ACQUISITION AGREEMENT

                                    by and among

                              KANSAS CITY SOUTHERN,
                             a Delaware corporation,

                                 KARA Sub, Inc.,
                             a Delaware corporation,

                                GRUPO TMM, S.A.,
                         a sociedad anonima organized under
                       the laws of the United Mexican States,

                           TMM HOLDINGS, S.A. de C.V.,
                       a sociedad anonima de capital variable
             organized under the laws of the United Mexican States,

                                       and

                          TMM MULTIMODAL, S.A. de C.V.,
                       a sociedad anonima de capital variable
               organized under the laws of the United Mexican States


                             DATED AS OF APRIL 20, 2003


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                                Table of Contents

ARTICLE 1 STOCK PURCHASE.....................................................1
  Section 1.1 Stock Purchase.................................................1
  Section 1.2 Stock Purchase Price...........................................1
ARTICLE 2 SUBSIDIARY INVESTMENT..............................................2
  Section 2.1 Subsidiary Investment..........................................2
ARTICLE 3 THE MERGER.........................................................2
  Section 3.1 The Merger.....................................................2
  Section 3.2 Name Change, Certificate of Incorporation and Bylaws...........2
  Section 3.3 Board and Officers.............................................2
  Section 3.4 Merger Integration Committee...................................3
ARTICLE 4 CLOSING............................................................3
  Section 4.1 Closing........................................................3
  Section 4.2 Actions at Closing.............................................3
  Section 4.3 Conversion of Securities.......................................4
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS..........................5
  Section 5.1 Organization and Related Matters...............................5
  Section 5.2 Authorized Capitalization......................................6
  Section 5.3 GTFM and GTFM Subsidiaries.....................................7
  Section 5.4 Authority; No Violation........................................7
  Section 5.5 Consents and Approvals.........................................8
  Section 5.6 Financial Statements; Undisclosed Liabilities..................9
  Section 5.7 Contracts......................................................9
  Section 5.8 Intellectual Property Rights..................................10
  Section 5.9 Employee Benefit Matters......................................10
  Section 5.10 Labor and Other Employment Matters...........................11
  Section 5.11 Tax Matters..................................................13
  Section 5.12 Legal Proceedings............................................14
  Section 5.13 Permits and Compliance.......................................14
  Section 5.14 Environmental Matters........................................15
  Section 5.15 Properties...................................................15
  Section 5.16 Insurance....................................................16
  Section 5.17 No Other Broker..............................................16
  Section 5.18 No GTFM Material Adverse Effect..............................16
  Section 5.19 Sufficiency of and Title to Assets...........................16
  Section 5.20 Information in Filed Documents...............................16
  Section 5.21 Transactions with Affiliates.................................17
  Section 5.22 No Loss of Significant Customers.............................17
  Section 5.23 Trading in and Ownership of KCS Common Stock.................17
  Section 5.24 Solvency.....................................................17
  Section 5.25 Termination of Option Agreement..............................17
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF KCS.............................18
  Section 6.1 Organization and Related Matters..............................18
  Section 6.2 Authority; No Violation.......................................18
  Section 6.3 Consents and Approvals........................................20

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  Section 6.4 Authorized Capitalization.....................................20
  Section 6.5 SEC Filings...................................................21
  Section 6.6 Financial Statements; Undisclosed Liabilities.................21
  Section 6.7 No Other Broker...............................................21
  Section 6.8 Information in Filed Documents................................22
  Section 6.9 No KCS Material Adverse Effect................................22
  Section 6.10 KARA Sub.....................................................22
  Section 6.11 Legal Proceedings............................................22
  Section 6.12 KCS Capital Resources........................................22
  Section 6.13 Employee Benefit Matters.....................................23
  Section 6.14 Labor and Other Employment Matters...........................23
  Section 6.15 Tax..........................................................23
  Section 6.16 Permits and Compliance.......................................23
  Section 6.17 Environmental Matters........................................24
  Section 6.18 Properties...................................................24
ARTICLE 7 COVENANTS AND ADDITIONAL AGREEMENTS...............................25
  Section 7.1 Conduct of Business by the GTFM Group.........................25
  Section 7.2 Conduct of Business by KCS and its Subsidiaries...............27
  Section 7.3 Access to Information; Confidentiality........................28
  Section 7.4 Regulatory Matters; Governing Documents; Third-Party Consents.28
  Section 7.5 Stockholder and Debtholder Approvals..........................29
  Section 7.6 Tax Matters...................................................30
  Section 7.7 Insurance.....................................................30
  Section 7.8 Notification of Certain Matters...............................30
  Section 7.9 Further Assurances............................................31
  Section 7.10 Third-Party Matters..........................................31
  Section 7.11 Efforts of Parties to Close..................................32
  Section 7.12 Expenses.....................................................33
  Section 7.13 VAT Contingency Payment......................................33
  Section 7.14 Financing for the Acquisition................................33
  Section 7.15 Release......................................................33
ARTICLE 8 CONDITIONS........................................................34
  Section 8.1 Mutual Conditions.............................................34
  Section 8.2 Conditions to the Obligations of KCS..........................34
  Section 8.3 Conditions to the Obligations of Sellers......................35
ARTICLE 9 TERMINATION.......................................................37
  Section 9.1 Termination...................................................37
  Section 9.2 Survival after Termination....................................37
ARTICLE 10 INDEMNIFICATION..................................................38
  Section 10.1 Survival of Representations, Warranties and Covenants;
  Exclusive Monetary Remedies...............................................38
  Section 10.2 Indemnification by Sellers...................................38
  Section 10.3 Indemnification by KCS.......................................39
  Section 10.4 Procedures for Third-Party Claims............................40
  Section 10.5 Tax Indemnification..........................................41
ARTICLE 11 DEFINITIONS......................................................41
  Section 11.1 Certain Defined Terms........................................41
ARTICLE 12 MISCELLANEOUS....................................................47

                                     - ii -
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  Section 12.1 Amendments; Waiver...........................................47
  Section 12.2 Entire Agreement.............................................47
  Section 12.3 Interpretation...............................................48
  Section 12.4 Severability.................................................48
  Section 12.5 Notices......................................................49
  Section 12.6 Headings.....................................................50
  Section 12.7 Binding Effect; Persons Benefiting; No Assignment............50
  Section 12.8 No Third Party Beneficiaries.................................50
  Section 12.9 Counterparts.................................................50
  Section 12.10 Specific Enforcement........................................50
  Section 12.11 Governing Law; Dispute Resolution...........................50
  Section 12.12 Announcements...............................................53
  Section 12.13 Termination Fee.............................................53






















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                             TABLE OF DEFINED TERMS


      Term.. Page Section

2003 Notes.........................9.....................5.5
2006 Notes.........................9.....................5.5
Acquisition........................1................Preamble
Affiliate.........................40....................11.1
Agreement..........................1................Preamble
Ancillary Agreements...............1................Preamble
Applicable Law....................40....................11.1
Arbitration Costs.................51...........12.11(d)(iii)
Arbitration Demand................50................12.11(d)
Arbitrators.......................50.............12.11(d)(i)
Benefit Plan......................10..................5.9(a)
Board of Directors.................2.....................3.3
Business Day......................40....................11.1
Buyer Parties.....................31.................7.10(c)
Certificate of Merger..............2.....................3.1
Change of Control.................40....................11.1
Closing............................3.....................4.1
Closing Date.......................3.....................4.1
Code..............................22....................6.13
Concession........................41....................11.1
Confidentiality Agreement.........41....................11.1
Consulting Agreement..............41....................11.1
Contracts.........................41....................11.1
Control...........................41....................11.1
Del. G.C.L.........................2.....................3.1
Disputes..........................49................12.11(a)
Dispute Notice....................50................12.11(c)
Dispute Parties...................49................12.11(a)
Dispute Party.....................49................12.11(a)
Effective Time.....................2.....................3.1
Encumbrance.......................41....................11.1
Environmental Laws................41....................11.1
Environmental Permit..............42....................11.1
ERISA.............................22....................6.13
ERISA Affiliate...................42....................11.1
Exchange Act......................42....................11.1
Expiration Date...................37.................10.1(a)
Final Resolution of the VAT Claim.42....................11.1
GAAP..............................42....................11.1
Governmental Authority............42....................11.1
GTFM...............................1................Preamble
GTFM Assets.......................16....................5.19

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GTFM Benefit Plan.................10..................5.9(a)
GTFM Business.....................42....................11.1
GTFM Financial Statements..........9.....................5.6
GTFM Form 20-F....................43....................11.1
GTFM Group........................43....................11.1
GTFM Insurance Policies...........16....................5.16
GTFM Material Adverse Effect......43....................11.1
GTFM Shares........................1.....................1.1
GTFM Subsidiaries..................7..................5.3(a)
GTFM Trademarks...................43....................11.1
GTFM Voting Debt...................6.....................5.2
Hazardous Materials...............43....................11.1
HSR Act...........................43....................11.1
Income Taxes......................43....................11.1
Indemnified Party.................39.................10.4(a)
Intellectual Property.............43....................11.1
Investment Advisers Act...........44....................11.1
Investment Company Act............44....................11.1
KARA Sub...........................1................Preamble
KARA Sub Common Stock..............2.....................2.1
KCS................................1................Preamble
KCS Acquisition Proposal..........31.................7.10(c)
KCS Assets........................44....................11.1
KCS Business......................44....................11.1
KCS Disclosure Schedule...........17..Article 6 Introduction
KCS Financial Statements..........20.....................6.6
KCS Indemnitees...................37....................10.2
KCS Material Adverse Effect.......44....................11.1
KCS SEC Documents.................21.....................6.5
KCS Stock Option Plan.............44....................11.1
KCS Voting Debt...................20.....................6.4
Knowledge.........................44....................11.1
Law...............................44....................11.1
Losses............................38....................10.2
Merger.............................1................Preamble
Merger Integration Committee.......3.....................3.4
MM.................................1................Preamble
MM Subsidiaries...................44....................11.1
NAFTA Rail.........................2.....................3.2
NYSE..............................44....................11.1
Parties............................1................Preamble
Permits...........................14.................5.13(a)
Permitted Encumbrance.............45....................11.1
Person............................45....................11.1
Proceedings.......................14....................5.12
Process Agent.....................52................12.11(f)
Put Agreement.....................45....................11.1
Put Purchase Price................45....................11.1

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<PAGE>

Reconciliation.....................9.....................5.6
Scheduled Contracts................9.....................5.7
SEC...............................45....................11.1
Securities........................45....................11.1
Securities Act....................45....................11.1
Securities Laws...................45....................11.1
Seller Disclosure Schedule.........5..Article 5 Introduction
Seller Indemnitees................38....................10.3
Seller Material Adverse Effect....45....................11.1
Seller Parties....................30.................7.10(a)
Sellers............................5..Article 5 Introduction
Strategic Investor................45....................11.1
Stock Purchase.....................1................Preamble
Stock Purchase Price...............1.....................1.1
Straddle Period...................29..................7.6(b)
Subsidiary........................46....................11.1
Subsidiary Investment..............1................Preamble
Surviving Company..................2.....................3.1
Tax...............................45....................11.1
Tax Return........................46....................11.1
Taxing Authority..................46....................11.1
Termination Date..................36..............9.1(a)(vi)
TFM...............................46....................11.1
Third-Party Claim.................39.................10.4(a)
TMM................................1................Preamble
TMM Account........................1.....................1.2
TMM Acquisition Proposal..........30.................7.10(a)
TMMH...............................1................Preamble
UMS................................1................Preamble
U.S...............................46....................11.1
VAT...............................46....................11.1
VAT Claim.........................46....................11.1
VAT Contingency Payment...........32....................7.13
VAT Payment.......................46....................11.1

Exhibit 1      KARA Sub Note
Exhibit A      Amended and Restated  Certificate of Incorporation of the
               Surviving Company
Exhibit B      Bylaws of the Surviving  Company
Exhibit C      Agreement of Assignment and Assumption of Put Obligations
Exhibit D      Boards  of  Directors,   Committees  and  Officers  of  Surviving
               Company,  GTFM  and  GTFM  Subsidiaries  and  Merger  Integration
               Committee
Exhibit E      Seller Disclosure Schedule
Exhibit F      KCS Disclosure Schedule
Exhibit G-1.   Form of Opinion Letter of Milbank, Tweed, Hadley & McCloy LLP
Exhibit G-2    Form of Opinion Letter of Haynes & Boone,  L.C.
Exhibit H-1    Form of Opinion Letter of Sonnenschein  Nath & Rosenthal
Exhibit H-2    Form of Opinion Letter of Jay Nadlman, Esq.

                                     - vi -
<PAGE>
      ACQUISITION AGREEMENT,  dated as of April 20, 2003 (this "Agreement"),  by
and among KANSAS CITY SOUTHERN, a Delaware corporation ("KCS"),  KARA Sub, Inc.,
a Delaware  corporation  ("KARA  Sub"),  GRUPO  TMM,  S.A.,  a sociedad  anonima
organized  under the laws of the United  Mexican  States  ("UMS")  ("TMM"),  TMM
HOLDINGS,  S.A. de C.V., a sociedad anonima de capital variable  organized under
the laws of the UMS and a subsidiary of TMM ("TMMH") and TMM MULTIMODAL, S.A. de
C.V., a sociedad anonima de capital variable organized under the laws of the UMS
("MM") and a subsidiary of TMMH (collectively, the "Parties").

      WHEREAS,  each of the Boards of  Directors  of KCS,  TMM,  TMMH and MM has
approved and declared  advisable the  acquisition by KCS of all of MM's interest
in GRUPO TRANSPORTACION  FERROVIARIA MEXICANA,  S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of the UMS ("GTFM") through (i) the
purchase by KARA Sub from MM of all of the capital stock of GTFM held by MM (the
"Stock  Purchase"),  (ii) the  investment  by MM in KARA  Sub  (the  "Subsidiary
Investment")  and (iii) the merger of KARA Sub with and into KCS (the  "Merger")
upon the terms and subject to the  conditions of this  Agreement  (collectively,
the  Stock  Purchase,   Subsidiary   Investment  and  the  Merger  comprise  the
"Acquisition"); and

      WHEREAS,  certain of the  Parties  and other  parties  are  entering  into
ancillary  agreements (the "Ancillary  Agreements,"  identified  hereinafter) to
carry out certain of the objectives of this Agreement and of the Acquisition.

     NOW,  THEREFORE,  in  consideration  of the foregoing  and the  respective
representations,   warranties,  covenants  and  agreements  set  forth  in  this
Agreement  and  intending  to be legally  bound  hereby,  the  Parties  agree as
follows:

                                   ARTICLE 1

                                 STOCK PURCHASE

     Section 1.1  Stock Purchase.  Upon the terms and subject to satisfaction or
waiver of the conditions set forth in Article 8, at the Closing,  KARA Sub shall
purchase,  acquire and receive  from MM, and MM shall  sell,  assign,  transfer,
convey and deliver to KARA Sub, all GTFM Shares held by MM, consisting of 25,500
shares of Series "A" fixed capital stock of GTFM and 3,842,901  shares of Series
"A" variable  capital stock of GTFM  (collectively  the "GTFM Shares"),  for the
consideration described in Section 1.2 (the "Stock Purchase Price").

     Section 1.2  Stock Purchase  Price.  The Stock Purchase Price to be paid by
KARA Sub to MM at the Closing for the  purchase of the GTFM Shares shall be paid
by the delivery of: (i) $200 million,  in immediately  available  funds, by wire
transfer to the account  designated  by TMM to KCS at least three  business days
prior to the Closing Date (the "TMM  Account"),  provided,  that KCS may, at its
option,  elect to pay up to $80  million of such  amount by  delivering  to MM a
number of shares of KCS Common Stock, or of KCS Class A Common Stock  determined
by  dividing  the amount  that KCS so elects to pay other than in cash by $12.50
(such election to be made by written notice to the Sellers not less than 30 days
prior to the

                                       -1-
<PAGE>

Closing  specifying  the amount  which KCS elects to pay through the delivery of
Common Stock or Class A Common  Stock and the class of such stock,  which notice
shall be  irrevocable  once  given);  and (ii) a  subordinated  promissory  note
evidencing an indebtedness  of KARA Sub in the principal  amount of $25,000,000,
having the terms and conditions set forth in the form of note attached hereto as
Exhibit 1 (the "KARA Sub Note").  KCS  covenants  and agrees to provide KARA Sub
with sufficient funds to make all payments  required to be made by it under this
Agreement.

                                   ARTICLE 2

                              SUBSIDIARY INVESTMENT

     Section 2.1  Subsidiary Investment.  At the Closing,  immediately following
the Stock Purchase, MM shall subscribe for and purchase from KARA Sub 100 shares
of KARA Sub common stock, $.01 par value ("KARA Sub Common Stock"), representing
10% of the issued and outstanding  shares of KARA Sub Common Stock, and KARA Sub
shall issue,  sell and transfer to MM the KARA Sub Common Stock in consideration
for delivery by MM to KARA Sub of the KARA Sub Note.

                                   ARTICLE 3

                                   THE MERGER

     Section 3.1  The Merger.  Immediately following the Subsidiary  Investment,
KARA Sub  shall be  merged  with and  into KCS in  accordance  with the  General
Corporation Law of the State of Delaware ("Del. G.C.L."). KCS and KARA Sub shall
cause  the  Merger to be  consummated  by filing a  certificate  of merger  (the
"Certificate  of Merger")  with the Secretary of State of the State of Delaware,
in such form as  required  by, and  executed  in  accordance  with the  relevant
provisions  of,  the  Del.  G.C.L.  (the  date  and  time of the  filing  of the
Certificate of Merger being the "Effective  Time").  At the Effective  Time, the
effects of the Merger shall be as provided in the  Certificate of Merger and the
applicable provisions of the Del. G.C.L. As a result of the Merger, the separate
corporate  existence  of KARA Sub  shall  cease and KCS  shall  continue  as the
surviving corporation of the Merger (the "Surviving Company").

     Section 3.2  Name Change,  Certificate of Incorporation  and Bylaws. At the
Effective  Time, KCS shall change its name to "NAFTA Rail  Corporation"  or such
other  name as  shall  be  determined  by KCS and its  Restated  Certificate  of
Incorporation  and  Bylaws  shall be amended in their  entirety  to contain  the
provisions set forth, respectively, in Exhibits A and B to this Agreement, which
shall   become,   respectively,   the  Amended  and  Restated   Certificate   of
Incorporation  and Bylaws of the Surviving  Company.  At the Effective Time, the
Charter  and Bylaws,  or other  organizational  documents  of GTFM and each GTFM
Subsidiary shall be amended as determined by KCS.

     Section  3.3   Board and  Officers.  At the  Effective  Time,  the Board of
Directors of the Surviving Company (the "Board of Directors") shall be comprised
of eleven members  (provided,  that KCS may add a representative  of a Strategic
Investor in KCS as a twelfth director) divided into three classes, each class to
be as equal in number as practicable, to serve staggered three-year terms. At or
promptly following the Effective Time, the Board of Directors shall establish,

                                       -2-
<PAGE>

and appoint the members of,  such  committees  as the Board of  Directors  deems
appropriate,  which shall include the  committees set forth in Exhibit D to this
Agreement.  Included in Exhibit D are the names of the members of the respective
initial Board of Directors  (including those persons designated to be members of
the committees of the Board of Directors),  and the initial executive  officers,
of the Surviving Company,  and of GTFM and the GTFM  Subsidiaries,  each to hold
office at the  Effective  Time.  Each  person  identified  in  Exhibit D to this
Agreement shall hold office in accordance with the applicable  charter documents
and Ancillary  Agreements and until the earlier of their resignations or removal
as permitted  under such charter  documents and Ancillary  Agreements,  or until
their respective successors are duly elected and qualified, as the case may be.

     Section 3.4   Merger  Integration  Committee.  The Board of Directors shall
appoint,  effective as of the  Effective  Time, a merger  integration  committee
("Merger Integration Committee"),  comprised initially of the persons identified
as such in Exhibit D. The Merger Integration Committee shall assist the Board of
Directors  for a period of one year in managing the  transition of ownership and
operation  of GTFM  contemplated  by this  Agreement  and shall  have such other
duties  and  responsibilities  as may be  assigned  by the  Board of  Directors,
consistent with the Ancillary Agreements.

                                    ARTICLE 4

                                     CLOSING

     Section  4.1   Closing.  Unless  this  Agreement  shall  have been  earlier
terminated  in  accordance  with  the  terms  hereof,  the  consummation  of the
transactions  contemplated by this Agreement (the "Closing")  shall,  subject to
the  satisfaction or waiver of the conditions set forth in Article 8, take place
at the offices of  Sonnenschein  Nath &  Rosenthal,  1221 Avenue of the America,
24th Floor,  New York,  New York, on the second (2nd)  Business Day after all of
the  conditions set forth in Article 8 have been satisfied or waived (other than
the  conditions  that  relate to actions to be taken at the  Closing) or at such
other date,  time and place as KCS and MM shall  mutually  agree in writing (the
date on which the Closing takes place, the "Closing  Date").  The closing of the
Acquisition  is dependent  upon the closing of each of the Stock  Purchase,  the
Subsidiary  Investment and the Merger and if any one of the Stock Purchase,  the
Subsidiary  Investment or the Merger shall not close, then the Acquisition shall
not close and all consideration  theretofore paid or exchanged shall be promptly
returned.

     Section 4.2  Actions at Closing. At the Closing:

     (a) KCS shall  cause KARA Sub to deliver  to MM the Stock  Purchase  Price,
including  the KARA Sub Note,  duly  executed and in proper form to evidence the
indebtedness of KCS Sub represented thereby and MM shall, and TMM shall cause MM
to, deliver to KARA Sub the stock certificates for the GTFM Shares duly endorsed
in favor of KARA Sub in proper  form to transfer  ownership  to KARA Sub of such
shares free and clear of any and all Encumbrances.

     (b) MM shall,  and TMM shall cause MM to,  deliver to KARA Sub the KARA Sub
Note,  duly  endorsed  for  transfer  to KARA Sub free and  clear of any and all
Encumbrances,  other than  Encumbrances  arising solely by operation of law, and
KCS shall cause KARA Sub to issue and deliver to MM the KARA Sub Common Stock.


                                      -3-
<PAGE>

     (c) KCS and  KARA  Sub  shall  file  the  Certificate  of  Merger  with the
Secretary of State of Delaware to effect the Merger.

     (d) The Parties  shall deliver and receive,  respectively,  the opinions of
counsel referred to in Section 8.2(f) and 8.3(e) and the officers'  certificates
referred to in Section 8.2(c) and 8.3(c).

     (e) KCS and Consultant shall execute and deliver the Consulting  Agreement,
which shall become  effective on the first  business day  following  the Closing
Date.

     (f) KCS and TMM shall  execute  and  deliver  the  Marketing  and  Services
Agreement.  KCS, TMM and the other parties thereto shall execute and deliver the
Stockholders' Agreement and the Registration Rights Agreement.

     (g) TMM and KCS shall execute and deliver an agreement by which TMM assigns
its rights, and KCS assumes TMM's obligations, to purchase TFM stock pursuant to
the Put  Agreement  and  indemnifying  TMM from  KCS's  non-performance  of such
obligations, such agreement to be substantially in the form of Exhibit C hereto.

