OTI to proceed to Closing are
            conditioned upon the simultaneous closing of the sale pursuant to
            that certain Purchase Agreement dated March 6, 2001 (the "Rubber
            Recovery Agreement.") to Rubber Recovery Technologies Acquisition
            LLC (or its nominee) ("RRT") by KTI of its 12.5% interest in New
            Heights and of the 37.5% interest in New Heights to be transferred
            to KTI pursuant to this Agreement.

                                                                     Page 6 of 9
<PAGE>   7

      (b)   If the sale to RRT is consummated, the Closing shall occur at the
            same time and at the same location as such sale.

      (c)   If such sale is not consummated as a result of the termination of
            the Rubber Recovery Agreement, this Agreement may be terminated by
            KTI by written notice to OCI and OTI given within 10 business days
            following the termination of the Rubber Recovery Agreement.

            (i)   If this Agreement is terminated by KTI pursuant to Section
                  9(c), this Agreement shall be void and of no further force or
                  effect; provided, however, that no party shall be released
                  from liability for any breach of such party's obligations
                  hereunder to the extent such breach caused the termination of
                  the Rubbery Recovery Agreement.

            (ii)  If this Agreement is not so terminated, the Closing shall
                  occur within five (5) business days following the expiration
                  of such 10-business-day period.

      (d)   Following the Closing, none of OCI, OTI or any of their respective
            affiliates, successors or assigns shall have any recourse to the New
            Heights interest being transferred to KTI under this Agreement. Any
            claims of any such parties by reason of a breach of an obligation
            hereunder; the failure of a representation or warranty made herein
            to be true and correct; or otherwise shall be made solely against
            the other assets of KTI and/or Casella, and each of OCI and OTI
            acknowledge that RRT will be a holder in due course of the New
            Heights interest being transferred under this Agreement free and
            clear of any claims of OCI, OTI or any of their respective
            affiliates successors or assigns.

10.   WAIVERS, RELEASES & DISCHARGES.

      (a)   KTI's Waiver, Release & Discharge. By the execution hereof, each of
            KTI and Casella for and on behalf of itself, and their affiliates,
            hereby waives, and releases and discharges OCI and OTI and each of
            their affiliates, officers, directors, employees, agents and
            representatives (collectively the "OCI Released Parties") from, any
            and all claims, demands, losses, damages, actions or causes of
            action, obligations, debts and liabilities of any kind or nature
            whatsoever, known or unknown, now existing or hereafter existing,
            which any of them now has or may hereafter have against any one or
            more of the OCI Released Parties arising out of any matter, cause or
            event occurring on or prior to the Closing including the Investment
            Agreement, the Loan Agreement, the Amendment Agreement, the Pledge
            Agreement and the Sterling Pledge Agreement; provided, however, that
            nothing contained herein shall operate to release any obligation of
            OCI or OTI arising under this Agreement, the Promissory Note or the
            Warrant. In the event the Closing does not occur and this Agreement
            is terminated, the foregoing release shall be void ab initio and of
            no force or effect.

      (b)   Waivers, Releases & Discharges of OCI and OTI. By the execution
            hereof, each of OCI and OTI for and on behalf of itself, any parent
            company and their affiliates, hereby waives, and releases and
            discharges each of KTI and Casella and their affiliates, and each of
            their officers, directors, employees, agents and representatives
            (collectively the "KTI Released Parties") from, any and all claims,
            demands, losses, damages, actions or causes of action, obligations,
            debts and liabilities of any kind or nature whatsoever, known or
            unknown, now existing or hereafter existing, which any of them now
            has or may hereafter have against any one or more of the KTI
            Released

                                                                     Page 7 of 9
<PAGE>   8

            Parties arising out of any matter, cause or event occurring on or
            prior to the Closing including the Investment Agreement, the Loan
            Agreement, the Amendment Agreement, the Pledge Agreement and the
            Sterling Pledge Agreement; provided, however, that nothing contained
            herein shall operate to release any obligation of KTI or Casella
            arising under this Agreement, the Promissory Note or the Warrant. In
            the event the Closing does not occur and this Agreement is
            terminated, the foregoing release shall be void ab initio and of no
            force or effect.

11.   NOTICES. All notices hereunder given by one party to the others shall be
      in writing and shall be either hand delivered against a receipt or sent by
      overnight delivery service, with all charges prepaid, in any case, to such
      party's address set forth below. All such notices and correspondence shall
      be deemed given when received or when delivery is refused.

      If to KTI or Casella, at:                     If to OTI or OCI at:
      25 Greens Hill Lane                           3365 Spruce Lane
      Rutland, VT 05701                             Grapevine, Texas 76501
      Attention: President                          Attention: President

      or to such other address of a party as such party may by notice hereunder
      designate to the other parties.

12.   SEVERABILITY. If any provision or part of a provision of this Agreement is
      finally declared to be invalid by any tribunal of competent jurisdiction,
      such part shall be deemed automatically adjusted, if possible, to conform
      to the requirements for validity, but, if such adjustment is not possible,
      it shall be deemed deleted from this Agreement as though it had never been
      included herein. In either case, the balance of any such provision and of
      this Agreement shall remain in full force and effect.

13.   MISCELLANEOUS.

      (a)   This Agreement together with the exhibits referred to herein
            contains the entire understanding of the parties on the subject
            matter hereof except as otherwise expressly contemplated herein;
            shall not be amended except by written agreement of the parties
            signed by each of them; shall be binding upon and inure to the
            benefit of the parties and their successors and permitted assigns;
            and shall not be assignable by a party without the prior written
            consent of the other party.

      (b)   This Agreement may be (i) executed and delivered by telecopier or
            other facsimile transmission with the same force and effect as if
            the same were a fully executed and delivered original manual
            counterpart; and (ii) may be executed in any number of counterparts,
            each of which may be executed by fewer than all of the parties
            hereto (provided that each party executes one or more counterparts),
            each of which shall be enforceable against the parties executing
            such counterparts, and all of which together shall constitute one
            and the same agreement.

      (c)   Construction.

            (i)   The words "hereof," "herein," "hereunder," "this Agreement"
                  and words of similar import when used in this Agreement shall
                  refer to this Agreement as a whole and not any particular
                  provision of this Agreement and as this Agreement now exists
                  or may hereafter be amended, modified, supplemented, extended,
                  renewed, restated or replaced.

                                                                     Page 8 of 9
<PAGE>   9
               (ii)  The words "include" "includes" "including" and words of
                     similar import shall mean considered as part of a larger
                     group and not limited to any one or more enumerated items.

               (iii) The captions of the paragraphs herein are for convenience
                     only and shall not be used to construe or interpret this
                     Agreement.

               (iv)  Each provision of this Agreement shall be interpreted and
                     enforced without the aid of any canon, custom or rule of
                     law requiring or suggesting construction against the party
                     drafting or causing the drafting of such provision.

         (d)   Waivers. Failure by a party to insist upon strict compliance with
               any term, covenant or condition, or to exercise any right,
               contained herein shall not be deemed a waiver of such term,
               covenant, condition or right; and no waiver or relinquishment of
               any term, covenant, condition or right at any one or more times
               shall be deemed a waiver or relinquishment thereof at any other
               time or times.

14.   GOVERNING LAW. This Agreement shall be governed by and construed in
      accordance with the domestic laws of the State of New York without giving
      effect to any choice of law or conflict of law provision or rule (whether
      of the State of New York or of any other jurisdiction) that would cause
      the application hereto of the laws of any jurisdiction other than the
      State of New York.

15.   JURISDICTION. Each of the parties submits to the jurisdiction of any state
      or federal court sitting in the State and County of New York in any action
      or proceeding arising out of or relating to this Agreement and agrees that
      all claims in respect of the action or proceeding may be heard and
      determined in any such court. Each party also agrees not to bring any
      action or proceeding arising out of or relating to this Agreement in any
      other court.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first above
written.

