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                                                                    EXHIBIT 10.4

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT



                  THIS AGREEMENT ("Agreement") is made and entered into as of
this 4th day of August, 1998, by and between Harold C. Kropp, Jr., an individual
resident of the State of Pennsylvania ("Employee"), and RailWorks Corporation, a
Delaware corporation (as defined below the "Holding Company").

                               W I T N E S S E T H

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

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

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

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

                  SECTION 1.        EMPLOYMENT.

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

                  Subject to the terms and conditions of this Agreement, from
the date hereof, Employee agrees to devote substantially all of his business
time and best efforts to the performance of his job as Vice President and Chief
Accounting Officer of the Holding Company, subject to direction by the Board of
Directors of the Holding Company (the "Board of Directors"), as long as such
directions are consistent with the duties, responsibilities and 





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authority customarily given or required of chief accounting officers generally,
with the Employee to report his activities regularly to the Board of Directors.

                  SECTION 2.        TERM OF EMPLOYMENT.

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

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

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

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

                           For purposes of this Agreement, a "Change of Control"
                  shall be deemed to have occurred if (A) any "person" (as such
                  term is used in Sections 13(d) and 14(d) of the Securities
                  Exchange Act of 1934, as amended (the "Exchange Act")),





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                  other than a trustee or other fiduciary holding securities
                  under an employee benefit plan of the Holding Company, a
                  corporation owned directly or indirectly by the stockholders
                  of the Holding Company (immediately after the IPO) or any of
                  their respective affiliates, becomes the "beneficial owner"
                  (as defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of the Holding Company representing
                  50% or more of the total voting power represented by the
                  Holding Company's then outstanding securities that vote
                  generally in the election of directors (referred to herein as
                  "Voting Securities"); (B) during any period of two consecutive
                  years, individuals who at the beginning of such period
                  constitute the Board of Directors and any new directors whose
                  election by the Board of Directors or nomination for election
                  by the Holding Company's stockholders was approved by a vote
                  or a majority of the directors then still in office who either
                  were directors at the beginning of the period or whose
                  election or nomination for election was previously so
                  approved, cease for any reason to constitute a majority of the
                  Board of Directors; (C) the stockholders of the Holding
                  Company approve a merger or consolidation of the Holding
                  Company with any other corporation, other than a merger or
                  consolidation (i) which would result in the Voting Securities
                  of the Holding Company outstanding immediately prior thereto
                  continuing to represent (either by remaining outstanding or by
                  being converted into Voting Securities of the surviving
                  entity) at least 50% of the total voting power represented by
                  the Voting Securities of the Holding Company or such surviving
                  entity outstanding immediately after such merger or
                  consolidation or (ii) in which 50% or more of the board of
                  directors of the surviving entity is composed of members from
                  the Board of Directors of the Holding Company; (D) the
                  stockholders of the Holding Company approve a plan of complete
                  liquidation of the Holding Company or an agreement for the
                  sale or disposition by the Holding Company of (in one
                  transaction or a series of transactions) all or substantially
                  all of the Holding Company's assets; or

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





                  SECTION 3.        COMPENSATION.





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

                  (a)      Salary. From the date of this Agreement, Employee
                           will be paid a salary (the "Base Salary") of no less
                           than One Hundred Thirty Five Thousand Dollars
                           ($135,000) per annum, less deductions and
                           withholdings required by applicable law. The Base
                           Salary shall be paid to Employee in equal monthly
                           installments (or on such more frequent basis as other
                           executives of Employer are compensated). The Base
                           Salary shall be reviewed by the Board of Directors of
                           Employer on at least an annual basis thereafter and
                           may be increased but not decreased as a result of any
                           such review.

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

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

                           (i)      For each fiscal year of the Employer, .15%
                                    of the pre-tax net income, before any
                                    performance or other periodic bonuses for
                                    any of the employees of the Employer and any
                                    of its consolidated subsidiaries, of the
                                    Employer on a consolidated basis for
                                    financial accounting basis based upon
                                    applying generally accepted accounting
                                    principles and generally accepted auditing
                                    standards on a consistent basis. This bonus
                                    shall be calculated by the independent
                                    certified public accountant regularly
                                    employed by the Employer (the "CPA")
                                    applying such generally accepted accounting
                                    principles and generally accepted auditing
                                    standards on a consistent basis.



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                           Plus

                           (ii)     For each fiscal year of the Employer, one
                                    point five percent (1.5%) of the excess of
                                    (a) the consolidated after tax net income of
                                    the Employer and its consolidated
                                    subsidiaries for a fiscal year, computed by
                                    the CPA applying generally accepted
                                    accounting principles and generally accepted
                                    auditing standards on a consistent basis
                                    over (b) the Wall Street Estimate (as
                                    hereinafter defined) for such fiscal year.
                                    For purposes of this subsection (ii)(b),
                                    Wall Street Estimate for a fiscal year shall
                                    mean the simple arithmetical average of the
                                    consolidated earnings per share estimates
                                    for a fiscal year of the Employer and its
                                    consolidated subsidiaries in the possession
                                    of First Call on the Determination Date (as
                                    hereinafter defined), translated by the CPA
                                    into the equivalent consolidated after tax
                                    net income of the Employer and its
                                    consolidated subsidiaries for such fiscal
                                    year. For purposes of this subsection
                                    (ii)(b), the Determination Date shall mean
                                    the date the IPO is consummated and
                                    thereafter shall be the first day of the
                                    fiscal year for which such computation
                                    applies.