     (h) To the extent in the possession of TMM or MM, TMM and MM shall, and TMM
shall  cause MM to,  deliver to GTFM all files and books of  account,  including
business,  financial and tax records,  of GTFM,  including,  without limitation,
minute  books,  stock record books,  the  Concession  Agreement  and  supporting
exhibits and records relating thereto and work papers.  In addition,  TMM and MM
shall,  and TMM shall cause MM to, deliver to GTFM or KCS such other  documents,
resolutions,  appointments,  powers of  attorney  and  instruments  of  transfer
necessary or appropriate to implement this Agreement and effect the transactions
contemplated  hereby and by the  Ancillary  Agreements,  in each case as KCS may
reasonably request and in form and substance reasonably acceptable to KCS.

     (i) MM shall cause the Secretary of GTFM to make the corresponding notation
in the Stock Registry Book of GTFM evidencing KARA Sub as the record,  legal and
beneficial owner of the GTFM Shares as of the Closing Date.

     (j) The written  resignations  of all  directors  and  officers  (or, as to
officers,  evidence reasonably  acceptable to KCS of corporate action sufficient
to effect their removal and replacement) of GTFM and GTFM Subsidiaries effective
as of the Closing Date,  except for those persons  identified on Exhibit D as to
continue  in  office,  shall  be  delivered  to  KCS,  accompanied  by  evidence
reasonably  satisfactory to KCS that prior to such resignation,  the election of
the successors to directors resigning was approved by at least two-thirds of the
entire Board of Directors of such corporations.

     (k) All actions taken at the Closing  pursuant to this  Agreement  shall be
deemed to have been taken  simultaneously and no actions or transactions will be
deemed to have taken place, or documents delivered, or payments made, unless all
actions  and  transactions  have  been  completed  and all  documents  have been
executed and delivered.

     Section 4.3  Conversion of Securities.  At the Effective Time, by virtue of
the Merger and without any other action on the part of any Party:

                                      -4-
<PAGE>

     (a) each share of KARA Sub Common Stock issued and outstanding  immediately
prior to the Effective Time and held of record and  beneficially  by MM shall be
converted  into and exchanged for 180,000  shares of Class A Common Stock of the
Surviving  Company,  representing in the aggregate  18,000,000 shares of Class A
Common  Stock of the  Surviving  Company and having the par value and the rights
and limitations described in Article Fourth of Exhibit A to this Agreement;

     (b) each share of KARA Sub Common Stock issued and outstanding  immediately
prior to the Effective Time and held of record and  beneficially by KCS shall be
cancelled;

     (c) each share of KCS Common Stock,  and each share of KCS Preferred Stock,
issued and  outstanding  immediately  prior to the  Effective  Time shall remain
issued and outstanding as one share of Common Stock,  and one share of Preferred
Stock,  respectively,  of the  Surviving  Company,  having the par value and the
rights  and  limitations  described  in  Article  Fourth  of  Exhibit  A to this
Agreement;

     (d) each share of KCS Common  Stock and each share of KCS  Preferred  Stock
that is owned by KCS  immediately  prior to the Effective Time as treasury stock
shall remain as one share of treasury stock of the Surviving  Company having the
par value and the rights and limitations  described in Article Fourth of Exhibit
A to this Agreement; and

     (e) each  option  to  acquire  KCS  Common  Stock  issued  and  outstanding
immediately  prior to the  Effective  Time shall be  adjusted  as  necessary  to
provide that, at the  Effective  Time,  such option shall be deemed an option to
acquire,  on the same terms and conditions as were applicable under such option,
the  number  of shares of Common  Stock of the  Surviving  Company  equal to the
number of shares of KCS Common Stock subject to such option.

                                   ARTICLE 5

                    REPRESENTATIONS AND WARRANTIES OF SELLERS

     Except as set forth in the  disclosure  schedule  attached  as Exhibit E to
this Agreement (the "Seller Disclosure Schedule"), TMM, TMMH and MM ("Sellers"),
jointly and severally, represent and warrant to KCS as follows:

     Section 5.1  Organization and Related Matters.

     (a) TMM is a sociedad  anonima,  duly formed,  validly existing and in good
standing  under the laws of the UMS. TMM has the  corporate  power and authority
necessary  to carry on its  business in the manner as it is now being  conducted
and to own,  lease and operate  all of its  properties  and assets.  The copy of
TMM's Corporate Charter and Bylaws previously  provided to KCS is a complete and
correct copy of such  instrument  as in effect on the date hereof.  Sellers have
provided KCS with an English translation of such documents.

     (b) TMMH is a S.A.  de C.V.,  duly  formed,  validly  existing  and in good
standing  under the laws of the UMS. TMMH has the corporate  power and authority
necessary to carry on its business in the manner it is now being  conducted  and
to own, lease and operate all of its properties and assets. TMMH is a subsidiary
of TMM, which owns all of the issued and

                                      -5-
<PAGE>

outstanding  capital  stock of TMMH,  except as set forth in Section  5.1 of the
Seller Disclosure Schedule.

     (c) MM is a S.A.  de  C.V.,  duly  formed,  validly  existing  and in  good
standing  under the laws of the UMS. MM has the  corporate  power and  authority
necessary  to carry on its  respective  business  in the  manner it is now being
conducted and to own, lease and operate all of its properties and assets.  MM is
a subsidiary of TMMH, which owns all of the issued and outstanding capital stock
of MM, except as set forth in Section 5.1 of the Seller Disclosure Schedule.

     (d) GTFM is a S.A.  de C.V.,  duly  formed,  validly  existing  and in good
standing under the laws of the UMS, and each of the GTFM  Subsidiaries is a S.A.
de C.V. or other  business  entity duly  formed,  validly  existing  and in good
standing  under the laws of the UMS. GTFM has the corporate  power and authority
necessary to carry on its business in the manner it is now being  conducted  and
to own, lease and operate all of its properties and assets.

     (e)  Each of TMM,  TMMH,  MM,  GTFM  and the  Subsidiaries  of GTFM is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business  conducted by it or the character or location of the properties and
assets  owned,  leased or operated by it makes such  qualification  or licensing
necessary,  except  in  jurisdictions  where  the  failure  of such  license  or
qualification  would not  individually  or in the aggregate have a GTFM Material
Adverse Effect.

     (f) The copies of the  Corporate  Charter  and Bylaws of each of TMMH,  MM,
GTFM, and of each of the GTFM Subsidiaries, delivered to KCS by TMM prior to the
execution of this Agreement are complete and correct copies of such  instruments
as in effect on the date  hereof and  Sellers  have  provided  KCS with  English
translations of such documents.

     Section 5.2   Authorized  Capitalization.  The authorized  capital stock of
GTFM consists of (i) 25,500 shares of Series "A" fixed capital,  of which 25,500
shares are held by MM, (ii) 3,842,901 shares of Series "A" variable capital,  of
which  3,842,901  shares are held by MM, (iii) 24,500 shares of Series "B" fixed
capital,  of which  24,500  shares are held by NAFTA Rail,  S.A.  de C.V.,  (iv)
3,692,199 shares of Series "B" variable  capital,  of which 3,692,199 shares are
held by NAFTA  Rail,  S.A. de C.V.,  and (v)  2,478,470  shares of Series  "LII"
variable  capital,  of which  2,478,470 are held by TFM.  Except as set forth in
Section  5.2 of the Seller  Disclosure  Schedule,  there are no other  shares of
capital stock of GTFM or other ownership interests in GTFM issued,  reserved for
issuance or outstanding.  All of the shares of capital stock of GTFM outstanding
are duly authorized,  validly issued,  fully paid and  nonassessable and free of
any  preemptive  rights and are not subject to any voting  trust  agreement  (or
similar agreement),  or other Contract  restricting or otherwise relating to the
voting,  dividend  rights or  disposition of such shares to which GTFM or any of
the Sellers is a party or by which GTFM or any of the  Sellers is bound.  Except
as set forth in this  Section  5.2,  there is no  outstanding  option,  warrant,
convertible or exchangeable security, right, subscription,  call, right of first
refusal,  legally  binding  commitment,  preemptive  right or other agreement or
right of any  kind to which  GTFM or the  Sellers  are a party or are  otherwise
bound  entitling  any Person to  purchase or  otherwise  acquire  (including  by
exchange or conversion)  from GTFM or any GTFM  Subsidiary any shares of capital
stock  of  GTFM.  Except  as  set  forth  in the  Put  Agreement,  there  are no
outstanding obligations of GTFM or any of its Subsidiaries to redeem, repurchase
or otherwise acquire any of

                                      -6-
<PAGE>

the  shares of capital  stock of GTFM or any  shares of capital  stock (or other
ownership  interests)  of any of its  Subsidiaries.  Neither  GTFM  nor any GTFM
Subsidiary has outstanding any bonds,  debentures,  notes or other  indebtedness
generally  having the right to vote (or convertible  into, or exchangeable  for,
Securities  having the right to vote) on any matters on which  holders of shares
of capital stock of GTFM may consent or vote ("GTFM Voting Debt").  There are no
options,  warrants,  rights,  convertible or exchangeable Securities,  "phantom"
interests  or  other  ownership  interest   appreciation  rights,   commitments,
Contracts,  arrangements or undertakings of any kind to which GTFM or any of its
Subsidiaries  is a party or by which any of them is bound (i) obligating GTFM or
any of its Subsidiaries or any other Person to issue,  deliver or sell, or cause
to be issued,  delivered or sold, existing or additional shares of capital stock
of GTFM or capital stock (or other ownership  interests) of any GTFM Subsidiary,
or any security  convertible  into or exercisable or exchangeable for any of the
foregoing or for GTFM Voting Debt,  (ii)  obligating GTFM or any GTFM Subsidiary
or any other  Person  to issue,  grant,  extend or enter  into any such  option,
warrant, call, right, security commitment, Contract, arrangement or undertaking,
(iii) that give any Person the right to receive  any  economic  benefit or right
similar to or derived from the economic  benefits and rights accruing to holders
of the shares of  capital  stock of GTFM or  capital  stock (or other  ownership
interests)  of any GTFM  Subsidiary or (iv) that give rise to a right to receive
any  payment  from  GTFM or any  GTFM  Subsidiary  upon  the  execution  of this
Agreement  or the  consummation  of the Merger or any of the other  transactions
contemplated  hereby,  except as set forth in this Section 5.2.  Notwithstanding
the  disclosures set forth in Section 5.2 of the Seller  Disclosure  Schedule or
otherwise,  the shares of GTFM to be  purchased  by KARA Sub from MM pursuant to
this  Agreement  shall be  acquired  by KARA  Sub free and  clear of any and all
Encumbrances,  except for any Encumbrances created by KARA Sub or its Affiliates
or by operation of law.

     Section 5.3  GTFM and GTFM Subsidiaries.

     (a) Section 5.3 of the Seller Disclosure  Schedule lists each Subsidiary of
GTFM  (the  "GTFM   Subsidiaries")   and  their   respective   jurisdictions  of
incorporation  or organization  and the outstanding  shares of capital stock and
other  ownership  interests,  if any, of the GTFM  Subsidiaries,  and the record
owner  thereof.  All of the  outstanding  shares of  capital  stock of, or other
equity interests in, each of the GTFM  Subsidiaries have been validly issued and
are fully paid and  nonassessable and such shares or interests owned directly or
indirectly  by  GTFM  free  and  clear  of  all  Encumbrances  and  free  of any
restriction  on the right to vote,  sell or  otherwise  dispose of such  capital
stock or other  ownership  interests,  except as set forth in Section 5.3 of the
Seller  Disclosure  Schedule.  Except for the capital  stock or other  ownership
interests  of the GTFM  Subsidiaries  as set forth on Section  5.3 of the Seller
Disclosure  Schedule,  GTFM does not beneficially own directly or indirectly any
capital stock, membership interest, partnership interest, joint venture interest
or other equity interest in any Person.

     (b) Neither GTFM nor any of the GTFM Subsidiaries  engage in or conduct any
business  other  than as set  forth in the GTFM  Form  20-F,  or as set forth in
Section 5.3 of the Seller Disclosure Schedule.  Neither GTFM nor any of the GTFM
Subsidiaries  has  taken  any  action  or  commenced  or  threatened  any  legal
proceeding  for the  administration,  winding-up  or  provisional  winding-up or
dissolution of GTFM or any of the GTFM Subsidiaries or seeking to enter into any
arrangement or composition for the benefit of creditors,  or for the appointment
of a  receiver,  administrator,  administrative  receiver,  trustee  or  similar
officer of any of the  properties,

                                      -7-
<PAGE>

revenues,  undertakings or assets of GTFM or any of the GTFM  Subsidiaries,  nor
have any orders been made for any of the foregoing.

     Section 5.4  Authority; No Violation.

     (a) TMM, TMMH and MM each has full corporate power and authority to execute
and deliver this Agreement and the Ancillary  Agreements to which it is a party,
to perform its  obligations  hereunder  and  thereunder  and to  consummate  the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement  and  the  Ancillary  Agreements  to  which  it  is a  party  and  the
consummation of the transactions  contemplated hereby and thereby have been duly
and validly authorized by all requisite action on their respective parts, and no
other  corporate  action on the part of TMM,  TMMH or MM is necessary to approve
this  Agreement  or the  Ancillary  Agreements  to  which  it is a  party  or to
authorize or consummate the transactions  contemplated hereby or thereby,  other
than approvals from the shareholders of TMM and MM. TMM has received the opinion
of JP Morgan  Securities,  Inc.  that the  consideration  to be  received in the
Acquisition  is fair from a financial  point of view to TMM. This  Agreement and
the  Ancillary  Agreements  to which it is a party  have been  duly and  validly
executed  and  delivered  by  TMM,  TMMH  and MM  (except  for  those  Ancillary
Agreements that are not dated the date hereof,  which Ancillary Agreements shall
be duly and validly  executed and delivered  prior to the Closing) and (assuming
the  due  authorization,  execution  and  delivery  of  this  Agreement  and the
Ancillary  Agreements by the other Parties hereto and thereto)  constitute valid
and  binding  obligations  of TMM,  TMMH  and MM  (except  for  those  Ancillary
Agreements that are not dated the date hereof,  which Ancillary Agreements shall
constitute  valid and binding  obligations  of TMM, TMMH and MM at the Closing),
enforceable  against TMM, TMMH and MM in accordance with their terms,  except as
(i) the  enforceability  thereof  may be subject  to or  limited by  bankruptcy,
insolvency, reorganization,  moratorium or similar laws relating to or affecting
the rights of creditors  generally  and the  availability  of  equitable  relief
(whether in proceedings at law or in equity) and (ii) rights to  indemnification
may be limited by the Securities Laws and the policies underlying such laws.

     (b) Neither the execution  and delivery of this  Agreement or the Ancillary
Agreements  to which it is a party by TMM,  TMMH or MM nor the  consummation  by
TMM, TMMH or MM of any of the transactions  contemplated hereby or thereby to be
performed by them,  nor  compliance  by TMM, TMMH or MM with any of the terms or
provisions  hereof or thereof,  will (i) violate any provision of the Charter or
Bylaws of TMM, TMMH or MM or the charter or bylaws or comparable  organizational
documents of GTFM or any GTFM  Subsidiary or (ii) assuming that the consents and
approvals  referred to in Section 5.5 are duly obtained,  (x) violate,  conflict
with or require  any  notice,  filing,  consent,  waiver or  approval  under any
Applicable Law to which TMM, TMMH, MM, GTFM or the GTFM  Subsidiaries  or any of
their respective  properties,  Contracts or assets are subject,  or (y) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under,  constitute a default (or an event which, with or without notice or lapse
of time, or both, would  constitute a default) under,  result in the termination
of or a right of termination or  cancellation  under,  accelerate or result in a
right of acceleration of the performance  required by, result in the creation of
any liability  under,  result in the creation of any Encumbrance  other than any
Permitted Encumbrance upon the properties, Contracts or assets of TMM, TMMH, MM,
GTFM or the GTFM Subsidiaries under, or require any notice, approval,  waiver or
consent under,  any note, bond,  mortgage,  indenture,  deed of trust,  license,
lease,  agreement or other instrument or obligation to which TMM, TMMH, MM, GTFM
or any of the

                                      -8-
<PAGE>

GTFM Subsidiaries is a party, or by which TMM, TMMH, MM, GTFM or any of the GTFM
Subsidiaries  or any of their  properties  or assets  may be bound or  affected,
except,  in the case of this  clause  (ii),  as set forth in Section  5.4 of the
Seller  Disclosure  Schedule or as would not have or be  reasonably  expected to
have, individually or in the aggregate, a GTFM Material Adverse Effect or result
in an Encumbrance on the GTFM Shares.

     Section 5.5  Consents and Approvals. Except (i) as set forth in Section 5.5
of the Seller  Disclosure  Schedule and in the  Ancillary  Agreements,  (ii) the
prior approval of the Mexican Foreign Investments Commission, (iii) clearance by
the  Mexican  Antitrust  Commission,  (iv)  notice to the  Mexican  Ministry  of
Communications  and  Transportation,  (v) compliance  with and filings under the
Securities  Laws as may be required in  connection  with this  Agreement and the
Ancillary Agreements and the transactions  contemplated hereby and thereby, (vi)
any  required  filings  with the NYSE,  (vii) the filing of the  Certificate  of
Merger,  (viii) consents from the holders of TMM's  outstanding 9 1/2% Notes due
2003 (the "2003 Notes") and 10 1/4% Notes due 2006 (the "2006 Notes"),  and (ix)
the  expiration or earlier  termination of the waiting period under the HSR Act,
no consents or approvals of, or filings,  declarations or registrations with any
Governmental Authority, any third party or any other Person are necessary on the
part of the Sellers in connection with the execution and delivery by each Seller
of this  Agreement or the  Ancillary  Agreements  to which it is a party and the
consummation  by the  Sellers  of the  Acquisition  and the  other  transactions
contemplated  by this  Agreement  and the Ancillary  Agreements  other than such
consents,  approvals,  filings,  declarations  or  registrations  which  if  not
obtained  would not  reasonably  be  expected  to have a GTFM  Material  Adverse
Effect. To the best of Sellers'  Knowledge,  no control share,  anti-takeover or
similar  statute  under the laws of the UMS is  applicable  to the  transactions
contemplated hereby or by the Ancillary Agreements.

     Section 5.6  Financial  Statements;  Undisclosed  Liabilities.  The audited
consolidated financial statements of GTFM and its consolidated  Subsidiaries for
the period ended  December 31, 2002,  as approved by the  shareholders  of GTFM,
previously provided to KCS (the "GTFM Financial  Statements") present fairly, in
all material  respects,  in  conformity  with IAS applied on a consistent  basis
(except as may be indicated in the notes thereto),  the  consolidated  financial
position of GTFM and its  consolidated  Subsidiaries as of the dates thereof and
their  consolidated  results of  operations  and cash flows for the periods then
ended (subject,  in the case of the unaudited interim financial  statements,  to
normal year-end adjustments). The reconciliation ("Reconciliation") to U.S. GAAP
from IAS of the  GTFM  Financial  Statements,  provided  by GTFM to KCS,  fairly
presents in all  material  respects  all  adjustments  necessary  to reflect the
presentation  of such financial  statements on a U.S. GAAP basis.  Except as set
forth in the GTFM Financial Statements, neither GTFM nor any of its Subsidiaries
has any  liabilities or obligations of any nature  (whether  accrued,  absolute,
contingent or otherwise) required by IAS, or the Reconciliation, to be set forth
on a consolidated  balance sheet of GTFM and the consolidated  GTFM Subsidiaries
or in the  notes  thereto  or which,  individually  or in the  aggregate,  could
reasonably be expected to have a GTFM Material Adverse Effect.

     Section 5.7  Contracts.  Section 5.7 of the Seller Disclosure Schedule sets
forth a  complete  and  accurate  list or  description,  as of the  date of this
Agreement,  of all  Contracts:  (i)  that  are  between  GTFM or any of the GTFM
Subsidiaries,  on the one hand,  and Sellers or any  Affiliate of Seller  (other
than  GTFM and its  Subsidiaries)  on the  other  hand,  (ii)  which  constitute
nondisclosure agreements or confidentiality agreements which could reasonably be
expected to have a significant effect on the conduct of the GTFM Business or the
business of the Surviving

                                      -9-
<PAGE>

Company;  (iii)  pursuant  to which  GTFM or any of its  Subsidiaries  is either
obligated  to pay or  entitled  to receive in excess of $10  million in any year
(that is not otherwise  required to be disclosed  pursuant to this Section 5.7);
(iv) that are employment,  management,  consulting or severance  agreements with
any officer or director of GTFM or any of its Subsidiaries; (v) that include any
noncompetition or  nonsolicitation  covenant or any exclusive dealing or similar
arrangement  that  limits  the  ability  of GTFM or any of its  Subsidiaries  to
compete  (geographically or otherwise) in any line of business or which would so
limit the Surviving Company or any of its Subsidiaries  after the Effective Time
or (vi) trackage  rights  agreements,  interline or interchange  agreements with
other  railroads  (collectively,  the  "Scheduled  Contracts").  As of the  date
hereof,  each of the Contracts is a legal,  valid and binding obligation of GTFM
or its Subsidiaries  (assuming the due authorization,  execution and delivery by
the other Parties  thereto) and is in full force and effect and  enforceable  in
accordance  with its  terms,  except as such  enforceability  may be  limited by
bankruptcy, insolvency, reorganization,  moratorium and similar laws relating to
or affecting  creditors  generally and by the availability of equitable remedies
(whether in proceedings at law or in equity).  As of the date of this Agreement,
neither GTFM nor any of its  Subsidiaries has received notice of cancellation of
or  default  under or  intent  to  cancel  or call a  default  under  any of the
Scheduled Contracts. Assuming receipt of the consents and approvals set forth in
Section 5.5, to the best of the Sellers'  Knowledge,  nothing has occurred which
with or  without  notice or lapse of time or both  would  constitute  a material
breach of or a material default under any of the Scheduled Contracts.

     Section 5.8  Intellectual Property Rights.

     (a) With respect to all  Intellectual  Property  used in the conduct of the
GTFM  Business,  GTFM or a  Subsidiary  of GTFM either has all right,  title and
interest in or valid and binding rights under Contract to use such  Intellectual
Property,  except where the failure to have such rights would not  reasonably be
expected to have a GTFM Material Adverse Effect.  Except as disclosed in Section
5.8 of the Seller Disclosure  Schedule or as would not reasonably be expected to
have a GTFM Material Adverse Effect, (i) all registrations with and applications
to Governmental Authorities in respect of Intellectual Property owned by GTFM or
a Subsidiary  of GTFM are valid and in full force and effect,  (ii) there are no
material restrictions on the direct or indirect transfer of any Contract, or any
interest therein, held by GTFM or any Subsidiary in respect of such Intellectual
Property,  (iii) to the Knowledge of the Sellers neither GTFM nor any Subsidiary
of GTFM is in  default  (or with the  giving of notice or lapse of time or both,
would be in  default) in any  material  respect  under any  Contract to use such
Intellectual   Property  and  (iv)  to  the  Knowledge  of  the  Sellers,   such
Intellectual  Property is not being infringed by any other Person.  Neither GTFM
nor any  Subsidiary of GTFM has received  notice that GTFM or any  Subsidiary of
GTFM is  infringing  in any material  respect any  Intellectual  Property of any
other Person, to the Knowledge of Sellers,  no claim is pending or has been made
to such effect that has not been  resolved and, to the Knowledge of the Sellers,
neither GTFM nor any Subsidiary of GTFM is infringing any Intellectual  Property
of any other Person the effect of which, individually or in the aggregate, could
reasonably  be  expected  to have a GTFM  Material  Adverse  Effect.  TMM  shall
transfer  to GTFM or KCS,  effective  upon the  closing,  all  right,  title and
interest  in and to  that  certain  trademark  of  mixed  type,  owned  by  TMM,
registered with the Mexican Institute of Industrial Property under number 53951,
class 37, in  connection  with the name "TFM" and its design,  and shall execute
and deliver all documents  reasonably required by KCS to effect such transfer to
the transferee and its successors and assigns.