KTI, INC.                                   OAKHURST COMPANY, INC.

By: /s/ JOHN W. CASELLA                   By: /s/ MAARTEN D. HEMSLEY
  ---------------------------------          -----------------------------------
    John W. Casella, President                Maarten D. Hemsley, President

CASELLA WASTE SYSTEMS, INC.                 OAKHURST TECHNOLOGY, INC.

By: /s/ JOHN W. CASELLA                   By: /s/ MAARTEN D. HEMSLEY
  ---------------------------------          -----------------------------------
    John W. Casella, President                Maarten D. Hemsley, President

                                                                     Page 9 of 9
<PAGE>   10

                                PROMISSORY NOTE

DATE: JULY 3, 2001                                                   $1,000,000

                             OAKHURST COMPANY, INC.

OAKHURST COMPANY, INC., a Delaware corporation (together with its successors
and assigns the "Issuer") for value received hereby promises to pay to KTI,
INC., a New Jersey corporation, 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 one million dollars ($1,000,000),
together with interest on the unpaid principal balance of this Note from time
to time outstanding at the rate of 12% per year, compounded annually on each
anniversary of the date of this Note. The interest on this Note shall accrue
and shall be payable with the principal amount of this Note 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. Definitions. The following terms for all purposes of this Note shall have the
   respective 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 1 include the plural as well as the singular.

   (a) "Acceleration Notice" shall have the meaning set forth in Section 2.

   (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 New York 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; and (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.

   (e) "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.

   (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.

                                                                     Page 1 of 5

<PAGE>   11
     (h)  "Maturity Date" means 5:00 p.m. Eastern Time on the fourth anniversary
          of the date hereof.

     (i)  "Notice of Default" shall have the meaning set forth in Section 2.

     (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; and (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.

2.   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 or interest on
          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.

     (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 or interest on 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 (i)
               any other of the covenants or agreements on the part of the
               Issuer contained herein (other than those covered by clause (i),
               above;) or (ii) 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
               Wind-Up Agreement of even date herewith, 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 (as hereinafter defined)
               in violation of the provisions of Section 6 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

                                                                     Page 2 of 5
<PAGE>   12
               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 sentence of this Section 2, in each case where an
     Event of Default specified in Section 2(c)(i) through 2(c)(iv) occurs, the
     Holder, 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 2(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 Holder.

3.   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.

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

     (a)  No right or remedy herein conferred upon or reserved to the Holder 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
          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 Holder 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 Holder.

5.   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 the Notes; but no such
          waiver shall extend to any subsequent or other default or Event of
          Default or impair any right consequent thereon.

6.   SUBORDINATION.

     (a)  No payment on account of principal of or interest on 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

                                                                     Page 3 of 5
<PAGE>   13
          purchase or immediately after giving effect thereto, (i) there shall
          exist a default in any payment with respect to the Senior Indebtedness
          or (ii) there shall have occurred an event of default as defined in
          the instrument under which the same 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 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 6 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 6 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 6 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 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 and interest 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 and accrued interest then owed under this Note bears to the
          aggregate principal and accrued interest then owed under all
          Subordinated Notes then outstanding.

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

8.   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

                                                                     Page 4 of 5

<PAGE>   14
          TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
          OR RELATING TO THIS NOTE.

9.        SUBMISSION TO JURISDICTION. The Issuer irrevocably submits to the
          exclusive jurisdiction of the Supreme Court of the State of New York,
          New York County, and the United States District Court for the
          Southwestern District of New York, 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 New York 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 Supreme Court of the State of New York, New York County, or the
          United States District Court for the Southern District of New York,
          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.
3513 Concord Pike
Wilmington, Delaware 19803

By:  /s/ MAARTEN D. HEMSLEY
    -----------------------------
    Maarten D. Hemsley, President

                                                                     Page 5 of 5

<PAGE>   15
                                                                       EXHIBIT B

THE SALE AND ISSUANCE OF THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION.
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED,
SOLD, PLEDGED, OR TRANSFERRED UNLESS (i) A REGISTRATION STATEMENT UNDER THE ACT
IS IN EFFECT AS TO THESE SECURITIES AND SUCH OFFER, SALE, PLEDGE, OR TRANSFER IS
IN COMPLIANCE WITH APPLICABLE SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION
OR (ii) THERE IS AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY
TO THE COMPANY, THAT AN EXEMPTION THEREFROM IS AVAILABLE AND THAT SUCH OFFER,
SALE, PLEDGE, OR TRANSFER IS IN COMPLIANCE WITH APPLICABLE SECURITIES LAW OF ANY
STATE OR OTHER JURISDICTION.

WARRANT NO. KTI-1                                                 321,296 Shares
                                            (subject to adjustment and increase)

DATE: July 3, 2001

                        WARRANT TO PURCHASE COMMON STOCK

                                       OF

                             OAKHURST COMPANY, INC.

                            Void after July 3, 2011

This certifies that for value received, KTI, INC., a New Jersey corporation, or
registered assigns (the "Holder") is entitled, subject to the terms set forth
below, to purchase from Oakhurst Company, Inc., a Delaware corporation (the
"Company") (i) the greater of Three Hundred Twenty-One Thousand Two Hundred
Ninety-Six (321,296) shares of the Common Stock, $0.01 par value per share, of
the Company (the "Common Stock") or ten percent (10%) of the issued and
outstanding common stock of the Company on the Warrant Issue Date (as defined
below;) plus (ii) ten percent (10%) of the number of shares of Common Stock
issued to the shareholders of Sterling Construction Company of Houston, Texas
existing on the date hereof (collectively, the "Warrant Shares") upon surrender
hereof, at the principal office of the Company referred to below, with the
subscription form attached hereto duly executed, and simultaneous payment
therefor in lawful money of the United States or otherwise as hereinafter
provided, at the Exercise Price set forth in Section 2 below. The number,
character and Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein shall include
this Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.

This Warrant is issued effective April 19, 2001 (the "Warrant Issue Date") in
connection with that certain Windup Agreement dated as of April 19, 2001 between
the Company, Oakhurst Technology, Inc and KTI, Inc.

1.   TERM OF WARRANT. Subject to the terms and conditions set forth herein and
     except as provided below, this Warrant shall be exercisable, in whole or in
     part, during the term commencing on the date that is fifty-four (54) months
     after the Warrant Issue Date and ending at 5:00 p.m., Eastern Time on the
     tenth (10th) anniversary of the Warrant Issue Date, and shall be void
     thereafter. Notwithstanding the foregoing, this Warrant shall become
     exercisable commencing immediately prior to the occurrence of any event
     described in Section 11(a) below that results in a person or group of
     persons acquiring more than fifty percent (50%) of the issued and
     outstanding capital stock of the Company on a fully-diluted basis. For
     purposes of this Warrant, a "person" shall be deemed to

                                                                    Page 1 of 16
<PAGE>   16

     include natural persons, firms, corporations, partnerships, associations,
     joint ventures, joint stock companies, trusts, unincorporated organizations
     and any other private or public entities, whether or not any of the
     foregoing are acting on their behalf or in a representative capacity.

2.   EXERCISE PRICE. The Exercise Price at which this Warrant may be exercised
     shall be equal to One Dollar and Fifty Cents ($1.50) per share. The
     Exercise Price shall be subject to adjustment as provided below.

3.   EXERCISE OF WARRANT.

     (a)  The purchase rights represented by this Warrant are exercisable by the
          Holder in whole or in part at any time, or from time to time, during
          the term hereof as set forth in Section 1, above, by the surrender of
          this Warrant and the Notice of Exercise attached as Annex I hereto
          duly completed and executed on behalf of the Holder, at the principal
          office of the Company (or such other office or agency of the Company
          as it may designate by notice in writing to the Holder at the address
          of the Holder appearing on the books of the Company), upon payment by
          cashier's check payable to the Company or by wire transfer of the
          purchase price of the shares to be purchased.