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

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



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

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

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

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

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

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

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

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

                                    IV.      Mortgage application, points, fees,
                                             charges, appraisal, attorney fees
                                             of the mortgage lender, title
                                             insurance, survey,



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                                             and all other costs and expenses
                                             associated with obtaining a loan
                                             and mortgage and the purchase of
                                             the Maryland Home.

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

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

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

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



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

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

                  SECTION 4.        COMMON STOCK.

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

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

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

                  4.2      Stock Loan.



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

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

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

                           (B)      If after January 1, 2001 the Holding Company
                                    proposes to register any of its securities
                                    under the Securities Act for sale to the
                                    public for its own account or for the
                                    account of other security holders or both,
                                    the Holding Company may, upon 30 days prior
                                    written notice to the Employee, require the
                                    Employee to include the Required



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

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

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

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

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



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                  4.3      Securities Act. THE SHARES OF COMMON STOCK (THE
"SHARES") GRANTED PURSUANT TO THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS, THE SHARES ARE OFFERED PURSUANT TO EXEMPTIONS PROVIDED BY
SECTION 4(2) OF THE ACT AND CERTAIN RULES AND REGULATIONS PROMULGATED PURSUANT
THERETO. THE SHARES MAY NOT BE TRANSFERRED BY THE EMPLOYEE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO EMPLOYER AND ITS COUNSEL,
WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY WITHHELD, THAT SUCH REGISTRATION IS
NOT REQUIRED.

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

                  SECTION 5.        PARTIAL RESTRAINT ON COMPETITION.

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

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



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                                    Group for the most recent fiscal year of the
                                    Employer before or on the Termination Date.

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

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

                           (d)      "Confidential Information" means any
                                    confidential, proprietary business
                                    information or data belonging to or
                                    pertaining to Employer that does not
                                    constitute a "Trade Secret" (as hereinafter
                                    defined) and that is not generally known by
                                    or available through legal means to the
                                    public, including, but not limited to,
                                    information regarding Employer's customers
                                    or actively sought prospective customers,
                                    acquisition targets, suppliers,
                                    manufacturers and distributors gained by
                                    Employee as a result of his employment with
                                    Employer.

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

                           (f)      "Noncompete Period" or "Nonsolicitation
                                    Period" means the period beginning the date
                                    hereof and ending on the second anniversary
                                    of the termination of Employee's employment
                                    with Employer; provided that such Noncompete
                                    Period or Nonsolicitation Period shall end
                                    on the Termination Date in the event this
                                    Agreement is terminated pursuant to the
                                    provisions of Section 2 (iii) hereof and,
                                    provided further, that the Noncompete Period
                                    or Nonsolicitation Period may be shortened
                                    at the discretion of the Board of Directors
                                    of Employer.



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

                           (h)      "Trade Secrets" means information or data of
                                    or about Employer, including but not limited
                                    to technical or non-technical data,
                                    formulas, patterns, compilations, programs,
                                    devices, methods, techniques, drawings,
                                    processes, financial data, financial plans,
                                    products plans, or lists of actual or
                                    potential customers, clients, distributees
                                    or licensees, information concerning
                                    Employer's finances, services, staff,
                                    contemplated acquisitions, marketing
                                    investigations and surveys, that are not
                                    generally known to, and/or are not readily
                                    ascertainable by legal means by, other
                                    persons.

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

                  5.2      Trade Name and Confidential Information.

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

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



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<PAGE>   14



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

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

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

                           (c)      To the greatest extent possible, all Work
                                    Product shall be deemed to be "work made for
                                    hire" (as defined in the Copyright Act, 17
                                    U.S.C.A.ss.ss.101 et seq., as amended) and
                                    owned exclusively by Employer. Employee
                                    hereby unconditionally and irrevocably
                                    transfers and assigns to Employer all
                                    rights, title and interest Employee may have
                                    in or to any and all Work Product,
                                    including, without limitation, all patents,
                                    copyrights, trademarks, service marks and
                                    other intellectual property rights. Employee
                                    agrees to execute and deliver to Employer
                                    any transfers, assignments, documents or
                                    other instruments which Employer may deem
                                    necessary or appropriate to vest complete
                                    title and ownership of any and all such Work
                                    Product, and all rights therein, exclusively
                                    in Employer.



                                       14

<PAGE>   15




                  5.3      Noncompetition.

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

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

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

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

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

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



                                       15

<PAGE>   16



                                    agreement or understanding between such
                                    employee, consultant, contractor or other
                                    person and Employer.

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

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

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

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

                  SECTION 6.        MISCELLANEOUS.



                                       16

<PAGE>   17




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

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


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

                  HOLDING COMPANY

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

                  EMPLOYEE

                  Mr. Harold C. Kropp, Jr.
                  1757 McConnell Drive
                  Williamsport, PA 17701

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

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

                  6.5      Entire Agreement. This Agreement is intended by the
parties hereto to be the final expression of their agreement with respect to the
subject matter hereof and is the



                                       17

<PAGE>   18



complete and exclusive statement of the terms thereof, notwithstanding any
representations, statements or agreements to the contrary heretofore made. This
Agreement supersedes and terminates all prior employment and compensation
agreements, arrangements and understandings between or among Employer and
Employee. This Agreement may be modified only by a written instrument signed by
all of the parties hereto.

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

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

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

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

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



                                       18

<PAGE>   19




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


                                       HOLDING COMPANY

                                       RAILWORKS CORPORATION



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

                                       EMPLOYEE



                                       /s/ Harold C. Kropp, Jr.          (SEAL)
                                       ----------------------------------
                                       Harold C. Kropp, Jr.





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<PAGE>   20


                                    EXHIBIT A


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






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