                                      -10-
<PAGE>

     Section 5.9  Employee Benefit Matters.

     (a) Section  5.9 of the Seller  Disclosure  Schedule  sets forth a true and
complete  list  of each  material  pension  plan,  deferred  compensation  plan,
retirement  income plan,  stock option or stock  purchase  plan,  profit sharing
plan, bonus plan or policy, employee group insurance plan, hospitalization plan,
disability  plan or other employee  benefit plan,  program,  policy or practice,
formal or  informal,  funded or  unfunded,  to any  current or former  director,
officer or employee (or to any dependent or beneficiary  thereof) of GTFM or any
Subsidiary of GTFM under which GTFM or any Subsidiary of GTFM has any present or
future material obligation or liability, whether actual or contingent. Each such
plan,  agreement,  program,  policy and  arrangement  shall be  referred to as a
"Benefit  Plan." Each Benefit Plan is further  designated  in Section 5.9 of the
Seller Disclosure Schedule as either currently or formerly maintained, sponsored
or  contributed  to by GTFM (a "GTFM  Benefit  Plan") or by any other entity (in
which case such entity is identified). Neither GTFM nor any GTFM Subsidiary, nor
to the  Knowledge  of  Sellers,  any other  Person,  has any  express or implied
commitment,  whether legally enforceable or not, to modify,  change or terminate
any GTFM  Benefit  Plan,  other than with respect to a  modification,  change or
termination required by Applicable Law.

     (b) With respect to each Benefit Plan, GTFM has delivered or made available
to KCS true, current,  correct and complete copies of (i) each Benefit Plan (or,
if not written,  a written  summary of its material  terms),  including  without
limitation all plan documents, adoption agreements, trust agreements,  insurance
Contracts  or  other  funding  vehicles  and all  amendments  thereto,  (ii) any
summaries  and  summary  plan  descriptions,  including  any summary of material
modifications,  distributed to Benefit Plan participants,  (iii) the most recent
actuarial report or other financial  statement relating to such Benefit Plan, as
applicable,  and (iv) all filings made with any  Governmental  Authorities  with
respect to any Benefit Plan.

     (c) Each Benefit Plan has been administered in material compliance with its
terms and all  Applicable  Laws and material  contributions  required to be made
under the  terms of any of the  Benefit  Plans as of the date of this  Agreement
have been timely made or, if not yet due,  have been  properly  reflected in the
GTFM  Financial  Statements.  With  respect to the Benefit  Plans,  no event has
occurred and there exists no condition  or set of  circumstances  in  connection
with  which GTFM could be subject  to any  material  liability  (other  than for
liabilities  to pay  benefits)  under the terms of,  or with  respect  to,  such
Benefit Plans, or any Applicable Law.

     (d) Except as disclosed in Section 5.9 of the Seller  Disclosure  Schedule:
(i) there has been no prohibited  transaction  (within the meaning of Applicable
Law) with respect to any Benefit Plan that could result in material liability to
GTFM or the Surviving Company, (ii) each Benefit Plan can be amended, terminated
or otherwise discontinued after the Effective Time in accordance with its terms,
without  material  liability  (other than liability for ordinary  administrative
expenses   typically   incurred  in  a  termination   event),   (iii)  no  suit,
administrative  proceeding,  action or other  litigation has been brought or, to
the  Knowledge of Sellers,  is  threatened,  against or with respect to any such
Benefit Plan, including any audit or inquiry by any Governmental Authority, (iv)
all tax,  annual  reporting and other  governmental  filings  required have been
timely filed with the  appropriate  Governmental  Authority  and all notices and
disclosures  have been timely provided to participants and (v) each Benefit Plan
meets the  requirement  for  deductibility  under the law and regulations of the
UMS.

                                      -11-
<PAGE>

     (e) No Benefit Plan exists,  and no other  payment shall be made that, as a
result of the execution of this Agreement or the  transactions  contemplated  by
this Agreement (whether alone or in connection with a subsequent  event),  could
result in the  payment to any  employee  of the GTFM Group of any money or other
property or could  result in the  increase,  acceleration  or  provision  of any
payments, other rights or benefits to any such employee.

     Section 5.10 Labor and Other Employment Matters.

     (a) Sellers have made available to KCS a complete and accurate list (giving
name, job title and current  payroll  compensation  of each current  employee of
each  company in the GTFM  Group.  None of the members of the GTFM Group has any
responsibility or liability to any of its employees for any delinquent  payments
of wages,  salaries,  commissions,  bonuses or other direct compensation for any
services  performed for it or amounts required to be reimbursed to such employee
or paid to such  employee  for  mandatory  profit  sharing,  housing,  mandatory
retirement  benefits,  vacation  benefits or social security  benefits  required
under Mexican law in an amount that would have a GTFM Material Adverse Effect.

     (b) Except as would not  reasonably  be  expected  to have a GTFM  Material
Adverse  Effect,  each of the members of the GTFM Group (i) are in compliance in
all material  respects with all  Applicable Law  respecting  labor,  employment,
immigration,  fair  employment  practices,  terms and  conditions of employment,
workers' compensation,  occupational safety, plant closings, wages and hours and
any other Law  applicable to any of their  employees,  and (ii) has withheld all
amounts  required by  Applicable  Law or by  agreement  to be withheld  from the
wages,  salaries,  and other payments to employees,  and (iii) is not liable for
any  arrears of wages or any Taxes or any penalty for failure to comply with any
of the foregoing.

     (c) No current  officer of any member of the GTFM Group has given notice of
termination of employment to the GTFM Group,  nor do Sellers  otherwise have any
Knowledge, that any such officer intends to terminate his or her employment with
the GTFM Group.

     (d)  The  Mexican  Railway  Workers  Union  (El  Sindicato   deTrabajadores
Ferrocarrileros de la Republica Mexicana) is the only trade union or labor union
representing  any  employees  of GTFM or any of its  Subsidiaries.  Sellers have
provided to KCS a true and complete copy of the collective  bargaining agreement
and any amendments thereof. Neither GTFM nor any of its Subsidiaries is a party,
or is otherwise subject, to any other collective  bargaining  agreement or other
labor  union  contract  applicable  to its  employees.  There  are  no  material
activities or proceedings by a labor union or representative thereof to organize
any  employees  of  GTFM  or any  of  its  Subsidiaries.  There  are no  pending
negotiations  between  GTFM or any of its  Subsidiaries  and any labor  union or
representative  thereof  regarding any proposed material changes to any existing
collective  bargaining agreement and no such collective  bargaining agreement is
subject to  expiration  or renewal  within one year after the date hereof or the
extension or renewal of such an agreement or the entering of any such agreement.
There  are no  pending,  and  none  of  GTFM  or any  of  its  Subsidiaries  has
experienced  since  December 31, 2001 any,  material labor  disputes,  lockouts,
strikes,  slowdowns, work stoppages, or threats thereof nor, to the knowledge of
the Sellers,  has any event occurred or does any  circumstance  exist that would
provide a reasonable basis for any such dispute, lockout, strike, slowdown, work
stoppage or threat  thereof.  GTFM and its  Subsidiaries  are not in default and
have not breached in any material respect the terms of any applicable collective
bargaining or other labor union  contract,

                                      -12-
<PAGE>

and there are no material claims or grievances  outstanding against GTFM, any of
its Subsidiaries,  or any of their respective employees under any such agreement
or contract.

     (e) Except as specified in Section 5.10 of the Seller Disclosure  Schedule,
(i) there are no claims,  disputes or actions  pending,  or to the  Knowledge of
Sellers  threatened,  between GTFM or any of its Subsidiaries,  on the one hand,
and any of their  employees,  on the other hand,  and (ii) to the  Knowledge  of
Sellers,  there are no facts or circumstances  involving any employee that would
form the  basis of, or give rise to,  any cause of  action,  including,  without
limitation,  unlawful termination based on discrimination of any kind, except in
case of such  clause (i) or (ii) as would not  reasonably  be  expected to have,
individually or in the aggregate, a GTFM Material Adverse Effect.

     Section 5.11 Tax Matters.

     (a) Except as set forth in Section 5.11 of the Seller  Disclosure  Schedule
or as would not have a GTFM Material Adverse Effect, all Tax Returns and reports
of GTFM and the GTFM Subsidiaries  required to be filed on or before the Closing
Date have been duly and timely filed (taking into account all proper extensions)
with the appropriate  Taxing Authorities and all such Tax Returns were complete,
correct and accurate. All Taxes shown on such Tax Returns as owed by GTFM or the
GTFM Subsidiaries have been paid.

     (b) Except as set forth in Section 5.11 of the Seller Disclosure  Schedule,
neither GTFM nor any of the GTFM Subsidiaries has received any written notice of
deficiency  or  assessment  from any Taxing  Authority  with respect to material
liabilities  for Taxes of GTFM or any of the GTFM  Subsidiaries  which  have not
been paid or  finally  settled.  No claim has ever  been made in  writing  by an
authority in a jurisdiction  where GTFM or any of the GTFM  Subsidiaries  do not
file Tax  Returns  that such  entity is or may be  subject to  taxation  by that
jurisdiction.  Except  as set forth in  Section  5.11 of the  Seller  Disclosure
Schedule,  no  audit  of any  Tax  Return  concerning  GTFM  or any of the  GTFM
Subsidiaries  is  pending,  being  conducted,  or to the  Knowledge  of Sellers,
threatened  to be  instituted  by a Taxing  Authority.  Except  as set  forth in
Section 5.11 of the Seller Disclosure Schedule, neither GTFM nor any of the GTFM
Subsidiaries  has in effect a waiver of any statute of  limitation in respect of
Taxes or agreed to any  extension  of time with respect to a Tax  assessment  or
deficiency that will be in effect as of the Closing Date.

     (c) There  are no liens for Taxes on any  assets of GTFM or any of the GTFM
Subsidiaries  other than liens for current  Taxes (i) not yet due and payable or
(ii) that would not have a GTFM Material Adverse Effect.

     (d) Except as set forth in Section 5.11 of the Seller Disclosure  Schedule,
neither GTFM nor any of the GTFM Subsidiaries has any liability for the Taxes of
any other Person as a transferee or successor, by Contract or otherwise.

     (e)  There  are no Tax  sharing  or Tax  indemnity  agreements  or  similar
arrangements with respect to or involving GTFM or any of the GTFM  Subsidiaries,
other than agreements among GTFM and Subsidiaries in which GTFM owns directly or
indirectly all equity interest.

     (f) Each of GTFM and the GTFM  Subsidiaries  has  complied in all  material
respects  with  all  applicable  governmental  rules  relating  to the  payment,
collection and withholding of Taxes.

                                      -13-
<PAGE>

     (g) Except as set forth in Section 5.11 of the Seller Disclosure  Schedule,
there is no Tax  Litigation  pending or to the  Knowledge of Sellers  threatened
against GTFM and/or the GTFM Subsidiaries.

     (h)  To  the  Knowledge  of  the  Sellers  neither  GTFM  nor  any  of  its
Subsidiaries  will suffer any adverse tax  consequences in the UMS from ceasing,
as a result of the Acquisition, to be members of the TMM consolidated group.

     (i) During the period from the date of the GTFM Financial  Statements until
the date of this Agreement, GTFM and each of the GTFM Subsidiaries (i) have made
no change in any accounting  method used for Tax purposes or in  depreciation or
amortization  policies,  and have made no election for Tax purposes which is not
consistent with the method, policies and elections made prior to the date of the
GTFM Financial  Statements;  and (ii) have not settled any pending Tax audits or
settled any Tax liability.

     Section 5.12 Legal Proceedings. Except as set forth in Section 5.12 of the
Seller  Disclosure  Schedule,  there are no legal,  administrative,  arbitral or
other proceedings (including disciplinary  proceedings),  claims, suits, actions
or governmental or regulatory investigations of any nature whether in the UMS or
elsewhere (collectively, "Proceedings") that are pending or, to the Knowledge of
Sellers, threatened against GTFM or any of the GTFM Subsidiaries or any of their
respective  directors or officers (in their capacity as such) or the GTFM Assets
or the GTFM Business,  which if determined  adversely would have a GTFM Material
Adverse Effect,  or that challenge the validity or propriety of the transactions
contemplated by this Agreement or by any of the Ancillary  Agreements.  There is
no  injunction,  order,  judgment or decree imposed upon GTFM or any of the GTFM
Subsidiaries, any material portion of the GTFM Assets or the GTFM Business.

     Section 5.13 Permits and Compliance.

     (a) Section 5.13 of the Seller  Disclosure  Schedule  sets forth a true and
complete list of all licenses,  franchises,  concessions,  decrees,  permits and
authorizations required under Applicable Law (collectively, "Permits") currently
held by GTFM and each of its  Subsidiaries and which are required to operate the
GTFM  Business as  currently  conducted  where the failure to hold such  Permits
would  reasonably be expected to have a GTFM Material  Adverse  Effect.  Each of
GTFM and its  Subsidiaries  (i) holds, and at all times has held, and at Closing
will hold, all Permits for the lawful  ownership,  operation and use of the GTFM
Assets and the conduct of the GTFM Business,  (ii) has been and is in compliance
with each such Permit, and (iii) has not received notice asserting any violation
of any such  Permit,  in each case,  where the failure to hold or comply or such
violation would reasonably be expected to have a GTFM Material Adverse Effect.

     (b) Except for normal examinations  conducted by any Governmental Authority
in the regular course of the business of GTFM and its  Subsidiaries  or as would
not  reasonably  be  expected  to have a GTFM  Material  Adverse  Effect,  since
December 31, 2001, no Governmental Authority has provided written notice to GTFM
or any of its Subsidiaries of any threatened  proceeding or  investigation  into
the business or  operations of GTFM or any of its  Subsidiaries  or any of their
members, officers, directors or employees in their capacity as such with GTFM or
any of  its  Subsidiaries  and,  to  the  Knowledge  of  the  Sellers,  no  such
proceedings  or

                                      -14-
<PAGE>

investigations are contemplated. There is no unresolved deficiency, violation or
exception claimed or asserted by any Governmental  Authority with respect to any
examination of any of GTFM or any of its Subsidiaries.

     (c)  Neither  GTFM  nor  any of its  Subsidiaries  is in  violation  of any
Applicable  Laws or orders  of any  Governmental  Authority  except as would not
reasonably  be expected to have a GTFM  Material  Adverse  Effect.  No event has
occurred  or exists  that would  (with or without  notice or lapse of time) give
rise  to any  obligation  on the  part of  GTFM  or any of its  Subsidiaries  to
undertake  or to bear all or any portion of the cost of any  remedial  action of
any nature which would  reasonably be expected to have a GTFM  Material  Adverse
Effect.

     (d) Without  limiting the generality of the foregoing,  to the Knowledge of
Sellers no basis exist for  revocation,  material  modification  or  termination
prior to the  expiration,  of the concession held by TFM to operate rail freight
transportation services in Mexico.

     Section 5.14 Environmental  Matters.  GTFM and each of its Subsidiaries (i)
are in compliance with, and are not subject to any liability under, in each case
with respect to all, applicable  Environmental Laws; (ii) hold all Environmental
Permits  necessary  to  conduct  their  current  operations  and  (iii)  are  in
compliance with their respective Environmental Permits, except where the failure
to hold  or be in  compliance  with  such  Environmental  Permits  would  not be
expected to have a GTFM Material Adverse Effect.  Except as would not reasonably
be expected to have a GTFM Material Adverse Effect,  neither GTFM nor any of its
Subsidiaries has received any written notice,  demand,  letter, claim or request
for  information  alleging  that  GTFM  or  any of  its  Subsidiaries  may be in
violation of, or liable under,  any  Environmental  Law. Neither GTFM nor any of
its  Subsidiaries  (x) has entered into or agreed to any consent decree or order
or is subject to any judgment,  decree or judicial  order relating to compliance
with Environmental Laws,  Environmental Permits or the investigation,  sampling,
monitoring,  treatment,  remediation,  removal or cleanup of Hazardous Materials
and no  investigation,  litigation  or other  proceeding  is pending  or, to the
Knowledge  of  the  Sellers,  threatened,  with  respect  thereto  or  (y) is an
indemnitor  or has assumed  liability  in  connection  with any pending  demand,
notice,  claim,  or other  allegation,  or to the Knowledge of the Sellers,  any
claim threatened,  by or against any third-party relating to any liability under
any Environmental Law or relating to any Hazardous  Materials.  None of the real
property  owned or  leased or  operated  by GTFM or any of its  Subsidiaries  is
listed or, to the Knowledge of the Sellers,  proposed for listing on any list of
sites maintained by Governmental Authority requiring investigation or cleanup.

     Section 5.15  Properties.  Section 5.15 of the Seller  Disclosure  Schedule
sets forth a true and complete  list of all real  property and interests in real
property owned or leased by GTFM or any of the GTFM  Subsidiaries  and a summary
of the lease  agreements  with respect thereto (true and correct copies of which
leases have been  provided to KCS) and a true and complete  list of all personal
property,  equipment and fixtures  (other than items having a book value of less
than $1 million individually) owned by GTFM or any of the GTFM Subsidiaries, all
of which  personal  property,  equipment and fixtures are

                                      -15-
<PAGE>

in good condition and repair,  normal wear and tear  excepted.  Each of GTFM and
the GTFM Subsidiaries has good and marketable title to, or valid and enforceable
leasehold or concession  interests in, all of its properties and tangible assets
necessary to conduct the GTFM Business as currently  conducted  except where the
failure to have such title or interest  would not reasonably be expected to have
a GTFM Material Adverse Effect. All of such property and assets which constitute
personal property,  equipment,  and fixtures,  are in good condition and repair,
normal wear and tear excepted. Except as set forth in Section 5.15 of the Seller
Disclosure, all of such assets and properties,  other than assets and properties
in which GTFM or any of the GTFM Subsidiaries has a leasehold interest, are free
and clear of all Encumbrances other than Permitted Encumbrances and Encumbrances
which would not individually or in the aggregate  reasonably be expected to have
a GTFM  Material  Adverse  Effect.  Each of GTFM and the GTFM  Subsidiaries  has
complied in all material  respects with the terms of all leases and  concessions
(including  the  Concession)  to which it is a party  and  under  which it is in
occupancy, and all such leases and concessions (including the Concession) are in
full force and effect.

     Section  5.16  Insurance.  Section 5.16 of the Seller  Disclosure  Schedule
includes a list of all policies of fire, liability, product liability,  workers'
compensation,  health and other  forms of  insurance  presently  in effect  with
respect to the GTFM  Business  (the "GTFM  Insurance  Policies"),  including the
named insured(s) and all beneficiaries thereunder,  and true and complete copies
of the GTFM Insurance Policies have been delivered to KCS. Neither GTFM, nor any
of the GTFM  Subsidiaries  has been  refused any  insurance  with respect to any
aspect of the operations of its business, nor has its coverage been rescinded by
any insurance carrier to which it has applied for insurance or with which it has
carried  insurance.  No notice of  cancellation or termination has been received
with respect to any such policy.  The activities and operations of GTFM and each
of the GTFM Subsidiaries have been conducted in a manner so as to conform in all
material respects to all material provisions of the GTFM Insurance Policies.

     Section 5.17 No Other Broker.  Other than J.P.  Morgan Chase,  the fees and
expenses of which have been or will be paid by TMM, no broker, finder or similar
intermediary  is  entitled  to any  broker's,  finder's  or similar fee or other
remuneration  from or as a result  of  engagement  by,  Sellers  or any of their
respective   Affiliates  in  connection  with  this  Agreement,   the  Ancillary
Agreements or the transactions contemplated hereby or thereby.

     Section 5.18 No GTFM Material Adverse Effect.  Since December 31, 2002, (i)
GTFM and the GTFM Subsidiaries  have conducted their respective  businesses only
in the ordinary  course,  consistent with past practice,  and (ii) there has not
been (x) any GTFM  Material  Adverse  Effect  or any event or  development  that
could,  individually or in the aggregate,  reasonably be expected to have a GTFM
Material  Adverse  Effect  or (y) to the  Knowledge  of  Sellers  any  event  or
development that would, individually or in the aggregate, reasonably be expected
to  materially  delay or prevent  the  consummation  of, or the  performance  by
Sellers  or any of their  respective  Affiliates,  of any of  their  obligations
under, this Agreement or any of the Ancillary Agreements, to which any Seller is
a party.

     Section 5.19 Sufficiency of and Title to Assets.  GTFM and each of the GTFM
Subsidiaries  owns or licenses,  and upon the  consummation  of the Merger,  the
Surviving Company and its Subsidiaries will own or license, all right, title and
interest in and to all of the  properties,  assets,  Contracts and rights of any
kind,  whether  tangible or  intangible,  real or personal  (including,  without
limitation, the Concession), necessary to enable GTFM (prior to the Closing) and
the  Surviving  Company  (after the  Closing)  to conduct  the GTFM  Business as
presently  conducted  (the "GTFM  Assets"),  free and clear of any  Encumbrances
other than  Permitted  Encumbrances,  except as set forth in Section 5.19 of the
Seller Disclosure Schedule.

                                      -16-
<PAGE>
     Section  5.20  Information  in  Filed  Documents.  None of the  information
regarding any of TMM, TMMH, MM, GTFM or any of the GTFM Subsidiaries supplied or
to be  supplied by Sellers  prior to the  Closing  expressly  for  inclusion  or
incorporation  by reference in any  documents to be filed with any  Governmental
Authority prior to the Closing in connection with the transactions  contemplated
hereby, including,  without limitation, the proxy materials to be filed with the
SEC by KCS in connection  with the Merger,  will, at the  respective  times such
information is supplied, contain any untrue statement of a material fact or omit
to state a material fact required to be stated  therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

     Section 5.21 Transactions with Affiliates.  Except for this Agreement,  the
Ancillary Agreements and the other agreements  contemplated herein to be entered
into in connection with the  transactions  contemplated  hereby and thereby,  no
Contract,  understanding  or  arrangement  between  GTFM  or  any  of  the  GTFM
Subsidiaries, on the one hand, and TMM or any of its Affiliates (other than GTFM
and its Subsidiaries),  on the other hand, will continue in effect subsequent to
the Closing Date,  except as described in Section 5.21 of the Seller  Disclosure
Schedule. Except as set forth in Section 5.21 of the Seller Disclosure Schedule,
none of TMM or any of its  Subsidiaries  or Affiliates  (other than GTFM and its
Subsidiaries)  provides  any  material  services  to  GTFM  or any  of the  GTFM
Subsidiaries,  except pursuant to the Management Services Agreement,  originally
dated  as of May 9,  1997,  between  TMM  and  TFM,  which  agreement  shall  be
terminated  and of no further  force and effect as of the  Effective  Time other
than  with  respect  to  amounts  due or  indemnification  or other  obligations
relating to periods prior to Closing,  none of which may  reasonably be expected
to be  material  individually  or in the  aggregate.  At the Closing  Date,  the
Parties  shall  settle the net  intercompany  receivables  as  follows:  (A) the
parties shall  calculate the amount,  if any, of open accounts  receivables  due
over 30 days (i) from TMM Logistics, S.A. de C.V. or any other Subsidiary of TMM
(other than GTFM,  any of the GTFM  Subsidiaries,  Mexrail or any  subsidiary of
Mexrail), on the one hand, to GTFM or any of the GTFM Subsidiaries or Mexrail or
any  Subsidiary of Mexrail,  on the other hand, and (ii) from GTFM or any of the
GTFM  Subsidiaries or Mexrail or any Subsidiary of Mexrail,  on the one hand, to
TMM Logistics, S.A. de C.V. or any other Subsidiary of TMM (other than GTFM, any
of the GTFM  Subsidiaries,  Mexrail or any subsidiary of Mexrail),  on the other
hand;  (B) the Parties  shall  calculate  the absolute  value of the  difference
between the amount in clause (i),  above,  and the amount in clause (ii),  above
(the "Net Receivable Amount"); (C) if the amount in clause (i), above is greater
than clause (ii), then TMM shall, or shall cause one or more of its Subsidiaries
to, pay to KCS the Net Receivable  Amount;  and (D) if the amount of clause (ii)
is greater  than  clause  (i),  then KCS shall,  or shall  cause one or more its
Subsidiaries to, pay to TMM the Net Receivable Amount. All calculations required
by this Section 5.21 shall be provided not later than five  business  days prior
to the Closing.