     (b)  This Warrant shall be deemed to have been exercised at 5:00 p.m.
          Eastern Time on the date of its surrender for exercise as provided
          above, and the person entitled to receive the shares of Common Stock
          issuable upon such exercise shall be treated for all purposes as the
          holder of record of such shares at such date and time. As promptly as
          practicable on or after such date and in any event within ten (10)
          days thereafter, the Company at its expense shall issue and deliver to
          the person or persons entitled to receive the same a certificate or
          certificates for the number of shares issuable upon such exercise. In
          the event that this Warrant is exercised in part, the Company at its
          expense shall execute and deliver a new Warrant of like tenor
          exercisable for the number of shares for which this Warrant may then
          be exercised.

     (c)  Notwithstanding the provisions of Section 3(a), above, the Holder may
          at its option elect to pay some or all of the purchase price payable
          upon an exercise of this Warrant by canceling a portion of this
          Warrant exercisable for such number of Warrant Shares as is determined
          by dividing (i) the total purchase price payable in respect of the
          number of Warrant Shares being purchased upon such exercise by (ii)
          the excess of the Fair Market Value per share of Common Stock (as
          defined below) as of the exercise date over the Exercise Price per
          share.

     (d)  For purposes of this Warrant, the "Fair Market Value" per share of
          Common Stock shall be determined as follows: (i) If the Common Stock
          is listed on a national securities exchange, the Nasdaq National
          Market or another nationally recognized trading system as of the
          exercise date, the Fair Market Value per share of Common Stock shall
          be deemed to be the average of the high and low reported sale prices
          per share of Common Stock thereon on the trading day immediately
          preceding the exercise date (provided that if no such price is
          reported on such day, the Fair Market Value per share of Common Stock
          shall be determined pursuant to the following clause (ii)); and (ii)
          if the Common Stock is not listed on a national securities exchange,
          the Nasdaq National Market or another nationally recognized trading
          system as of the Exercise Date, the Fair Market Value per share of
          Common Stock shall be deemed to be the amount most recently determined
          by the Board of Directors of the Company to represent the fair market
          value per share of the Common Stock. Upon request of the Holder, the
          Board of Directors (or a representative thereof) shall promptly notify
          the Holder of the Fair Market Value per share of Common Stock.

                                                                    Page 2 of 16
<PAGE>   17
           Upon request of the Holder, the Board of Directors (or a
           representative thereof) shall promptly notify the Holder of the Fair
           Market Value per share of Common Stock. Notwithstanding the
           foregoing, if the Board of Directors has not made such a
           determination within the three-month period prior to the exercise
           date, then the Board of Directors shall make a determination of the
           Fair Market Value per share of the Common Stock within fifteen (15)
           days of a request by the Holder that it do so; and the exercise of
           this Warrant pursuant to this subsection shall be delayed until such
           determination is made.

4.   NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing
     fractional shares shall be issued upon the exercise of this Warrant. In
     lieu of any fractional share to which the Holder would otherwise be
     entitled, the Company shall make a cash payment equal to the Fair Market
     Value per share of Common Stock multiplied by such fraction.

5.   REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory to
     the Company of the loss, theft, destruction or mutilation of this Warrant
     and, in the case of loss, theft or destruction, on delivery of an indemnity
     agreement reasonably satisfactory in form and substance to the Company or,
     in the case of mutilation, on surrender and cancellation of this Warrant,
     the Company at its expense shall execute and deliver, in lieu of this
     Warrant, a new warrant of like tenor and amount.

6.   RIGHTS OF STOCKHOLDERS. Subject to Sections 9 and 11 of this Warrant, the
     Holder, as such, shall not be entitled to vote or receive dividends or be
     deemed the holder of Common Stock or any other securities of the Company
     that may at any time be issuable on the exercise hereof for any purpose,
     nor shall anything contained herein be construed to confer upon the Holder,
     as such, any of the rights of a stockholder of the Company or any right to
     vote for the election of directors or upon any matter submitted to
     stockholders at any meeting thereof, or to give or withhold consent to any
     corporate action (whether upon any recapitalization, issuance of stock,
     reclassification of stock, change of par value, or change of stock to no
     par value, consolidation, merger, conveyance, or otherwise) or to receive
     notice of meetings, or to receive dividends or subscription rights or
     otherwise until this Warrant shall have been exercised as provided herein.

7.   TRANSFER OF WARRANT.

     (a)  Warrant Register. The Company shall maintain a register (the "Warrant
          Register") containing the names and addresses of the Holder or
          Holders. Any Holder of this Warrant or any portion thereof may change
          his address as shown on the Warrant Register by written notice to the
          Company requesting such change. Any notice or written communication
          required or permitted to be given to the Holder may be delivered or
          given by mail to such Holder as shown on the Warrant Register and at
          the address shown on the Warrant Register. Until this Warrant is
          transferred on the Warrant Register, the Company may treat the Holder
          as shown on the Warrant Register as the absolute owner of this Warrant
          for all purposes, notwithstanding any notice to the contrary.

     (b)  Warrant Agent. The Company may, by written notice to the Holder,
          appoint an agent for the purpose of maintaining the Warrant Register,
          issuing the Common Stock or other securities then issuable upon the
          exercise of this Warrant, exchanging this Warrant, replacing this
          Warrant, or any or all of the foregoing. Thereafter, any such

                                                                    Page 3 of 16
<PAGE>   18

          registration, issuance, exchange, or replacement, as the case may be,
          shall be made at the office of such agent.

     (c)  Transferability and Non-negotiability of Warrant.

          (i)   This Warrant may not be transferred or assigned in whole or in
                part without compliance with all applicable federal and state
                securities laws by the transferor and the transferee (including
                the delivery of investment representation letters and legal
                opinions reasonably satisfactory to the Company, if such are
                reasonably requested by the Company.)

          (ii)  Notwithstanding the foregoing, no registration or opinion of
                counsel shall be required for (A) a transfer by the Holder to an
                affiliate, provided that the transferee agrees in writing to be
                subject to the terms of this Section 7; or (B) a transfer made
                in accordance with Rule 144 under the Act.

          (iii) Subject to the foregoing restrictions, this Warrant may be
                transferred by endorsement (by the Holder executing the
                Assignment Form attached as Annex II hereto) and delivery in the
                same manner as a negotiable instrument transferable by
                endorsement and delivery.

     (d)  Exchange of Warrant Upon a Transfer. On surrender of this Warrant for
          exchange, properly endorsed on the Assignment Form and subject to the
          provisions of this Warrant with respect to compliance with the Act and
          with the limitations on assignments and transfers contained in this
          Section 7, the Company at its expense shall issue to or on the order
          of the Holder a new warrant or warrants of like tenor, in the name of
          the Holder or as the Holder (on payment by the Holder of any
          applicable transfer taxes) may direct, for the number of shares
          issuable upon exercise hereof.

     (e)  Compliance with Securities Laws. The Holder of this Warrant, by
          acceptance hereof, acknowledges (i) that this Warrant and the shares
          of Common Stock to be issued upon exercise hereof are being acquired
          solely for the Holder's own account and not as a nominee for any other
          party, and for investment, and (ii) that the Holder shall not offer,
          sell or otherwise dispose of this Warrant or any shares of Common
          Stock to be issued upon exercise hereof except under circumstances
          that will not result in a violation of the Act or any state securities
          laws. Upon exercise of this Warrant, the Holder shall, if requested by
          the Company, confirm in writing, in a form reasonably satisfactory to
          the Company, that the shares of Common Stock so purchased are being
          acquired solely for the Holder's own account and not as a nominee for
          any other party, for investment, and not with a view toward
          distribution or resale.