     Section 5.22 No Loss of Significant Customers. From January 1, 2002 through
the Business Day immediately preceding the date of this Agreement,  neither GTFM
or any of the  GTFM  Subsidiaries  has  had any  customer  which  has  canceled,
terminated or failed to renew any Contract with such entity which  accounted for
more  than $10  million  in  revenues  to such  entity in either of the last two
fiscal years.

Section 5.23 Trading in and Ownership of KCS Common Stock. None of Sellers
or any of their  respective  Affiliates has, during the sixty (60) Business Days
prior to the date hereof,  either  directly or  indirectly,  bought or sold,  or
otherwise  effected any trade in any shares of KCS

                                      -17-
<PAGE>

Common Stock, or any Security derivative of KCS Common Stock and none of Sellers
or any of their respective  Affiliates,  own as of the or date of this Agreement
any shares of KCS Common Stock or any security derivative of KCS Common Stock.

     Section 5.24 Solvency. No insolvency or bankruptcy  proceedings against TMM
or any of its Subsidiaries are pending as of the last business day preceding the
date of this Agreement.

     Section 5.25 Termination of Option  Agreement.  Prior to the Closing Date,
the Amended and Restated Option  Agreement  between MM and The Bank of New York,
as Trustee,  dated October 25, 2002,  as amended by Amendment  Number One to the
Amended and  Restated  Option  Agreement,  dated  December 10, 2002 (the "Option
Agreement"),  entered into in connection  with the  Logistics  Trust 2000-A (the
"Trust")  formed  pursuant  to the Second  Amended  and  Restated  Master  Trust
Agreement, dated as of December 10, 2002 (the "Master Trust Agreement"), between
TMM and The Bank of New York, as Trustee,  will have been terminated or amended,
and the Master Trust Agreement and the Transaction  Documents (as defined in the
Master Trust  Agreement) shall have been terminated or amended so that as of the
Closing  Date  (i)  there  shall  be  no  outstanding  option,  warrant,  right,
subscription,  call,  legally binding  commitment or other agreement or right of
any kind entitling any Person (including The Bank of New York, as Trustee of the
Trust) to acquire,  or any other  Encumbrance  arising under such agreements on,
any shares of capital stock of GTFM and (ii) the provision in Section 6.4 of the
Option Agreement  requiring a written  agreement to be bound by the terms of the
Option  Agreement and related  agreements shall not apply to the purchase of the
GTFM Shares under this Agreement and the purchase of the GTFM Shares by KARA Sub
will be  effective  without KARA Sub or KCS  entering  into any  agreement to be
bound by the terms of the Option Agreement and related agreements.  Seller shall
have provided to KARA Sub evidence  reasonably  satisfactory to KARA Sub of such
amendment or  termination.  Prior to the Closing Date, MM will cause each legend
affixed to any stock certificates  evidencing GTFM Shares pursuant to the Option
Agreement to be cancelled or removed,  and MM will cause any annotation that was
required by the Option Agreement to be placed in the Stockholders  Registry Book
of GTFM to be cancelled or removed.  Prior to the Closing Date,  the Amended and
Restated Put Option  Agreement  between MM and The Bank of New York, as Trustee,
dated  October 25, 2002,  as amended by Amendment  Number One to the Amended and
Restated Option Agreement,  dated December 10, 2002,  entered into in connection
with the Trust  shall have been  terminated  or  amended,  and the Master  Trust
Agreement  and  the  Transaction  Documents  (as  defined  in the  Master  Trust
Agreement)  shall have been terminated or amended so that as of the Closing Date
there shall be no  obligation  of KCS,  KARA Sub or any of their  Affiliates  to
purchase or otherwise acquire any certificate or other interest in or related to
the Trust  and  Seller  shall  have  provided  to KARA Sub  evidence  reasonably
satisfactory  to KARA Sub of such  amendment or  termination.  Unless the Option
Agreement is  terminated  or amended to make such  requirement  inapplicable  MM
shall have provided notice at or prior to the Closing date to the Trustee of the
sale of the GTFM Shares as required by Section 6.4 of the Option Agreement.





                                      -18-
<PAGE>

                                   ARTICLE 6

                      REPRESENTATIONS AND WARRANTIES OF KCS

     Except as set forth in the  disclosure  schedule  attached  as Exhibit F to
this  Agreement  (the "KCS  Disclosure  Schedule"),  KCS hereby  represents  and
warrants to each of the Sellers as follows:

     Section 6.1  Organization and Related Matters.

     (a)  KCS is a  corporation,  duly  formed,  validly  existing  and in  good
standing under the laws of the State of Delaware,  and each of its  Subsidiaries
is a corporation or other business entity duly organized,  validly  existing and
in good standing under the laws of its jurisdiction of organization. KCS has the
corporate power and authority and each of its  Subsidiaries has the corporate or
other  applicable  power and  authority  necessary to carry on their  respective
businesses in the manner as they are now being  conducted and to own,  lease and
operate all of their respective properties and assets.

     (b) KCS and  each  of its  respective  Subsidiaries  is  duly  licensed  or
qualified  to do  business  in each  jurisdiction  in which  the  nature  of the
business  conducted  by it or the  character or location of the  properties  and
assets  owned,  leased or operated by it makes such  qualification  or licensing
necessary  except  in  jurisdictions  where  the  failure  of  such  license  or
qualification  would not  individually  or in the aggregate  have a KCS Material
Adverse Effect.

     Section 6.2  Authority; No Violation.

     (a) Each of KCS and KARA Sub has full  corporate  power  and  authority  to
execute and deliver this Agreement and the Ancillary Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement  and  the  Ancillary  Agreements  to  which  it  is a  party  and  the
consummation of the transactions  contemplated hereby and thereby have been duly
and validly authorized by all requisite  corporate action on the part of KCS and
KARA  Sub and no  other  corporate  action  on the  part of KCS and  KARA Sub is
necessary to approve this Agreement or the Ancillary Agreements to which it is a
party or  authorize  or  consummate  the  transactions  contemplated  hereby and
thereby,  except for obtaining the approval of its  stockholders as described in
Section 6.3. KCS has received the opinion of Deutsche Bank that the  Acquisition
is fair from a financial  point of view to KCS. This Agreement and the Ancillary
Agreements  to which it is a party  have  been  duly and  validly  executed  and
delivered by KCS and KARA Sub (except for those  Ancillary  Agreements  that are
not dated the date hereof,  which Ancillary Agreements shall be duly and validly
executed  and   delivered   prior  to  the  Closing)  and   (assuming   the  due
authorization,  execution  and  delivery  of this  Agreement  and the  Ancillary
Agreements by the other Parties hereto and thereto) constitute valid and binding
obligations of KCS and KARA Sub (except for those Ancillary  Agreements that are
not dated the date hereof, which Ancillary Agreements shall constitute valid and
binding obligations of KCS and KARA Sub at the Closing), enforceable against KCS
and KARA Sub in accordance  with their terms,  except as (i) the  enforceability
thereof may be subject to or limited by bankruptcy, insolvency,  reorganization,
moratorium  or similar  laws  relating to or  affecting  the rights of creditors
generally and the  availability  of equitable  relief (whether in proceedings at
law

                                      -19-
<PAGE>

or in  equity)  and  (ii)  rights  to  indemnification  may  be  limited  by the
Securities Laws and the policies underlying such laws.

     (b) Neither the execution  and delivery of this  Agreement or the Ancillary
Agreements  to which it is a party by KCS and KARA Sub nor the  consummation  by
KCS and  KARA Sub of the  transactions  contemplated  hereby  or  thereby  to be
performed  by KCS and KARA Sub, nor  compliance  by KCS and KARA Sub with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Certificate  of  Incorporation  or Bylaws of KCS or KARA Sub, (ii) assuming that
the consents and  approvals  referred to in Section 6.3 are duly  obtained,  (x)
violate,  conflict with or require any notice, filing, consent or approval under
any  Applicable  Law to  which  KCS or  any  of its  Subsidiaries  or any of its
properties,  Contracts or assets are subject,  or (y)  violate,  conflict  with,
result  in a  breach  of any  provision  of or the  loss of any  benefit  under,
constitute  a default  (or an event  which,  with or without  notice or lapse of
time, or both, would  constitute a default) under,  result in the termination of
or a right of termination or cancellation under, accelerate or result in a right
of acceleration  of the  performance  required by, result in the creation of any
liability under,  result in the creation of any Encumbrance upon the properties,
Contracts or assets of KCS or KARA Sub under, or require any notice, approval or
consent under,  any note, bond,  mortgage,  indenture,  deed of trust,  license,
lease,  agreement or other  instrument  or obligation to which KCS or any of its
Subsidiaries is a party, or by which KCS or any of its  Subsidiaries,  or any of
its  properties or assets,  may be bound or affected  except in the case of this
clause (ii) in each case as would not have or  reasonably  be expected to have a
KCS Material Adverse Effect.

     (c) The shares of Class A Common Stock to be issued in the Merger,  and, if
KCS elects,  in payment of a portion of the purchase  price  pursuant to Section
1.2,  have  been duly  authorized  and,  when  issued  as  contemplated  by this
Agreement and the Merger  Agreement as the case may be, will be duly and validly
issued,  fully paid and  non-assessable  and free of any pre-emptive  rights and
entitled  to  the  benefits  and  rights  set  forth  in  the   Certificate   of
Incorporation  of KCS,  as in effect at the  Effective  Time.  All shares of KCS
Common Stock issuable upon  conversion of the Class A Common Stock issued in the
Merger  and,  if KCS  elects,  in  payment of a portion  of the  purchase  price
pursuant to Section 1.2, will be, upon any such  conversion  in accordance  with
the terms of the  Certificate  of  Incorporation  as in effect at the  Effective
Time, validly issued, fully paid, and non-assessable and free of any pre-emptive
rights.

     Section 6.3  Consents and Approvals.

     (a) The affirmative vote of the holders of (i) a majority of the votes cast
by all outstanding  shares of KCS Common Stock and KCS Preferred  Stock,  voting
together as a single  class,  to approve (x) Amendment to KCS's  Certificate  of
Incorporation  in accordance  with the Del.  G.C.L.  and (y) the issuance of the
Class A Common Stock in  accordance  with the Del.  G.C.L.  and the rules of the
NYSE,  is the only vote of the  holders  of any  Security  of KCS  necessary  to
approve this Agreement and the other transactions contemplated by this Agreement
and the Ancillary Agreements.

     (b) Except for (i) the prior  approval of the Mexican  Foreign  Investments
Commission,  clearance by the Mexican  Competition  Commission and notice to the
Mexican Ministry of Communications and Transportation,  (ii) compliance with and
filings under the  Securities  Laws as may be required in  connection  with this
Agreement and the Ancillary Agreements and the

                                      -20-
<PAGE>

transactions  contemplated  hereby and thereby,  (iii) any required filings with
the NYSE,  (iv) the filing of the  Certificate  of Merger and (v) Bank  consents
under Amended and Restated Credit  Agreement dated June 12, 2002; no consents or
approvals of, or filings,  declarations or  registrations  with any Governmental
Authority,  any third party or any other Person are necessary in connection with
the execution and delivery by KCS of this Agreement and the Ancillary Agreements
to which it is a party and the  consummation  by KCS of the  Acquisition  or the
other transactions contemplated by this Agreement and the Ancillary Agreements.

     (c) KCS has taken or shall  take  prior to  Closing  all  corporate  action
necessary  to  assure  that  the  transactions  contemplated  hereby  and by the
Ancillary  Agreements  will (i) not be prohibited by Section 203 of the Delaware
General  Corporation Law and (ii) not constitute a "trigger event" under the KCS
Shareholder Rights Plan. To the best of KCS's Knowledge, no other control share,
anti-takeover  or similar  statute  under the laws of any state is applicable to
the transactions contemplated hereby or by the Ancillary Agreements.

     Section 6.4  Authorized Capitalization. The authorized capital stock of KCS
consists  of  400,000,000  shares of  Common  Stock,  $.01 par value per  share,
840,000 shares of Preferred  Stock, $25 par value per share and 2,000,000 shares
of New Series Preferred Stock,  $1.00 par value per share. As of March 31, 2003,
there were (i)  61,631,987  shares of KCS Common Stock and 242,170 shares of KCS
Preferred  Stock,  issued and  outstanding,  (ii) 5,048,669 shares of KCS Common
Stock  reserved for  issuance  pursuant to options  granted  pursuant to the KCS
Stock Option Plan and (iii) no shares of New Series Preferred Stock outstanding.
All of the shares of KCS Common Stock and KCS Preferred Stock outstanding at the
date of this  Agreement are listed for trading on the NYSE. All of the shares of
capital stock of KCS outstanding  are duly  authorized,  validly  issued,  fully
paid, nonassessable and free of any preemptive rights and are not subject to any
voting trust agreement (or similar  agreement) or other Contract  restricting or
otherwise relating to the voting,  dividend rights or disposition of such shares
to which KCS is a party,  except for restricted share agreements between KCS and
certain of its officers and limited  stock  appreciation  rights.  Except as set
forth in this Section 6.4, there is no outstanding option, warrant,  convertible
or exchangeable  security,  right,  subscription,  call, right of first refusal,
legally binding commitment,  preemptive right or other agreement or right of any
kind to purchase or otherwise acquire (including by exchange or conversion) from
KCS or any KCS  Subsidiary  any  shares of  capital  stock of KCS.  There are no
outstanding obligations of KCS or any of its Subsidiaries to redeem,  repurchase
or otherwise  acquire any of the shares of capital stock of KCS or any shares of
capital stock (or other ownership interests) of any of its Subsidiaries. Neither
KCS nor any KCS Subsidiary has outstanding any bonds, debentures, notes or other
indebtedness  generally  having  the  right to vote  (or  convertible  into,  or
exchangeable  for,  Securities having the right to vote) on any matters on which
holders of shares of  capital  stock of KCS may  consent  or vote  ("KCS  Voting
Debt").  There are no options,  warrants,  rights,  convertible or  exchangeable
Securities, "phantom" interests or other ownership interest appreciation rights,
commitments, Contracts, arrangements or undertakings of any kind to which KCS or
any of its  Subsidiaries  is a  party  or by  which  any of them  is  bound  (i)
obligating KCS or any of its Subsidiaries or any other Person to issue,  deliver
or sell, or cause to be issued, delivered or sold, existing or additional shares
of capital stock of KCS or capital stock (or other  ownership  interests) of its
Subsidiaries,  or any security  convertible  into or exercisable or exchangeable
for any of the foregoing or for KCS Voting Debt,  (ii)  obligating KCS or any of
its Subsidiaries or any other Person to issue,  grant,  extend or enter into any
such option, warrant, call, right, security commitment, Contract, arrangement or
undertaking,

                                      -21-
<PAGE>
(iii) that give any Person the right to receive  any  economic  benefit or right
similar to or derived from the economic  benefits and rights accruing to holders
of the  shares of  capital  stock of KCS or  capital  stock (or other  ownership
interests) of its  Subsidiaries or (iv) that give rise to a right to receive any
payment upon the execution of this Agreement or the  consummation  of the Merger
or any of the other  transactions  contemplated  hereby,  except as set forth in
this Section 6.4.

     Section 6.5  SEC Filings.  Since  December 31, 1999, KCS has filed with the
SEC all  documents  required  to be filed by it under  the  Exchange  Act or the
Securities Act and as of their  requisite  dates (or the dates of any amendments
thereto) such  documents  (the "KCS SEC  Documents")  did not contain any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein  or  necessary  in  order  to make the  statements  therein  not
misleading   and  complied  in  all  material   respects  with  the   applicable
requirements of the Exchange Act and the Securities Act and the applicable rules
of the SEC thereunder.

     Section 6.6  Financial  Statements;  Undisclosed  Liabilities.  The audited
consolidated  financial statements and unaudited interim financial statements of
KCS and its  consolidated  Subsidiaries  included in the KCS SEC Documents  (the
"KCS  Financial  Statements")  present  fairly,  in all  material  respects,  in
conformity  with GAAP applied on a consistent  basis (except as may be indicated
in the  notes  thereto),  the  consolidated  financial  position  of KCS and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended (subject, in the case of
the unaudited interim  financial  statements,  to normal year-end  adjustments).
Except as set forth in the KCS  Financial  Statements  or the KCS SEC  Documents
filed  prior  to  the  date  of  this  Agreement,  neither  KCS  nor  any of its
Subsidiaries has any liabilities or obligations of any nature (whether  accrued,
absolute,  contingent  or  otherwise)  required  by  GAAP to be set  forth  on a
consolidated  balance sheet of KCS and the  consolidated  KCS Subsidiaries or in
the notes thereto or which,  individually or in the aggregate,  could reasonably
be expected to have a KCS Material Adverse Effect.

     Section 6.7  No Other  Broker.  Other than  Deutsche  Bank,  whose fees and
expenses  will be paid by KCS,  no  broker,  finder or similar  intermediary  is
entitled to any broker's, finder's or similar fee or other commission from or as
a result of engagement by KCS or any of its Subsidiaries in connection with this
Agreement,  the Ancillary Agreements or the transactions  contemplated hereby or
thereby.

     Section  6.8   Information  in  Filed  Documents.  None of the  information
regarding KCS or any of its  Subsidiaries  supplied or to be supplied by KCS for
inclusion in any documents to be filed with any Governmental  Authority prior to
Closing in connection  with the  transactions  contemplated  hereby will, at the
respective  times  such  information  is  supplied  by KCS,  contain  any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

     Section 6.9  No KCS Material Adverse Effect.  Since September 30, 2002, (i)
KCS and its Subsidiaries have conducted their respective  businesses only in the
ordinary course,  consistent with past practice, (ii) there has not been any KCS
Material Adverse Effect or any event or development that could,  individually or
in the aggregate,  reasonably be expected to have a KCS Material Adverse Effect,
and (iii) to the Knowledge of KCS, there has not occurred any event or


                                      -22-
<PAGE>

development that would, individually or in the aggregate, reasonably be expected
to prevent the  consummation of the Acquisition or the performance by KCS of its
obligations under this Agreement or any of the Ancillary  Agreements to which it
is a party.

     Section 6.10 KARA Sub. The authorized capital stock of KARA Sub consists of
1,000  shares of common  stock,  $.01 par value per share.  There are 900 shares
issued  and  outstanding,  all of which are owned by KCS,  free and clear of all
Encumbrances.  All of the shares of capital  stock of KARA Sub  outstanding  are
duly  authorized,  validly  issued,  fully paid,  nonassessable  and free of any
preemptive  rights and are not subject to any voting trust agreement (or similar
agreement) or other Contract  restricting  or otherwise  relating to the voting,
dividend  rights of disposition  of such shares.  KARA Sub is not a party to any
Contract  other than this  Agreement.  KARA Sub has not  conducted  any business
other than in connection  with the  transactions  contemplated by this Agreement
and the Ancillary  Agreements and has incurred no material  indebtedness and has
no material assets.

     Section 6.11  Legal Proceedings.  There are no Proceedings that are pending
or, to the Knowledge of KCS,  threatened  against KCS or any of its Subsidiaries
or any of their respective  directors or officers (in their capacity as such) or
the KCS Assets or the KCS Business which (i) if adversely determined, would have
a KCS Material Adverse Effect or (ii) challenge the validity or propriety of the
transactions  contemplated  by  this  Agreement  or  by  any  of  the  Ancillary
Agreements.

     Section 6.12 KCS Capital  Resources.  The  information set forth in the KCS
Report on Form 10-K for the year  ended  December  31,  2002  filed with the SEC
accurately sets forth  anticipated  material  capital  expenditures  required to
maintain  in good  repair and  working  order the KCS Assets and to provide  for
material additions to KCS property, plant and equipment necessary to conduct the
business  of KCS as  described  in such SEC  Report.  KCS has  access to capital
resources  sufficient to fund such capital expenditures in the amount and at the
time required.

     Section 6.13 Employee Benefit Matters.  Each employee benefit plan,  within
the meaning of Section 3(3) of the Employee  Retirement  Income  Security Act of
1974, as amended,  ("ERISA") that is maintained,  administered or contributed to
by KCS or any of its  Subsidiaries  for employees or former employees of KCS and
its  Subsidiaries  has been  maintained  in  compliance  with its  terms and the
requirements  of  any  applicable  statutes,   orders,  rules  and  regulations,
including,  but not limited to, ERISA and the Internal  Revenue Code of 1986, as
amended, ("Code"). No prohibited transaction,  within the meaning of Section 406
of ERISA or Section  4975 of the Code,  has  occurred  with  respect to any such
plan, excluding  transactions effected pursuant to a statutory or administrative
exemption.  For each such plan which is subject to the funding  rules of Section
412 of the Code or Section 302 of ERISA, no "accumulated funding deficiency," as
defined in Section 412 of the Code,  has been  incurred,  whether or not waived,
and the fair market value of the assets of each such plan (excluding,  for these
purposes,  accrued but unpaid  contributions)  exceeds the present  value of all
benefits  accrued  under  such plan as  determined  using  reasonable  actuarial
assumptions.

     Section 6.14 Labor and Other Employment Matters.  There are no existing or,
to the Knowledge of KCS and its  Subsidiaries,  threatened,  labor disputes with
employees of KCS and its Subsidiaries which would be reasonably expected to have
a KCS Material Adverse Effect.


                                      -23-
<PAGE>

     Section 6.15 Tax. KCS and its Subsidiaries  have filed all federal,  state,
local and foreign tax returns which have been required to be filed and have paid
all taxes shown thereon and all  assessments  received by them or any of them to
the extent that such taxes have become due and are not being  contested  in good
faith,  except  as  would  not,  individually  or in the  aggregate,  have a KCS
Material  Adverse  Effect;  and,  except as disclosed in Section 6.15 of the KCS
Disclosure  Schedule,  there  is no tax  deficiency  which  has  been  or  might
reasonably  be expected to be asserted or  threatened  against KCS or any of its
Subsidiaries,  except as would not, individually or in the aggregate, have a KCS
Material Adverse Effect.

     Section 6.16 Permits and Compliance.

     (a)  Except as would  not,  individually  or in the  aggregate,  have a KCS
Material Adverse Effect, (i) each of KCS and its Subsidiaries owns, possesses or
has obtained all licenses,  permits,  certificates,  consents, orders, approvals
and other  authorizations  from, and has made all declarations and filings with,
all   federal,   state,   local  and   other   governmental   authorities,   all
self-regulatory  organizations  and all courts and other tribunals  necessary to
own or lease,  as the case may be, and to operate its properties and to carry on
its  business as conducted as of the date hereof and (ii) neither KCS nor any of
its Subsidiaries has received notice of any proceeding relating to revocation or
modification of any such license, permit, certificate,  consent, order, approval
or  other  authorization,  except  as  described  in  Section  6.15  of the  KCS
Disclosure Schedule.