8.   RESERVATION OF STOCK. The Company covenants that during the term that this
     Warrant is exercisable, the Company shall reserve from its authorized and
     unissued Common Stock a sufficient number of shares to provide for the
     issuance of Common Stock upon the exercise of this Warrant and, from time
     to time, shall take all steps necessary to amend its Certificate of
     Incorporation to provide sufficient reserves of shares of Common Stock
     issuable upon exercise of this Warrant. The Company further covenants that
     all shares that may be issued upon the exercise of rights represented by
     this Warrant, and payment of the Exercise Price, all as set forth herein,
     will be free from all taxes, liens and charges in respect of the issue
     thereof (other than taxes in respect of any transfer occurring
     contemporaneously or otherwise specified herein). The Company agrees that
     its issuance of this Warrant shall constitute full authority to its
     officers who are charged with the duty

                                                                    Page 4 of 16
<PAGE>   19

     of executing stock certificates to execute and issue the necessary
     certificates for shares of Common Stock upon the exercise of this Warrant.

9.   NOTICES.

     (a)  Whenever the Exercise Price or number of shares purchasable hereunder
          shall be adjusted pursuant to Section 11 hereof, the Company shall
          issue a certificate signed by its Chief Financial or Chief Executive
          Officer setting forth, in reasonable detail, the event requiring the
          adjustment, the amount of the adjustment, the method by which such
          adjustment was calculated, and the Exercise Price and number of shares
          purchasable hereunder after giving effect to such adjustment, and
          shall cause a copy of such certificate to be mailed by first-class
          mail, postage prepaid, to the Holder of this Warrant.

     (b)  In the event --

          (i)   that the Company shall take a record of the holders of its
                Common Stock (or other stock or securities at the time
                receivable upon the exercise of this Warrant) for the purpose of
                entitling them to receive any dividend or other distribution, or
                any right to subscribe for or purchase any shares of stock of
                any class or any other securities, or to receive any other
                right; or

          (ii)  of any capital reorganization of the Company, any
                reclassification of the capital stock of the Company, any
                consolidation or merger of the Company with or into another
                corporation, or any conveyance of all or substantially all of
                the assets of the Company to another corporation; or

          (iii) of any voluntary dissolution, liquidation or winding-up of the
                Company, then, and in each such case, the Company shall mail or
                cause to be mailed to the Holder or Holders a notice specifying,
                as the case may be, (1) the date on which a record is to be
                taken for the purpose of such dividend, distribution or right,
                and stating the amount and character of such dividend,
                distribution or right; or (2) the date on which such
                reorganization, reclassification, consolidation, merger,
                conveyance, dissolution, liquidation or winding-up is to take
                place, and the time, if any is to be fixed, as of which the
                holders of record of Common Stock (or such stock or securities
                at the time receivable upon the exercise of this Warrant) shall
                be entitled to exchange their shares of Common Stock (or such
                other stock or securities) for securities or other property
                deliverable upon such reorganization, reclassification,
                consolidation, merger, conveyance, dissolution, liquidation or
                winding-up. Such notice shall be mailed at least 15 days prior
                to the date therein specified.

     (c)  All such notices, advice and communications shall be deemed to have
          been received (i) in the case of personal delivery, on the date of
          such delivery and (ii) in the case of mailing, on the third business
          day following the date of such mailing.

10.  AMENDMENTS & WAIVERS.

     (a)  Any term of this Warrant may be amended with the written consent of
          the Company and the Holder.

     (b)  No waivers of, or exceptions to, any term, condition or provision of
          this Warrant, in any one or more instances, shall be deemed to be, or
          construed as, a further or continuing waiver of or exception to any
          such term, condition or provision.

                                                                    Page 5 of 16
<PAGE>   20

11.  ADJUSTMENTS. The Exercise Price and the number of shares purchasable
     hereunder are subject to adjustment from time to time as follows:

     (a)  Merger, Sale of Assets, etc.

          (i)   If at any time while this Warrant or any portion hereof is
                outstanding and unexpired, there shall be (A) a reorganization
                (other than a combination, reclassification, exchange or
                subdivision of shares otherwise provided for herein); (B) a
                merger or consolidation of the Company with or into another
                corporation in which the Company is not the surviving entity or
                a merger (including a reverse triangular merger) in which the
                Company is the surviving entity but the shares of the Company's
                capital stock outstanding immediately prior to the merger are
                converted by virtue of the merger into other property, whether
                in the form of securities, cash, or otherwise; or (C) a sale or
                transfer of the Company's properties and assets as, or
                substantially as, an entirety to any other person, then, as a
                part of such reorganization, merger, consolidation, sale or
                transfer, lawful provision shall be made so that the holder of
                this Warrant shall thereafter be entitled to receive upon
                exercise of this Warrant, during the period specified herein and
                upon payment of the Exercise Price then in effect, the number of
                shares of stock or other securities or property of the successor
                corporation resulting from such reorganization, merger,
                consolidation, sale or transfer that a holder of the shares
                deliverable upon exercise of this Warrant would have been
                entitled to receive in such reorganization, consolidation,
                merger, sale or transfer if this Warrant had been exercised
                immediately before such reorganization, consolidation, merger,
                sale or transfer, all subject to further adjustment as provided
                in this Section 11.

          (ii)  Notwithstanding the foregoing sentence, if (A) there shall occur
                any reorganization, consolidation, merger, sale or transfer
                involving the Company in which the Common Stock is converted
                into or exchanged for anything other than solely equity
                securities; (B) the common stock of the acquiring or surviving
                company is publicly traded; and (C) the acquiring or surviving
                company agrees to the following, then, as part of any such
                reorganization, recapitalization, consolidation or merger, (1)
                the Holder shall have the right thereafter to receive upon the
                exercise of this Warrant such number of shares of common stock
                of the acquiring or surviving company as is determined by
                multiplying (x) the number of shares of Common Stock then
                subject to this Warrant by (y) a fraction, the numerator of
                which is the Fair Market Value per share of Common Stock as of
                the effective date of such transaction, and the denominator of
                which is the fair market value per share of common stock of the
                acquiring or surviving company as of the effective date of such
                transaction, as determined in good faith by the Board of
                Directors of the Company (using the principles set forth in
                Section 3(d) to the extent applicable); and (2) the exercise
                price per share of common stock of the acquiring or surviving
                company shall be the Exercise Price divided by the fraction
                referred to in clause (y) above.

          (iii) The foregoing provisions of this Section 11(a) shall similarly
                apply to successive reorganizations, consolidations, mergers,
                sales and transfers and to the stock or securities of any other
                corporation that are at the time receivable upon the exercise of
                this Warrant. If the per share consideration payable to the
                holder hereof for shares in connection with any such transaction
                is in a form other than cash or marketable securities, then the
                value of such consideration shall be

                                                                    Page 6 of 16
<PAGE>   21

                determined in good faith by the Company's Board of Directors. In
                all events, appropriate adjustment (as determined in good faith
                by the Company's Board of Directors) shall be made in the
                application of the provisions of this Warrant with respect to
                the rights and interest of the Holder after the transaction, to
                the end that the provisions of this Warrant shall be applicable
                after that event, as near as reasonably may be, in relation to
                any shares or other property deliverable after that event upon
                exercise of this Warrant.

     (b)  Reclassification, etc. If the Company, at any time while this Warrant
          or any portion hereof remains outstanding and unexpired, by
          reclassification of securities or otherwise, shall change any of the
          securities as to which purchase rights under this Warrant exist into
          the same or a different number of securities of any other class or
          classes, this Warrant shall thereafter represent the right to acquire
          such number and kind of securities as would have been issuable as the
          result of such change with respect to the securities that were subject
          to the purchase rights under this Warrant immediately prior to such
          reclassification or other change and the Exercise Price therefor shall
          be appropriately adjusted, all subject to further adjustment as
          provided in this Section 11.

     (c)  Split, Subdivision or Combination of Shares. If the Company at any
          time while this Warrant or any portion hereof remains outstanding and
          unexpired, shall split, subdivide or combine the securities as to
          which purchase rights under this Warrant exist, into a different
          number of securities of the same class, the Exercise Price for such
          securities shall be proportionately decreased, and the number of
          shares of such securities for which this Warrant may be exercised
          shall be proportionately increased, in the case of a split or
          subdivision, or the Exercise Price for such securities shall be
          proportionately increased and the number of shares of such securities
          for which this Warrant may be exercised shall be proportionately
          decreased, in the case of a combination.

     (d)  Adjustments for Dividends in Stock or Other Securities or Property. If
          at any time while this Warrant or any portion hereof remains
          outstanding and unexpired the holders of the securities as to which
          purchase rights under this Warrant exist at the time shall have
          received, or, on or after the record date fixed for the determination
          of eligible stockholders, shall have become entitled to receive,
          without payment therefor, other or additional stock or other
          securities or property (other than cash) of the Company by way of
          dividend, then and in each case, this Warrant shall represent the
          right to acquire, in addition to the number of shares of the security
          receivable upon exercise of this Warrant, and without payment of any
          additional consideration therefor, the amount of such other or
          additional stock or other securities or property (other than cash) of
          the Company that such holder would hold on the date of such exercise
          had it been the holder of record of the security receivable upon
          exercise of this Warrant on the date hereof and had thereafter, during
          the period from the date hereof to and including the date of such
          exercise, retained such shares and/or all other additional stock
          available by it as aforesaid during such period, giving effect to all
          adjustments called for during such period by the provisions of this
          Section 11. Notwithstanding the foregoing, the Company agrees that it
          shall not make or authorize any cash dividend or other distribution of
          property (other than securities) on its capital stock to any holders
          thereof unless the Warrant is or is made to become

                                                                    Page 7 of 16
<PAGE>   22

          exercisable at such date and shall remain exercisable from such date
          until the 10th anniversary of the Warrant Issue Date.

     (e)  Adjustment For Diluting Issuances.

          (i)   For purposes of this Section 11(e), the following definitions
                shall apply:

                (A)   "Convertible Securities" shall mean any evidences of
                      indebtedness, shares or other securities directly or
                      indirectly convertible into or exchangeable for Common
                      Stock other than Excluded Securities (as defined below;)

                (B)   "Options" shall mean rights, options or warrants to
                      subscribe for, purchase or otherwise acquire Common Stock
                      or Convertible Securities, other than Excluded Securities;

                (C)   "Additional Shares of Common Stock" shall mean all shares
                      of Common Stock issued (or deemed to be issued) by the
                      Company after the Warrant Issue Date, other than:

                      (1)   shares of Common Stock issued or issuable upon
                            conversion or exchange of any Convertible Securities
                            outstanding on the Warrant Issue Date;

                      (2)   Excluded Securities; or

                      (3)   shares of Common Stock issued or issuable by reason
                            of a dividend, stock split, split-up or other
                            distribution on shares of Common Stock that are
                            covered elsewhere in this Section 11.

                (D)   "Excluded Securities" shall mean Common Stock issued to
                      officers, employees, or directors of, or consultants to,
                      the Company (including officers, employees, or directors
                      of, or consultants to its affiliates), pursuant to any
                      agreement, plan, or arrangement that has been approved by
                      the Board of Directors of the Company, or options to
                      purchase or rights to subscribe for such Common Stock or
                      securities by their terms convertible into or exchangeable
                      for such Common Stock, or options to purchase or rights to
                      subscribe for such convertible or exchangeable securities,
                      in each case as approved by the Board of Directors;
                      provided, however, that to the extent the number of shares
                      of Common Stock issued or issuable pursuant to all such
                      agreements, plans, arrangements, options and rights exceed
                      an aggregate of ten percent (10%) of the Common Stock
                      outstanding from time to time on a fully diluted basis,
                      such shares shall not be considered Excluded Securities.

          (ii)  In the event the Company shall at any time after the Warrant
                Issue Date issue Additional Shares of Common Stock, without
                consideration or for a consideration per share less than the
                Exercise Price in effect immediately prior to such issue, then
                and in such event, the Exercise Price shall be reduced,
                concurrently with such issue, to the price (calculated to the
                nearest cent) determined by multiplying such Exercise Price by a
                fraction, (A) the numerator of which shall be (1) the number of
                shares of Common Stock outstanding immediately prior to such
                issue plus (2) the number of shares of Common Stock which the
                aggregate consideration received or to be received by the
                Company for the total number of Additional Shares of Common
                Stock so issued would purchase at such Exercise Price; and (B)
                the denominator of which shall be the number of shares of Common
                Stock outstanding immediately prior to such issue plus the
                number of such Additional Shares of Common Stock so issued;
                provided that, (x) for the

                                                                    Page 8 of 16
<PAGE>   23

                purpose of this subsection 11(e), all shares of Common Stock
                issuable upon conversion or exchange of Convertible Securities
                outstanding immediately prior to such issue shall be deemed to
                be outstanding, and (ii) the number of shares of Common Stock
                deemed issuable upon conversion or exchange of such outstanding
                Convertible Securities shall not give effect to any adjustments
                to the conversion or exchange price or conversion or exchange
                rate of such Convertible Securities resulting from the issuance
                of Additional Shares of Common Stock that is the subject of this
                calculation. In addition, the number of Warrant Shares
                purchasable upon the exercise of this Warrant shall be changed
                to the number determined by dividing (i) an amount equal to the
                number of shares issuable upon the exercise of this Warrant
                immediately prior to such adjustment, multiplied by the Exercise
                Price in effect immediately prior to such adjustment, by (ii)
                the Exercise Price in effect immediately after such adjustment.

          (iii) If the Company at any time or from time to time after the
                Warrant Issue Date shall issue any Options or Convertible
                Securities or shall fix a record date for the determination of
                holders of any class of securities entitled to receive any such
                Options or Convertible Securities, then the maximum number of
                shares of Common Stock (as set forth in the instrument relating
                thereto without regard to any provision contained therein for a
                subsequent adjustment of such number) issuable upon the exercise
                of such Options or, in the case of Convertible Securities and
                Options therefor, the conversion or exchange of such Convertible
                Securities, shall be deemed to be Additional Shares of Common
                Stock issued as of the time of such issue or, in case such a
                record date shall have been fixed, as of the close of business
                on such record date, provided that Additional Shares of Common
                Stock shall not be deemed to have been issued unless the
                consideration per share of such Additional Shares of Common
                Stock would be less than the Exercise Price in effect on the
                date of and immediately prior to such issue, or such record
                date, as the case may be, and provided further that in any such
                case in which Additional Shares of Common Stock are deemed to be
                issued: (i) no further adjustment in the Exercise Price shall be
                made upon the subsequent issue of Convertible Securities or
                shares of Common Stock upon the exercise of such Options or
                conversion or exchange of such Convertible Securities; (ii) if
                such Options or Convertible Securities by their terms provide,
                with the passage of time or otherwise, for any increase or
                decrease in the consideration payable to the Company, then upon
                the exercise, conversion or exchange thereof, the Exercise Price
                computed upon the original issue thereof (or upon the occurrence
                of a record date with respect thereto), and any subsequent
                adjustments based thereon, shall, upon any such increase or
                decrease becoming effective, be recomputed to reflect such
                increase or decrease insofar as it affects such Options or the
                rights of conversion or exchange under such Convertible
                Securities; (iii) upon the expiration or termination of any such
                unexercised Option, the Exercise Price shall not be readjusted;
                (iv) in the event of any change in the number of shares of
                Common Stock issuable upon the exercise, conversion or exchange
                of any such Option or Convertible Security, including, but not
                limited to, a change resulting from the anti-dilution provisions
                thereof, the Exercise Price then in effect shall forthwith be
                readjusted to such Exercise Price as would have obtained had the
                adjustment which was made upon the issuance of such Option or
                Convertible Security not exercised, converted or exchanged prior
                to such change been made

                                                                    Page 9 of 16
<PAGE>   24

                upon the basis of such change; and (v) no readjustment pursuant
                to clause (ii) or (iv) above shall have the effect of increasing
                the Exercise Price to an amount which exceeds the lower of (A)
                the Exercise Price on the original adjustment date, or (B) the
                Exercise Price that would have resulted from any issuances of
                Additional Shares of Common Stock between the original
                adjustment date and such readjustment date. In the event the
                Company, after the Warrant Issue Date, amends the terms of any
                such Options or Convertible Securities (whether such Options or
                Convertible Securities were outstanding on the Warrant Issue
                Date or were issued after the Warrant Issue Date), then such
                Options or Convertible Securities, as so amended, shall be
                deemed to have been issued after the Warrant Issue Date and the
                provisions of this subsection 11(e)(iii) shall apply.