     (b) Except for normal examinations  conducted by any Governmental Authority
in the regular  course of the business of KCS and its  Subsidiaries  or as would
not reasonably be expected to have a KCS Material Adverse Effect, since December
31, 2001, no Governmental Authority has provided written notice to KCS or any of
its Subsidiaries of any threatened proceeding or investigation into the business
or  operations  of  KCS or any of  its  Subsidiaries  or any of  their  members,
officers,  directors or  employees in their  capacity as such with KCS or any of
its Subsidiaries.

     (c)  Neither  KCS  nor  any  of its  Subsidiaries  is in  violation  of any
Applicable  Laws or orders of any  Governmental  Authority,  except as would not
reasonably  be  expected to have a KCS  Material  Adverse  Effect.  No event has
occurred  or exists  that would  (with or without  notice or lapse of time) give
rise  to any  obligation  on the  part  of  KCS  or any of its  Subsidiaries  to
undertake  or to bear all or any portion of the cost of any  remedial  action of
any nature which would  reasonably  be expected to have a KCS  Material  Adverse
Effect.

     Section 6.17  Environmental  Matters.  KCS and each of its Subsidiaries (i)
are in  compliance  with,  and are not subject to any liability  under,  in each
case, all applicable  Environmental  Laws; (ii) hold all  Environmental  Permits
necessary to conduct their current  operations and (iii) are in compliance  with
their respective  Environmental Permits,  except where the failure to hold or be
in compliance with such  Environmental  Permits would not reasonably be expected
to have a KCS Material  Adverse Effect.  Neither KCS nor any of its Subsidiaries
has  received  any  written  notice,   demand,  letter,  claim  or  request  for
information alleging that KCS or any of its Subsidiaries may be in violation of,
or liable under,  any  Environmental  Law,  except where the preceding would not
reasonably be expected to have a KCS Material  Adverse  Effect.  Neither KCS nor
any of its  Subsidiaries (x) has entered into or agreed to any consent decree or
order or is  subject to any  judgment,  decree or  judicial  order  relating  to
compliance with

                                      -24-
<PAGE>

Environmental  Laws,  Environmental  Permits  or  the  investigation,  sampling,
monitoring,  treatment,  remediation,  removal or cleanup of Hazardous Materials
and no  investigation,  litigation  or other  proceeding  is pending  or, to the
Knowledge of KCS and its Subsidiaries,  threatened with respect thereto,  except
as would not reasonably be expected to have a KCS Material Adverse Effect or (y)
is an indemnitor or has assumed liability in connection with any pending demand,
notice,  claim,  or  other  allegation,  or to  the  Knowledge  of KCS  and  its
Subsidiaries, any claim threatened by or against any third-party relating to any
liability under any  Environmental  Law or relating to any Hazardous  Materials,
except  as would not  reasonably  be  expected  to have a KCS  Material  Adverse
Effect.  None of the real property  owned or leased or operated by KCS or any of
its  Subsidiaries  is listed or, to the  Knowledge of KCS and its  Subsidiaries,
proposed  for  listing  on any  list of  sites  maintained  by any  Governmental
Authority requiring  investigation or cleanup, except as would not reasonably be
expected to have a KCS Material Adverse Effect.

     Section  6.18  Properties.  Each of KCS and its  Subsidiaries  has good and
marketable title to, or valid and enforceable leasehold,  easement or concession
interests in, all of its properties and tangible assets necessary to conduct the
KCS Business as currently conducted, except where the failure to have such title
or interest  would not  reasonably  be expected to have a KCS  Material  Adverse
Effect.  All of such  property and assets which  constitute  personal  property,
equipment,  and fixtures, are in good condition and repair, normal wear and tear
excepted. Each of KCS and its Subsidiaries has complied in all material respects
with the terms of all  leases and  concessions  to which it is a party and under
which it is in occupancy,  and all such leases and concessions are in full force
and effect,  except in each case as would not  reasonably  be expected to have a
KCS Material Adverse Effect.

                                   ARTICLE 7

                       COVENANTS AND ADDITIONAL AGREEMENTS

     Section 7.1  Conduct of Business by the GTFM Group.  During the period from
the date of this  Agreement and continuing  through the Closing Date,  except as
expressly  permitted  or required by this  Agreement  or with the prior  written
consent of KCS, Sellers shall use commercially  reasonable efforts to cause GTFM
and each of its Subsidiaries to (i) carry on its business in the ordinary course
consistent with past practice and (ii) use  commercially  reasonable  efforts to
preserve  their present  business  organizations  and  relationships  (including
keeping  available the present  services of their employees and preserving their
rights, franchises,  goodwill and relations with their customers and others with
whom they conduct  business).  Without limiting the generality of the foregoing,
except as expressly  permitted or required by this  Agreement or consented to in
writing by KCS, Sellers shall use commercially reasonable efforts to cause GTFM,
and each of the GTFM Subsidiaries not to, directly or indirectly:

     (a)  amend or agree  to amend  their  charters  or  bylaws  (or  comparable
organizational  documents),  or merge with or into or consolidate with, or agree
to merge with or into or consolidate with, any other Person, subdivide or in any
way reclassify any of their membership interests,  shares or any other ownership
interests,  or  change  or agree to change  in any  manner  the  rights of their
membership  interests,  shares or any other ownership  interests or liquidate or
dissolve;

                                      -25-
<PAGE>

     (b) (i) issue,  sell,  redeem or acquire  any share or any other  ownership
interest  or any debt  security  in GTFM or any of the GTFM  Subsidiaries;  (ii)
issue, sell or grant any option, warrant,  convertible or exchangeable Security,
right,  "phantom" or other ownership interest,  subscription,  call, unsatisfied
preemptive  right  or other  agreement  or  right  of any  kind to  purchase  or
otherwise acquire  (including by exchange or conversion) any shares or any other
ownership interests in GTFM or any of the GTFM Subsidiaries; or (iii) enter into
any Contracts,  agreements or arrangements to issue, redeem, acquire or sell any
shares or any other ownership interests in GTFM or any of the GTFM Subsidiaries;

     (c) incur any  indebtedness for borrowed money in excess of $30 million for
the facility at Toluca, or $10 million in the aggregate  (outstanding at any one
time) for other purposes, or guarantee any liability, obligation or indebtedness
(whether or not  currently due or payable) of any other Person or incur any GTFM
Voting Debt;

     (d) except as required by law or IAS,  make any change in their  accounting
methods  or  practices  for Tax or  accounting  purposes  or make any  change in
depreciation  or  amortization  policies  or  rates  adopted  by them for Tax or
accounting purposes or make any material, or change any existing,  Tax election,
settle any pending audits or make voluntary  disclosure  agreements or settle or
compromise  any Tax  liability,  except in the case of any such liability to the
extent  reserved for on the GTFM  Financial  Statements  or except to the extent
such change would not have a GTFM Material Adverse Effect;

     (e)  make any  loan or  advance  or  capital  contribution  to any of their
Affiliates  who are not  members of the GTFM  Group,  or any of their  officers,
directors,  employees,  consultants, agents or other representatives (other than
reasonable and customary travel advances made in the ordinary course of business
consistent with past practice);

     (f) sell,  transfer,  lease,  license,  offer to sell,  abandon or make any
other  disposition of any of their assets or rights or grant or suffer, or agree
to grant or suffer, any Encumbrance other than Permitted  Encumbrances on any of
their assets or rights, other than in the ordinary course of business consistent
with past practice and not exceeding $5 million in the aggregate;

     (g) except as expressly  permitted pursuant to subsection (o) below, settle
any claim, action or proceeding involving any liability for money damages or any
restrictions  upon any of their  operations,  any of the GTFM Assets or the GTFM
Business,  except to the extent such  settlement  would not have a GTFM Material
Adverse Effect;

     (h) create,  renew, amend,  terminate or cancel, any Contract other than in
the ordinary course of business  consistent with past practice and providing for
consideration  payable by or to GTFM or any GTFM  Subsidiaries  equal to or less
than $1 million individually;

     (i)  enter  into,  amend,  or agree to enter  into or amend  any  Contract,
agreement  or  arrangement  or any  financial  transaction  with  any  of  their
officers, directors, consultants, agents representatives, (in the case of agents
and  representatives,  other than in the ordinary course of business  consistent
with past  practice),  or  Affiliates  who are not  members  of the GTFM  Group;
provided,  however,  that this clause (i) shall not prohibit the  performance of
Contracts executed prior to the date of this Agreement,  the terms of which have
been disclosed to KCS in the Seller Disclosure Schedule;

                                      -26-
<PAGE>

     (j)  declare  or  make  any   dividends   or  declare  or  make  any  other
distributions  of any kind payable to MM or any  Affiliate of MM (other than any
other member of the GTFM Group);

     (k) acquire or agree to acquire in any manner any equity  interests  in, or
any business of, any Person or other business  organization or division thereof,
including by way of merger, consolidation,  or purchase of an equity interest or
assets;

     (l) enter into,  amend,  modify or renew any Benefit Plan or other  written
employment,   consulting,   severance  or  similar   employment   agreements  or
arrangements,  or grant any salary or wage  increase or increase in severance or
termination pay or increase any employee  benefit or hire any new employee for a
management position,  except as may be required by Applicable Law; and except in
the ordinary course of business consistent with past practice.

     (m) take any action to accelerate any material rights or benefits,  or make
any material  determinations  not in the ordinary course of business  consistent
with past practice,  under any collective bargaining agreement,  Benefit Plan or
employment, indemnification, severance or termination agreement;

     (n) make or incur any capital  expenditures in excess of those set forth in
the GTFM 2003 Capital Budget, a copy of which has been provided to KCS, or cease
to make capital  expenditures in the ordinary course of business consistent with
past practice;

     (o) cancel any  indebtedness  or waive any claims or rights in amounts,  in
each case, in excess of $500,000 in the aggregate;

     (p) accrue or pay any bonuses to any  employee of the GTFM Group other than
in the ordinary  course of business  consistent  with past practices , except as
set forth in Section 7.1 of the Seller Disclosure Schedule; or

     (q)  authorize  or  agree  (by  Contract  or  otherwise)  to do  any of the
foregoing.

     Section 7.2  Conduct of Business by KCS and its Subsidiaries.

     (a)  During  the  period  from the date of this  Agreement  and  continuing
through the Closing  Date,  except as  expressly  permitted  or required by this
Agreement or with the prior  written  consent of TMM,  KCS and its  Subsidiaries
shall (i) carry on their business in the ordinary  course  consistent  with past
practice,  (ii) use  commercially  reasonable  efforts to preserve their present
business  organizations  and  relationships  (including  keeping  available  the
present  services of their  employees and preserving  their rights,  franchises,
goodwill and  relations  with their  customers and others with whom they conduct
business),  (iii) take no action  that would  reasonably  be expected to prevent
completion of, or materially  delay, the Acquisition,  or change  materially the
terms of the Acquisition to the detriment of Sellers,  and (iv) take none of the
following  actions that would  materially  change the  economic  benefits of the
Acquisition to the detriment of the Sellers:

            (u) amend  their  charters or bylaws (or  comparable  organizational
      documents),  or merge or consolidate with, any other Person,  subdivide or
      reclassify their common stock or other ownership interests,  or change the
      rights of their common stock or other ownership  interests or liquidate or
      dissolve;


                                      -27-
<PAGE>

            (v) issue,  sell or  acquire  any  common  stock or other  ownership
      interest of any of the KCS Subsidiaries;

            (w) make any loan or advance or capital contribution to any of their
      Affiliates  (other  than any KCS  Subsidiary),  or any of their  officers,
      directors, employees,  consultants, agents or other representatives (other
      in the ordinary course of business consistent with past practice;

            (x)  declare  or make any  dividends  or  declare  or make any other
      distributions  of any kind on or  payable to the  holders  of its  capital
      stock (other than regularly  scheduled  dividends payable on KCS preferred
      stock);

            (y) acquire any equity  interests  in, or assets of any business of,
      any Person; or

            (z) authorize or agree to do any of the foregoing.

     (b) In  connection  with  obtaining  the funds  necessary  for the Purchase
Price,  KCS shall keep apprised on a current basis  regarding any  negotiations,
and consult on a non-binding basis with,  Javier Serrano Segovia  concerning any
KCS asset  disposition and with Jacinto Marina Cortez concerning any Acquisition
financing arrangements.

     Section 7.3  Access to Information; Confidentiality.

     (a) Between the date of this  Agreement  and the Closing  Date,  subject to
Applicable  Laws relating to the exchange and disclosure of  information  and to
the  Confidentiality  Agreements,  the Parties and their  respective  Affiliates
shall  afford  to each  other  and to their  respective  authorized  agents  and
representatives access, upon reasonable notice and during normal business hours,
to all  properties  of,  and all  Contracts,  documents  and  information  of or
relating to the assets, liabilities, business, customers, employees, operations,
personnel and other aspects of their respective businesses;  provided,  however,
that such access  shall be  conducted  in a manner  which does not  unreasonably
interfere with a Party's normal operations.

     (b) The  Parties  agree to  continue  to be bound  by and  comply  with the
provisions  set  forth in the  Confidentiality  Agreements,  and all  amendments
thereto, the provisions of which are hereby incorporated herein by reference, to
the extent such provisions are not in conflict with the terms of this Agreement.

     Section 7.4  Regulatory Matters; Governing Documents; Third-Party Consents.

     (a) The Parties shall cooperate with each other and use their  commercially
reasonable efforts promptly to prepare and file all necessary documentation,  to
effect  all  applications,  notices,  petitions  and  filings,  and to obtain as
promptly  as  practicable  all  permits,   consents,   approvals,   waivers  and
authorizations of all Governmental Authorities,  third parties and other Persons
which are necessary or advisable to consummate the transactions  contemplated by
this Agreement and the Ancillary Agreements,  and requests for required consents
under  the  Contracts,  including,  without  limitation,  those  referred  to in
Sections  5.5 and  6.3.  KCS and  Sellers  agree to take  all  reasonable  steps
necessary to satisfy any conditions or requirements

                                      -28-
<PAGE>

imposed by any Governmental Authority in connection with the consummation of the
transactions  contemplated  by this  Agreement,  other than those  conditions or
requirements,  in the aggregate, the satisfaction of which are reasonably likely
to result in either a GTFM  Material  Adverse  Effect,  a KCS  Material  Adverse
Effect or a Seller  Material  Adverse  Effect.  The Parties agree that they will
consult with each other with respect to the obtaining of all permits,  consents,
approvals and authorizations of all Governmental Authorities,  third parties and
other  Persons  necessary or advisable  to  consummate  the Merger and the other
transactions  contemplated  by this  Agreement and the Ancillary  Agreements and
each  Party  will keep the  other  Parties  apprised  of the  status of  matters
relating to completion of the transactions contemplated herein and therein.

     (b) The  Parties  shall  promptly  advise  each  other  party  hereto  upon
receiving any  communication  from any  Governmental  Authority whose consent or
approval is required for consummation of the  transactions  contemplated by this
Agreement or the Ancillary Agreements.

     (c) Each Party will (i) take  promptly  all actions  necessary  to make the
filings  required  of such  Party or its  Affiliates  under  the HSR Act  (which
filings shall include a request for the early  termination of the waiting period
under  the HSR  Act),  (ii)  comply at the  earliest  practicable  date with any
request for additional information received by such Party or its Affiliates from
the Federal  Trade  Commission or the  Antitrust  Division of the  Department of
Justice  pursuant  to the HSR Act and (iii)  cooperate  with each other Party in
connection  with such other  Party's  filing under the HSR Act and in connection
with resolving any  investigation  or other inquiry  concerning the transactions
contemplated by this Agreement  commenced by either the Federal Trade Commission
or the  Antitrust  Division  of the  Department  of Justice  or state  attorneys
general.

     (d) KCS shall promptly after the date of this Agreement (i) file before the
Mexican Antitrust  Commission (Comision Federal de Competencia) the notification
required  pursuant  to  Articles  20 and 21 of the  Mexican  Antitrust  Law (Ley
Federal de Competencia  Economica),  using  commercially  reasonable  efforts to
assure that the  notification  is accurate  and complete and contains all of the
information  required  pursuant to the regulations of the Mexican  Antitrust Law
(Reglamento de la Ley Federal de Competencia Economica) and other official forms
therefor,  and (ii) that any request for any additional  information that may be
required or otherwise solicited by the Mexican Antitrust  Commission from KCS or
any of its Affiliates in connection with such notification is complied with on a
timely basis. Sellers shall promptly provide KCS with all information  regarding
Sellers, GTFM and GTFM Subsidiaries that may be necessary for KCS to satisfy its
obligations  under this Section  7.4(d).  The Parties shall  cooperate with each
other in connection with such Mexican  antitrust  notification and in connection
with resolving any  investigation  or other inquiry  concerning the transactions
contemplated  by this  Agreement,  commenced by either the Antitrust  Commission
directly or as a result of any person  filing any claim  before  such  Antitrust
Commission in connection therewith.

     (e) TMM shall cause to be taken all action  necessary  and  appropriate  to
amend the Bylaws of GTFM and the GTFM Subsidiaries to contain the provisions set
forth in Exhibit C.

     (f) TMM  shall  use its  commercially  reasonable  efforts  to  obtain  the
consents  of  the  Lessor  and  the  Lenders  required  under  the  Sublease  of
Locomotives  identified in Section 5.5 of Sellers' Disclosure  Schedule,  to the
change of control resulting from the Acquisition.

                                      -29-

<PAGE>

     Section 7.5  Stockholder and Debtholder Approvals.

     (a) As soon as practicable following the date of this Agreement,  KCS shall
prepare  and file with the SEC a proxy  statement  for a special  meeting of its
stockholders  to be called to approve the matters  referred to in Section 6.3(a)
and to  obtain  clearance  of such  proxy  statement  from the  SEC.  As soon as
practicable  after the definitive  proxy  statement has been cleared by the SEC,
KCS will call and give notice of a special meeting of its stockholders,  cause a
proxy  statement and any  amendments  thereto to be mailed to its  stockholders,
convene the special meeting of its  stockholders and seek to obtain the approval
of its stockholders to the matters set forth therein as requiring such approval,
including recommending such approval to its Stockholders,  provided that the KCS
Board may withdraw its  recommendation  of the  Acquisition  if it is advised by
counsel to the effect that because of a third party proposal occurring after the
date of the  Board's  initial  approval  of the  Acquisition,  for the  Board to
continue to recommend the Acquisition would be a breach of the Board's fiduciary
duties to the KCS Stockholders.

     (b) As soon as practicable following the date of this Agreement,  TMM shall
use  its  commercially   reasonable  efforts  to  obtain  the  approval  of  its
stockholders  and of the  stockholders  of MM  referred to in Section  5.4.  The
Boards of  Directors  of TMM and of MM shall  recommend  such  approval to their
respective stockholders.

     (c) As soon as practicable following the date of this Agreement,  TMM shall
use  its  commercially  reasonable  efforts  to  obtain  the  approvals  of  its
debtholders referred to in Section 5.5.

     Section 7.6  Tax Matters.

     (a) TMM shall  prepare or cause to be  prepared  and shall  timely  file or
cause to be timely filed all Tax Returns for GTFM and the GTFM  Subsidiaries for
all periods  ending on or prior to the Closing Date. To the extent  permitted by
law,  all such Tax Returns  shall be prepared in a manner  consistent  with past
practices of GTFM and the GTFM Subsidiaries, respectively.

     (b) The Surviving  Company shall prepare or cause to be prepared and timely
file  or  cause  to be  timely  filed  any  Tax  Returns  of  GTFM  or the  GTFM
Subsidiaries  for Tax periods  that begin  before the Closing Date and end after
the Closing Date (a "Straddle Period"). To the extent permitted by law, all such
Tax Returns shall be prepared in a manner consistent with past practices of GTFM
and the GTFM Subsidiaries.

     (c) After the Closing Date, the Surviving Company, TMM and their respective
Subsidiaries  shall  provide each other with such  cooperation  and  information
relating to TMM, GTFM, the Surviving Company or their respective Subsidiaries as
the  Parties  reasonably  may  request  in  (i)  filing  any  Tax  Return,  (ii)
determining  any  liability  for  Taxes  or a right  to a Tax  refund  or  (iii)
conducting or defending any proceeding in respect of Taxes. Such cooperation and
information shall include  provisions by the Surviving Company to provide powers
of attorney for the purpose of signing Tax Returns and  defending any Tax Audits
for Pre-Closing Periods.

(d) At the Closing,  TMM and GTFM shall deliver to the Surviving Company and the
Surviving  Company  shall,  and shall cause GTFM and the GTFM  Subsidiaries  to,
retain  for a period  of six (6)  years  following  the  Closing  Date,  all Tax
Returns, books and records (including

                                      -30-
<PAGE>

computer  files) of, or with  respect to the  activities  of,  GTFM and the GTFM
Subsidiaries  for all taxable periods from date of  incorporation to the Closing
Date for GTFM and all GTFM Subsidiaries.

     (e) The Surviving Company shall, in consultation with TMM, control,  manage
and be solely responsible for any audit, contest,  claim,  proceeding or inquiry
with  respect to Taxes for any  Taxable  period  ending on or before the Closing
Date and for any Straddle Period and shall have the right, in consultation  with
TMM, to settle or contest any such audit, contest, claim, proceeding or inquiry;
provided,  however,  that the Surviving  Company shall not settle any such issue
that would  adversely  affect  TMM or any of its  respective  Subsidiaries  in a
material way,  without the prior written consent of TMM, which consent shall not
be unreasonably withheld or delayed.

     Section 7.7   Insurance.  Each of the Sellers shall cause GTFM and the GTFM
Subsidiaries  shall  maintain in effect and pay all premiums due thereon for the
period  ending on the Closing Date with  respect to any and all  fidelity  bonds
maintained by them on the date hereof and all GTFM Insurance Policies or procure
comparable  replacement  policies and bonds (or such replacement  coverage as is
obtainable on a  commercially  reasonable  basis) and maintain such policies and
bonds in effect until the Closing Date.

     Section 7.8   Notification of Certain Matters. Each party to this Agreement
shall give  prompt  notice to the other  Parties,  to the  extent  known by such
party, of (i) the occurrence,  or failure to occur, of any event or existence of
any  condition  that has caused or could  reasonably be expected to cause any of
the  representations  or warranties of such party contained in this Agreement to
be untrue or  inaccurate  in any material  respect at any time after the date of
this  Agreement,  up to and including the Closing Date;  (ii) any failure on its
part to comply with or satisfy, in any material respect, any covenant, condition
or  agreement  to be  complied  with or  satisfied  by  such  party  under  this
Agreement.

     Section 7.9  Further Assurances. Each party to this Agreement shall execute
such  documents  and  other  papers  and  perform  such  further  acts as may be
reasonably required to carry out the provisions of this Agreement, the Ancillary
Agreements  and the  transactions  contemplated  hereby  and  thereby.  Upon the
request of KCS, Sellers and their  respective  Affiliates shall promptly execute
and deliver  such  further  instruments  of  assignment,  transfer,  conveyance,
endorsement,   direction  or  authorization  and  other  documents  as  KCS  may
reasonably  request  to  effectuate  the  purposes  of  this  Agreement  and the
Ancillary Agreements.