          (iv)  The consideration per share received by the Company for
                Additional Shares of Common Stock deemed to have been issued
                pursuant to subsection 11(e)(iii), relating to Options and
                Convertible Securities, shall be determined by dividing: (i)the
                total amount, if any, received or receivable by the Company as
                consideration for the issue of such Options or Convertible
                Securities, plus the minimum aggregate amount of additional
                consideration (as set forth in the instruments relating thereto,
                without regard to any provision contained therein for a
                subsequent adjustment of such consideration) payable to the
                Company upon the exercise of such Options or the conversion or
                exchange of such Convertible Securities, or in the case of
                Options for Convertible Securities, the exercise of such Options
                for Convertible Securities and the conversion or exchange of
                such Convertible Securities, by (ii) the maximum number of
                shares of Common Stock (as set forth in the instruments relating
                thereto, without regard to any provision contained therein for a
                subsequent adjustment of such number) issuable upon the exercise
                of such Options or the conversion or exchange of such
                Convertible Securities.

     (f)  Certificate as to Adjustments. Upon the occurrence of each adjustment
          or readjustment pursuant to this Section 11, the Company at its
          expense shall promptly compute such adjustment or readjustment in
          accordance with the terms hereof and furnish to each Holder of this
          Warrant a certificate setting forth such adjustment or readjustment
          and showing in detail the facts upon which such adjustment or
          readjustment is based. The Company shall, upon the written request, at
          any time, of any such Holder, furnish or cause to be furnished to such
          Holder a like certificate setting forth (i) such adjustments and
          readjustments; (ii) the Exercise Price at the time in effect; and
          (iii) the number of shares and the amount, if any, of other property
          that at the time would be received upon the exercise of the Warrant.

     (g)  No Impairment. The Company shall not, by amendment of its Certificate
          of Incorporation or through any reorganization, transfer of assets,
          consolidation, merger, dissolution, issue or sale of securities or any
          other voluntary action, avoid or seek to avoid the observance or
          performance of any of the terms to be observed or performed hereunder
          by the Company, but shall at all times in good faith assist in the
          carrying out of all the provisions of this Section 11 and in the
          taking of all such action as may be necessary or appropriate in order
          to protect the rights of the Holder of this Warrant against
          impairment.

     (h)  The Company represents to the Holder that attached hereto as Annex IV
          is a complete and accurate list of the capitalization of the Company
          including a complete and

                                                                   Page 10 of 16
<PAGE>   25

          accurate list of (i) all outstanding shares of Common Stock of the
          Company on a fully diluted basis (assuming the conversion into, or
          exercise for, Common Stock of all securities, including warrants and
          options, convertible into or exercisable for, Common Stock,)
          indicating in each such case (A) the number and class or series of
          Company shares subject to each option and warrant and (for Company
          shares other than Common Stock) the number of share of Common Stock
          (if any) into which such Company shares are convertible; (B) the
          exercise price, date of grant, vesting schedule and expiration date
          for each option or warrant; and (C) any terms regarding the
          acceleration of vesting; (ii) all stock option plans and other stock
          or equity-related plans of the Company, including an indication of the
          number of shares issuable thereunder; and (iii) an estimate of the
          shares and warrants anticipated to be issued in the contemplated
          transaction with Sterling Construction Company.

12.  REGISTRATION RIGHTS. Whenever the Company proposes to file a registration
     statement under the Act with respect to the Common Stock (a "Registration
     Statement") at any time and from time to time, prior to such filing it will
     give written notice to the Holder of its intention to do so. Upon the
     written request of the Holder given within twenty (20) days after the
     Company provides such notice (which request shall state the Holder's
     intended method of disposition of such shares), the Company shall use
     commercially reasonable efforts to cause all Warrant Shares which the
     Company has been requested by the Holder to register to be registered under
     the Act to the extent necessary to permit their sale or other disposition
     in accordance with the intended methods of distribution specified in the
     request of the Holder. If the registration for which the Company gives such
     notice is a registered public offering involving an underwriting, the
     Company shall so advise the Holder and the right of the Holder to include
     its Warrant Shares in such registration shall be conditioned upon the
     Holder's participation in such underwriting on the terms thereof, which
     terms, however, shall be no more onerous to the Holder than the terms
     applicable to all stockholders registering shares under the Registration
     Statement, and if the managing underwriter determines that marketing
     factors require a limitation of the number of shares to be underwritten,
     the number of Warrant Shares to be included in the Registration Statement
     shall be accordingly reduced; provided however, that the number of shares
     that the Holder shall be entitled to include shall not be less than its pro
     rata share of the shares to be registered by it and by the holders of the
     Sterling Warrants (as defined below), or the shares issuable hereunder and
     thereunder, based on the number of shares issuable under this Warrant in
     relation to the shares issuable hereunder and under the Sterling Warrant.

     (a)  Registration Procedures. In connection with the filing by the Company
          of a Registration Statement, the Company shall furnish to the Holder a
          copy of the prospectus, including a preliminary prospectus, in
          conformity with the requirements of the Act. The Company shall use
          commercially reasonable efforts to register or qualify the Warrant
          Shares covered by the Registration Statement under the securities laws
          of each state of the United States; provided, however, that the
          Company shall not be required in connection with this Section 12(a) to
          qualify as a foreign corporation or execute a general consent to
          service of process in any jurisdiction. If the Company has delivered
          preliminary or final prospectuses to the Holder and after having done
          so the prospectus is amended or supplemented to comply with the
          requirements of the Act, the Company shall promptly notify the Holder
          and, if requested by the Company, the Holder shall immediately cease
          making offers or sales of shares under the Registration Statement and
          return all prospectuses to the

                                                                   Page 11 of 16
<PAGE>   26

          Company. The Company shall promptly provide the Holder with revised or
          supplemented prospectuses and, following receipt of the revised or
          supplemented prospectuses, the Holder shall be free to resume making
          offers and sales under the Registration Statement. The Company shall
          pay the expenses incurred by it in complying with its obligations
          under this Section 12, including all registration and filing fees,
          exchange listing fees, fees and expenses of counsel for the Company,
          and fees and expenses of accountants for the Company, but excluding
          (i) any brokerage fees, selling commissions or underwriting discounts
          incurred by the Holder in connection with sales under the Registration
          Statement and (ii) the fees and expenses of any counsel retained by
          Holder.

     (b)  Requirements of Holder. The Company shall not be required to include
          any Warrant Shares in the Registration Statement unless:

          (i)  the Holder furnishes to the Company in writing such information
               regarding the Holder and the proposed sale of Warrant Shares by
               the Holder as the Company may reasonably request in writing in
               connection with the Registration Statement or as shall be
               required in connection therewith by the U.S. Securities and
               Exchange Commission or any state securities law authorities;

          (ii) the Holder shall have provided to the Company its written
               agreement:

               (A)  to indemnify the Company and each of its directors and
                    officers against, and hold the Company and each of its
                    directors and officers harmless from, any losses, claims,
                    damages, expenses or liabilities (including reasonable
                    attorneys fees) to which the Company or such directors and
                    officers may become subject by reason of any statement or
                    omission in the Registration Statement made in reliance
                    upon, or in conformity with, a written statement by the
                    Holder furnished pursuant to Section 12(b)(i); and

               (B)  to report to the Company sales made pursuant to the
                    Registration Statement.

     (c)  Indemnification. The Company agrees to indemnify and hold harmless the
          Holder against any losses, claims, damages, expenses or liabilities to
          which Holder may become subject by reason of any untrue statement of a
          material fact contained in the Registration Statement or any omission
          to state therein a fact required to be stated therein or necessary to
          make the statements therein not misleading, except insofar as such
          losses, claims, damages, expenses or liabilities arise out of or are
          based upon information furnished to the Company by the Holder for use
          in the Registration Statement.

13.  GENERAL.

     (a)  Governing Law. This Warrant shall be governed by and construed
          according to the laws of the State of Delaware.

     (b)  Delays or Omissions. No delay or omission to exercise any right,
          power, or remedy accruing to either party upon any breach or default
          under this Warrant, shall be deemed a waiver of any other breach or
          default theretofore or thereafter occurring. Any waiver, permit,
          consent, or approval of any kind or character on the part of either
          party of any breach or default under this Warrant, or any waiver on
          the part of either party of any provisions or conditions of this
          Warrant, must be in writing and signed by the party to be bound
          thereby. All remedies, either under this Warrant or by law or
          otherwise afforded to either of the parties, shall be cumulative and
          not alternative.

                                                                   Page 12 of 16
<PAGE>   27

     (c)  Captions. Captions of sections have been added only for convenience
          and shall not be deemed to be a part of this Warrant.

     (d)  Receipt. Upon the receipt of this Warrant, KTI, Inc. shall execute and
          deliver to the Company the form of Receipt attached hereto as Annex
          III.

     (e)  Sterling Construction Company. The Company agrees that the warrants or
          other rights to purchase Common Stock issuable in connection with the
          Company's anticipated transactions with Sterling Construction Company
          (the "Sterling Warrant") shall at all times be substantially the same
          from an economic viewpoint as this Warrant (other than the number of
          shares issuable thereunder and the differences in their issue dates.)

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by an
officer thereunto duly authorized.

OAKHURST COMPANY, INC.

By:   /s/ MAARTEN D. HEMSLEY
   -----------------------------
   Maarten D. Hemsley, President

                                                                   Page 13 of 16
<PAGE>   28

                                     ANNEX I
                               NOTICE OF EXERCISE

TO: Oakhurst Company, Inc.:

(1)      The undersigned hereby irrevocably elects to purchase _____ shares of
         Common Stock of Oakhurst Company, Inc. pursuant to the terms of the
         attached Warrant, and tenders herewith payment of the purchase price
         for such shares in full consisting of

         $______ in lawful money of the United States; or
         the cancellation of such portion of the attached Warrant as is
         exercisable for a total of

          __________ Warrant Shares (using a Fair Market Value per share of
         Common Stock

         of $________ for purposes of this calculation).

(2)      In exercising this Warrant, the undersigned hereby confirms and
         acknowledges that the shares of Common Stock are being acquired solely
         for the account of the undersigned and not as a nominee for any other
         party, and for investment, and that the undersigned shall not offer,
         sell or otherwise dispose of any such shares of Common Stock except
         under circumstances that will not result in a violation of the
         Securities Act of 1933, as amended, or any state securities laws.

(3)      Please issue a certificate or certificates representing said shares of
         Common Stock, and pay any cash for any fractional share to:

NAME                                 ADDRESS                    NUMBER OF SHARES

(4)      Please issue a new Warrant for the unexercised portion of the attached
         Warrant in the name of the undersigned and/or, if the undersigned has
         completed an Assignment Form in the form of Annex II to this Warrant,
         in such other names and amounts as is specified in such Assignment
         Form.

Dated:                                 Holder:
       ---------------------                   ---------------------------------

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

                                                                   Page 14 of 16
<PAGE>   29

                                    ANNEX II
                                 ASSIGNMENT FORM

For value received, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:

and does hereby irrevocably constitute and appoint Attorney ____________________
to make such transfer on the books of Oakhurst Company, Inc. maintained for such
purpose, with full power of substitution in the premises.

NAME                                 ADDRESS                    NUMBER OF SHARES

The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof are being acquired for investment and that the Assignee shall
not offer, sell or otherwise dispose of this Warrant or any shares of stock to
be issued upon exercise hereof except under circumstances which will not result
in a violation of the Securities Act of 1933, as amended, or any state
securities laws.

Further, the Assignee has acknowledged that upon exercise of this Warrant, the
Assignee shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of stock so purchased are being
acquired for investment and not with a view toward distribution or resale.

Dated:                                 Holder:
       ---------------------                   ---------------------------------

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

                                                                   Page 15 of 16
<PAGE>   30

                                    ANNEX III
                                 WARRANT RECEIPT

The undersigned KTI, Inc. hereby acknowledges and represents to Oakhurst
Company, Inc. (the "Company") (i) that it has received that certain Warrant To
Purchase Common Stock dated July 3, 2001 covering the shares of the common
stock, $0.01 par value per share, of the Company provided for in the first
paragraph of such warrant (the "Warrant;") and (ii) that on the date hereof the
Warrant has a nominal value, is speculative in nature, and that there is
substantial risk that the Warrant will not be exercised.

KTI, INC.

By: /s/ JOHN W. CASELLA                          Dated: July 3, 2001
   -------------------------------                      --------------------
   John W. Casella
   President

                                                                   Page 16 of 16
<PAGE>   31

                                                                       EXHIBIT C
                             ASSIGNMENT OF INTEREST

         This Assignment of Interest dated April 19, 2001 is executed and
delivered by Oakhurst Technology, Inc., a Delaware corporation ("OTI"), to KTI,
Inc., a New Jersey corporation ("KTI"). All capitalized words and terms used in
this Assignment of Interest and not defined herein shall have the respective
meanings ascribed to them in the Wind-Up Agreement dated April 19, 2001 by and
among KTI, OTI and Oakhurst Company, Inc., a Delaware corporation (the
"Agreement").

         WHEREAS, pursuant to the Agreement, OTI has agreed to sell, transfer,
convey, assign and deliver to KTI all of OTI's equity interest in New Heights;

         NOW, THEREFORE, for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, OTI hereby agrees as follows:

         1. OTI hereby sells, transfers, conveys, assigns and delivers to KTI,
its successors and assigns, to have and to hold forever, 5,972,625 units of
equity interest in New Heights (the "Interest"). This Assignment shall vest in
KTI, its successors and assigns, title to the Interest. The Interest comprises
all of the ownership interests of New Heights that is owned by OTI and its
affiliates.

         2. OTI hereby covenants and agrees that it will, at the request of KTI
and without further consideration, execute and deliver, and will cause its
employees to execute and deliver, such other instruments of sale, transfer,
conveyance and assignment, and take such other action as may reasonably be
necessary to more effectively sell, transfer, convey, assign and deliver to, and
vest in, KTI, its successors and assigns, title to the Interest, and to put KTI
in actual possession and control thereof, to assist KTI in exercising all rights
with respect thereto and to carry out the purpose and intent of the Agreement.