     Section 7.10 Third-Party Matters.

     (a) From the date of this  Agreement  to the  Effective  Time,  (i) neither
Sellers, nor any of their respective Affiliates, officers, directors, employees,
members,  shareholders,  representatives  or agents,  including  any  investment
banker,  attorney  or  accountant  engaged  by any of them  shall,  directly  or
indirectly  solicit,  encourage or facilitate  inquiries or proposals,  or enter
into  any  agreement,  with  respect  to,  or  initiate  or  participate  in any
negotiations  or  discussions  with any Person  concerning,  any  acquisition or
purchase  of all or a  substantial  portion  of the  assets of, or of any equity
interest in, or any merger or business  combination  with, TMMH, MM, GTFM or any
of their  respective  Subsidiaries,  and  (ii)  TMM  shall  not  enter  into any
agreement  with  any  Person   concerning  any  acquisition  or  purchase  of  a
controlling  equity  interest  in TMM  by  any

                                      -31-
<PAGE>

Competitor  (as  defined  in the  Stockholders'  Agreement  which is part of the
Ancillary   Agreements)  (each   acquisition,   purchase,   merger  or  business
combination, a "TMM Acquisition Proposal"), or furnish any information regarding
a TMM  Acquisition  Proposal  to any such  Person.  Sellers  shall  notify  KCS,
providing full information, within twenty-four (24) hours if any TMM Acquisition
Proposal is received by, any such  information  is requested  from,  or any such
negotiations  or  discussions  are sought to be initiated  with,  TMM, TMMH, MM,
GTFM,  any of  their  respective  Affiliates,  officers,  directors,  employees,
members, or shareholders (for purposes of this Section 7.10,  collectively,  the
"Seller Parties"), or their representatives and agents, including any investment
banker, attorney or accountant engaged by any of them. It is understood that any
breach of the restrictions set forth in this Section 7.10 by any Seller Party or
any investment banker, attorney or other advisor or representative of the Seller
Parties shall be deemed to be a breach of this Section 7.10 by Sellers.

     (b) Sellers shall, and shall cause their respective  Affiliates,  officers,
directors,  employees, members,  shareholders,  representatives and advisors to,
immediately cease or cause to be terminated any existing  activities,  including
discussions or negotiations with any Parties, conducted prior to the date hereof
with respect to any TMM  Acquisition  Proposal and,  subject to the terms of any
existing   confidentiality   agreements,   shall  seek  to  have  all  materials
distributed  to  Persons  in  connection  therewith  by  Sellers or any of their
respective  Affiliates or advisors returned to TMM promptly.  Neither Sellers or
any of their respective Affiliates,  officers,  directors,  employees,  members,
shareholders,  representatives  or  agents,  including  any  investment  banker,
attorney or accountant  engaged by any of them,  shall amend,  modify,  waive or
terminate, or otherwise release any Person from, any standstill, confidentiality
or  similar  agreement  or  arrangement  currently  in effect  relating  to this
Agreement or the  transactions  contemplated  hereby.  Sellers shall cause their
respective Affiliates,  officers, directors,  employees, members,  shareholders,
representatives and agents to comply with the provisions of Sections 7.10(a) and
7.10(b).

     (c) From the date of this Agreement to the Effective Time, neither KCS, nor
any   of   its   respective   Affiliates,    officers,   directors,   employees,
representatives  or  agents,   including  any  investment  banker,  attorney  or
accountant  engaged  by any of  them  shall,  directly  or  indirectly  solicit,
encourage or  facilitate  inquiries or proposals,  or enter into any  agreement,
with respect to, or initiate or participate in any  negotiations  or discussions
with any Person concerning,  any acquisition or purchase of all or substantially
all of the assets of, or a  controlling  equity  interest in, KCS or KCSR or any
merger  or  business  combination  with KCS or KCSR  (each,  a "KCS  Acquisition
Proposal"),  or furnish any information  regarding a KCS Acquisition Proposal to
any such  Person.  KCS shall  notify TMM,  providing  full  information,  within
twenty-four (24) hours if any KCS Acquisition  Proposal is received by, any such
information  is requested  from, or any such  negotiations  or  discussions  are
sought to be initiated  with, KCS, any of its respective  Affiliates,  officers,
directors,  employees,  (for  purposes of this Section 7.10,  collectively,  the
"Buyer Parties"), or their representatives and agents,  including any investment
banker, attorney or accountant engaged by any of them. It is understood that any
breach of the  restrictions set forth in this Section 7.10 by any Buyer Party or
any investment banker,  attorney or other advisor or representative of the Buyer
Parties shall be deemed to be a breach of this Section 7.10 by KCS.

     (d) KCS shall,  and shall cause its KCS  Affiliates,  officers,  directors,
employees,  representatives  and advisors to,  immediately  cease or cause to be
terminated any existing

                                      -32-
<PAGE>

activities,  including  discussions or negotiations with any Parties,  conducted
prior to the date  hereof  with  respect to any KCS  Acquisition  Proposal  and,
subject to the terms of any existing confidentiality  agreements,  shall seek to
have all materials  distributed to Persons in connection therewith by KCS or its
Affiliates  or  advisors  returned  to KCS  promptly.  Neither KCS or any of its
Affiliates, officers, directors, employees, representatives or agents, including
any  investment  banker,  attorney or accountant  engaged by any of them,  shall
amend,  modify,  waive or terminate,  or otherwise  release any Person from, any
standstill,  confidentiality  or similar  agreement or arrangement  currently in
effect relating to this Agreement or the transactions  contemplated  hereby. KCS
shall cause its Affiliates, officers, directors, employees,  representatives and
agents to comply with the provisions of Sections 7.10(c) and 7.10(d).

     (e)  Nothing set forth in this  Section  7.10 shall  preclude  the Board of
Directors of KCS or TMM from taking any action in good faith if it is advised by
counsel that failure to do so would be a breach of duty to its stockholders.

     Section 7.11  Efforts of Parties to Close.  During the period from the date
of this  Agreement  through the Closing  Date,  each party  hereto shall use its
commercially  reasonable  efforts to fulfill  or obtain the  fulfillment  of the
conditions  precedent  to  the  consummation  of the  transactions  contemplated
hereby,  including the execution  and delivery of any  documents,  certificates,
instruments or other papers that are reasonably required for the consummation of
the transactions  contemplated  hereby.  During the period from the date of this
Agreement and continuing  through the Closing,  except as required by Applicable
Law,  no party to this  Agreement  shall  knowingly  take any action  which,  or
knowingly  fail to take any  action  the  failure  of which to be  taken,  could
reasonably  be  expected  to:  (i)  result  in any of  the  representations  and
warranties  set  forth in this  Agreement  on the part of the  party  taking  or
failing to take such action being or becoming  untrue in any  material  respect;
(ii)  result in any  conditions  to the Closing set forth in Article 8 not being
satisfied;  or (iii) result in a violation of any provision of this Agreement or
the Ancillary Agreements.

     Section  7.12  Expenses.  Except as  expressly  provided  otherwise in this
Agreement,  the Parties  shall each bear their  respective  direct and  indirect
expenses  incurred in connection  with the  negotiation  and preparation of this
Agreement  and  the  consummation  of the  Merger  and  the  other  transactions
contemplated hereby.

     Section 7.13 VAT Contingency Payment. Provided the Acquisition has occurred
and that neither KCS nor any Subsidiary of KCS has purchased the TFM "Class III"
shares  referred to in clause (i) of this Section 7.13 upon exercise of the Put,
as  compensation  for TMM's  services in obtaining  Final  Resolution of the VAT
Claim,  KCS  shall  make or shall  cause  TFM to make a cash  payment  (the "VAT
Contingency  Payment") to TMM, as set forth below,  following  the date of Final
Resolution  of the VAT Claim,  and the receipt by TFM or its designee of the VAT
Payment,  so long as the VAT  Payment  consists  of at least  (i) all of the TFM
"Class III" shares (representing 20% of the capital stock of TFM) currently held
by the Mexican Government or (ii) a cash payment or other property acceptable to
the  Parties  which has a fair value equal to or greater  than the Put  Purchase
Price as  calculated  on the date the VAT Payment is received (or a  combination
thereof).  In such event,  KCS shall, at its option,  pay or cause TFM to pay to
TMM (iii)  $100,000,000  within 90 days thereafter or (iv) $50,000,000 within 90
days thereafter and an additional $55,000,000 within 365 days thereafter. If the
VAT Payment  exceeds the Put Purchase  Price as  calculated on the date that the
VAT Payment is received, KCS

                                      -33-
<PAGE>

shall pay or cause TFM to pay to TMM  within 90 days after the VAT  Payment  and
Final Resolution of the VAT Claim the first  $25,000,000  received above the Put
Purchase Price, and 15% of any additional amount received above the Put Purchase
Price  beyond  the first  $25,000,000  (but such 15%  payment  shall not  exceed
$50,000,000).  The  calculation of all cash payments and property  distributions
received  by TFM or its  designee  referred  to in  this  Section  7.13 as a VAT
Contingency  Payment shall be made after reducing the value of such payments and
distributions  by the amount of all expenses  incurred by or on behalf of TFM in
effecting  Final  Resolution  of the VAT Claim and  receipt of the VAT  Payment,
including  without  limitation legal fees and net of Mexican corporate tax (paid
or payable in cash assuming  utilization  of all  available  net operating  loss
carry  forwards).  As part of the services to be performed  under the Consulting
Agreement,   Consultant  shall  have  the  right  to,  and  shall,   manage  the
negotiation,  prosecution  and settlement of the VAT Claim and any extensions or
other modifications of the obligations under the Put.

     Section  7.14  Financing  for  the  Acquisition.  In  connection  with  the
financing for the  Acquisition  (including  any amounts due under Section 7.13),
KCS shall not, and shall cause its  Subsidiaries  and  Affiliates  not to, enter
into any financing  arrangements that materially (i) restrict the ability of KCS
and its subsidiaries and affiliates to make any payments  required to be made by
this  Agreement or (ii) deny or restrict in any material way any rights  granted
to TMM, its  Subsidiaries  and Affiliates  under this Agreement or the Ancillary
Agreements.

     Section 7.15 Release.  At the Closing,  KCS shall deliver to TMM a release,
effective as of the Closing,  of each Person,  not  identified in Exhibit D as a
continuing  officer or  director,  who served at the  request of any Seller as a
director  or  officer  of GTFM or any of its  Subsidiaries  at any time prior to
Closing,  from any and all claims of KCS and its  Subsidiaries  for any  actions
taken or  omitted  by such  Person in such  capacity,  except  for any action or
omission  which  was in  violation  of law or the  bylaws  of GTFM or any of its
Subsidiaries,  or constituted fraud,  willful misconduct,  gross negligence or a
breach of this Agreement or any of the Ancillary Agreements.

                                   ARTICLE 8

                                   CONDITIONS

     Section  8.1   Mutual  Conditions.  The  obligations  of each party to this
Agreement to consummate the Acquisition  shall be subject to the satisfaction of
each of the following conditions, unless any such condition is waived by KCS and
TMM:

     (a) No order,  injunction or decree issued by any Governmental Authority of
competent  jurisdiction or other legal  restraint or prohibition  preventing the
consummation of the Acquisition shall be in effect.  No proceeding  initiated by
any  Governmental  Authority  seeking an  injunction to restrain or prohibit the
consummation of the Acquisition shall be pending. No statute,  rule, regulation,
order,  injunction or decree shall have been enacted,  entered,  promulgated  or
enforced  by  any  Governmental  Authority  which  prohibits,  restricts  in any
material manner or makes illegal consummation of the Acquisition;

     (b) All consents,  waivers,  authorizations and approvals required from all
Governmental  Authorities to consummate the Acquisition,  without the imposition
of conditions or  requirements,  in the aggregate,  the satisfaction of which by
KCS or its  Subsidiaries  or TMM or

                                      -34-
<PAGE>

its Subsidiaries is reasonably likely to result in either a KCS Material Adverse
Effect,  a GTFM Material  Adverse Effect or a Seller  Material  Adverse  Effect,
shall  have been  obtained  and shall  remain in full force and effect as of the
Closing Date;

     (c) A general  moratorium on commercial  banking  activities in New York or
Mexico shall not have been declared by either Federal or state  authorities  and
be continuing  nor shall there occur and be continuing any calamity or crisis in
the U.S. or Mexican financial markets; and

     (d) The  securities  to be issued  pursuant  to the Merger  and,  if KCS so
elects   pursuant  to  Section  1.2,  in  payment  of  a  portion  of  the  cash
consideration, shall have been be approved for listing by the NYSE.

     Section 8.2   Conditions to the  Obligations of KCS. The obligations of KCS
to consummate the  Acquisition  shall be subject to the  satisfaction of each of
the following conditions, any of which may be waived in writing by KCS:

     (a)  For   purposes  of  this   Section   8.2(a),   the   accuracy  of  the
representations  and warranties of Sellers set forth in this Agreement  shall be
assessed  as of the  date of this  Agreement  and  shall be  assessed  as of the
Closing  Date  with the same  effect  as  though  all such  representations  and
warranties had been made again on and as of the Closing Date (provided, however,
that the  representations  and warranties that speak as of a specific date other
than the date of this  Agreement  shall  speak  only as of such  date)  and such
representations  and  warranties  shall  be true  and  correct  in all  material
respects;

     (b) Sellers shall have performed and complied in all material respects with
all agreements, covenants, obligations and conditions required by this Agreement
to be performed or complied with by them at or prior to the Closing Date;

     (c) TMM, TMMH and MM shall have delivered to KCS a certificate, dated as of
the Closing Date,  signed on their behalves by their  respective  Presidents and
Chief  Financial  Officers  confirming  their  satisfaction  of  the  conditions
applicable to them contained in Sections 8.2(a) and 8.2(b);

     (d) Each of the  Ancillary  Agreements  shall have been duly  executed  and
delivered by or on behalf of each of Sellers as the case may be;

     (e) KCS shall have  received an opinion  dated the Closing Date of Milbank,
Tweed,  Hadley & McCloy LLP, U.S.  counsel to Sellers and Haynes & Boone,  S.C.,
Mexican  counsel  to  Sellers,  in the form and as to the  matters  set forth on
Exhibit G-1 and G-2,  respectively,  with such exceptions and  qualifications as
are reasonably acceptable to KCS;

     (f) KCS shall have  received  from the Holders of the  requisite  number of
outstanding  shares of KCS Common Stock and KCS Preferred  Stock the affirmative
vote referred to in Section 6.3(a);

     (g) Since  December 31, 2002,  there shall not have been any GTFM  Material
Adverse  Effect  or  any  development  or  combination  of  developments   that,
individually or in the aggregate,

                                      -35-
<PAGE>
has had or is reasonably likely to have a GTFM Material Adverse Effect, of which
KCS did not have Knowledge prior to the date of this Agreement;

     (h) KCS  shall  have  received  copies of all  other  consents,  approvals,
authorizations,  qualifications  and orders of all Governmental  Authorities and
all other Persons party to Contracts  with any member of the GTFM Group that are
required in respect of the transactions to be consummated at the Closing,  other
than those  that if not  obtained  would not  individually  or in the  aggregate
reasonably be expected to have a GTFM Material  Adverse Effect or a KCS Material
Adverse  Effect and such consents and other items shall remain in full force and
effect as of the Closing Date; and

     (i) KCS shall have  received  the  officers'  and  directors'  resignations
referred to in Section 4.2(j).

     (j) There  shall not be pending any  insolvency  or  bankruptcy  proceeding
against MM, TMMH or TFM,  provided  that if any such  proceeding  is pending MM,
TMMH or TFM  shall  have had at least 60 days to  obtain  dismissal  of any such
proceeding.

     Section 8.3   Conditions to the  Obligations of Sellers.  The obligation of
Sellers to consummate the  Acquisition  shall be subject to satisfaction of each
of the following conditions, which may be waived in writing by TMM:

     (a)  For   purposes  of  this   Section   8.3(a),   the   accuracy  of  the
representations  and  warranties of KCS and KARA Sub set forth in this Agreement
shall be assessed as of the date of this  Agreement  and shall be assessed as of
the  Closing  Date with the same effect as though all such  representations  and
warranties had been made again on and as of the Closing Date (provided, however,
that the  representations  and warranties that speak as of a specific date other
than the date of this  Agreement  shall  speak  only as of such  date)  and such
representations  and  warranties  shall  be true  and  correct  in all  material
respects;

     (b) Each of KCS and KARA Sub  shall  have  performed  and  complied  in all
material  respects with all  agreements,  covenants,  obligations and conditions
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date;

     (c) Each of KCS and KARA Sub shall  have  delivered  to TMM a  certificate,
dated as of the Closing  Date,  signed on behalf of KCS or KARA Sub, as the case
may be, by its Chief Executive  Officer and Chief Financial  Officer  confirming
the satisfaction of the conditions contained in Sections 8.3(a) and 8.3(b);

     (d) Each of the  Ancillary  Agreements  shall have been duly  executed  and
delivered by or on behalf of KCS, and Sellers shall have no reasonable basis for
belief that any of such agreements  shall not become  effective at the Effective
Time;

     (e)  TMM  shall  have  received  an  opinion  dated  the  Closing  Date  of
Sonnenschein  Nath &  Rosenthal,  counsel  to KCS,  and Jay  Nadlman,  Associate
General  Counsel to KCS,  in the form and as to the matters set forth on Exhibit
H-1 and H-2,  respectively,  with  such  exceptions  and  qualifications  as are
reasonably acceptable to TMM;

                                      -36-
<PAGE>

     (f)  There  shall  not exist  any  event or  combination  of  events  that,
individually  or in the  aggregate,  will (or would  reasonably  be expected to)
prevent  KCS from  performing  any of its  post-Closing  obligations  under this
Agreement or any Ancillary Agreement at or after the Effective Time;

     (g) Since  December 31, 2002,  there has not been any KCS Material  Adverse
Effect or any development or combination of developments  that,  individually or
in the aggregate, has had or is reasonably likely to have a KCS Material Adverse
Effect of which TMM did not have knowledge prior to the date of this Agreement;

     (h) TMM  shall  have  received  copies of all  other  consents,  approvals,
authorizations,  qualifications  and orders of all Governmental  Authorities and
all other Persons party to contracts  with KCS or any of its  Subsidiaries  that
are required in respect of the transactions to be consummated at Closing,  other
than those that, if not obtained,  would not,  individually or in the aggregate,
reasonably be expected to have a KCS Material  Adverse  Effect and such consents
and other items shall remain in full force and effect as of the Closing Date;

     (i) TMM shall have  received  the consents of the holders of the 2003 Notes
and of the 2006 Notes  referred to in Section 5.5,  provided that TMM shall have
used its commercially reasonable efforts to obtain such consents; and.

     (j) TMM shall have received the release referred to in Section 7.15.

                                    ARTICLE 9

                                   TERMINATION

     Section 9.1  Termination.

     (a) This Agreement may be terminated prior to the Closing as follows:

          (i) by written consent of KCS and TMM;

          (ii)  by  KCS  or TMM if  any  order  of  any  Governmental  Authority
     permanently   restraining,   enjoining   or   otherwise   prohibiting   the
     consummation of the Acquisition shall have become final and  non-appealable
     or if any of the  approvals  of any  Governmental  Authority to perform the
     transactions herein, imposes any condition or requirement, the satisfaction
     of which is  reasonably  likely to result in either a KCS Material  Adverse
     Effect or a GTFM Material Adverse Effect;

          (iii) by KCS if any  condition  to the  obligations  of KCS  hereunder
     becomes incapable of fulfillment  through no fault of KCS and is not waived
     by KCS;

          (iv) by TMM if any condition to the  obligations of Sellers  hereunder
     becomes  incapable  of  fulfillment  through no fault of Sellers and is not
     waived by TMM;

          (v) by KCS if TMM shall have  experienced  a Change of Control,  or by
     TMM if KCS shall have experienced a Change of Control; and

                                      -37-
<PAGE>
          (vi) by KCS or TMM if the  Closing  does  not  occur  by the  close of
     business  on or  prior to  December  31,  2004  (the  "Termination  Date");
     provided, however, that the Termination Date may be extended by KCS and TMM
     by written agreement.

     (b) The  termination of this Agreement shall be effectuated by the delivery
by the party terminating this Agreement to the other Parties of a written notice
of such termination.  If this Agreement so terminates,  it shall become null and
void and have no further force or effect, except as provided in Section 9.2.

     Section 9.2  Survival after Termination. If this Agreement is terminated in
accordance with Section 9.1 hereof and the transactions  contemplated hereby are
not consummated,  this Agreement and each Ancillary  Agreement shall become void
and of no further  force and effect,  without any  liability  on the part of any
party hereto,  except for the  provisions of Sections  7.12,  12.5 and 12.11 and
this Article 9. Notwithstanding the foregoing, nothing in this Section 9.2 shall
relieve any party to this  Agreement of liability  for a breach of any provision
of this  Agreement  or any  agreement  made as of the date hereof or  subsequent
thereto pursuant to this Agreement.

                                   ARTICLE 10

                                 INDEMNIFICATION

     Section  10.1  Survival  of  Representations,   Warranties  and  Covenants;
Exclusive Monetary Remedies.

     (a)  All  representations  and  warranties  in  this  Agreement  or in  any
instrument  executed and delivered in  fulfillment of the  requirements  of this
Agreement shall survive the Closing for the following  periods of time following
the Closing Date (in each case, the "Expiration  Date"). The representations and
warranties  of the Sellers set forth in Sections  5.1,  5.2,  5.3, 5.4, 5.5, and
5.17  shall  survive   until  the  fifth   anniversary   of  the  Closing.   The
representations  and  warranties  of the Sellers set forth in Section 5.11 shall
survive for the applicable statute of limitations. All other representations and
warranties  of the Sellers  shall  survive  until the third  anniversary  of the
Closing,  provided,  if the  Spin-off  Merger  referred to in the  Stockholders'
Agreement that is part of the Ancillary  Agreements  shall have  occurred,  such
representations  and warranties shall survive only until the second  anniversary
of the Closing.  The representations and warranties of KCS set forth in Sections
6.1,  6.2, 6.3, 6.4 and 6.7 shall  survive  until the fifth  anniversary  of the
Closing.  The  representations  and  warranties of KCS set forth in Section 6.15
shall   survive  for  the   applicable   statute  of   limitations.   All  other
representations and warranties of KCS shall survive until the second anniversary
of the  Closing.  All  covenants or other  agreements  in this  Agreement  shall
terminate at the Effective  Time,  except the covenants in Sections 7.6, 7.9 and
7.13 which  shall  survive  the  Closing  indefinitely  or for the period of the
respective statutes of limitation relating thereto.

     (b)  Notwithstanding  anything in this Agreement to the Contrary,  the sole
and  exclusive  basis on which any party may  recover  monetary  damages for any
breach of this  Agreement  by any other  party,  whether  based  upon  breach of
representations and warranties,  breach of any covenant, or otherwise,  shall be
in accordance with the indemnification  provisions set forth in this Article 10,
and subject to the  limitations  and  exclusions  set forth in this  Article 10,
provided

                                      -38-
<PAGE>

however,  that such exclusive  remedies for monetary  damages shall not preclude
any party from pursuing the remedies of specific performance, injunctive relief,
declaratory  judgment or any other non-monetary  equitable remedies available to
such party under Applicable Law.

     (c)  All  Losses  (as   defined   below)  for  which  any  party  may  seek
indemnification  hereunder shall be net of (i) any insurance recoveries received
by such party or to which such party is entitled and (ii) any amounts which such
party has  received  or is  entitled  to receive  from any third party under any
indemnification or other similar agreement.

     Section  10.2  Indemnification  by  Sellers.  Subject  to  the  limitations
contained in this Article 10,  Sellers,  jointly and severally,  shall indemnify
and hold KCS, the Surviving Company and each of their Subsidiaries,  and each of
their respective officers, directors,  employees, members, stockholders,  agents
and representatives  ("KCS  Indemnitees")  harmless from and against all losses,
damages,  liabilities,  claims, demands,  obligations,  deficiencies,  payments,
judgments,  settlements,  costs and expenses of any nature whatsoever (including
the  costs  and  expenses  of  any  and  all  investigations,   actions,  suits,
proceedings,   demands,   assessments,   judgments,   orders,   settlements  and
compromises relating thereto, and reasonable attorneys',  accountants', experts'
and other fees and expenses in connection  therewith) ("Losses") resulting from,
arising out of, or due to, directly or indirectly, any of the following:

     (a)  Any   inaccuracy   or   misrepresentation   in,  or  breach   of,  any
representation or warranty of Sellers contained in Article 5, in any schedule or
exhibit delivered  hereunder by any of Sellers or in any certificates  delivered
by any of Sellers pursuant to this Agreement, or any breach or nonfulfillment of
any covenant or agreement of any of Sellers contained in this Agreement,  in any
schedule or exhibit delivered hereunder by any of Sellers or in any certificates
delivered by any of Sellers pursuant to this Agreement, or any claims, causes of
actions,  rights  asserted or demands made by any third parties  (including  any
Governmental  Authority)  arising from or relating to any of the  foregoing  (it
being  agreed  that  for  purposes  of  such  right  to   indemnification,   the
representations  and warranties made by Sellers shall be deemed not qualified by
any references  therein to materiality or whether or not any breach could result
or could  reasonably be expected to result in a GTFM Material  Adverse  Effect);
and

     (b)  Sellers'  indemnification  obligations  under this  Article 10 for any
inaccuracy or misrepresentation  in, or breach of any representation or warranty
regarding  Grupo TFM or its  Subsidiaries  shall be limited to 51% of Losses and
then only to the  extent  such 51% of Losses  amount  to, in the  aggregate,  $5
million or more; provided,  that for the purpose of computing this limitation on
Sellers' indemnification obligations,  Losses shall be calculated without regard
to whether such Losses involved a GTFM Material  Adverse Effect.  The limitation
in this Section  10.2(b) shall not be applicable to any Losses arising out of or
resulting from any action or omission on the part of any Seller or its Affiliate
that involved a crime, fraud, willful misconduct or gross negligence.

     Section  10.3  Indemnification  by  KCS.  (a)  Subject  to the  limitations
contained in this Article 10, KCS shall  indemnify  and hold  harmless  Sellers,
each of their  Subsidiaries  and each of their respective  officers,  directors,
employees,   members,   stockholders,   agents  and   representatives   ("Seller
Indemnitees") from and against all Losses resulting from, arising out of, or due
to, directly or indirectly,  any inaccuracy or  misrepresentation  in, or breach
of,  any  representation  or  warranty  of KCS  contained  in  Article 6, in any
schedule or exhibit delivered hereunder by KCS

                                      -39-
<PAGE>

or in any  certificates  delivered  by KCS  pursuant to this  Agreement,  or any
breach or nonfulfillment of any covenant of KCS contained in this Agreement,  in
any  schedule  or  exhibit  delivered  hereunder  by KCS or in any  certificates
delivered by KCS pursuant to this Agreement,  or any claims,  causes of actions,
rights asserted or demands made by any third parties (including any Governmental
Authority) arising from or relating to any of the foregoing.

     (b)  KCS's  indemnification  obligations  under  this  Article  10 shall be
limited  to Losses  which  amount  to, in the  aggregate,  $10  million or more,
provided   that  for  the  purpose  of  computing   this   limitation  or  KCS's
indemnification  obligations,  Losses  shall be  calculated  without  regard  to
whether such Losses involved a KCS Material  Adverse  Effect.  The limitation in
this Section  10.3(b) shall not be  applicable  to any Losses  arising out of or
resulting  from any action or omission on the part of KCS or its Affiliate  that
involved a crime, fraud, willful misconduct or gross negligence.

     Section 10.4 Procedures for Third-Party Claims.

     (a) In order for a Person (the  "Indemnified  Party") to be entitled to any
indemnification  provided  for under  Section 10.2 or 10.3 hereof in respect of,
arising out of or involving a claim made by any Person (other than another Party
or its Affiliate)  against the Indemnified Party (a "Third-Party  Claim"),  such
Indemnified  Party  must  notify  the  indemnifying  party  in  writing  of  the
Third-Party  Claim  promptly  following  receipt  by such  Indemnified  Party of
written notice of the Third-Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the  extent  the  indemnifying  party  shall  have been  actually  materially
prejudiced as a result of such failure.  Thereafter, the Indemnified Party shall
deliver to the  indemnifying  party,  as promptly as  practicable  following the
Indemnified  Party's  receipt  thereof,  copies  of all  notices  and  documents
(including  court  papers)  received by the  Indemnified  Party  relating to the
Third-Party Claim that are not separately addressed to the indemnifying party.

     (b) If a  Third-Party  Claim is made  against  an  Indemnified  Party,  the
indemnifying  party shall be entitled to participate in the defense thereof and,
if it so chooses,  to assume the defense  thereof with  counsel  selected by the
indemnifying  party;  provided,  however,  that such  counsel is not  reasonably
objected to by the Indemnified Party.  Should the indemnifying party so elect to
assume the defense of a Third-Party  Claim, the indemnifying  party shall not be
liable to the Indemnified  Party for any reasonable legal expenses  subsequently
incurred by the Indemnified Party in connection with the defense thereof. If the
indemnifying  party assumes such defense,  the Indemnified  Party shall have the
right to participate in the defense  thereof and to employ  counsel,  at its own
expense,  separate from the counsel employed by the indemnifying party, it being
understood  that the  indemnifying  party shall control such defense;  provided,
however, that the indemnifying party shall bear the reasonable fees and expenses
of such  separate  counsel (i) if the  Parties to any such action or  proceeding
(including  impleaded  parties) include other Parties and representation of both
Parties would, in the reasonable  opinion of counsel for the Indemnified  Party,
be inappropriate due to a conflict of interest or (ii) if the indemnifying party
shall not have employed counsel (other than counsel that is reasonably  objected
to by the  Indemnified  Party)  within a reasonable  time after the  Indemnified
Party has given notice of the  institution of a Third-Party  Claim in compliance
with Section  10.4(a)  hereof.  The  indemnifying  party shall be liable for the
reasonable fees and expenses of counsel  employed by the  Indemnified  Party for
any period  during  which the  indemnifying  party has not  assumed  the

                                      -40-
<PAGE>

defense thereof, provided, however, that such counsel is not reasonably objected
to by the  indemnifying  party. If the  indemnifying  party chooses to defend or
prosecute a Third-Party  Claim,  all the Indemnified  Parties shall cooperate in
the defense or prosecution  thereof at the indemnifying  party's  expense.  Such
cooperation  shall  include the  retention  and (upon the  indemnifying  party's
request) the provision to the indemnifying party of records and information that
are  reasonably  relevant  to  such  Third-Party  Claim,  and  making  employees
available on a mutually  convenient basis to provide additional  information and
explanation  of any  material  provided  hereunder.  If the  indemnifying  party
assumes the defense of a  Third-Party  Claim,  the  Indemnified  Party shall not
admit any liability  with respect to, or settle,  compromise or discharge,  such
Third-Party Claim without the indemnifying  party's prior written consent (which
consent shall not be unreasonably  withheld).  If the indemnifying party assumes
the defense of a Third-Party  Claim,  the  Indemnified  Party shall agree to any
settlement, compromise or discharge of a Third-Party Claim that the indemnifying
party may recommend and that by its terms  obligates the  indemnifying  party to
pay the full amount of the liability in connection with such Third-Party  Claim,
which  releases  the  Indemnified  Party  completely  in  connection  with  such
Third-Party Claim and that would not otherwise  materially  adversely affect the
Indemnified Party.

     Section 10.5 Tax Indemnification.

     (a) Sellers shall indemnify and hold each of the KCS  Indemnitees  harmless
from and against all Taxes of GTFM,  and the GTFM  Subsidiaries,  the payment of
which would  result in a breach of any  representation  or warranty set forth in
Section  5.11 or an  agreement  set  forth in  Sections  7.1(e) or 7.6 (it being
agreed that for purposes of such right to  indemnification,  the representations
and  warranties set forth in Section 5.11 or a breach of any agreement set forth
in Section 7.1(e) or 7.6 shall be deemed not qualified by any references therein
to materiality or whether or not any breach could result or could  reasonably be
expected to result in a GTFM Material Adverse Effect).

     (b) KCS shall, and shall cause the Surviving  Company and its Subsidiaries,
to  indemnify  and hold  Sellers  harmless  from and  against  all  Taxes of the
Surviving  Company and its Subsidiaries the payment of which would not result in
a breach described in Section 10.5(a)

                                   ARTICLE 11

                                   DEFINITIONS

     Section  11.1  Certain  Defined  Terms.  As  used in  this  Agreement,  the
following terms shall have the following meanings:

     "Affiliate" shall mean any Person that directly,  or indirectly through one
or more  intermediaries,  Controls,  is Controlled by or is under common Control
with the Person specified.

     "Agreement"  shall  have the  meaning  set  forth in the  preamble  to this
Agreement.

     "Ancillary  Agreements" shall mean the following agreements entered into as
of the  date of  this  Acquisition  Agreement  or to be  entered  into as of the
Closing:  (i)  Stockholders'  Agreement by and among KCS, TMM, TMMH and MM; (ii)
Registration  Rights Agreement

                                      -41-
<PAGE>

among KCS, TMM, TMMH and MM; (iii) Stock Purchase Agreement among KCS, TMM, TMMH
and MM; (iv) the Consulting Agreement; (v) the Marketing and Services Agreement;
and (vi) the Put Agreement.

      "Applicable  Law" shall mean any Law  applicable to KCS, TMM,  TMMH, MM or
any of their respective Affiliates,  properties,  assets,  officers,  directors,
employees or agents, as the case may be.

      "Business  Day"  shall  mean any day that is not a  Saturday,  a Sunday or
other day on which banks are required or  authorized  by law to be closed in the
United States or Mexico.

      "Certificate of Merger" shall have the meaning set forth in Section 3.1 of
this Agreement.

      "Change  of  Control"  shall  mean,  with  respect  to  such  Person,  the
occurrence of any of the following  prior to the Closing Date: (a) any Person or
Group,  other than a  subsidiary  or any  employee  benefit plan (or any related
trust) of such Person or a  subsidiary  of such Person,  becomes the  beneficial
owner of Voting  Securities  representing  20.0% or more of the  combined  Total
Voting Power of all Voting  Securities  of such Person,  or (b) the  individuals
who, as of the date of this Agreement, constitute the board of directors of such
Person (the "Incumbent  Directors")  cease for any reason to constitute at least
75.0% of the members of such board of  directors  unless,  at least 75.0% of the
individuals  then  constituting  such board of directors were nominated upon the
recommendation  of at least 75.0% of the Incumbent  Directors or other directors
so nominated;  or (c) approval by the  stockholders of such Person of any of the
following:  (1) a merger,  reorganization or consolidation  ("Acquisition") with
respect to which the individuals and entities who were the respective beneficial
owners of the stock and Voting Securities of the Person  immediately before such
Acquisition  do not,  after such  Acquisition,  beneficially  own,  directly  or
indirectly,  more  than  80.0%  of the  combined  voting  power  of  the  Voting
Securities of the Person resulting from such  Acquisition in  substantially  the
same proportion as their ownership  immediately  before such Acquisition,  (2) a
liquidation or dissolution of such Person,  or (3) the sale or other disposition
of all or substantially all of the assets of such Person.

      "Code" shall mean the Internal  Revenue Code of 1986, as amended,  and the
rules and regulations promulgated thereunder.

      "Concession"  shall mean the concession title from the Mexican  government
held by TFM to provide  freight  transportation  services over its rail lines in
Mexico.

      "Confidentiality  Agreements"  shall mean the  Confidentiality  Agreements
dated as of  November  9,  2002 by and  between  KCS and TMM and all  amendments
thereto.

      "Consultant" shall mean the Company owned by Jose Serrano Segovia that has
entered into the Consulting Agreement with KCS.

      "Consulting  Agreement" shall mean that agreement  between  Consultant and
the Surviving Company dated as of the Effective Time.

      "Contracts"  shall  mean  all  written  or  oral  contracts,   agreements,
evidences of indebtedness, guarantees, leases and executory commitments to which
any member of the GTFM

                                      -42-
<PAGE>

Group is a party  (jointly  or  severally,  in whole or in part,  with others or
solely) or by which any of the GTFM Assets are bound,  or  otherwise  related to
the GTFM Business.

      "Control" shall mean the ability whether  directly or indirectly to direct
the affairs of another by means of ownership of assets or voting securities,  or
by contract.

      "Encumbrance"  shall mean any lien, pledge,  mortgage,  security interest,
claim,  charge,  easement,  limitation,  commitment,  encroachment,  restriction
(other  than a  restriction  on  transferability  imposed  by  federal  or state
securities laws) or other encumbrance of any kind or nature whatsoever  (whether
absolute or contingent).

      "Environmental  Laws"  shall mean any and all U.S.  and  Mexican  federal,
state and local statutes, laws, regulations, ordinances or rules in existence on
or prior to the Closing Date relating to the  protection of the  environment  or
natural resources, occupational safety and health; the effect of the environment
or Hazardous Materials on human health; or emissions,  discharges or releases of
Hazardous Materials into the environment, including, without limitation, ambient
air, surface water,  groundwater or land; or otherwise  relating to the handling
of Hazardous  Materials or the  investigation,  clean-up or other remediation or
analysis thereof.

      "Environmental  Permit"  shall mean any permit,  approval,  identification
number,   license  and  other   authorization   required  under  any  applicable
Environmental Law, including any  administratively  complete application that is
sufficient  to  serve  as an  authorization  for  an  activity  regulated  under
Environmental Law.

      "ERISA  Affiliate"  shall mean any  Person  who is in the same  controlled
group of  corporations  or who is under  common  control  with KCS  (within  the
meaning of Section 414 of the Code).

      "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.

      "Final  Resolution  of the VAT Claim" shall mean the final  settlement  or
resolution of the VAT Claim, whether by a voluntary settlement or judgment, that
is not  subject  to any form or manner of  appeal,  collateral  claim  under the
January 31, 1997 Stock Purchase Agreement for the acquisition of Ferrocarril del
Noreste,  S.A. de C.V.  or  otherwise  or offset or reclaim by any  Governmental
entity or any other Person in any manner whatsoever, provided, that if KCS shall
have  received the TFM Class III shares  referred to in 7.13(i) in settlement of
all or a portion  of the VAT Claim or if KCS shall  have  received  the  payment
referred to in 7.13(ii)  along with the written  agreement  (in form  reasonably
satisfactory  to KCS) of TMM to defend  and  indemnify  KCS  against  any claim,
collateral claim,  offset,  reclaim,  appeal or challenge of any kind whatsoever
which  seeks to  rescind , set  aside,  revoke or  diminish  the  amount of such
payment or the VAT Claim,  then a "Final  Resolution  of the VAT Claim" shall be
deemed to have occurred for the purpose of the VAT Payment.

      "GAAP" shall mean generally accepted accounting  principles,  consistently
applied,  as used in the  United  States of America as in effect at the time any
applicable  financial  statements  were or are prepared or any act requiring the
application of GAAP was or is performed.

                                      -43-
<PAGE>

      "Governmental  Authority" shall mean any United States, Mexican or foreign
government,  any  state or  other  political  subdivision  thereof,  any  entity
exercising  executive,  legislative,   judicial,  regulatory  or  administrative
functions of or pertaining to government,  including the SEC or any other United
States,  Mexican or foreign government  authority,  agency,  department,  board,
commission  or  instrumentality  of the United  States,  any state of the United
States or any political subdivision thereof or any foreign jurisdiction, and any
court,  tribunal or  arbitrator(s)  of  competent  jurisdiction,  and any United
States,  Mexican or foreign  governmental  or  non-governmental  self-regulatory
organization, agency or authority (including the NYSE).

      "GTFM Assets" shall mean the properties,  assets,  Contracts and rights of
any kind,  whether tangible or intangible,  real or personal,  of the GTFM Group
necessary to enable GTFM and the GTFM  Subsidiaries to conduct the GTFM Business
as presently conducted.

      "GTFM  Business"  shall mean the business and operations of the GTFM Group
in the manner in which the same have been  conducted  prior to the date  hereof,
are currently being conducted and are currently proposed by the GTFM Group to be
conducted, whether conducted by GTFM or any of its Subsidiaries.

      "GTFM Financial Statements" shall mean those financial statements referred
to in Section 5.6.

      "GTFM  Form 20-F"  shall mean the Annual  Report on Form 20-F for the year
ended December 31, 2001 filed by GTFM with the SEC.

      "GTFM Group" shall mean GTFM and all of its Subsidiaries, collectively.

      "GTFM Material  Adverse  Effect" shall mean a change,  event or occurrence
that has had, or is reasonably  likely to have, a material adverse effect on the
business,  assets,  properties,  liabilities,  financial condition or results of
operations  of the GTFM Group taken as a whole  other than any change,  event or
occurrence  resulting from (i) changes in the railroad industry in Mexico or the
United  States  generally,  (ii) changes in general  economic  conditions in the
United States or Mexico or the securities  markets in general,  (iii)  terrorist
activities or the  commencement  or escalation of any war or armed  hostilities,
which do not  disproportionately  affect the GTFM Group, or (iv)  performance of
this Agreement in accordance with its terms.

      "GTFM  Subsidiaries"  shall mean all of the  Subsidiaries  of GTFM  except
Mexrail, Inc. and its Subsidiaries.

      "GTFM Trademarks" shall mean all trademarks of GTFM and its Subsidiaries.

      "Hazardous  Materials" shall mean (i) any petroleum,  petroleum  products,
byproducts or breakdown  products,  radioactive  materials,  asbestos-containing
materials or polychlorinated  biphenyls or (ii) any chemical,  material or other
substance  defined or  regulated  as toxic or  hazardous  or as a  pollutant  or
contaminant or waste under any applicable Environmental Law.

      "HSR  Act"  means  Section  7A  of  the  Clayton  Act  (Title  II  of  the
Hart-Scott-Rodino  Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.


                                      -44-
<PAGE>

      "IAS" shall mean International Accounting Standards,  consistently applied
as used in the UMS as in effect at the time any applicable  financial statements
were  or are  prepared  or any  act  requiring  compliance  with  IAS  was or is
performed.

      "Income  Taxes"  shall  mean all  Taxes,  charges,  fees,  levies or other
assessments imposed by any Taxing Authority and based on or measured solely with
respect to income or profits  including  any  interest,  penalties  or additions
attributable or imposed with respect thereto.

      "Intellectual   Property"  shall  mean  all  patents  and  patent  rights,
trademarks  and  trademark  rights,  trade names and trade name rights,  service
marks and service mark  rights,  service  names and service  name rights,  brand
names, inventions copyrights and copyright rights,  processes,  formulae,  trade
dress,  business and product names, logos,  slogans,  trade secrets,  industrial
models,  processes,  designs,  methodologies,  computer programs  (including all
source codes) and related documentation,  technical information,  manufacturing,
engineering and technical  drawings,  know-how and all pending  applications for
and registrations of patents, trademarks, service marks and copyrights.

      "Investment  Advisers Act" shall mean the Investment Advisers Act of 1940,
as amended, and the rules and regulations of the SEC thereunder.

      "Investment Company Act" shall mean the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.

      "KCS Assets" shall mean the  properties,  assets,  Contracts and rights of
any kind, whether tangible or intangible, real or personal,  necessary to enable
KCS (prior to the  Closing)  and the  Surviving  Company  (after the Closing) to
conduct the KCS Business as presently conducted.

      "KCS Business" shall mean the consolidated  business and operations of KCS
and its  Subsidiaries  in the manner in which the same have been conducted prior
to the date hereof,  are currently being conducted and are currently proposed by
KCS and its Subsidiaries to be conducted, whether conducted by KCS or any of its
Subsidiaries.

      "KCS  Disclosure  Schedule"  shall  have  the  meaning  set  forth  in the
introduction to Article 6 of this Agreement.

      "KCS Material  Adverse  Effect"  shall mean a change,  event or occurrence
that has had, or is reasonably  likely to have, a material adverse effect on the
business,  assets,  properties,  liabilities,  financial condition or results of
operations of KCS and its Subsidiaries,  taken as a whole other than any change,
event or occurrence  resulting from (i) changes in the railroad  industry in the
United  States  generally,  (ii) changes in general  economic  conditions in the
United States or the securities markets in general,  (iii) terrorist  activities
or the commencement or escalation of any war or armed hostilities,  which do not
disproportionately  affect KCS or its Subsidiaries,  or (iv) performance of this
Agreement in accordance with its terms.

      "KCS Stock Option  Plan" shall mean the 1991  Amended and  Restated  Stock
Option and Performance Award Plan, as amended and restated effective November 7,
2002.

      "Knowledge"  of (a) KCS  shall  mean  actual  knowledge  after  reasonable
inquiry of any  executive  officer of KCS, (b) TMM, TMMH or MM shall mean actual
knowledge

                                      -45-
<PAGE>

after  reasonable  inquiry by any executive  officer of TMM, TMMH or MM, and (c)
Sellers shall mean actual  knowledge after  reasonable  inquiry by any executive
officer of Sellers.

      "Law"  shall mean any U.S.,  Mexican or  foreign  federal,  state or local
statute, law (whether statutory or common law), ordinance,  rule, administrative
interpretation,   regulation,  order,  writ,  injunction,  directive,  judgment,
decree,  policy,  guideline or other requirement or arbitration award or finding
(including,  without  limitation,  those  of the  NYSE or any  other  applicable
self-regulatory organization).

      "Losses"  shall  have  the  meaning  set  forth  in  Section  10.2 of this
Agreement.

      "MM Subsidiaries" shall mean GTFM and GTFM Subsidiaries.

      "NYSE" shall mean the New York Stock Exchange, Inc.

      "Permitted  Encumbrance"  shall  mean  (i)  liens  reflected  in the  GTFM
Financial  Statements;  (ii)  liens  imposed  by  operation  of law  and not for
borrowed  money,  such  as  materialmen's,  mechanics',  workers',  repairmen's,
employees',  carriers',  vendors'  warehousemen's  and other like liens that are
insignificant,  individually and in the aggregate,  to the operation of the GTFM
Business and (iii) liens incurred in the ordinary course of business and not for
borrowed money that are insignificant, individually and in the aggregate, to the
operation of the GTFM Business.

      "Person"  shall  mean  any  individual,  firm,  corporation,   partnership
(limited or general),  limited liability  company,  joint venture,  association,
trust or other entity.

      "Put Agreement" shall mean the Agreement between the Federal Government of
the United Mexican States, GTFM, TMM and KCS, dated June 9, 1997.

      "Put" shall mean the right of the Federal Government of the United Mexican
States under the Put  Agreement to compel  purchase of the Shares of TFM held by
it.
      "Put  Purchase  Price"  shall mean the  purchase  price for the 20% of TFM
stock held by the Federal Government of the United Mexican States, as defined in
the Put  Agreement and  calculated  under the  Twenty-Sixth  Clause of the Stock
Purchase Agreement.