         3. OTI does hereby irrevocably constitute and appoint KTI, its
successors and assigns, its true and lawful attorney, with full power of
substitution, in its name or otherwise, and on behalf of OTI, or for its own
use, to claim, demand, collect and receive at any time and from time to time any
and all assets, properties, claims, accounts and other rights, tangible or
intangible, hereby sold, transferred, conveyed, assigned and delivered, or
intended so to be, and to prosecute the same at law or in equity and, upon
discharge thereof, to complete, execute and deliver any and all necessary
instruments of satisfaction and release.

         4. OTI, by its execution of this Assignment of Interest, and KTI, by
its acceptance of this Assignment of Interest, each hereby acknowledges and
agrees that neither the representations and warranties nor the rights and
remedies of any party under the Agreement shall be deemed to be enlarged,
modified or altered in any way by this instrument.

                            [Signature page follows]

<PAGE>   32

                   [SIGNATURE PAGE TO ASSIGNMENT OF INTEREST]

         IN WITNESS WHEREOF, OTI and KTI have caused this instrument to be duly
executed under seal as of and on the date first above written.

                                          OAKHURST TECHNOLOGY, INC.

                                          By: /s/ MAARTEN D. HEMSLEY
                                             -----------------------------------
                                              Maarten D. Hemsley
                                              President

[Corporate Seal]

Attest:

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

Agreed and Accepted:

KTI, INC.

By: /s/ JOHN W. CASELLA
   -----------------------------------
    John W. Casella
    President
<PAGE>   33
                                                                       EXHIBIT D

                               FIRST AMENDMENT TO
                        NEW HEIGHTS POWER & RECOVERY, LLC
                       LIMITED LIABILITY COMPANY AGREEMENT

         This First Amendment to the New Heights Power & Recovery, LLC Limited
Liability Company Agreement (the "Agreement") by and among the Members (as
defined therein), is effective as of this 19th day of April, 2001. Capitalized
terms not otherwise defined herein shall have the meanings set forth in the
Agreement.

         WHEREAS, the Members have entered into the Agreement;

         WHEREAS, Oakhurst Technology, Inc., a Delaware corporation ("KTIA"),
is, on the date hereof, transferring its Company Interest to KTI, Inc., a New
Jersey corporation ("KTI");

         WHEREAS, the Members desire to amend the Agreement to provide for the
admission of KTI as a Member under the Agreement in the place of KTIA;

         NOW THEREFORE, in consideration of the foregoing, the Agreement is
amended as follows:

1. Insert the following paragraph immediately following Paragraph G of the
Recitals to the Agreement:

         "H. Pursuant to that certain Wind-Up Agreement (the "Wind-Up
Agreement") dated as of April 19, 2001 by and among KTI, KTIA and Oakhurst
Company, Inc., a Delaware corporation, KTIA agreed to transfer all of its equity
interest in the Company to KTI and KTI agreed to assume all of the rights and
obligations of KTIA under the Agreement."

2. The defined term "KTIA Directors" in Article 1 shall be deleted and the
following shall be inserted in lieu thereof:

         "KTI Directors has the meaning assigned in Section 5.2(a)."

3. The defined term "KTIA Units" in Article 1 shall be deleted and the following
shall be inserted in lieu thereof:

         "KTI Units means the Units issued to KTI in consideration of its
contributions to the Company under Sections 4.1 and 4.2 hereof and the
Investment Agreement and the Units transferred by KTIA to KTI pursuant to the
Wind-Up Agreement or otherwise."

4. The defined term "Units" in Article 1 shall be deleted and the following
shall be inserted in lieu thereof:

<PAGE>   34

         "Units means units of Company Interest owned by the Members. Units
entitle the holder to vote the holder's respective Percentage Interest and to
receive a percentage Financial Interest. Total authorized Units are 15,927,000
Units. The number of Units issued on the day after the Effective Date of this
Agreement and to be held by the initial Members is 15,927,000. Total issued and
outstanding Units of the Company are divided equally between Bondholder Units
and KTI Units and certificates with respect thereto will be issued to the
Members. Bondholder Units in the amount of 7,963,500 Units will be issued
representing one (1) Unit for each $10.00 of outstanding Allowed Secured Claims,
subject to a proportionate reduction and reallocation for Units issued to the
Plan Contribution Lenders (in the maximum amount of 1,333,333 Units,
representing one (1) Unit for each $1.50 of Plan Contribution made by a Plan
Contribution Lender up to a maximum of $2,000,000), and an additional adjustment
and reallocation among the Bondholder Members for Units not issued to holders of
Allowed Secured Claims because of an election by them to receive cash in lieu of
such Units or where redemption of such Units for cash has been determined to be
necessary under the Plan to limit the number of Bondholder Members, and with
respect to which cash has been paid by the Company to the holder of an Allowed
Secured Claim in lieu of issuing such Units. Irrespective of the number of Units
redeemed and reallocated to the Bondholder Members or otherwise reallocated as a
result of the Plan Contribution by the Plan Contribution Lender or redemption of
Units for cash, the Bondholder Members will collectively own 7,963,500 Units as
of the day after the Effective Date hereof. KTI currently owns 7,963,500 Units."

5. Section 3.1 of the Agreement shall be deleted and the following shall be
inserted in lieu thereof:

         "3.1 Members.

                  The Members of the Company and the Units allocated to each
Member are set forth on Schedule A. The Members holding Bondholder Units shall
become Members of the Company and be bound by this Agreement effective upon
their deemed contribution to the Company of their portion of the Allowed Secured
Claims exchanged for such Units pursuant to the Plan or upon their making their
proportionate share of the Plan Contribution with respect to the Plan
Contribution Lenders, and without any further action. KTI holds the KTI Units
and is a Member of the Company and is bound by this Agreement. Pursuant to the
Plan, any interest of an Old Member of Ford Heights or the Company, as successor
to Ford Heights, will be deemed extinguished immediately after the admission of
the Members to the Company."

6. All references to "KTIA" in the Agreement, except those in the Recitals and
Article 1 of the Agreement are hereby deleted, and "KTI" shall be inserted in
lieu thereof.

7. All references to "KTIA Directors" in the Agreement are hereby deleted, and
"KTI Directors" shall be inserted in lieu thereof.

8. All references to "KTIA Units" in the Agreement are hereby deleted, and "KTI
Units" shall be inserted in lieu thereof.

<PAGE>   35

9. Schedule A to the Agreement is hereby deleted, and the following shall be
inserted in lieu thereof:

                                   SCHEDULE A

                        NEW HEIGHTS RECOVERY & POWER, LLC

                      MEMBERS, COMPANY INTERESTS AND UNITS

<TABLE>
<CAPTION>

       MEMBER NAME AND                                                   PERCENTAGE                 FINANCIAL
          ADDRESS                                 UNITS                   INTEREST                  INTEREST
       ---------------                            -----                  ----------                 ---------
<S>                                             <C>                      <C>                        <C>
KTI, Inc.
------------------------                        7,963,500                    50.00%                    50.00%
------------------------
------------------------
Grace Brothers Members                                                            %                         %
c/o Grace Brothers, Ltd.                       ----------                 --------                  --------
1560 Sherman Avenue, Suite 900
Evanston, IL 60201

SCFI Members
c/o SC Fundamental Investments, L.P.                                              %                         %
10 East 50th Street, 21st Floor                ----------                 --------                  --------
New York, NY 10022

Resurgence Members                                                                %                         %
c/o Resurgence Asset
Management, L.L.C.                             ----------                 --------                  --------
1185 Avenue of the Americas
New York, NY 10036-2699

Other Investors (See Schedule A-1)                                                %                         %
                                               ----------                 --------                  --------

TOTAL                                          15,927,000                   100.00%                   100.00%
</TABLE>

                        Authorized and Outstanding Units

<TABLE>
<S>                                                     <C>
          Total Authorized Units                           15,927,000
          Total Issued Units                              (15,927,000)
                                                         ------------
          Authorized But Unissued Units                             0
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}]]