      "SEC" shall mean the Securities and Exchange Commission, and any successor
thereto.

      "Securities" shall mean any securities as defined in the Securities Act.

      "Securities  Act" shall mean the Securities  Act of 1933, as amended,  and
the rules and regulations of the SEC thereunder.

      "Securities  Laws" shall mean the  Securities  Act, the Exchange  Act, the
Investment Company Act, the Investment  Advisers Act, all applicable state "blue
sky" laws, all applicable Mexican and foreign securities laws, and the rules and
regulations promulgated thereunder.

      "Seller Material Adverse Effect" shall mean a change,  event or occurrence
that has had, or is reasonably  likely to have, a material adverse effect on the
business,  assets,  properties,

                                      -46-
<PAGE>

liabilities,  financial  condition or results of operations of Sellers and their
Subsidiaries,  taken as a whole  other  than  any  change,  event or  occurrence
resulting  from (i)  changes  in the  railroad  industry  in the  United  States
generally,  (ii) changes in general economic  conditions in the United States or
the  securities   markets  in  general,   (iii)  terrorist   activities  or  the
commencement  or  escalation  of any  war or  armed  hostilities,  which  do not
disproportionately  affect  a  Seller  or  any  of  its  Subsidiaries,  or  (iv)
performance of this Agreement in accordance with its terms.

      "Strategic Investor" shall mean a U.S. Class 1 railroad, or its Affiliate,
which purchases or commits to purchase from KCS equity or debt securities of KCS
within one year from the date of this Agreement.

      "Subsidiary"  of a Person shall mean any other Person more than 50% of the
voting  stock  (or of any  other  form of other  voting  or  controlling  equity
interest  in the  case  of a  Person  that is not a  corporation)  of  which  is
beneficially  owned by the Person  directly  or  indirectly  through one or more
other Persons.

      "Tax" shall mean all U.S. and Mexican  federal,  provincial,  territorial,
state,  municipal,  local,  foreign  or other  taxes,  imposts,  rates,  levies,
assessments,  contributions  and other  similar  charges  (and all  interest and
penalties thereon and additions thereto imposed by any Governmental  Authority),
including,  without limitation,  all income, excise, franchise,  gains, capital,
real  property,  goods and  services,  transfer,  value added,  gross  receipts,
windfall profits, severance, ad valorem, personal property,  production,  sales,
use, license, stamp, documentary stamp, mortgage recording, employment, payroll,
social  security  (IMSS),  housing,  unemployment,   disability,   estimated  or
withholding taxes, housing fund (Infonavit), retirement fund contributions (SAR)
and all customs and import duties.

      "Tax  Return"  shall  mean  any and all  returns,  reports,  declarations,
information statements,  schedules or other documents required to be provided by
GTFM or any of its  Subsidiaries  with  respect  to  Taxes  to any  Governmental
Authority or Tax authority or agency, whether U.S., Mexican or foreign.

      "Taxing Authority" shall mean any government  authority,  U.S., Mexican or
other, having jurisdiction over the assessment,  determination,  collection,  or
other imposition of Taxes.

      "TFM" shall mean TFM, S.A. de C.V.

      "U.S." means the United States of America.

      "VAT" means the Mexican value added tax.

      "VAT Claim" means TFM's claim against the Mexican  Treasury for the refund
of a value added tax payment in the original  principal  amount of 2,111,111,790
pesos.

      "VAT Payment" means the shares or cash compensation received by TFM or its
designee from the Mexican Government on the VAT Claim.

                                      -47-
<PAGE>

                                   ARTICLE 12

                                  MISCELLANEOUS

     Section 12.1 Amendments; Waiver. This Agreement may not be amended, altered
or modified  except by written  instrument  executed by KCS and TMM. KCS and TMM
may amend this Agreement without notice to or the consent of any other party and
any  third  party.  Any  agreement  on the part of KCS and TMM to waive  (i) any
inaccuracies  in any  representation  and  warranty  contained  herein or in any
document,  certificate or writing delivered  pursuant hereto, or (ii) compliance
with any of the agreements,  covenants or conditions  contained herein, shall be
valid  only if set forth in an  instrument  in  writing  signed on behalf of the
party  against  whom  the  waiver  is to be  effective.  No  such  waiver  shall
constitute  a waiver of, or estoppel  with respect to, any  subsequent  or other
inaccuracy,  breach or failure to strictly  comply with the  provisions  of this
Agreement. Any delay or omission on the part of KCS or TMM to exercise any right
hereunder  shall not in any manner impair the exercise of any right  accruing to
it hereafter.

     Section  12.2  Entire  Agreement.  This  Agreement  (including  the  Seller
Disclosure Schedule, the KCS Disclosure Schedule, any other exhibits, schedules,
certificates, lists and documents referred to herein, and any documents executed
by the  Parties  simultaneously  herewith or pursuant  thereto),  the  Ancillary
Agreements,   the  Consulting  Agreement  and  the  Confidentiality   Agreements
constitute the entire agreement of the Parties,  except as provided herein,  and
supersede all prior agreements and  understandings,  written and oral, among the
Parties with respect to the subject matter hereof and thereof, including without
limitation,  the Letter of Intent,  dated August 28, 1995,  between TMM and KCS;
the Joint Venture Implementation Agreement, dated September 7, 1995, between TMM
and KCS; the Joint Venture  Agreement,  dated December 1, 1995,  between TMM and
KCS; the undated Letter of  Understanding  between TMM and KCS; the Shareholders
Agreement dated as of May 1997, by and among KCS, Caymex  Transportacion,  Grupo
Servia, S.A. de C.V., TMM and MM; Management Services Agreements between KCS and
TFM,  dated May 9, 1997,  and  between  TMM and TFM,  dated May 9, 1997 (as such
agreements have been amended and extended from time to time); the Stock Purchase
Agreement  dated as of February 27, 2002,  by and among MM, TMM, KCS, The Kansas
City Southern  Railway  Company and TFM; and the Omnibus  Agreement by and among
TMM, MM, TFM,  Mexrail,  Inc., The Kansas City Southern Railway  Company,  NAFTA
Rail,  S.A. de C.V. and KCS, dated March 8, 2002;  provided that, if the Closing
shall not have occurred  prior to the  Termination  Date,  or if this  Agreement
shall have been  terminated  pursuant  to the terms set forth in Article 9, then
this  Section  12.2 shall be null and void  retroactively  to the date first set
forth above and the prior agreements and understandings referred to herein shall
be and remain effective as if this Agreement had never been effective.

     Section 12.3 Interpretation.

     (a) The Recitals, Exhibits and Schedules to this Agreement are incorporated
by  reference  into,  and are  deemed  to be part  of,  this  Agreement.  When a
reference is made in this  Agreement to Sections,  Exhibits or  Schedules,  such
reference shall be to a Section of or an Exhibit or a Schedule to this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement  are for  reference  purposes only and shall not affect in any way the
meaning or  interpretation  of this  Agreement.  Whenever  the words  "include,"
"includes" or

                                      -48-
<PAGE>

"including" are used in this  Agreement,  they shall be deemed to be followed by
the words "without limitation."

     (b) Each of the Seller Disclosure  Schedule and the KCS Disclosure Schedule
shall set forth items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in a provision hereof
or as an exception to one or more of such party's  representations or warranties
or one or more of its covenants contained in this Agreement, in each case making
reference  to  the  particular  subsection  of  this  Agreement  requiring  such
disclosure or to which such exception is being taken.

     (c) This Agreement is in the English language. The Parties waive any rights
they  may  have  under  Applicable  Law to  have  this  Agreement  or any of the
Ancillary  Agreements  made in any language other than English;  provided to the
extent that any such waiver shall not be valid under Applicable Law, the Parties
agree  that  in case of any  ambiguity  or  contradiction  between  the  English
language  version of this Agreement and any translation into any other language,
that the English language version shall control.

     Section 12.4 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,  be
ineffective  to the  extent  of  such  invalidity  or  unenforceability  without
rendering  invalid or  unenforceable  the remaining terms and provisions of this
Agreement or affecting  the  validity or  enforceability  of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

     Section 12.5 Notices.  Unless otherwise  provided  herein,  all notices and
other communications  hereunder shall be in writing and shall be deemed given if
(a)  delivered  in  person,   (b)   transmitted   by  facsimile   (with  written
confirmation),  (c) mailed by  certified  or  registered  mail  (return  receipt
requested)  (in which case such  notice  shall be deemed  given on the third day
after such  mailing)  or (d)  delivered  by an  express  courier  (with  written
confirmation)  to the  Parties  at the  following  addresses  (or at such  other
address for a party as shall be specified by like notice):

      If to Sellers:

      Grupo TMM, S.A.
      Avenida de la Cuspide, No. 4755
      Colonia Parques del Pedregal
      14010 Mexico, D.F.

      CT Corporation
      1209 Orange Street
      Wilmington, Delaware 19801

      With a copy (which shall not constitute notice) to:

      Milbank, Tweed, Hadley & McCloy LLP
      601 South Figueroa Street, 30th Floor

                                      -49-
<PAGE>

      Los Angeles, CA 90017
      Attention:  Thomas C. Janson, Esq.


      If to KCS or the Surviving Company:

      Kansas City Southern
      P.O. Box 219335
      427 West 12th Street
      Kansas City, MO 64121-9335

      With a copy (which shall not constitute notice) to:

      Sonnenschein Nath & Rosenthal
      4520 Main Street, Suite 1100
      Kansas City, MO 64111
      Attention:  John F. Marvin, Esq.

Any party hereto may from time to time change its address for notices under this
Section 12.5 by giving at least 10 days'  notice of such changed  address to the
other Parties hereto.

     Section 12.6 Headings. The headings herein are for convenience only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions of this Agreement.

     Section 12.7  Binding  Effect;  Persons  Benefiting;  No  Assignment.  This
Agreement  shall  inure to the  benefit of and be binding  upon the  Parties and
their  respective  successors  and assigns.  No  provision of this  Agreement is
intended or shall be  construed  to confer upon any entity or Person  other than
the Parties and their  respective  successors  and permitted  assigns any right,
remedy or claim under or by reason of this  Agreement or any part  hereof.  This
Agreement  may not be assigned by any of the Parties  without the prior  written
consent of the other Parties.

     Section 12.8 No Third Party  Beneficiaries.  This Agreement is intended for
the benefit of the Parties hereto and their respective  permitted successors and
assigns and is not for the benefit of, nor may any  provision of this  Agreement
be enforced by, any other Person.

     Section 12.9  Counterparts.  This  Agreement may be executed in two or more
counterparts,  each  original or facsimile of which shall be deemed an original,
but all of which taken together shall constitute one and the same agreement,  it
being understood that all of the Parties need not sign the same counterpart.

     Section 12.10   Specific  Enforcement.  The Parties hereto  acknowledge and
agree  that  irreparable  damage  would  occur  in  the  event  that  any of the
provisions  of this  Agreement  were not  performed  in  accordance  with  their
specific terms or were otherwise breached. It is accordingly agreed that each of
the Parties  hereto shall be entitled to an injunction or injunctions to prevent
or cure breaches of the provisions of this Agreement by the other and to enforce
specifically the terms and provisions of this Agreement,  this being in addition
to any other remedy to which they may be entitled by law or equity.

                                      -50-
<PAGE>

     Section 12.11 Governing Law; Dispute Resolution.

     (a)  Resolution  of any and  all  disputes  between  KCS and one or more of
Sellers  (each of KCS, on the one hand,  and one or more of the Sellers,  on the
other hand, a "Dispute Party" and together,  the "Dispute Parties') arising from
or  in  connection  with  this  Agreement,   the  Ancillary  Agreements  or  any
transactions contemplated by this Agreement or the Ancillary Agreements, whether
based on contract,  tort,  common law,  equity,  statute,  regulation,  order or
otherwise,  ("Disputes") including Disputes arising in connection with claims by
third persons,  shall be exclusively  governed by and settled in accordance with
the provisions of this Section  12.11;  provided,  that the foregoing  shall not
preclude  equitable or other judicial relief to enforce the provisions hereof or
to preserve the status quo pending resolution of Disputes hereunder.

     (b) THIS AGREEMENT,  THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO AND THE
ADJUDICATION AND ENFORCEMENT  THEREOF,  SHALL BE GOVERNED BY AND INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE  SUBSTANTIVE  LAWS OF THE STATE OF DELAWARE AND
THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA,  WITHOUT  REGARD TO APPLICABLE
CHOICE OF LAW PROVISIONS THEREOF.

     (c) As to any  Dispute  which is not  resolved  in the  ordinary  course of
business,  the Dispute  Parties  shall  first  attempt in good faith to promptly
resolve any Dispute by negotiations  between  executives.  Either of the Dispute
Parties may initiate this procedure by delivery of written notice of the Dispute
(the "Dispute  Notice") to the other.  Not later than 20 days after  delivery of
the Dispute  Notice,  one executive of one of the Dispute Parties with authority
to settle the Dispute  shall meet with the one  executive  of the other  Dispute
Party with authority to settle the Dispute at a reasonably  acceptable  time and
place,  and thereafter as such executives shall deem reasonably  necessary.  The
executives  shall  exchange  relevant  information  and  endeavor to resolve the
Dispute.  Prior to any such meeting, each Dispute Party's executive shall advise
the other as to any individuals who will attend such meeting with the executive.
All  negotiations  pursuant to this Section  12.11(c) shall be confidential  and
shall be treated as  compromise  negotiations  for  purposes  of Rule 408 of the
Federal  Rules of Evidence and  similarly  under other local or foreign rules of
evidence.

     (d) Each Dispute  Party  hereby  agrees to submit all Disputes not resolved
pursuant  to Section  12.11(c)  hereof to final and binding  arbitration  in New
York, New York.  Either Dispute Party may initiate such  arbitration by delivery
of a demand therefor (the  "Arbitration  Demand") to the other Dispute Party not
sooner  than 60 days  after  the date of  delivery  of the  Dispute  Notice  but
promptly thereafter;  provided, that if a Dispute Party rejects participation in
the  procedures  provided  under Section  12.11(c),  the other Dispute Party may
initiate  arbitration  at  such  earlier  time as such  rejection  shall  become
reasonably apparent,  and, whenever arbitration is initiated,  may seek recovery
of any damages or expenses  arising from such  rejection,  including  attorney's
fees and  expenses,  Arbitration  Costs (as defined  below) in  connection  with
arbitration hereunder.

                  (i) Three Arbitrators shall be appointed (the  "Arbitrators"),
            one of whom shall be  appointed by KCS, one by TMM, and the third of
            whom, who shall act as the chairman of the arbitral tribunal,  shall
            be appointed by the first two Arbitrators within 10 business days of
            the first two Arbitrators  confirmation by the American  Arbitration
            Association.  Each Party  agrees that  Sellers  shall be

                                      -51-
<PAGE>

          considered jointly as one side for the purposes of constitution of the
          arbitration  tribunal  hereunder.  If either  Dispute  Party  fails to
          appoint an Arbitrator  within 10 business days of a request in writing
          by the other  Dispute  Party to do so or if the first two  Arbitrators
          cannot  agree on the  appointment  of the third  Arbitrator  within 10
          business  days  of  their  confirmation  by the  American  Arbitration
          Association,  then such Arbitrator  shall be appointed by the American
          Arbitration  Association in accordance with its Commercial Arbitration
          Rules.  As soon as the  arbitration  tribunal  has  been  convened,  a
          hearing date shall be set within 15 days  thereafter;  provided,  that
          the Arbitrators may extend the date of the hearing upon request of any
          Dispute  Party to the extent  necessary  to insure  that such  Dispute
          Party is given a reasonable period of time to prepare for the hearing.
          Written  submittals  in the English  language  shall be presented  and
          exchanged  by both  Dispute  Parties  five  business  days  before the
          hearing  date.  At such time the Dispute  Parties  shall also exchange
          copies of all  documentary  evidence  upon which they will rely at the
          arbitration  hearing and a list of the  witnesses  whom they intend to
          call to  testify  at the  hearing.  The  Arbitrators  shall make their
          determination  as  promptly as  practicable  after  conclusion  of the
          hearing.

               (ii) The arbitration  shall be conducted in the English  language
          pursuant to the Commercial  Arbitration Rules of American  Arbitration
          Association.  Notwithstanding  the  foregoing,  (A) each Dispute Party
          shall  have the  right to audit the  books  and  records  of the other
          Dispute  Party that are  reasonably  related to the Dispute;  (B) each
          Dispute Party shall provide to the other, reasonably in advance of any
          hearing,  copies of all  documents  which a Dispute  Party  intends to
          present in such  hearing;  (C) all  hearings  shall be conducted on an
          expedited  schedule;  and (D) all proceedings  shall be  confidential,
          except  that  either   Dispute   Party  may  at  its  expense  make  a
          stenographic record thereof.

               (iii) The Arbitrators shall endeavor to complete all hearings not
          later than 120 days after their tribunal has been convened,  and shall
          make a final award as promptly as practicable  thereafter.  Such award
          shall be communicated,  in writing,  by the Arbitrators to the Dispute
          Parties,  and shall contain specific  findings of fact and conclusions
          of law in  accordance  with the  governing  law set  forth in  Section
          12.11(c) of this  Agreement.  Any award of such  Arbitrators  shall be
          final and binding upon the Parties to this  Agreement and shall not be
          attacked by any of the Parties to this  Agreement  in any court of law
          and  may be  enforced  in any  court  having  jurisdiction,  including
          expressly  the  courts  of the  State of  Delaware,  United  States of
          America,  and the  courts  of the  Federal  District  of  Mexico.  The
          Arbitrators shall apportion all costs and expenses of the arbitration,
          including the  Arbitrators'  fees and  expenses,  fees and expenses of
          experts and fees and  expenses of  translators  ("Arbitration  Costs")
          between  the  prevailing  and  non-prevailing  Dispute  Party  as  the
          Arbitrators shall deem fair and reasonable. In circumstances where (A)
          a Dispute has been  asserted or defended  against on grounds  that the
          Arbitrators deem manifestly  unreasonable,  or (B) the  non-prevailing
          Dispute Party has rejected  participation  in procedures under Section
          12.11(c), the Arbitrators may assess all Arbitration Costs against the
          non-prevailing  Dispute  Party  and  may  include  in  the  award  the
          prevailing  Dispute

                                      -52-
<PAGE>

          Party's  attorney's  fees and expenses in connection  with any and all
          proceedings under this Section 12.11.  Notwithstanding  the foregoing,
          in no event may the arbitrator award multiple or punitive damages.

     (e)  Pursuant  to  an  agreement  of  the  Parties  hereto  or  a  judicial
determination that a Dispute is not subject to final and binding  arbitration as
set forth in Section 12.11, KCS and each of Sellers  irrevocably agrees that any
legal action or  proceeding  against it with respect to this  Agreement  and any
transaction  contemplated  by this Agreement shall be brought only in the courts
of the State of Delaware,  or of Federal  courts of the United States of America
sitting in Delaware,  and by execution and delivery of this  Agreement,  KCS and
each of Sellers  irrevocably  submits to the venue and jurisdiction of each such
court and  irrevocably  waives any  objection  or defense such party may have to
venue or personal  jurisdiction  in any such court for the purpose of  resolving
any claim, dispute,  cause of action arising out of or related to this Agreement
(including any claim that the suit or action has been brought in an inconvenient
forum and any  right to which it may  become  entitled  on  account  of place of
residence or domicile), the alleged breach of this Agreement, the enforcement of
the terms of this Agreement,  the Acquisition,  the Ancillary Agreements and the
other  terms  contemplated  hereby and  thereby.  A final  judgment in any suit,
action or proceeding  shall be conclusive and may be enforced in any court where
jurisdiction  over the Parties may be had or in which the Parties are subject to
service of process.

     (f) Each of the parties hereto  irrevocably  appoints CT  Corporation  (the
"Process  Agent"),  at 1209  Orange  Street,  Wilmington,  County of New Castle,
Delaware  19801  (302-658-7581),  respectively  as its agent and true and lawful
attorney-in-fact in its name, place and stead to accept on behalf of each of the
parties and their respective  properties and revenues,  service of copies of the
summons  and  complaint  and any other  process  which may be served in any such
suit,  action or  proceeding  brought in the State of Delaware,  and each of the
parties  hereto  agrees that failure of the Process  Agent to give any notice of
any such  service of process to any of the  parties  hereto  shall not impair or
affect the validity of such  service or the  enforcement  of any judgment  based
thereon.

     Section  12.12  Announcements.  KCS and TMM shall  consult  with each other
before issuing, and provide each other the opportunity to review, comment on and
concur with,  any press release or other public  statement  with respect to this
Agreement, the Acquisition,  the Ancillary Agreements and the other transactions
contemplated  hereby  and  thereby,  except as either  party  may  determine  is
otherwise  required by Applicable Law, judicial or administrative  action or any
requirement of the NYSE or any other applicable self-regulatory organization.

     Section 12.13  Termination Fee. In the event of (i) a termination  pursuant
to  Section  9.1(a)(v),  the Party  experiencing  the  Change of  Control  shall
promptly after a demand  therefor remit to the Party  terminating in immediately
available  funds  the sum of $18  million  and (ii) a  termination  pursuant  to
Section 9.1(a)(iii) or 9.1(a)(iv) as a result of the failure of the stockholders
of KCS or of TMM to approve  the  Acquisition  if at or prior to the  meeting of
such stockholders to approve the Acquisition,  the Board of Directors of KCS, in
the case of the KCS Stockholders'  meeting, or the Board of Directors of TMM, in
the case of the TMM  Stockholders'  meeting,  shall have failed to  recommend or
shall have withdrawn and not reinstated its  recommendation of, the Acquisition,
then the Party whose  stockholders shall not have approved the Acquisition shall
remit to the other  Party,  promptly  after a demand  therefor,  in  immediately
available  funds,  the sum of $18 million.  The receipt of any sums  pursuant to
this

                                      -53-
<PAGE>

Section  12.13 shall not  preclude or diminish any other rights a Party may have
under this Agreement.



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                                      -54-

<PAGE>


      IN WITNESS WHEREOF,  the Parties have caused this Agreement to be executed
as of the date first above written.

                  KANSAS CITY SOUTHERN


                  By:   /s/ M.R. Haverty
                     ---------------------------------------
                  Name:  Michael R. Haverty
                  Title: Chairman, President & CEO


                  KARA Sub, Inc.


                  By:   /s/ M.R. Haverty
                     ---------------------------------------
                  Name:  Michael R. Haverty
                  Title: Chairman, President & CEO


                  GRUPO TMM, S.A.


                  By:   /s/ Jose Serrano
                     ---------------------------------------
                  Name:  Jose Serrano
                  Title: Chairman


                  By:   /s/ Javier Segovia
                     ---------------------------------------
                  Name:  Javier Segovia
                  Title: President


                  TMM HOLDINGS, S.A. de C.V.


                  By:   /s/ Jose Serrano
                     ---------------------------------------
                  Name:  Jose Serrano
                  Title: Chairman


                  By:   /s/ Javier Segovia
                     ---------------------------------------
                  Name:  Javier Segovia
                  Title: President


                                      -55-
<PAGE>
                  TMM MULTIMODAL, S.A. de C.V.


                  By:   /s/ Jose Serrano
                     ---------------------------------------
                  Name:  Jose Serrano
                  Title: Chairman


                  By:   /s/ Javier Segovia
                     ---------------------------------------
                  Name:  Javier Segovia
                  Title: President


















                                      -56-